Fondo Italiano awakens Italian private equity

With a portfolio of 37 companies, 20 fund-of-fund commitments and a headcount of 45, Fondo Italiano di Investimento's impact on the local market has been huge. Indeed, in its first full year of operation, volume and value of deal activity peaked in Italy.

The number of deals with Fondo Italiano as the sole private equity sponsor represented 18% of deal volume in 2011, 19% in 2012 and 8% in 2013, according to unquote" data. And the local behemoth's market share is about to get bigger.

The GP recently secured a further €350m commitment from Cassa Depositi e Prestiti (CDP), which is 80% owned by the Italian Ministry of Economy and Finance and holds 12.5% of the €1.2bn private equity fund. The fresh capital will be used to support two new funds-of-funds; a €500m vehicle to focus on private debt and a €100m vehicle to support the venture capital industry. CDP has cornerstoned each fund-of-funds, providing 50% of LP commitments.

"We have to raise an equivalent amount from other investors," says Innocenzo Cipolletta, president of Fondo Italiano and industry association Aifi. "We are mainly raising from the banks that backed Fondo Italiano's first fund - Banca Intesa, Unicredit, Monte dei Paschi and some of the Banchi Popolari. We are also trying to raise money from other banks, insurers and pension funds, as well as industrial companies – we want to have some industrial investors, mainly for the venture capital fund-of-funds."

Critics of Fondo Italiano declare themselves unable to compete with the scale and momentum afforded to the bank-backed behemoth by its unique position, bridging public and private. Cipolletta denies the claim: "We are a private investor; our capital came from the banks. The initiative is public, but the money is private, so in a sense we are competition but it is a fair competition. We take minority stakes, while other funds focus mainly on majority, so we are in a sector where there is less competition. In principle, there is no conflict of interest because we raise money directly from the market."

Nevertheless, the GP has arguably thrown down the gauntlet in an area of the market that already represented a battleground for local investors. According to unquote" data, 75% of dealflow occurred in the small-cap space in Italy in 2010 – when Fondo Italiano completed its first investment on the closing days of the year. The following year, the market segment took 79% of dealflow, rising to 81% in 2012 before a drop to 72% in 2013. The small-cap space was already well-served. And with €100m left to be invested in the space by the GP, and another fund on the horizon, it will remain well-capitalised.

Biting the hand that feeds?
However, Fondo Italiano's recent shift towards fund-of-funds activity may give local private equity firms reason to rejoice. "Our proposition is to finance small- and medium-sized companies. Sometimes Italian SMEs are not ready for a direct equity injection immediately – they have a propensity for debt. A large amount of companies are in debt to the banks, which are lending less due to the crisis and capital requirements. We want to substitute short-term bank debt with long-term debt. There is a risk of a credit shortage and minibonds are a good way to approach a company. It is a way of preparing companies for an equity injection the next time around," says Cipolletta.

Far from deal-snatching, the recent move suggests a more nourishing role in the local ecosystem. The market certainly needs it; in the first half of the year, dealflow in the lower mid-market reached the lowest point since H1 2010. Given the speed and size of its maiden fund – indeed, the GP employs 45 staff and is set to expand to satisfy demand for private debt and venture capital expertise – Fondo Italiano is expected to hit the ground running, with the momentum to which onlookers have become accustomed.

• Tweet  
• Facebook  
• LinkedIn  
• Google plus  
• Send to  

• Topics
• Southern Europe
• LPs
• GPs
• Italy
• Top story
• Fondo Italiano di Investimento