The IRIDE Project: Five Italian Pension Funds Joining Forces
Co-authors: Alessandro Stori, Director at Fondenergia; Fabio Cappuccio, General Director at Previmoda; Luca Ruggeri, General Director at Fondo Gomma Plastica and Fondo Foncer.
On the 29th of March 2019 five Italian pension funds (Foncer, Fondenergia, Fondogommaplastica, Pegaso, and Previmoda) joined their forces to create the Iride Project and published a Request for Proposal for the selection of an AIFM for Private Equity investments.
Twenty fund managers participated in the selection process, which was conducted with the assistance of Prometeia Advisor Sim. Following the first stage of the selection procedure, which consisted of technical analysis and questionnaires, six shortlisted fund managers were admitted to the second phase of the process, in July 2019. Neuberger Berman was appointed to run the Private Equity AIF mandate.
In autumn 2019, Foncer, Fondenergia, Fondogommaplastica, Pegaso, and Previmoda met with Neuberger Berman to sign the Management Agreement and finalize the operational set-up by the end of 2019. A total amount of 216 million euros will be invested in European Private Equity Funds. The fund manager will be allowed to invest in Neuberger Berman’s funds or in external funds, acquired on the primary or the secondary market.
Fifty percent of the AIF’S will be investing in Italian enterprises. Domestic investments will be focused on mid/small cap unlisted Italian companies. Geographic diversification will be ensured from geographic diversification of their revenues: Most of their turnover largely derives from abroad and, therefore, from other countries’ economic performance.The AIF’s will be focused on buyout and growth, whereas AIF’s investing in riskier strategies, such as venture capital, distressed assets or turnaround strategies are not allowed.
A customized investment mandate for Private Equity investments is coherent with the fund management model to which Italian supplementary pension funds abide. The advantages deriving from the Iride mandate adopted will consist of:
- the availability of techno-professional competences of a manager in the sourcing, screening and due diligence processes;
- a greater diversification in terms of volume of the AIF, their management teams, and their underlying investments;
- an efficient management of the tactical asset allocation;
- access the secondary market with the goal of implementing J-curve mitigation strategies and guaranteeing the liquidity of the AIF’s investments within the terms and expiration date of the mandate; and
- a simplified operational management process via interfacing with one PE managers rather than multiple managers.
Significant synergies have been realized, both during the preliminary study phase and in the selection and cost containment process. Furthermore, Prometeia Advisor Sim was selected as the consultant responsible for risk control and the ongoing monitoring of the fund’s management.
The mandates were launched at the beginning of February. The first investments, which include the AIFs invested in Italy, one coinvested AIF, and two pan-european AIFs, will become effective within the first semester of 2020.
On one hand, the launch of the mandates in the midst of the coronavirus pandemic implies that the fund manager will have to cope with turbulence in financial markets and navigate a more complex economic environment. However, on the other hand, the selected AIFs will have the opportunity to enter into more attractive transactions.