SSGA asserts ETFs are here to stay in Italy
Danilo Verdecanna has been the managing director of State Street Global Advisors in Italy since 2009, since when the local ETF market has developed significantly.
SSGA manages some $2.4trn (€2.18trn) of assets globally as of the end of March, including a significant portion of the ETF market. The company is a multiexpertise one focused on passive strategies, but also has also a strong connection with institutional clients including many central banks.
The Italian branch was established in 2007 and focuses on front office services. When Verdecanna joined in 2007, in the eye of the financial crisis storm: “ETFs were just again becoming one of the main interests of institutional investors,” he says.
But those were tough times, he adds. SSGA focused mainly on pension funds to start with, and since then has become the largest foreign asset manager in that segment, Verdecanna says.
“We started off with conservative, balanced mandates. Then both the economic scenario and our expertise in the country improved and today we also offer some equity mandates with an active share and we have a wider asset range for our products,” Verdecanna explains.
A second step in the company’s development came in 2011, with the launch in Europe and Italy of a SPDR ETF initiative. Since then, ETFs in Italy have become a different story.
“In Europe, ETFs are clearly a much more recent story compared to the US, but it has definitely become a trend, and one that is meant to stay,” he says.
In the debate between active and passive management, Verdecanna says SSGA remains quite neutral and has recently found in the so-called “advanced beta” strategy a good synthesis of the two.
ADVANCED BETA STRATEGY
Just recently, SSGA and Morningstar Investment Consulting France teamed up to analyse the current fund landscape in Europe, with a particular attention on advanced beta.
The White Paper they produced sums up the environment as follows: “Advanced beta, sometimes also referred to as smart beta, has established itself in today’s investment universe and has proliferated in recent years.
“Generically, these are rules-based, transparent investment processes that look to isolate factors that have been shown to outperform market-capweighted indexes over time. “As the distinction between active and passive investing begins to merge, advanced beta strategies are experiencing unprecedented growth.”
Verdecanna, for his part, describes advanced beta strategies as innovative products that look beyond traditional cap-weighted strategies, combining the advantages of a passive implementation,
such has cost-efficiency, with the performance potential of active management, due to the active choice investors need to make about which factor exposures to target.
And what will happen to ETFs if the market goes down? “Well, nothing is good for all seasons, is it? ETFs are to be sold as little bricks which complete a wider asset allocation including flexible funds with exposure to total return strategies, for instance,” Verdecanna argues.
Moreover, in the Italian asset management industry, where total AUM has risen sharply in the past couple of years, SSGA’s local MD is confident that ETFs will be well suited to the requirements
of regulations such as Mifid II.
Having launched 65 Ucits ETFs across the continent, 43 of which are listed on Borsa Italiana, Verdecanna looks ahead and sees two main objectives for the remainder of 2015: “We want to capture new clients in the Italian wholesale space. At the same time, we have just launched a couple of new ETF products: the first infrastructure ETF to offer combined exposure to equities and bonds and the world’s first passive global convertible bond ETF, listed on the Borsa Italiana since 23 April 2015.”