Funds People

Italian equity and value strategy: a winning mix.


“Equity markets in the developed countries have reached historically high valuations but are underpinned by very low 10-year interest rates and by earnings that are still growing. In addition, with most central banks still adopting a strongly expansionary monetary policy, short-term rates will stay low for a prolonged period”. Speaking is Luca Riboldi, investment director at Banor SIM and adviser for the Banor Italy long-short fund. He provides reassurance against the risk of a speculative bubble on the equity markets, but admits: “the markets have been moving fast and we’re finding it increasingly difficult to find under-valued stocks, especially in the developed countries. For this reason, the net exposure of the Banor Italy long short fund is in the lower part of our historic range”.

Historically, 25% to 75% of the fund has been invested in under-valued stocks. “To date, we’re at around 35% compared with the 70% we had at the start of the year. We’ve reduced exposure because of the strong market rally”, explains Riboldi. He adds that undervalued stocks can still be found, mainly “in the media, in real estate and in smaller banks”, but also in Intesa Sanpaolo, one of Banor’s biggest bets in the last 12 months.

The aim of the fund is to beat the FTSE Italy All-Share index in the medium-term, adjusting performance for the risk taken. “For example, from January 2009 to 30 April 2015, the strategy (the fund was launched in June 2010) has gained 70% compared with the 24% of the Italian index, with a volatility of 10.6% compared with 22.1% for the index”, comments Banor SIM’s investment officer.

Italian market

As for Italy, Riboldi explains that the Italian market has lower multiples than the other western markets but this is because of lower profitability and lower growth in domestic consumption. “If consumption growth resumes, some domestic stocks such as media, cooperative banks, real estate, telecoms and local utilities will have ample space to revalue”, says the expert, who advocates a value-based approach.

“I think that today there’s relatively more risk in a long-term bond portfolio than in a well managed equity portfolio. I’m convinced that a greater structural allocation towards the equity markets is healthy for investors and for the growth of the country”, concludes Riboldi.

Original article in Italian language, available here: Funds People, June 30, 2015.


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