Could Chrysler boost provide succor to Italy funds?

Chrysler has reported third quarter profits up 80% on the same period last year, resulting in net income of $381m – possibly music to the ears of Italy equity fund investors, given the US car maker is 58.5% owned by Fiat.

Chrysler’s big advantage over domestic competitors Ford and GM is that it has much less exposure to the bloated European car manufacturing sector, which has caused its peers to announce actual or considered plant shutdowns in order to stem losses. Quarterly revenues were $15.6bn.

Chrysler’s gains helped Fiat report a slim net profit of €39m in its own quarterly results, compared to losses of €46m reported for its third quarter last year. However, the Italian company has had to increase its debt, now predicted to hit about €6.5bn by the end of December.

Reviewing the FE funds universe for those funds with >25% exposure to Italian equity, there are some 28 overall. Of these just nine funds have a three year track record to 29 October, and offer exposure to Fiat in their top 10 holdings.

Fund 1m 3m 6m 1yr 3yr 5yr 10yr
AXA World Funds Framlington Italy A Cap EUR in EU 3.15 10.59 5.00 10.93 -0.73 -38.42 18.29
OYSTER Italian Opportunities EUR in EU 3.43 12.17 6.54 0.16 -16.02 -53.86 -19.95
CS Equity Italy B in EU 3.69 16.86 9.68 1.74 -16.40 -47.20 -1.08
Amundi ETF MSCI Italy EUR in EU 2.59 13.82 7.96 -2.01 -20.66    
SSgA Italy Index Equity P EUR in EU 2.60 13.64 7.52 -2.36 -21.45 -51.69  
iShares MSCI Italy Index TR in EU 2.76 13.78 7.99 -1.78 -22.01 -51.58 -1.36
DB X-Trackers FTSE MIB INDEX ETF 1D TR in EU 3.29 15.08 8.43 -3.34 -24.20 -52.76  
Lyxor FTSE MIB TR in EU 3.30 15.12 8.61 -3.12 -24.86 -53.08  
iShares FTSE MIB EUR TR in EU 3.27 14.97 8.58 -3.23 -26.57 -54.35  
RBS Market Access Leveraged FTSE MIB Monthly Index in EU 3.51 27.51 10.78 -6.10      
RBS Market Access Short FTSE MIB Monthly Index in EU -3.65 -23.89 -22.64 -11.11      
Credit Suisse ETF on FTSE MIB EUR in EU 3.31 15.15 8.93 -3.26      
ING (L) ING Direct Top Italia Arancio P Cap in EU 3.23 14.78 7.69 -4.60      

 Source: FE

Interestingly, the fund with the best performance in this group over the period is the one with the biggest exposure to Fiat. The Axa World Funds Framlington Italy has an 8.73% exposure, according to the monthly portfolio data to the end of September. This is compared to the tracker funds or ETFs replicating the FTSE MIB, which tend to have a 3.7% exposure to the company, and which have done significantly worse over the period in terms of euro based return.

Of course, none of the funds have made a postive return over the period, suggesting ongoing weakness in the overall market for Italian equities.

Unfortunately, the FTSE MIB constituent list does not provide further assurances on the overall direction of Italy equity funds. A quarter of the 40 constituents are banks or financial services firms according to the last rebalancing in September. There is considerable newsflow around these businesses as to their potential to engage in M&A activity, and their ability to deal with tougher EBA capitalisation requirements going forward, and ultimately their ability to generate profits for investors such as mutual funds.

 

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