Have you ever heard of asset management companies (Sgr) and mutual funds? Some people have, many haven't, in all likelihood. To navigate the complex financial landscape and become an informed investor, it pays to know who these companies are and what they do. Let's find out together.

Opportunities to put your savings to work

There are moments in life when you find yourself with a small sum of money that you want to set aside for the future. Perhaps it's a capital gain from the sale of a house, or an inheritance, or simply the portion of your salary saved up month after month. What do you do? Partly through a lack of awareness of the alternatives, partly to feel safer, and partly out of inertia, many people leave this money sitting in their bank current account. The advantage is that the risks are close to zero; the disadvantage is that over the years the purchasing power of that money may be eroded by inflation. If, on the other hand, you aspire to protect the value of your savings — or, better still, to grow them over time — several avenues open up.

What asset management companies are

Asset management companies (Sgr) are companies whose very purpose is to gather the capital of many small investors and manage it professionally. To use the words of Legislative Decree 58/1998, known as the Testo unico della finanza, they are "financial intermediaries" authorised to provide "collective and individual asset management services in Italy".

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Guaranteeing a transparent market

Given the enormous responsibility entrusted to them, everything they do is subject to the strictest supervision by the Banca d'Italia and the Consob, the National Commission for Companies and the Stock Exchange. There is also a reference association for asset management that brings together a number of these Sgr: it is called Assogestioni.

Since 2007, like any other financial intermediary, Sgr must comply with the 2004 European directive Markets in financial instruments directive, better known as Mifid. In response to the economic and financial crisis of 2007–2008, this set of rules aims to promote fairer, more transparent, efficient and integrated markets throughout the European Union, with the ultimate goal of protecting savers. At European level, the choice to establish intermediaries such as Sgr has represented a unique case, given that they also carry out other ancillary activities, such as investment advice.

The asset management company must operate with diligence, correctness and transparency in the interest of fund participants; organise itself so as to minimise the risk of conflicts of interest, including between the portfolios it manages; adopt suitable measures to safeguard the rights of fund participants.

Testo unico della finanza, article 40, paragraph 1

Individual and collective management

Let us pause for a useful distinction. In the case of individual management, the Sgr is engaged by individual clients to administer their investment portfolio, thus establishing a direct and personal relationship with each of them. This activity was previously reserved exclusively for credit institutions — banks — and securities intermediation companies (Sim), that is, entities that place and trade securities subject to Consob authorisation.

In the case of collective management, by contrast, assets flow into a single pool that is managed in a unified manner. With the individual client relationship removed from the equation, efficiency increases and costs are spread. Mutual funds, which we will describe in detail shortly, are the main instruments through which this task is carried out.

Mutual funds

Mutual funds, as the name suggests, pool the capital of numerous investors into a single portfolio. Professional operators invest it in shares, bonds, government securities or other financial assets (in which case they are known as securities mutual funds) or in buildings and land (real estate mutual funds). Each fund is divided into many units of equal value, updated on a daily basis. This mechanism ensures growth in the value of one's investments through portfolio diversification, which would otherwise be unachievable for a private individual.

In addition to Sgr, variable capital investment companies (Sicav) and fixed capital investment companies (Sicaf) may also manage mutual funds. The latter, however, differ in that they are fully-fledged companies in which subscribers hold all the rights and obligations of shareholders, including voting rights.

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Types of mutual fund

There are several types of fund.

• A fund is defined as closed when savers can redeem units only during the offer period, which takes place before the fund begins operating in earnest, and they normally redeem them only at the fund's maturity. Closed funds are generally reserved for illiquid, long-term investments (real estate, loans, unlisted companies).
• A fund is defined as open when savers can request redemption of their units at any time. These funds normally invest in listed financial assets.
• EU-harmonised funds comply with European Ucits or Aifmd regulations in terms of risk containment and the protection of interests and savings. They are divided into equity funds, which typically have a higher risk profile and invest in shares; bond funds, which usually have a lower risk profile and invest in corporate bonds and government securities; and balanced and flexible funds, which can invest in both equities and bonds, leaving the manager greater autonomy in choosing the optimal portfolio.
• Non-harmonised funds are those issued in non-EU jurisdictions; among the best known are funds that invest in units of other funds and hedge funds.

How to choose a mutual fund

Entrusting your savings to an Sgr means relying on a professional operator with expertise and opportunities that would be unthinkable for an individual saver. This does not mean losing control of your money, however — quite the contrary. The Sgr is obliged to draw up the prospectus and the document containing key investor information (Kiid) for each fund, following specific criteria set by Consob, and to deliver it to each prospective investor before subscription. This is a document that clearly sets out general information, the financial assets selected, the risk profile, costs and results achieved over time.

Each client therefore has the opportunity to assess, together with their adviser, which solution best matches their objectives, the time horizon they wish to set and the level of risk they are prepared to accept. And, why not, their values too. The market now offers a vast range of ESG funds, that is, funds compatible with environmental, social and governance (Esg) criteria. There is also the option of choosing a thematic fund, linked to a specific sector: water management, renewable energy, education, food and so on.

The European Union is pushing in this direction, encouraging economic growth that is compatible with respect for the environment and for people. To this end, in 2019 the European Commission published the Sustainable Finance Disclosure Regulation (SFDR), which aims to stimulate the transition towards a more sustainable economic system. Through the European taxonomy on sustainable finance, it will provide a common dictionary of economic activities that can genuinely be considered sustainable — thus providing protection against confusion and greenwashing.

The asset management sector has for years been grappling with the challenges posed by climate change and has no intention of being caught unprepared. All that remains for the individual saver is to stay informed and decide how to put their savings to work while at the same time contributing to building a sustainable future.