As frequently highlighted by researchers and the industry, the importance of looking beyond traditional investment tools, as well as recognizing the potential difficulties associated with alternative investments (such as illiquid asset class restrictions), is accepted all over the world. Institutional investors such as Social Security and Pension Funds, Insurance Companies and Banks are the main supporters of this investment class that includes private equity and venture capital, infrastructure, real estate and hedge funds.
In 2015 institutional investors in America and Europe have increased the exposure of their portfolio in alternative funds up to 20-25%. In Italy, too, we expect a portfolio allocation growth from the current 1-2% to 6-7% in the short term.
These numbers are significantly lower than those of the rest of Europe and this, of course, inhibits traditional investors because they can only invest small amounts of money. However, in Italy things are moving fast. Just a year ago, in June 2015, a ministerial decree was launched that favours this type of investment by Institutional operators thanks to a “tax bonus” for Social Security and Pension Funds. For social security funds, this consists in a tax credit of 6% of the income share that has been reinvested in medium/long term products that are related to the real economy. As for pension funds, there is a tax credit of 9% of the net result subject to substitute tax that has been re-invested in medium/long term financial activities that are linked to real economy.
Emphasizing the role of alternative investment as a tool for institutional investors to achieve a positive return is of fundamental importance today, as the Italian economic scenario generally offers limited possibilities. Indeed, with alternative investment, institutions can participate in the recovery of the Italian economic system, providing capital and managerial expertise for small and medium-sized companies, which are very often brilliant but unable to compete internationally since still poorly organized.
In these circumstances, we should note that the Italian startup scenario is far from still: it is extremely energetic and lively, so much so that it has begun to attract the attention of foreign investors. According to a study by EconomyUp, for example, the month of May was a record time for investment in Italy.
Indeed, there’s no doubt that in recent years our country has moved forward thanks to specific legislation from 2012 and 2015 that allow private investors in venture capital funds to receive tax benefits. If VC investment in innovative startups in the course of the reporting year amount to at least 70% of the value of financial instrument, then individual investors will be entitled to a 19% deduction of income tax, and corporate investors will be entitled to a deduction of 20% of their income tax.
These measures can accelerate the Italian tech revolution. They represent small but decisive steps that have already had a tremendous impact on the Italian ecosystem. Just imagine what Italy could do and become if institutional investors were given the opportunity to increase the amount of their investment. It would be a great occasion to demonstrate once again that our country is not short of ideas, motivation and vision and to finally take our investment scenario to the level of other European and non-European countries.