State Street Global Advisers (SSgA) has acquired 100% of Italian fund-of-funds Fondamenta. Fondamenta raised over €160m in 2001 and has a fund structure that invests 60% to 70% in Italian private equity funds and 30% to 40% in Italian co-investments, mainly in small-medium sized companies.
The name of the fund’s management company will change from Mediolanum State Street SGR to State Street Global Advisers SGR. Italian bank Mediolanum, which has more of a focus on retail investors, was not interested in developing its alternative asset class any further and so decided to sell its stake in Fondamenta. State Street is more focused on institutional investors and is keen to develop its alternative asset portfolio. It also has much more of an international focus, which appeals to Fondamenta.
Giuseppe Campanella, CEO of the fund, says it will be business as usual for Fondamenta, which recently welcomed a new recruit from Deloitte. Alberto Argnani has joined the team with specific responsibility for the direct investments of the fund.
Fondamenta has already completed its funds investment programme and is invested in 12 funds and six direct investments. It has over €40m left to be allocated to direct investments.
Campanella hopes marketing for the group’s second fund will begin in the autumn. The new fund will have an enlarged investment focus with 50% in Italy and 50% in southern Europe including South of France, Spain, Greece, Croatia and Slovenia and possibly some North African targets, which Campanella sees as a growth area for Italian companies to do business.
The team is also thinking of launching other products such as real estate funds, which are another popular sector in the Italian market.
Fondamenta has an exclusively Italian investor base. Campanella is confident about opportunities in Italy and for the second fund raising hopes to attract foreign investors to the fund. But the level of foreign investment in Italian private equity funds has historically been low and fund raising will be challenging. In 2003 the total volume of funds raised in Italy remained almost static compared to 2002, down 3% at €1.9bn. Around €1.5bn was raised (76%) from independent funds focused on Italy; €364m (19%) came from parent organisations of captive players and around (€94m or 5%) was capital gains available for reinvestment.
Banks were the primary source of capital (44%) followed by fund-of-funds (20%, a threefold increase on 2002 figures), while funds provided by private individuals were down from 7% in 2002 to 2% in 2003 decreasing from €121m to €45m.