Asset Management

Strategic outlines for managing assets

The Compagnia di San Paolo diversifies its management of assets in a typically institutional way, inspired by consolidated principles and by merging the Company’s traditions with international and independent contributions from advisors, getting the most out of the Foundation’s long term profile. The Compagnia considers this approach to be less risky than  “holding direct participations” in that it offers more diversification (ie: regarding types of instruments, sectors, styles, geography etc) and promises more stable returns, albeit more restrained when the markets boom.
This model is reflected on the organisational framework of the investment process, in which the Compagnia has direct decision-making and management responsibility for its participations (strategic and non-strategic) on the private equity portfolio while the management of the diversified portfolio is completely handed over to external persons, chosen by independent advisors and helped by the staff, who work independently and autonomously according to the law and who avail themselves of the competence and professionalism built up over the years by Fondaco SGR, a specialized company shared with other foundations.

How the portfolio is split
At the end of 2010 the whole value of the market of the portfolio of financial activities held by Compagnia di San Paolo is 5.7 billion euros.
The strategic portfolio, ie shares in   Intesa Sanpaolo, makes up about 42% of the total, while the greatest influence (50% of the total portfolio) is due to the invested part, made up of investment funds handled by Fondaco SGR S.p.A. and invested in share funds  (11%  of the total portfolio of the Compagnia), bond funds (25%), monetary funds (9%), hedge funds and absolute return funds (5%). The amount invested in private equity and venture capital funds is approximately 4%; another 4% is invested in other ventures, liquidity and tax credits.
On the whole, the Compagnia’s estate is characterized by high liquidity and absence of debt, solid blocks which are a competitive advantage for the investor in a market still suffering from an excess of operator leverage and good opportunities for investments of “patient capital”.

2010 results

2010 was an up and down year for the financial markets with a marked separation in performance: the first 6 months saw a lot of volatility in the market, due to fears of the collapse of fringe members of the European Union and the uncertainty about the extent of the USA’s recovery  – with the European  DJ Euro Stoxx and S&P500 indexes back on stable ground just halfway through the year – followed by a moderate recovery in prices in the following months, partly due to the consolidation of the USA’s recovery (+13% at the end of the year S&P500) and partly due to the involvement of states and central banks of the EU area in trying to avoid the financial system’s collapse.
During the year the two main components that make up the Compagnia’s portfolio ie: the strategic portfolio and investment portfolio had very different results. A dividend yield (dividend on average quotations in 2009) of 3,1% regarding Intesa Sanpaolo -  no revenue was registered in 2009 due to the lack of dividend from ordinary shares – and a net total return amounting to 6,2% for the investment portfolio.
Regarding the investment portfolio, European and international share funds contribute with returns in double figures, followed by hedge funds and absolute return funds and lastly, more modestly, by bonds and monetary investments.
All the portfolio activities nevertheless produced returns which were higher than the respective benchmarks of reference. Of further interest, considering the overall positive result, is the relatively low level of volatility presented by the administration (2,8%), which successfully managed to reduce the overall volatility of the portfolio in 2010. What emerges in this context is the particularly positive contribution of absolute returns, whose volatility is lower than that of fixed incomes. Finally, the private equity and venture capital portfolio showed a positive non-annualized internal return of investment of 1,2% for the first nine months of 2010 .

Notes
1st graph translation:
Obbligazioni = bonds
Monetario =  monetary
Azionario = shares
Fondi hedge = hedge funds
Altre attività = other
2nd graph
Rendimento del portafoglio gestito per classi di attività, 2010 = Investment portfolio performance according to activities, 2010
Absolute Ret. e HF = Absolute Returns and Hedge Funds
Portafoglio gestito = investment portfolio
Obbligazionario = Bonds
Monetario = Monetary
3rd graph
Rendimento gestione vs. benchmark, 2010 = Investment performance vs. benchmark, 2010
Totale gestione = whole investment