Abstract
The Italian asset management sector is in a rather favourable period, and open-end mutual fund AUM levels have reached a record value of 818 billion euro (+95% from 2011 to 2015). This increasing demand for open-end mutual funds from retail investors has been motivated by a search for more interesting returns under conditions of mostly zero/negative interest rates and by the decreasing dependence of commercial banks on bond funding. However, how much of these financial resources are used by mutual funds to finance SMEs? This topic should be of great interest to researchers and authorities, especially in the current period of credit-crunching and with the birth of a new investment vehicle, ELTIFs, which are specifically designed to stimulate SME financing.
JEL Classification: G10, G23, G28
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Notes
- 1.
Government bills returned a nominal yield of more than 10%. While inflation was similarly high and public finance was in distress, Italian households considered a government default to be impossible. The situation was partially restored in 1992 through a massive property tax consisting of a forced withdrawal from private bank accounts in favour of the government.
- 2.
The open architecture (or multi-brand) approach refers to an opportunity for the sales force of a bank (private bankers, relationship managers and tied agents) to sell mutual funds from different investment firms, and not only those created by the banking group captive investment firm. This is typically achieved through trade agreements made between a bank and numerous domestic and foreign investment firms. The open architecture approach is currently a very common practice in the market.
- 3.
This practice is still largely used today; it is in effect due to fiscal advantages available to domestic banking groups that have created their own investment firms abroad (until a fiscal revision made in 2012) and due to corresponding advantages available to Italian private investors who have bought these (actually untrue) foreign mutual funds. In any case, the production of mutual funds abroad by Italian banks accompanied by a greater diffusion of mutual funds supplied by foreign investment firms (also in the form of exchange-traded products) has largely extended investment decisions beyond domestic borders. In turn, Italian household money is increasingly conveyed to financial markets by foreign asset managers.
- 4.
There are approximately 30,000 operating tied agents. The most influential private banks that use these consultants (who are not employees) are Fideuram, Mediolanum, Fineco, Banca Generali, Azimut, and Allianz Bank. Approximately 66% of mutual funds distributed by tied agents are products domiciled abroad (i.e., round-trip funds or foreign funds). Furthermore, tied agents typically work with affluent and high net worth clients, while the local branches of commercial banks mainly serve retail consumers.
- 5.
This opportunity for mutual funds to grant loans is not a first of its type under Italian legislation. Indeed, closed-end mutual funds established as alternative investment funds (AIFs) can invest in credit acquired by third parties, in asset-backed securities and in credit granted by the fund itself. This capability has recently been extended to closed-end AIFs established in the European Union.
- 6.
We consider different classes of the same fund (i.e., the class reserved for institutional investors or that reserved for private investors) as different products, as they are assigned different identification numbers (ISINs).
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Crespi, F. (2017). Using Open-End Mutual Fund Resources to Finance SMEs: The Potential Market Share of ELTIFs. In: Rossi, S. (eds) Access to Bank Credit and SME Financing. Palgrave Macmillan Studies in Banking and Financial Institutions. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-319-41363-1_11
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