Italy Copying French SWF

Ashby Monk

You’re in France. It’s the year 2007. Foreign financial institutions called “sovereign wealth funds” are popping up around the world and attempting to invest in French firms. You don’t know how to react. So, naturally, you turn to your President, Nicolas Sarkozy, for direction:

“We’ve decided not to let ourselves be sold down the river by speculative funds, by unscrupulous attitudes which do not meet the transparency criteria one is entitled to expect in a civilised world. It’s unacceptable and we have decided not to accept it.”

The tone was set. Foreign SWFs were perceived as raiders, and France was going to build up its defenses against these funds.

What did France do? It set up a SWF. That’s right, the fonds stratégique d’investissement was set up in October 2008 with 20 billion euros and a mandate to develop, encourage and (let’s be honest) shelter French firms from foreign raiders. As they say, if you can’t beat ’em, join ’em. (By the way, if you’re interested, the FSI’s latest annual report is a work of art.)

So why the French history lesson? Well it turns out that Italy so approves of the French logic in this domain that it is now planning to set up a carbon copy of the French SWF. According to Italian Finance Minister Giulio Tremonti, Italy has…

“…a plan to create a fund open to private investments identical to the French strategic investment fund.”

And, as was also the case in France, it seems that fear of foreign investors is the driving impetus underpinning the new Italian fund:

“The Italian government is moving ahead with plans to set up a state investment fund to bolster Italy’s industrial fabric and stave off potential takeovers by foreign firms…The move comes as Italian politicians and bankers are scrambling to fend off French firms that hold large stakes in Italian firms and are seeking to take a stronger hand in running them. On Thursday the Italian government approved a measure giving Mr. Tremonti power to set up a state investment fund.”

To be fair to Italy and France, this desire to reassert some autonomy and self-determination over domestic economies is common in the era of globalization and has been a standard reason to set up SWFs. Put simply, these two countries want to ensure that global forces don’t marginalize their best firms; other countries (e.g., Abu Dhabi, Malaysia, Singapore, etc.) have done the same.  And, interestingly, these funds are generally not there to support failing firms; they are there to facilitate the global success of the best and brightest firms. As Adam Dixon and I note in our paper (which is forthcoming in Transactions), these are what we call ‘territorialist’ SWFs:

“The stated or implicit rationale behind these funds is to support the competitiveness of local firms, both at home and abroad…we associate these funds with countries that are either highly developed already, or are quickly reaching this status. The logic of the territorialist SWF is to develop and ensure the continued dominance of local assets within broader global networks of production, R&D and distribution. Importantly, territorialist SWFs are not likely to support uncompetitive firms and/or parts of the economy. Rather, the territorialist SWF operates on a market logic comparable with strategies followed by successful private equity firms. This market-based logic is crucial, as it deflects potential controversy, both in international and national contexts, involving government intervention in private markets.”

So Italy wants a SWF to facilitate the success of its domestic industries in the new global marketplace. Will it succeed? I guess we’ll soon find out.

3 Responses to “Italy Copying French SWF”


  1. 1 Victoria Barbary April 5, 2011 at 2:38 pm

    Ashby, I think we need to be more precise here (SWF geek alert). The SFI is a subsidiary of the Caisse de Depots in France, which has been in existence since the 1860s. Likewise, in Italy they have the Cassa Depositi e Prestiti, a similarly venerable institution, with a similar remit. What we’re seeing is these institutions are creating vehicles that can take a “private equity” stance and thus be more active in ensuring that that domestic companies are bolstered.

    Not disagreeing with your analysis of what these vehicles are for. Just what they are…

    • 2 Ashby Monk April 5, 2011 at 2:43 pm

      Vee! Thanks for the comment. (Shouldn’t you be off honeymooning somewhere?) Fair point on the post. FSI is 49% French gov + 51% Caisse. Notwithstanding, the fund harkens back to Temasek and Mubadala. And the new Italian one will as well. Whether or not we want to qualify them as SWFs…beyond me. Let’s just agree that they invest money and they are owned by governments. Ciao! A


  1. 1 Italian ‘Defense Fund’ Launching Today « Oxford SWF Project Trackback on April 11, 2011 at 9:55 am

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This website is a project of Professor Gordon L. Clark and Dr. Ashby Monk of the School of Geography and the Environment at the University of Oxford. Their research on sovereign wealth funds is funded by the Leverhulme Trust and The Rotman International Centre for Pension Management.

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