iShares’ Bellingeri sees ‘big bang’ for ETFs in Italy

iShares’ Italy country head Emanuele Bellingeri has told InvestmentEurope
why he sees major growth ahead for the Italian ETF/ETP market.

According to preliminary figures provided by consultant ETFGI’s Global ETF and ETP industry insights report in September 2013, near record net inflows of $44.08bn and strong market performance helped to push global exchange traded fund (ETF) and exchange traded product (ETP) assets to
$2.16trn at the end of July 2013.

At the time there were 4,883 ETFs/ETPs, with 9,925 listings, from 209 providers listed on 57 exchanges, ETFGI said. “Dovish comments from the Fed and positive market performance encouraged investors to put net inflows of US$44.08bn back into the market through ETFs/ETPs,” Deborah Fuhr, managing partner at ETFGI, said at the time of the report.

The global success of ETFs has been witnessed also on the Italian market by BlackRock’s ETF platform iShares. Its Italy country head Emanuele Bellingeri said the company saw “unprecedented” levels of positive inflows in 2013, for a total of €3.3bn.

A series of banks and asset management companies, including UBS and Lyxor, have been listing a progressive and constant number of ETFs on the Italian stock exchange, Borsa Italiana. The exceptional amount of inflows that came into the products is linked to a significant shift in investor attitudes. Whereas earlier ETFs were traditionally bought by niche investors for niche type of investments, they have now become a much more mainstream product.

The reasons for such changes are several, although many have been pointing at ETFs’ cost-effectiveness. “Without a doubt ETFs help investors cut investment costs, but that’s not the only reason why they have attracted such a high amount of inflows,” says Bellingeri.

“The truth is that ETFs are exceptionally good products that can help investors at a particular phase of the industry for two main reasons. For the first time we have seen a correlation between general asset management
product flows and that of ETFs. Moreover, a new type of investor has started to look at ETFs: institutional investors, pension funds, insurers as well as private investors for whom the demand for ETFs is still in a booming phase.”

Bellingeri also argues that, unlike a number of investors believe, ETFs are not necessarily a passive type of financial instrument, and thus appealing to the discretionary aspect of investment and selection processes. They are shifting from being niche products to offering wrapped asset allocation solutions.

“We could consider ETFs as small bricks in the process of portfolio building. In this sense ETFs allow managers a wide margin of freedom in terms of active management. Moreover the era of stock picking as the main source of alpha generation has passed and managers now understand that stock picking is not the start and the end of a successful investment process,” Bellingeri explains.

As for markets and assets ETFs invest in on behalf of the Italian client base, Bellingeri says that they are focused on developed market equities, mainly US, Europe and Japan, and partly on emerging market equities, as well as being particularly exposed to the whole spectrum of bond markets.

“Italian investors’ portfolios are particularly weighted to bonds, even above the European average which is already high in that respect,” he says.

Looking ahead at 2014, Bellingeri expects the year to be even more successful than 2013, predicting a proper ‘big bang’ in the sector.

“We are preparing for a real explosion of ETFs,” he says. “We are working closely with intermediaries on a series of projects that we will be announcing in the coming months in order to be ready to take full advantage of the inflows that will come.”

Looking at the macroeconomic scenario of the country, Bellingeri suggests investors should be positive about Italy, despite its chaotic and unstable political situation.

“Italy keeps being one of the countries with the highest inflows into asset management products. As for ETFs, a proper revolution is underway in the
industry; we’ve seen it coming constantly and progressively year after year, and I believe it is now set to bloom.”

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