This document provides an overview of the mutual fund market in Italy compared to India. It discusses the types of mutual funds available in both countries including equity funds, fixed income funds, and money market funds. It also describes key characteristics of the Italian mutual fund market, which has total assets of over €584 billion and strong presence of money market funds. The market is regulated by the Bank of Italy and Consob, and dominated by a few large players. In contrast, the Indian mutual fund market is smaller relative to its economy and has less investor trust.

1. Profile of Mutual Fund
Market in Italy vis-à-vis
India
By Itisha Gupta (865)
Semester VI

2. Mutual Funds
 A type of professionally managed collective investment scheme that pools
money from many investors to purchase securities.
 It is most commonly applied only to those collective investment vehicles that
are regulated and sold to the general public.
 Sometimes referred to as "investment companies" or "registered investment
companies."
 Most mutual funds are "open-ended," meaning stockholders can buy or sell
shares of the fund at any time.
 Mutual funds are operated by money managers, who invest the fund's capital
and attempt to produce capital gains and income for the fund's investors.

3. Advantages of Mutual Funds
 Give small investors access to professionally managed, diversified portfolios
of equities, bonds and other securities, which would be quite difficult to
create with a small amount of capital.
 Each shareholder participates proportionally in the gain or loss of the fund.
 Mutual fund units, or shares, are issued and can typically be purchased or
redeemed as needed at the fund's current net asset value (NAV) per share,
which is expressed as NAVPS.

4. Types of Mutual Funds
Types
Money Market
Funds
Bond or Fixed
Income Funds
Stock or
Equity Funds
Hybrid Funds

5. Mutual Fund Market in Italy
 Italy is 2nd largest fund market in Europe with assets of more than €584
billion.
 Mutual fund assets correspond to between 30 and 40 percent of GDP.
 Italians have more than one-fifth of their non-real estate investible assets in
mutual funds.
 Foreign fund companies have been prompted to sell their products in Italy
because regulators do not require them to contend with the issues of tax
credits and liabilities within their funds’ NAV.
 Italian mutual funds are hampered by generally high expenses.
 The growth of mutual funds has helped banks to lift their return on equity
from almost zero to 12%.

6. Recent Trends in the Italian Mutual Fund
Market
 With a compound annual growth rate of -7,1 per cent, the Italian mutual fund
market was the worst performing market in Europe over the period 2001 to
2003.
 The largest decline in mutual fund assets is found in the equity segment.
 Money withdrawn from equity accounts was invested into secure investments
like money market funds.
 Italian retail money market fund market and the traditionally strong bond
fund market are the largest of their category in Europe.
 Italy's mutual-fund market is the second-biggest in continental Europe, after
France, with about euro 500 billion ($525 billion) under management.

7. Italian Mutual Funds segmented by Type of Fund

8. Types of Funds in Italy
 Collective investment undertakings in Italy are organized as:
 open-end mutual investment funds which are in compliance with the UCITS Directive (Fondi
Comuni Mobiliari Aperti armonizzati)
 open-end mutual investment funds not in compliance with the EU Directive (Fondi Comuni
Mobiliari Aperti non armonizzati)
 closed-end mutual investment funds (Fondi Comuni Mobiliari Chiusi)
 funds for collective investment in real estate property (Fondi Comuni Immobiliari Chiusi)
 funds reserved for special categories of investors (fondi riservati); the investors in these
funds can only be banks, investment companies, financial entities or other entities or
persons specially qualified in financial matters
 speculative funds (fondi speculativi)
 variable capital investment funds (SICAVS): the only Italian funds with a corporate form
 guaranteed funds
 protected funds
 index funds

9. Market Players in Italy
 The fund market in Italy is very fragmented.
 Largest player (Nextra Investment Management) – 19% of the total market
 Other smaller and medium size players – 49% of the market
 Smaller suppliers of mutual funds – 32%
 Larger fund promoters have in contrast to other European markets been very
successful in Italy.

10. Types of Mutual Funds in Italy
1. Fixed Income Funds:
 Bonds held within the fund portfolio are designed to mature on a staggered basis so
that income payments are delivered consistently.
 The fund manager replaces bonds as they mature, when the issuer's credit is
downgraded and when the issuer "calls," or pays off the bond before the maturity
date.
 Some bond funds are designed to mimic the broader market, while others
specialize in high-yield (junk) bonds, short-term debt, emerging markets or tax-
free municipals from state and local governments.
 Bond-fund investors have a monthly payout of the income earned by the fund.
 Because you own mutual-fund shares, there is no maturity date on which you can
expect to get back "par," or the face value of the bond.

11. Types of Mutual Funds in Italy
2. Money Market Funds:
 In Italy, the strong relative presence of money market mutual funds is notable.
 This is connected with the imposition of restrictive regulations on the payment of
interest on checking accounts and other short-term bank deposits that all these
countries have imposed for prolonged periods.
 Even though such regulations have been withdrawn over time, once established
money market mutual funds have continued to thrive.
3. Equity Funds:
 In most of Continental Europe equity funds were underdeveloped in 1998, although
they were growing rapidly in France, Italy and Spain.

12. Supervision of Mutual Fund Market
 The supervisory authorities for funds are:
 Bank of Italy
 Consob
 Financial Intelligence Unit (anti money-laundering)

13. Fund Structure
 Each fund adopts its own regulations, subject to Bank of Italy’s approval, establishing:
 fund name
 duration of the fund
 promoter company, manager company (if different from the promoter), and custodian bank
 NAV computation
 terms and conditions of participation in the fund
 kind of investment allowed
 terms and conditions for distributing profits
 terms and conditions for publishing relevant fund documentation
 details of the expenses to be borne by the fund and those to be borne by the Italian
management company
 the amount of, or the methods for determining, the commissions due to the Italian
management company and the charges to be borne by unit holders

14. Mutual Fund Market in India
 The Indian mutual fund industry is still small in comparison to the size of the
Indian economy. However, the Mutual Fund Market in Italy is highly
developed.
 Investors trust the mutual fund market less in India, as opposed to Italy,
where the investors have great trust in the mutual fund market.
 In Italy, the mutual fund market is mainly regulated by Bank of Italy and
Consob, whereas the Indian Mutual Fund market is regulated by the Reserve
Bank of India (RBI), Securities and Exchange Board of India (SEBI) and the
Association of Mutual Funds of India (AMFI).
 Both Italy and India offer the 3 types of mutual funds to its investors: equity
funds, fixed income funds and the money market funds.

15. Thank You!