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Mario Pello

Italy: Back on the map?

​Mario Pellò (Head of Portfolio Management, Italy) explains how investment in Italy may be turning a corner.

​Over the past two years, Italy has not appeared on the investment map of institutional cross-border investors with investment activity coming to a virtual standstill.
Political instability, the European debt crisis and the sluggish economy, among many other reasons, have made investors nervous. Additionally, potential investors became frustrated with sticky price levels, which hardly adjusted to the challenging circumstances. For more than two years, supply and demand did not meet: vendors still hoped to keep prices close to the levels of the pre-crisis years, while investors were waiting to see prices drop as a result of the country’s higher investment risk.
Over the past six months, as a result of pressure exercised by banks, the need for disinvesting (for example due to approaching fund expiries) has increased and subsequently, asking prices have been moving closer to potential investors' expectations. This new approach has helped the Italian market to stabilise and in a way to “awake”, even though only opportunistic investors or companies targeting long investments horizons are really active in the market. Lower prices will start to appeal to core investors as the risk of a Eurozone collapse is perceived as remote. Appeal will also be driven by a need for diversification, in particular in order to bolster the very low initial yields currently available in core European markets.