[10577]
December 17, 1998
TO: INTERNATIONAL COMMITTEE No. 38-98
RE: ITALIAN PENSION FUND REFORM NEARING COMPLETION
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Enclosed is a copy of a memorandum prepared by outside counsel discussing Italy's new pension
system. Italy significantly revised its pension system in 1995 with a law that permits defined
contribution pension plans. After more than three years, most of the implementing regulations are in
place and pension plans are beginning to be formed under the new system.
Under the new rules, there are relatively few limitations on the types of investments that pension
plans may make. In particular, pension plans may invest in US mutual funds and other securities, subject
to certain non-discriminatory asset allocation limitations. For example, investments in closed-end funds
are limited to 20% of the pension plan’s assets and 25% of the closed-end fund’s assets. No distinction
is made between shares of a US closed-end fund or an Italian closed-end fund for purposes of these
limitations. The absence of general investment restrictions is noteworthy and is consistent with the
Institute’s long-standing position that asset allocation limitations and restrictions on foreign investment
by pension plans should be eliminated.
Pension plans are also permitted under the new rules to delegate management duties to
“authorized investment companies.” While the Italian CONSOB has not formally declared that US
managers will be authorized to manage Italian pension plan assets, an official communication to this
effect is expected in the near future.
Robert C. Grohowski
Assistant Counsel
Attachment