Italian ‘Defense Fund’ Launching Today

Ashby Monk

Less than a week after Italy announced plans to set up a ‘strategic defense fund’, the new fund has apparently already launched!

According to Reuters, the fund will be set up on Monday April 11 (i.e., today). Reuters is also reporting that the new ‘defense fund’ will have 20 billion euros (which is exactly what France’s FSI started with…recall that Italy said it wants a fund that is “identical” to the French SWF). Contributions to the new Italian fund are apparently coming from a variety of sources, including Italian state pensions and foreign SWFs. Apparently, a Chinese sovereign fund is considering participating.

That was fast! What’s all the rush?

Well, this new fund has been inspired by the desire to defend Italy’s darling Parmalat from an unwanted takeover bid by French rival Lactalis (which recently purchased a 29 percent stake in the Italian food and dairy company). So the new ‘defense fund’ will (in all probability) start buying up stakes in successful companies (such as Parmalat) in order to “help manage them.” And by “help manage” I’m fairly certain the Italians mean to say “help defend from unwanted foreign takeovers.”

To be fair, Economy Minister Guilo Tremonti recently said,

“Our strategy is to help Italian companies to grow, to have a bigger dimension. It is not a defensive move.”

All respect, Mr. Tremonti, but the new fund is definitely a defensive move. I accept that this may not be a protectionist move in that the new fund will not be protecting uncompetitive industries and companies from global competitive forces. But it will be defending Italy’s most successful companies from undesired takeover attempts. Basically, Italy wants to be sure its companies hold on to their local and global status. Italians just want their ‘national champions’ to remain, well, Italian.

1 Response to “Italian ‘Defense Fund’ Launching Today”

  1. 1 Patrick Flaherty April 11, 2011 at 10:40 am

    The China line has to be a red herring, right? I can’t see the CIC partaking in this fund. It could be some local Chinese fund but I doubt they would ever get permission from the central government. This fund, would at some point, probably be used to prevent a Chinese company from acquiring or investing in an Italian company.

    Once the legal issues are sorted, I wouldn’t be surprised if this fund is used to purchase all of the LIA’s Italy investments such as UniCredit and Enel.

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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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