The strategic lines of the management of financial assets
Compagnia di San Paolo adopts a policy of "diversified management" of its assets, typically inspired by the model of institutional investor and the principle of law according to which foundations must diversify the investment risk of their assets and use the latter to attain adequate profitability, ensuring a functional connection with their institutional aims and in particular with the development of the territory. Strategic Asset Allocation is defined with the contribution of an independent financial advisor.
The adopted model is reflected in the organisational layout of the investment process, in which Compagnia maintains direct management of shareholdings (whether strategic or not) and the mission-related investment portfolio, while the diversified portfolio is currently managed through investments in funds of funds handled by the participated company Fondaco SGR.
The portfolio’s structure
At the end of 2018, the total market value of the financial assets portfolio held by Compagnia di San Paolo amounted to € 6.3 billion.
The market value of Compagnia’s portfolio over the last years has been conditioned by the performance of Intesa Sanpaolo stock, which were particularly negative in 2018. The highest value of financial activities in the last six years was recorded in 2015. The upswing in Intesa Sanpaolo stock and investment in funds from the start of 2019 raised the value of the portfolio to approximately € 6.8 billion.
Total gross financial assets 2013-2018 (€/billion)
Regarding portfolio composition, on 31/12/2018 shareholding in Intesa Sanpaolo amounted to approximately 36.7% (considering both the shares held directly and those in management) of total financial assets, down from 45.9% the previous year. The "diversified" part of the overall portfolio, represented by the investment in mutual funds managed by Fondaco SGR S.p.A., made up about 50.4% of the total. The remaining 12,9%, completed allocations, represented by the mission related investment portfolio, liquid assets and other shareholdings and activities.
From the risk/yield angle, again in 2018 the component invested in funds efficiently carried out its task of reducing the portfolio’s total volatility: in the face of volatility approaching 30% of the investment in Intesa Sanpaolo (20 % in 2017), the diversified portfolio has kept an overall volatility of 2.8% (only slightly higher than the previous year), with a differentiated profile for the different activity classes, as shown below.
The combined effect of the different investments brought the portfolio’s overall volatility (excluding the mission related investments funds) back to a value of 11.8%.
The portfolio’s risk/yield profile in 2018
Portafoglio totale: Overall Portfolio
Fondi Azionari: Equity Funds
Fondi Alternatives (con PE): Alternatives Funds (with PE)
Portafoglio Diversificato: Diversified Portfolio
Fixed Income Funds (Gov)
Fondi Alternatives (ex PE): Alternatives Funds (ex PE)
Rendimento TW 2015 Gross: TW 2015 Gross Return
Volatilità Annualizzata: Annualised Volatility
2018 was a markedly negative year for financial markets: negative performances were reported for all activities except global government bonds and those in the euro area. However, the global economy continued to grow: world GDP levelled out at +3.7%
At the end of the year the European index Euro Stoxx 600 showed a -13.24 % negative price variation and the S&P500 ended the year down to -6.24%. The European financial sector – and, in particular, the banking sector – after starting the year positively performed negatively for the rest of the year trend, closing with a variation of -28%.
Concerning Compagnia’s portfolio, the shareholding in Intesa Sanpaolo confirmed excellent profitability in terms of dividends, distributing € 241 million in gross dividends to Compagnia (dividend yield of +7.9% - dividend on average 2018 stock price), against a negative total return of -24.9%:
Share performance finished the year at -30%, in alignment with the trend of the Italian banking sector (FTSE Italia All-Share Banks a -30,3%) and the European banking sector (EuroSTOXX Banks 600 a -28%).
The diversified portfolio invested in funds of funds managed by Fondaco Sgr had a net yield of -2.29%. The total final yield of Compagnia’s portfolio was negative (total return market value -10.8 %) above all because of the performance of the Transferee’s stock price.