Annual report 2004 - Compagnia di San Paolo

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Financial Management addition to those already subscribed with Sanpaolo IMI private Equity. As for investment diversification, in 2003 most of the Compagnia’s exposure on the Stock Markets consisted of stakes and, in particular, of that in SANPAOLO IMI S.p.A. 2004 marked a progressive growth of equity managed portfolios which at the end of the year reached over 450 million euros. On the whole, at the end of the year the Compagnia’s equity exposure levelled off at 51% of all assets. In general, the amount entrusted to managers in the bond sector did not change substantially during the year, though it recorded an increase in the exposure of inflation-linked bonds. At the end of the year they amounted to over 12% of total investments in the money market and fixed income sectors. Shares recorded a two year recovery, after the heavy falls of the last three years. In this respect it has to be noticed that return in this sector was close to that of traditional bonds, while indexed bonds recorded a return that was higher than or close to the performance of the two leading economic areas in the world (USA and Europe). The present model based on a diversification of assets into different investments classes, managing styles and geographical allocation is sharply different from the holding model based on participation adopted by other italian Foundations, thus placing the Compagnia in the main stream of the major international institutional investors. The 2004 financial year recorded a further step forward towards a portfolio diversification close to the strategic allocation; achieving this aim is a priority for the Governing Bodies and for the staff of the Compagnia.With the starting of equity mandates and the definition of three additional mandates in the first months of 2005, the allocation of resources to the equity sector is virtually concluded, as Absolute return portfolios in asset allocation During the year the Compagnia carried out a preliminary selection of absolute return managers, thus introducing a new category of investments which differs from traditional asset classes. Expected return in absolute return investment strategies do not depend on benchmark market indexes nor on the kind of investment, as it is defined in terms of absolute return in the medium term, through an active portfolio management and respecting the absolute risk limits defined in advance. Many different products meet these requirements, ranging from the most traditional balanced portfolios to the most advanced multi-asset strategies, from concentrated stock portfolios to portfolios based on derivative instruments and cash, in order to reduce return volatility. A different qualitative approach to absolute return strategies doesn’t exclude the use of standard quantitative tools: volatility and relative return have less significance whilst the analysis of absolute value is vital to assess the efectiveness of risk allocation. Absolute return products must have a low correlation with various indexes - therefore also with traditional investment toolsso that they can provide, above all, a good chance to diversify the portfolio. Benchmarks like beta, alpha and the correlation coefficient are the first to be taken into account when analysing these products; added value (alpha) generating sources have to be clearly identified as they represent the only relevant risk factor in the assessment of achieved results. In this kind of investments selection is therefore fundamental: risk, as well as return, depend on the ability of the manager and not on the benchmark market. This type of product is particularly suitable for institutional investors like Foundations, as they are perfectly in line with their strategic objective of safeguarding the assets real value and producing a constant cash flow. In addition, Absolute return products enable to diversify the nature of risks, with respect to those implicit in the most traditional asset class, like equity risk premium, and also compared to those entailed by alternative investments, due to their scarce transparency and liquidity. 131
Comparative table: USA-Europe equity market return, money market, bond market (Eurobonds) S&P 500 Total return Europe Bloomberg 500 40 % Eurobonds 3 months cash 30 % 20 % 10 % 0% -10% -20 % -30 % -40 % 2000 2001 2002 2003 2004 The Compagnia’s portfolio current allocation Money Market 19.9% Non Marketable Alternatives 1.5% Banks 41.14% Eurobonds 27.1% 132 International equities (excl. Europe) 3.8% European equities 6.2% portfolio managers only have to be selected for the U.S. and European small cap equities. Equity investments were made adopting a core-satellite structure, reducing portfolio management overlapping, diversifying specific risks and offering a high potential for added value relative to market indexes (alpha).
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Report 2004
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Introduction Summary page Introduct
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Introduction Letter from the Chairm
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Introduction Staff as of 31 January
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Programmes 71
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Programmes Oncology Programme Molin
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Programmes Turin’s Museum Program
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Permanent Organisations 77
Page 81 and 82: Fondazione per l’Arte www.fondazi
Page 83 and 84: Artemidorus’ papyrus - detail 82
Page 85 and 86: First edition of the “Foundation
Page 87 and 88: The Ufficio Pio www.ufficiopio.tori
Page 89 and 90: The poster of the “Provaci ancora
Page 91 and 92: Open-space computer classroom at th
Page 93 and 94: Istituto Superiore Mario Boella www
Page 95 and 96: The Mario Boella Institute 94 Wirel
Page 97 and 98: Entrance of the SiTI’s new home 9
Page 100 and 101: List of grants per sector 99
Page 102 and 103: List of grants per sector Scientifi
Page 104 and 105: List of grants per sector Scientifi
Page 106 and 107: List of grants per sector Education
Page 108 and 109: List of grants per sector Arts Arts
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Page 112 and 113: List of grants per sector Cultural
Page 118 and 119: List of grants per sector Health He
Page 120 and 121: List of grants per sector Assistanc
Page 127 and 128: Communication Being a non profit or
Page 129 and 130: The Historical Archives The Compagn
Page 131: Financial Management According to f
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Annual report 2004 - Compagnia di San Paolo

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