Apr 302017

One of the beauties of maths is that it is the same in every language. So you don’t need to know Italian to read the table on the second page of this article on this week’s Milano Finanza.

The Made in Italy Fund started in May last year and is up 43% since then.

Here are the main points of the article:

  1. The Italian stock market is dominated by the largest 40 stocks included in the FTSE MIB index. The FTSE MIB and the FTSE Italia All Shares indices are virtually overlapping (first graph on page 1).
  2. 2/3 of the Italian market is concentrated in 4 sectors.
  3. Small Caps – companies with a market cap of less than 1 billion euro – are 3/4 of the 320 quoted names, but represent only 6% of the value of the market.
  4. Small Caps as a whole have underperformed Large Caps (second graph).
  5. But quality Small Caps – those included in the Star segment of the market – have outclassed the MIB index (third graph).
  6. However, the Star index is itself concentrated (table on page 3): the top 11 stocks in the index with a market cap above 1 billion (not 12: Yoox is no longer there) represent more than 60% of the index value (a company needs to be below 1 billion to get into the Star segment, but it is not necessarily taken out when it goes above).
  7. Therefore, to invest in Italian Small Caps you need to know what you’re doing: you can’t just buy a Mid/Small Cap ETF – which is what a lot of people did in the first quarter of this year, after the launch of PIR accounts (similar to UK ISAs), taking the Lyxor FTSE Italia Mid Cap ETF from 42 to 469 million.

To this I would add: you can’t just buy a fund tracking the Star index either (there are a couple): to own a stock just because it is part of an index makes no sense – more on this in the next post.

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  3 Responses to “MIF on MF”

  1. Interesting, though the TER of the fund looks very high unfortunately

  2. If you could give us an idea of reason behind the first then holdings in the fund – since you mention in your post ‘Run away’ that it’s an important question to ask the fund manager – I would be very interested.
    The remark I made yesterday on fees was also based on the fact that financial advisors in the US suggest that one keep total expenses below 0,4%, see e.g. http://www.humbledollar.com/2017/09/weeksept-10-16/
    But I understand that particularly in small caps a good manager can potentially add a lot of value, hence my question above.

  3. Stefano
    Thanks for your comments. The MIF’s management fees are lower than average and the TER will come down as the fund size grows. Look at http://www.atomosicav.com/made-in-italy. Returns are net of all fees – that’s what matters after all. You can also look on morningstar.it and on our website http://www.bayesinvestments.com.

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