Dec 22, 2016
Italian family firms take direct route in quest for better returns
Dec 22, 2016
Italy's wealthy family businesses, fed up with a stagnant economy and meagre returns on their cash, are ditching their extended circle of financial advisers and striking out on their own.
Famous names, including the Agnelli clan that controls Fiat Chrysler and the Del Vecchio family whose Luxottica group makes Ray Ban sunglasses, are bypassing fund managers and private equity firms, and finding their own investments instead.
"Many families of entrepreneurs are actively looking for alternatives ... so they can increase diversification and returns, an objective that fund managers are no longer able to meet," said Marco Stevanato whose family makes glass packaging for the pharmaceutical industry.
"We entered into direct investments, initially focussing on international real estate," added Stevanato, whose business is based in the northeastern region of Veneto.
Italy has an impressive collection of family wealth for an economy that has barely grown in 10 years. It was six times larger than the nation's annual gross domestic product, according to Italian central bank data for 2014.
The country boasts more than 2,500 people who are each worth more than 30 million euros ($31.4 million), according to property consultants Knight Frank, representing a deep source of funds, and investment fees, for the asset management industry and private equity firms.
However, with zero interest rates and elusive economic growth at home, families are searching for higher returns on their own, or pooling resources in what are known as club deals.
KING OF CLUBS
Italy's king of the club deal, Gianni Tamburi, founder and chief of boutique investment bank Tamburi Investment Partners, has spent years channelling family funds into direct equity investments ranging from technology to fashion.
His most recent effort to pool together family money, a fund known as Asset Italia, showed that demand for direct investing was running hot -- it raised 550 million euros in a matter of weeks.
"It could have been a lot more," said Tamburi whose Milan-based firm now counts about 150 families among its investors.
"Twenty years ago, I realised the fact that there were lots of wealthy families that would have wanted to invest in companies without turning to a traditional fund."
Italy's traditional private equity industry has felt the winds of change.
"Many important investments have been realised through investment societies, club deals, special purpose vehicles or directly by family offices," said Fabio Sattin, president and founder of Milan-based buy-out firm Private Equity Partners.
Family offices are private wealth boutiques set up to manage the finances of a single family or group of families. They would normally work through traditional private equity firms to seek out investments, but are increasingly investing alongside them.
Wealthy Italian families tend to be conservative in terms of borrowing to fund their direct investments, though they do use debt to enhance returns just as private equity firms do.
Italy's private equity association, AIFI, said families were blazing their own trails, seeking out club deals in particular, but did not see the trend as a challenge for its members.
"They are creating more agile and dynamic investment structures, ad hoc for single deals," said AIFI director-general Anna Gervasoni.
"They have different investors with respect to the institutions that private equity turns to. I don't see it as competition but as a segmentation of the market."
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