Italian Asset Gatherers: Paradigm Shift, Part 4

Italian Asset Gatherers
11 October 2021 Update
Paradigm shift, part 4 Gian Luca Ferrari

Equity Analyst
Product innovation at the heart of the run to improve margins +39 02 8829 482
In this new publication, we aim to summarise the evolution of the product offer over the past Gianluca.Ferrari@mediobanca.com
twenty years in what we call a “search for margins” run. The debate around the choice between
“in-house” and “third-party” became more a decision on how to offer a guided open platform,
distributing a white label selection of third-party funds with the double benefits of earning better
A special recognition goes out to Beatrice Gianola
margins while taking advantage of the expertise of global fund managers. Lately, most players
for her contribution on this report
adopted the sub-advisory mandate model and, more recently, the main innovation has taken the
form of advisory contracts.
“Search for margins”: vertical integration in parallel with AuM growth
The search for more value to be internalised and retained has its natural development in the
progressive substitution of à la carte funds with sub-advisory solutions. This does not mean fully
replacing third-party products; rather it means that these solutions become the core of the offer.
Third-party funds would not disappear, however, as they would remain in demand for the top end
of the customer base. We believe the in-house management of some core investment lines in which Rating TP Upside
a company has some skills is reasonable, and this could eventually be done with the advice of some ANIMA O/P €5.00 +15%
external asset managers. We, finally, appreciate BGN’s recourse to “industrial advisory” to
AZIMUT N €24.0 +2%
manage some thematic lines.
BANCA GENERALI N €32.0 -16%
Fineco unveiled its cards already; BGN and BMED can extract more value from their AuM
BANCA MEDIOLANUM O/P €9.30 -4%
We run an exercise to identify who has the strongest upside potential from further optimisation of
the value chain. FBK has already unveiled its cards, and it’s expected to improve its net margins FINECO N €15.0 -5%
by a hefty 12bps by 2024. BGN could have room for improvement, too. We are not referring to the Note: Target prices are calculated excluding 2019-2020
expected repricing of the funds, but rather to a better in-house vs third-party mix and better dividends still to be distributed
conditions from external asset managers. The contribution of the expected growth is equally Source: Mediobanca Securities
material. We, therefore, see the potential for an 8pt expansion in the net margin by 2024. A lot
has been done already at BMED, but extending the strategy of reducing the scope of sub-advisory
to the AuM where it hasn’t been applied to yet could offer further upside potential in margins. We
believe BMED could internalise 4pts of net margin over the next three years. Our conclusion is that
we still see upside potential on companies’ margins and earnings, and this will reflect more
efficient management of the value chain and not higher TERs. And this is a positive, in our view.
KIIDs don’t lie, part 2: some good news, finally…
In 2017, we published a detailed note containing the results of the analysis of 113 mutual funds
representing €50bn AuM. The key findings of that research were the following: i) ongoing charges
of ca 300bps were too high; ii) 29 funds earned performance fees in 2016, despite clients’ losing
money and iii) total expenses reached 363bps, eroding 50% of gross performance. This time, we
extended the scope of our analysis to 330 funds, totalling ca €120bn AuM - almost three times the
scope compared to our former research. Our exercise shows some positive evidence: BGN and
BMED managed to significantly reduce the costs of their products. BMED also earned the merit of
being the first mover in adopting more stringent rules for calculating performance fees (with a
deserved caveat for FBK, which never charged them). As such, none of its funds charged
performance fees, despite negative performance delivered to clients (vs 23% of its funds in 2016,
15% of BGN’s and 25% of AZM’s in 2020).
…but plenty of room for greater efforts
On a less positive note, our analysis shows that no major progress was made by AZM in reducing
the cost of its products that, in some cases (ie, Equity Global ESG), showed ongoing charges of
400bps and TERs of 600bps. FBK, on the other hand, confirmed the good results already seen in
2016 from a pricing discipline perspective, although its equity funds didn’t shine in terms of
performance. In general, fixed-income funds delivered modest 1.1% net returns to clients, with
total expenses eroding two-thirds of performance. In this context, we find it hard to justify the
presence of performance fees in this category. Finally, despite the efforts made by ESMA towards
a fairer way to calculate performance fees, we are still not convinced about the benchmarks
adopted. In general, asset gatherers calculate performance fees as a percentage of the over-
performance of a fund to spread (typically 3M Euribor +300/400bps on equity funds); but this is
not an indicator of the capability to generate alpha. Rather, it’s merely a market call. And
performance fees should reward the former, not the latter.
IMPORTANT DISCLOSURE FOR U.S. INVESTORS: This document is prepared by Mediobanca Securities, the equity research department
of Mediobanca S.p.A. (parent company of Mediobanca Securities USA LLC (“MBUSA”)) and it is distributed in the United States by MBUSA
which accepts responsibility for its content. The research analyst(s) named on this report are not registered / qualified as research
analysts with Finra. Any US person receiving this document and wishing to effect transactions in any securities discussed herein should
do so with MBUSA, not Mediobanca S.p.A.. Please refer to the last pages of this document for important disclaimers.
Executive Summary
SECTION I – In search of extra margin
In our previous three “Paradigm shift” reports, we analysed some items relevant to the asset gathering
industry such as the implication of recruitment costs on operating leverage and private banking offer
of the “promotori finanziari” network. We deep-dived into the relationship between pricing and
service model in our last report.
In this publication, we aim to summarise the evolution of the product offer over the past twenty years,
in parallel to the fast development of the asset gathering industry, and in the light of a decline in
interest rates, which made the search for margins a topical item for this sector.
The debate around the choice between “in-house” and “third party” became more a decision on how
to offer a “guided open platform”, distributing a white label selection of third-party funds with the
double benefits of earning better margins while taking advantage of the expertise of global fund
managers. Consequently, distributors were earning better margins, partially shared with their financial
advisors - a win-win situation for all the actors involved. Lately, most players adopted the sub-advisory
mandate model - an alternative way to offer clones of third-party funds, with the possibility of white
labelling a product and earning, at the same time, better margins. More recently, the main innovation
has taken the form of advisory contracts. In this case, financial advisors’ networks need to set up their
teams of fund managers, which follow the indications of third-party fund managers.
Such an approach is unlikely to replace the previous strategies, but it’s complementary to the others.
Fineco is expected to use advisory contracts to manage some core, plain vanilla strategies. On the
other hand, Banca Generali successfully introduced some so-called industrial advisory lines, leveraging
the expertise of industrial partners to manage some thematic lines. We, finally, mention two examples
of solutions to internalise revenues: (i) new sub-funds to be launched by Banca Generali, tracking
“iconic” strategies of key AM partners, and (ii) the family of Target Date funds launched by Fineco
under the name FAM Target.
Italian asset gatherers – product offer evolution: vertical integration vs margin optimisation
GUIDED OPEN ARCHITECTURE /

OPEN ARCHITECTURE SEMI-DIRECT MANAGEMENT DIRECT MANAGEMENT
WHITE LABEL
NET MARGINS FOR THE DISTRIBUTOR
In-house fund
management
Sub-advisory mandates Structured solutions

<100% NAV (eg Fineco’s target date)
Funds of third-party funds Advisory
Sub-advisory mandates
Trackers
Third-party funds
VERTICAL INTEGRATION
Source: Mediobanca Securities
In the following chart, we provide an illustrative example of pay-in (ie, the management fee paid by
clients, net of the cost of third parties) for similar funds with the same management fee, but
“packaged” in a different way. This could prove to be a simplistic exercise, as there is no unique
answer to the question of how margins compare in different investment solutions. Yet, we believe it
is accurate enough to put things in the right context when it comes to commenting about margins.
11 October 2021 ◆ 2
We believe this throws enough light on why most asset gatherers are trying to substitute the existing
stock of third-party solutions with more profitable sub-advisory mandates and advisory solutions. The
issue is not immaterial, as a switch of €1bn AuM from third-party products to advisory solutions, just
to cite an example, could return €5m of additional gross fees (ie, before the payout to the distributors)
- something relevant, in our view.
Illustrative example of different profitability for each solution
100
90-95
NET MARGIN FOR THE DISTRIBUTOR
85
70
In-house funds Advisory Sub-advisory mandate Third-party
Many lessons can be learned from the analysis of the product strategy of the listed asset gatherers. In
this note, we synthesise all the best practices to identify the “optimal” product strategy with an eye
on margin optimisation.
The search for more value to be internalised and retained has its natural development in the
progressive substitution of à la carte funds with sub-advisory solutions. This does not mean the full
replacement of third-party products. But it certainly means that, in the development of a company,
these solutions become the core of the offer. Third-party solutions would not disappear, however, as
they would remain in demand for the top end of the customer base. For what concerns the direct
management of some funds, we believe the in-house management of some core investment lines in
which a company has some skills makes sense. Eventually, this could also be done with the advice of
some external fund managers. Advisory contracts could also be used for other purposes; we refer to
Banca Generali’s brilliant use of “industrial advisory”.
Product strategies: three alternative options
Strategic
IN-HOUSE FUND MANAGEMENT
option #1
NET MARGIN (AS A % OF AuM)
Strategic
SUB-ADVISORY MANDATES
option #2
FoF ADVISORY
THIRD-PARTY FUNDS
Strategic
THIRD-PARTY FUND MANAGEMENT
option #3
SIZE OF ASSETS UNDER MANAGEMENT
11 October 2021 ◆ 3
To sum things up, asset gatherers can obtain significantly more value from their asset management
businesses via the optimisation of their product mix. In most cases, the initiatives needed have already
been disclosed, or we even got targets from companies (eg, Fineco). In other cases, some measures
were just mentioned without many details regarding the net benefits to be achieved. We run an
exercise to identify who has the strongest (theoretically) upside potential from further optimisation
of the value chain, without including the effects of a richer mix in terms of equity exposure, which
sounds more as a macro call.
Fineco has already unveiled its cards, and it’s expected to improve net margins by a hefty 12bps by
2024. Aside from Fineco, Banca Generali could have room for improvement, too. We are not referring
to the well anticipated repricing of its products, but to a better in-house vs third-party mix and better
conditions from third parties. The contribution of the expected growth is equally material, thanks to
the higher gearing towards net fees. We don’t believe consensus expects major improvements in the
mix and margins over the next three years, with the only uptick driven by the recently announced
repricing.
A lot has been done already at Mediolanum, but extending the strategy of reducing the scope of sub-
advisory to the assets where it hasn’t been applied to yet could offer further upside potential in
margins. Our conclusion is that we still see upside potential on companies’ margins and earnings, and
this will mainly reflect more efficient management of the value chain and not higher total expense
ratios.
Selected Italian asset gatherers – potential net margin uplift from better mix and optimisation of value chain
More efficiency Expected accretion from Potential net margin
In bps Better mix
on the back book 2022-24E net flows uplift on AuM by 2024E
FBK +3bps +3bps +5-7bps +12bps

BGN +2bps +1bps +5bps +8bps
BMED +3bps - +1bp +4bps
11 October 2021 ◆ 4
SECTION II – KIIDs don’t lie, part 2

In 2017, we published a detailed note containing the results of the analysis of 113 funds representing
€50bn AuM, or one-third of the managed assets of the four listed asset gatherers. The key findings of
that research were the following:
1) Mutual funds had average ongoing charges of ca 300bps in 2016 - too high, in our view.
2) 29 funds (representing 27% of the AuM of the sample under analysis) earned a performance
fee, despite clients’ losing money during the year - not sustainable.
3) Including performance fees, funds charged an average (weighted for AuM) of 363bps. This
meant that ongoing charges and performance fees eroded 50% of gross performance reported
by those funds (ie, 756bps) in 2016 - again, unjustifiable.
This time, we extended the scope of our analysis to 330 funds, representing a total of ca €120bn AuM,
almost three times the scope compared to our former research. In this exercise, we added Anima in
our analysis.
For each company, we selected the 40 largest mutual funds by assets under management and across
categories (equities, balanced, flexible, multi-assets and fixed-income), taking into account each fund
class (accumulation, distribution, S-class vs L-class, currency hedged or not, etc.) and weighting costs
and performances for the size of a specific fund.
Top 40 funds (weighted by AuM)

Banca
Banca Generali Fineco Bank Azimut Anima
Mediolanum
Ongoing charges 2.28% 2.34% 2.23% 2.72% 1.54%

Performance fees 0.73% 0.35% 0.00% 0.64% 0.12%
Total costs 3.02% 2.69% 2.23% 3.37% 1.65%
2020 gross performance 13.73% 7.97% 3.59% 5.76% 3.31%

2020 net performance 10.71% 5.28% 1.36% 2.39% 1.66%
Total costs as % of gross perf. 22% 34% 62% 58% 50%

Perf. fees as % of gross perf. 5% 4% 0% 11% 4%
% funds earning perf. fees despite neg. perf. 15% 0% 0% 25% 0%
Source: Morningstar, KIIDs, Mediobanca Securities
To make the comparison between the companies even more comprehensive, we did not limit the
analysis to the top 40 funds by AuM for each company which is, in any case, a good proxy of the average
asset allocation of a client. We also analysed the top 20 in each category. Or the top 5/10/15 if a
specific category didn’t offer a sample wide enough. We would finally stress that the aim of such an
analysis was not to comment on 2020 performance, as an asset manager cannot be evaluated on single-
year performance. And we refrain from drawing conclusions on the back of higher (or lower)
performance compared to competitors’. We are more interested in flagging the key changes that
occurred in the pricing of the mutual funds (if any) and potential further initiatives that might be
taken to increase the transparency of this industry.
The conclusion is that, compared to our previous analysis, we see tangible improvements in the
product offer of Banca Generali and Banca Mediolanum, with ongoing charges finally not too far from
the best-in-class which is, once again, Fineco. It is worth reminding that in 2016, the two companies
were 137bps and 35bps, respectively, above Fineco’s ongoing charges applied to clients.
11 October 2021 ◆ 5
On the other hand, Azimut has emerged as an outlier, with the highest ongoing charges - 272bps on
average and ca 50bps above the average of the three peers. We note that such a level is not different
from the results of our previous analysis.
The analysis concerning the incidence of performance fees is also interesting. Banca Generali earned
73bps last year, as the LUX IM SICAV still calculated variable fees on a 12-month rolling basis and
benefited from a strong contribution in 1Q - before the Covid-19-related sell-off - and 4Q, when the
vaccine-triggered rally took place. Generous 13.7% (weighted average) gross performance achieved by
LUX IM translated the incidence of performance fees on gross performance delivered to clients into
5%, below the 11% reported by Azimut (which delivered 5.9% lower gross performance to its clients)
but above Mediolanum’s 4%, which has adopted, since 2019, the new ESMA rule of charging
performance fees only once a year.
In conclusion, Banca Generali and Banca Mediolanum managed to significantly reduce the costs of their
products via a new SICAV (LUX IM for Banca Generali), thanks to a progressive decline in the
distribution of the most expensive fund categories (eg, Mediolanum abandoned the expensive S-classes
in favour of the cheaper – even after the repricing – L-classes). Mediolanum also had the distinction of
adopting more stringent rules for calculating performance fees since the beginning of 2019. As such,
none of its funds charged performance fees on funds that delivered negative performance to clients
(vs 23% of its funds in 2016, 15% of Banca Generali’s and 25% of Azimut’s in 2020). This is a tangible
improvement compared to the past.
On a less positive note, our analysis shows that no major progress has been made by Azimut in reducing
the cost of its products which, in some cases, see the total expense ratio reaching 600bps - too high.
Fineco, on the other hand, confirms the good results already seen in 2016 from a pricing discipline
perspective, although its equity funds didn’t shine in terms of performance.
In general, we find it hard to justify the presence of performance fees in fixed-income funds in this
historical period. This fund category delivered, on average, 1.1% net returns to clients, with Anima
being an outlier, at +1.57% net. Total expenses of these funds represented 45% of gross performances
at Anima, the most virtuous in the panel. For all others, costs represented approximately two-thirds
of gross performance, while they eroded almost entire performance of Banca Mediolanum’s funds. In
this context, we wonder whether it makes sense for clients to buy products in which – on average –
two-thirds of performance is retained by the company and net performance is a modest 1.1%.
In the case of Banca Generali’s fixed-income funds, average gross performance was 3.53%, triggering
40bps of performance fees, which represented almost 30% of net performance delivered to clients.
Put in a different way, without performance fees, clients would have had ca 30% higher returns (from
135bps to 175bps) and still remunerate the company with ongoing charges of 178bps (lowering the
incidence of overall costs on gross performance from 62% to 50%). A similar argument could be applied
to Azimut, while the fact that no net performance was registered in Mediolanum’s fixed-income funds
(with Mediolanum being the cheapest thanks to the sharp incidence of short-term bonds or monetary
funds) makes such an argument even more sensitive. In the current low-rate environment, we believe
the overall pricing of fixed-income funds should be questioned, with the application of performance
fees being the main debatable item.
Focusing too much on fixed-income funds could be deemed to be misleading by FA networks, as some
of them are clearly focusing more on equity investments. Yet, the total expense ratio of ca 200bps for
an asset class that returned, on average, 300bps in a positive year should raise some doubts over its
sustainability.
Finally, despite the efforts made by ESMA to adopt a fairer way to calculate performance fees, we are
still not convinced about the benchmarks adopted. In general, Italian asset gatherers calculate
performance fees as a percentage of over-performance of a fund to spread (typically 3M Euribor
+300/400bps spread on equity/flexible funds); this is not, in our view, an indicator of the capability
to generate alpha, while being merely a market call. Performance fees should reward the former, not
the latter.
11 October 2021 ◆ 6
SECTION I - From an open platform vs in-house,

to a blend of solutions
In our previous three “Paradigm shift” reports, we analysed some relevant items for the asset
gathering industry such as the implication of recruitment costs on operating leverage and private
banking offer of the “promotori finanziari” network. We deep-dived into the relationship between
pricing and service model in our last report.
In this publication, we aim to summarise the evolution of the product offer over the past twenty
years in parallel to the fast development of the asset gathering industry and in the light of a
decline in interest rates, which made the search for margins a topical item for this sector.
When the “promotori finanziari” business started in the ’70s with historical networks such as
Fideuram, Programma Italia and Dival - to name the most important ones - mutual funds were not
even present in the Italian market. The ’80s and the ’90s have been the two decades in which
mutual funds ramped-up and consolided as a key investment solution.
Italian households – incidence of mutual funds within financial wealth

20.0%
18%
18.0% 17%
16%
16.0%
15%
14.0% 13% 13%

12% 12%
12.0% 11% 11%
11%
10% 10%
10%
10.0% 9%
9%
8% 8%
8.0% 7% 7% 7%
6%
6%
6.0% 5%
5% 4%
4% 4%
4.0%
3% 3% 2%
2% 2%
2.0%
1%
0% 0%
0.0%
Source: Bank of Italy
In the late nineties (and the first decade of the new century), most networks split into two
brackets: those setting up their own asset management companies and distributing their
(internally managed) funds and those adopting an open platform approach, distributing virtually
all existing mutual funds. Among the companies embracing these two opposite approaches, we
mention Azimut from the first category and Fineco from the second.
The obvious repercussions of these two opposite strategies were on margins, with the former
providing a possibility to retain the full value of a product and the open architecture proving to
be significantly less profitable for both the distributors and, ultimately, the financial advisors. The
last point also had strategic consequences, as the remuneration of advisors of third-party products
was, on average, ca 30% lower (or ca 20bps) compared to that of in-house funds (considering
similar products), and this made it more difficult to attract and retain professionals.
We, finally, note that the open platform approach proved to be time consuming for advisors, as
they spent most of their time in picking funds, rather than managing and developing their
customer base.
Hence, the debate around the choice between “in-house” and “third party” became more a
decision on how to offer a “guided open platform”, distributing a white label selection of third-
party funds with the double benefits of earning better margins while taking advantage of the
expertise of global fund managers. At first, the easiest way proved to be the creation of multi-
manager funds of funds; the improvement compared to the open platform lay in fund selection
made by the asset manager, with the higher costs paid by clients justified by the higher service
11 October 2021 ◆ 7
component. Consequently, distributors were earning better margins, partially shared with their
financial advisors - a win-win situation for all the actors involved.
Lately, most players adopted the sub-advisory mandate model - an alternative way to offer clones
of third-party funds, with the possibility of white labelling the product and earning, at the same
time, better margins. More recently, the main innovation has taken the form of advisory contracts.
In this case, financial advisors’ networks need to set up their teams of fund managers, which
follow the indications of third-party fund managers.
Such an approach is unlikely to replace the previous strategies, but it’s complementary to the
others. Fineco is expected to use advisory contracts to manage some core, plain vanilla strategies.
On the other hand, Banca Generali successfully introduced some so-called industrial advisory
lines, leveraging the expertise of industrial partners to manage some thematic lines.
We, finally, mention two examples of solutions to internalise revenues: new sub-funds to be
launched by Banca Generali, tracking “iconic” strategies of key AM partners, and the family of
target date launched by Fineco under the name FAM Target.
Italian asset gatherers – product offer evolution: vertical integration vs margin optimisation
GUIDED OPEN ARCHITECTURE /

OPEN ARCHITECTURE SEMI-DIRECT MANAGEMENT DIRECT MANAGEMENT
WHITE LABEL
NET MARGINS FOR THE DISTRIBUTOR
In-house fund
management
Sub-advisory mandates Structured solutions

<100% NAV (eg Fineco’s target date)
Funds of third-party funds Advisory
Sub-advisory mandates
Trackers
Third-party funds
VERTICAL INTEGRATION
In the following chart, we provide an illustrative example of pay-in (ie, the management fee paid
by clients, net of the cost of third parties) for similar funds with the same management fee, but
answer to the question of how margins compare in different investment solutions. Yet, we believe
it is accurate enough to put things in the right context when it comes to commenting about
margins.
We believe this throws enough light on why most asset gatherers are trying to substitute the
existing stock of third-party solutions with more profitable sub-advisory mandates and advisory
solutions. The issue is not immaterial, as a switch of €1bn AuM from third-party products to
advisory solutions, just to cite an example, could return €5m of additional gross fees (ie, before
the payout to the distribution) - something relevant, in our view.
11 October 2021 ◆ 8
100
90-95

85
70
Many lessons can be learned from the analysis of the product strategy of the listed asset gatherers
in our coverage.
In this note, we synthesise all the best practices to identify the “optimal” product strategy with
an eye on margin optimisation. The product offer is also a function of the size of an asset gatherer.
With a limited size of assets under management, a network is likely to count mainly on a few in-
house managed funds, while the largest portion is represented by third-party funds.
However, the search for more value to be internalised and retained has its natural development
in the progressive substitution of à la carte funds with sub-advisory solutions. This does not mean
fully replacing own or third-party products. But it certainly means that, in the development of a
company, these solutions become the core of the offer.
Third-party solutions would not disappear, though, as they would remain in demand for the top
end of the customer base. For what concerns the direct management of some funds, we believe
the in-house management of some core investment lines in which a company has some skills makes
sense. Eventually, this could also be done with the advice of some external fund managers.
Advisory contracts could also be used for other purposes; we refer to Banca Generali’s brilliant
use of “industrial advisory”.
Strategic
option #1
Strategic
option #2
FoF ADVISORY
THIRD-PARTY FUNDS
Strategic
option #3
11 October 2021 ◆ 9
In search of extra basis points: three examples

In this section, we provide an illustrative example of pay-in (ie, the management fee paid by
answer to the question of how margins compare in different investment solutions. Yet, we believe
it is accurate enough to put things in the right context when it comes to commenting about
margins. We believe this throws enough light on why most asset gatherers are trying to substitute
the existing stock of third-party solutions with more profitable sub-advisory mandates and
advisory solutions. The issue is not immaterial, as a switch of €1bn AuM from third-party products
to advisory solutions, just to cite an example, could return €5m of additional gross fees (ie, before
the pay-out to the distribution) - something relevant, in our view. We mention in this paragraph
some interesting moves made by listed asset gatherers to extract more value from their AuM
without increasing expenses to clients. Banca Mediolanum, as an example, reduced the incidence
of the sub-advisory mandate on the NAV, taking advantage of its fund management team in Dublin.
Fineco adopted some advisory solutions on the most important - core – strategies, again taking
advantage of a recently constituted team of fund managers based in Ireland at FAM. Finally, with
reference to Banca Generali, we flag an interesting case study of “industrial advisory” applied to
some thematic funds of the LUX IM SICAV, which is innovative and successful, aside being more
profitable than the straight distribution of a third-party product.
In the following chart, we provide an illustrative example of pay-in (ie, the management fee paid by
answer to the question of how margins compare in different investment solutions. Yet, we believe it
is accurate enough to put things in the right context when it comes to commenting about margins.
To gain more clarity on how to read the picture below, in the case of similar funds with a 200bps
management fee paid by clients, margins retained on in-house managed products (the so-called pay-
in) compared to those generated by distributing an equivalent third-party product could differ by
60bps (ie, 200bps vs 140bps). Such a 60bp gap halves to 30bps comparing in-house funds with a sub-
advisory mandate and reduces to 10-20bps considering advisory solutions.
We believe this throws enough light on why most asset gatherers are trying to substitute the existing
stock of third-party solutions with more profitable sub-advisory mandates and advisory solutions. The
issue is not immaterial, as a switch of €1bn AuM from third-party products to advisory solutions, just
to cite an example, could return €5m of additional gross fees (ie, before the payout to distribution) -
something relevant, in our view.
100
90-95
85
70
11 October 2021 ◆ 10
As such, it’s fairly evident why in the context of pressure on net interest income, less benign
environment for brokerage (compared to 2020) and less favourable regulation on performance fees,
most players are trying to optimise their margins. Increasing the pricing to clients is something
unconceivable (we will elaborate on the reasons later in the report), or it has already been done, with
most players recently repricing performance fees. Hence, the only lever left in the hands of asset
gatherers to improve their margins is to reduce the portion of profit left to third-party fund managers.
In most cases, the adoption of full in-house management, à la Azimut, is not consistent with business
models in which the expertise of third-party fund managers has been – since the beginning - a key
strategic factor for both clients and advisors. Hence, the preferred strategy seems to be more a
combination of all the above, with third-party AuM being gradually replaced by more profitable
alternatives such as sub-advisory and advisory.
We provide below some examples on how the different asset gatherers have managed to reduce the
cost of third-party asset managers so far.
1) Banca Mediolanum: reducing the incidence of the sub-advisory

mandate on the total NAV
The first case study we mention as an example of a strategy to improve the net profitability of asset
management is Banca Mediolanum.
Mediolanum’s product offer has historically leveraged few mutual funds directly managed by
Mediolanum Gestione Fondi SGR, and a wide offer of Irish-based single-brand, multi-brand or
multimanager funds of funds under the name Mediolanum Best Brands. Finally, the Irish management
company also offers funds managed by an ICAV (Irish collective asset management vehicle) called
Challenge.
In the beginning of 2019, in the context of a broader repricing of its funds, Mediolanum changed the
monthly calculation of performance fees of its Irish-based funds to an annual activity. At the same
time, the company offset the expected shortfall in fees via an increase in so-called investment
management fees. To make the transition to the new pricing scheme even less impactful, Banca
Mediolanum restructured its Challenge funds, lowering the incidence of the sub-advisory mandate
given to third parties, and contextually hired some fund managers to manage the portion of the NAV
not covered by the sub-advisory mandate.
As reported in the illustrative example below, basing the net margin for the distribution (before the
pay-out to the network) at 100, the equivalent fund managed via sub-advisory generates 85 for the
distributor. If the incidence of sub-advisory is capped to 60% of the NAV, the cost of third-party fund
managers would fall from 15% to 9%, with the net margin for the distributor expanding, at the same
time, from 85 to 91.
To complete the picture, it’s fair to remind that most of Mediolanum’s commercial efforts are focused
on insurance solutions such as “My Life” (unit linked). Yet, Challenge funds’ AuM accounts for €18.8bn,
or ca 30% of Mediolanum’s assets under management, and often constitutes the main underlying asset
of the insurance products. Hence, even though a 6% additional margin could appear modest overall,
translating this into basis points (and million euros) for the entire spectrum of the fund offer, this
strategy could result in €20-23m additional fees (before the pay-out to FAs) - not negligible, in our
view.
As mentioned, such a benefit is partially offset by the cost of hiring the fund managers needed, but
we deem this immaterial compared to the benefit obtained.
11 October 2021 ◆ 11
Illustrative example: margins of sub-advisory mandate with cap
100
91

85
70
In-house funds Sub-advisory mandate Sub-advisory mandate Third-party

with cap at 60% of NAV
2) Fineco: advisory for core strategies and new flagship Target Date
Fineco made open architecture its main competitive advantage compared to peers. However, the
company soon acknowledged the negative implications of having too wide an offer of third-party
products. Leaving to clients the possibility of choosing among a spectrum of more than 5,000 funds led
to financial advisors’ allocating a relevant part of their time to picking funds, more than developing
their customer base or managing the existing one. Equally, distributing third-party “à la carte” funds
proved to be far less profitable for both advisors and the company itself than selling other investment
solutions (during the IPO, the company mentioned an average of 45bp net margin for both the company
and the advisors with the “à la carte” solutions, compared to 75bps generated by guided solutions
such as Core Series). Lastly, clients’ perceived level of service was limited, mainly depending on
advisors’ capability to propose the best asset allocation and funds.
As a consequence, Fineco accelerated the development of its so-called guided solutions, mainly
represented by Core Series (a range of multi-asset funds of third-party funds) and Fineco Advice, a
fee-based advisory service.
The efforts made in replacing “à la carte” funds with “guided solutions” were quick and effective.
Guided solutions were just 11% of the total AuM in 2011, but now represent 75% of the total AuM (data
as at 1H21). The obvious consequence has been an expansion in net margins (after payout to FAs and
before taxes) from ca 50bps in 2011 to the current 63bps. Again, we would highlight that a 13bps
higher net margin applied to €50bn AuM means €65m of additional profit before taxes. To put things
in the right context, this corresponds to 13% of the 2021E operating profit.
Despite such astounding results, Fineco recently guided for net margins reaching 75bps by 2024E. This
will be possible thanks to the following initiatives:
1) The company sees €6bn/year inflows into asset management products, with retail net sales
for FAM at around €6bn per year. Hence, à la carte third-party products will dilute even more
over the next three years.
2) Similar to Mediolanum, Fineco hired some fund managers at its Irish-based management
company (Fineco Asset Management). The aim here was not to lower the incidence of the
sub-advisory mandate on the total NAV (and cover the difference via active management by
fund managers). Rather, the strategy was to replace the 4-5 main strategies (ie, European
equities, European fixed income, etc.) currently realised via à la carte solutions or sub-
advisory mandates (FAM funds) with in-house managed funds with advisory of third-party fund
managers. As per the illustrative example reported on page 11, replacing an equity fund
11 October 2021 ◆ 12
managed by a third party via an in-house fund with advisory could offer a 40-50bps uplift in
gross margin (or 20-25bps net of payout to a financial advisor). The same exercise calculated
that switching some strategies from sub-advisory to advice could generate a 10-20bp
additional gross margin (5-10bps net). Again, applying such a strategy to – as an example -
€5bn AuM could return some €5m additional net operating profit.
3) To reach the new target of 75bps by 2024E, Fineco will deeply leverage a further strategy.
We refer to the launch of a new family of Target Date funds that are set to become the new
flagship products of the company. FAM Target, for example, is an equity solution that guides
through a gradual exposure to the stock and bond markets over a period of 2 or 5 years. This
solution relies on a systematic and quantitative approach to capture the most favourable
market situations (correct market timing), which should accelerate – BOOST – the progressive
transformation of the capital invested towards the predefined target portfolio. We will later
analyse in more detail the features of this family of products. What is important to note,
though, is that these solutions are priced as equity solutions (ie with an average management
fee of 190-200bps), but with very limited underlying costs to structure the product. Hence,
the net margin (after payout to the distribution) could easily stand in the 90-95bp range. As
mentioned, these Target date funds have become the new flagship product offer at Fineco.
Hence, it’s easy to understand how Fineco will move from the current 63bps to the 75bps
target by 2024E.
3) Banca Generali: sub-advisory, advisory for thematic and trackers

Banca Generali recently announced the introduction of some flagship strategies of a few major
partners and asset management providers. As explained by management during the 1H21 conference
call, Banca Generali asked partners to track those strategies in an in-house fund, with the
remuneration paid to the external fund manager at 20-30bps for the advice. This is somewhat close to
the cost we have assumed on page 5 for sub-advisory mandates.
In addition, Banca Generali has a solid and proved record in distributing sub-advisory solutions, with
its LUX IM SICAV being one of the most interesting solutions in the market currently.
Equally notable is the use of advisory from non-financial specialists for the management of some
thematic lines. We consider this quite innovative, not seen among its competitors. The innovation we
see in these products is the possibility of sharing the expertise of some industrial partners in specific
thematic investments, which is a way to differentiate from – virtually - all other competitors that are
simply distributing thematic funds of external asset managers.
Hence, Banca Generali’s product strategy on mutual funds leverages a blend of sub-advisory, industrial
advisory for thematic lines, trackers and third-party funds.
With reference to the last point, analysing the composition of its €41.3bn managed assets (excluding
€15.9bn of traditional life policies), the company still has a sizeable amount of third-party funds
(€12.3bn at 1H21, ca 30% of the total managed assets). The remainder consists of in-house funds,
financial wrappers and insurance wrappers.
An alternative picture of how to read the exposure to third-party products is provided in the right-
hand side chart below. In 2015, the mix of retail funds comprised in-house (60%) and third-party
products (40%). The proportion has now inverted, with the share of in-house at 44% and third parties
representing 56% of AuM.
11 October 2021 ◆ 13
Banca Generali – b/d of managed solutions – € bn Retail funds: in-house vs third-party funds
Source: Mediobanca Securities Source: Mediobanca Securities
As such, we believe a change in the mix of retail funds towards in-house solutions could provide some
uplift to the overall profitability.
11 October 2021 ◆ 14
What the optimal product strategy looks like

Most asset gatherers typically started their operations by distributing third-party products or
offering funds of third-party funds in order to have an open platform with better margins. Only
Azimut maintained a strategy of vertical integration, with almost all the fund management made
in-house. All listed asset gatherers are incorporating interesting innovations in their offer. We
refer, as an example, to Fineco’s use of advisory for some core lines or Banca Generali’s use of
“industrial advisory” for managing some thematic lines, as well as Mediolanum’s strategy to lower
the incidence of the cost of the sub-advisory mandates, taking advantage of its recently reinforced
team of fund managers. Many lessons can be learned from each of them, and we synthesise all the
best practices to identify the “optimal” product strategy, with an eye on margin optimisation. The
product offer is also a function of the size of an asset gatherer. With a limited size of assets under
management, a network is likely to count mainly on a few in-house managed funds, with third-
party funds making up the largest portion. However, the search for more value to be internalised
and retained has its natural development in the progressive substitution of à la carte funds with
sub-advisory solutions. This does not mean the full replacement of own or third-party products.
But it certainly means that, in the development of a company, these solutions become the core
of the offer. Third-party solutions would not disappear, however, as they would remain in demand
for the top end of the customer base. For what concerns the direct management of some funds,
we believe the management of some core investment lines in which a company has some skills in-
house makes sense. Eventually, this could also be done with the advice of some external fund
managers. Advisory contracts could also be used for other purposes; we refer to Banca Generali’s
brilliant use of “industrial advisory”.
First a bit of history

We drew attention to the evolution of the product offer at each asset gatherer to clarify that the
trade-off is not just distributing funds directly managed in-house, à la Azimut, or adopting a full open
architecture approach à la Fineco in its early days.
The first approach has the undoubted advantage of maximising the profitability of a business via a full
integration of all the aspects of the value chain. However, it requires strong efforts on the asset
management side, which becomes as important as distribution.
As a reference, Azimut is the only company that has adopted such an approach (to be fully accurate,
the company has a limited portion of third-party funds, less than 10% of the total AuM), and,
admittedly, the company made efforts in having a comprehensive product range to ensure a
sustainable business model. This could have made sense when the alternative was the distribution of
third-party products, as the in-house management of funds allowed more margin internalisation (a
difference estimated at ca 30% of the management fees paid by clients, as per our example on page
5).
The opportunity to manage funds in-house became less obvious when funds of third-party funds started
to become popular (as examples, we mention the launch of Core Series at Fineco, Best Brands at
Mediolanum or BG Selection at Banca Generali, all of them constituted between 2000 and 2010), as
slightly lower margins compared to the distribution of in-house funds were offset by the possibility of
offering a product with a high advisory component thanks to both the selection of the best third-party
funds available in the market and the asset allocation component embedded in a product. In addition,
the possibility of white labelling a product and charging performance fees on top (with the exception
of Fineco, which never introduced such an item in its products) increased the attractiveness of such
an investment solution.
Increasingly, the possibility of having sub-advisory mandates reduced even more the need for directly
managing mutual funds in-house. And, basically, all asset gatherers developed their offer with flagship
products such as Challenge at Banca Mediolanum, BG SICAV/LUX IM at Banca Generali and FAM Series
at Fineco.
11 October 2021 ◆ 15
However, something changed, again, in the recent past. The latest innovation in the sector is the
possibility of signing advisory mandates with third-party asset managers. Different from the sub-
advisory solution, in the case of advisory, asset gatherers need to hire fund managers and fully manage
a product in-house. However, a third-party asset manager or an industrial specialist guides the fund
managers, from sector allocation to stock picking.
Interestingly enough, as illustrated on page 10, the cost of advisory solutions can be estimated at 5-
10% of the management fee of an equivalent fund fully managed in-house (ie, 10-20bps on an equity
fund priced 200bps). And this solution allows to maintain the same white-label strategy of sub-advisory
mandates, with the possibility of mentioning the third-party firm offering advice, which is a relevant
commercial tool for financial advisors. And the difference in terms of performance compared to a
third-party fund or a fund managed via a sub-advisory mandate should be non-material for both
customers and financial advisors.
The first two examples of companies exploiting this possibility are Fineco, with advisory solutions
provided by third-party asset managers of few plain vanilla strategies (4/5 strategies representing
some €5bn AuM), and Banca Generali’s LUX IM funds, where some industrial specialists offer their
advice on some thematic strategies (eg, Reply for LUX IM’s “Innovation Strategy”).
We would finally mention the latest family of target date funds at Fineco as an example of how to
structure an investment solution trying to limit the cost of external providers in order to maximise the
profitability for the distributor and advisors.
In the next section, we elaborate on the possible implications of this “search for margins”.
Optimal product strategy: an ongoing process to find the right balance

To conclude, what is the optimal product strategy? There is no “one-size fits all” answer to the
question. What is clear is that the two extremes (ie, full direct management of all funds distributed
to clients and open platform, with the distribution of thousands of funds à la carte) should be avoided
for different reasons.
The first approach requires enormous efforts and investments, and it competes directly with the giants
of the asset management industry or with specialised niche asset managers. Pretending to be as good
as the best performers in any single asset class is somehow naïve, in our view.
The second approach, as we stated, was very popular at the beginning of the century, but largely
proved to be inefficient from a margin standpoint. Advisors don’t have to become fund pickers, and
this is a low-margin strategy for distributors, which could trigger serious strategic issues such as those
related to the retention of advisors.
Hence, the best strategy is probably one in between. We like Fineco’s approach of directly managing
few plain vanilla core strategies (eg, Italian equities and European equities) with the advice of a global
asset manager. Equally, we like Banca Generali’s approach of choosing industrial specialists to manage
some thematic funds (quite popular at the moment). For the rest, we believe the sub-advisory mandate
is the best solution. We also appreciate what Mediolanum is doing in trying to limit the cost of the
mandates, partially internalising the management of these funds.
Our “ideal” product strategy also depends on the size of a network in terms of AuM. We refer to the
fact that a network with €10bn AuM does not have the same negotiating power as one with €50bn.
Hence, the journey to reach the “optimal” product strategy goes in parallel with the growth of the
network itself. To simplify, the bigger the company, the higher the margins.
Another activity should also be merging (or closing) low-performing funds, or funds with negligible
scale, in order to reduce complexity and costs. In many cases, funds with negligible AuM have no
reasons to remain in the product offer.
11 October 2021 ◆ 16
We show below what we think is the path to reach what we are saying. Strategic options #1 and #3
are simply what we already described, ie, the decision to fully manage in-house all fund categories or
fully outsource the fund management to third-party asset managers.
Strategic option #2 is the natural evolution of a product offer, in parallel with an increase in the
dimension of the firm, with margin expansion being a direct consequence.
Our belief is that the product offer of an asset gatherer with a limited size of assets under management
can count mainly on a few in-house managed funds and a large number of third-party funds and some
multimanager solutions. Needless to say, this approach generates margins between margins generated
from a full open architecture and those derived from a fully internalised model. However, the search
for more value that can be internalised and retained has its natural development in the progressive
substitution of à la carte funds with sub-advisory solutions.
This does not mean fully replacing own or third-party products. But it certainly means that, in the
development of a company, these solutions become the core of the offer. Third-party solutions would
not disappear, however, as they would remain in demand for the top end of the customer base. For
what concerns the direct in-house management of some funds, we believe the management of some
core investment lines in which a company has some skills makes sense. Eventually, this could also be
done with the advice of some external fund managers. Advisory contracts could also be used for other
purposes - we refer to Banca Generali’s brilliant use of “industrial advisory”.
Hence, our view is that a product range that typically starts with third-party funds, some multimanager
solutions and few in-house managed funds should naturally end up being a blend of all the above-
mentioned alternatives, with sub-advisory constituting the lion’s share.
Strategic
option #1
Strategic
option #2
FoF ADVISORY
THIRD-PARTY FUNDS
Strategic
option #3
11 October 2021 ◆ 17
Search for margins gone too far? The Fineco case

All asset gatherers under our coverage are, in some way or the other, trying to optimise the
margins they earn. We assess the possibility of an increase in clients’ total expenses in Section II
of this report, but this is generally unlikely given the already high expenses as we flagged in our
“KIIDs don’t lie” note published in 2017. Fineco came out as a clear outlier on the virtuous side,
with total expenses >100bps, below the peer average. Equally, Fineco is facing headwinds on NII
and brokerage revenues. Therefore, the search for higher margins in asset management is
perfectly logical and had its sublimation in the disclosure of a net margin target of 75bps by end-
2024 (from the current 63bps). In this section, we reverse engineered the measures the company
put in place to generate a 12bps uplift. Among others, we note that such “search for margins” is
evident in the launch of (short) Target Date funds, in which the investment component is passive,
but the pricing is comparable to that of active products. We acknowledge that the value of these
new flagship products lies in the level of service and not in the investment style of the underlying
assets. However, we wonder whether this could be questioned by customers, particularly in case
of less benign markets and in the light of the equivalent cost of similar passive instruments (eg,
ETFs’ replicating the same indexes). Is this asset management or structured finance? This is the
key question for us.
In the previous section, we referred to Fineco’s new flagship offer of target date funds. Here, we focus
on FAM Target China Coupon 2026 launched this year in which clients gain exposure to a certain
market/index via an accumulation plan (with the “BOOST” mechanism, which increases - up to 6 times
- the exposure to the index during market corrections) while obtaining a remuneration on the cash
waiting to be invested in equities/indexes thanks to exposure to some debt instruments (Italian
sovereign and corporate bonds of Mediobanca, Unicredit and IntesaSanPaolo). The initial cost of the
product is expected to be 2% up front, in addition to a management fee of 1.25% in the first year,
which increases to 1.95% when the investment reaches the maximum exposure to the index. As it is a
balanced portfolio, the average exposure to Chinese equities over the five-year horizon is estimated
at 50%.
It is interesting to note that the exposure to the Chinese market is not gained via mutual funds, but
mainly via total return swaps on the CSI 300 and CSI 500 indexes. Admittedly, the product cannot be
properly defined as structured, as it’s not all pre-set. And it’s not even a simple tracker. The service
component is present, and it’s linked to the constitution of a book of corporate bonds that remunerate
the cash component and to the “BOOST” mechanism, which allows entrance in the market taking
advantage from a smart dollar cost averaging. In a certain way, we could define such a product as an
“active management product made via passive exposure”. Equally, there is plenty of evidence to show
that proper active management in certain asset classes/geographies or strategies is simply not worth
the effort. Hence, it makes more sense to be active in the service, more than in the management of
the underlying assets.
This new flagship product offer is, somehow, changing the paradigm for Fineco. The company has
evolved from a supermarket of à la carte funds initially to a distributor of “guided solutions”,
structurer of in-house funds via the sub-advisory and advisory routes and, finally, distributor of
structured semi-passive products. The common denominator behind such an evolution was the need
to reduce the incidence of the cost paid to third-party asset managers in order to maximise the
retained margins to be shared with financial advisors.
It is equally important to note that FAM Target China Coupon 2026 is a target date fund with a 5-year
horizon. This means that the 1.95% management fee is reached towards the end of the life of a
product. Same arguments could be drawn for the FAM ESG Target Global Coupon recently distributed.
Going forward, we expect a new wave of target date funds to be launched with a shorter duration,
likely 3 years, and this is expected to lead to a quicker improvement in margins.
11 October 2021 ◆ 18
During the first-half 2021 conference call, Fineco announced a new target of 75bps pre-tax margin
(after distribution costs), up from the current 63bps. As illustrated in the chart below, we expect
Fineco to achieve such targets via three main steps:
1) Fineco is currently renegotiating the cost of sub-advisory mandates with third-party fund
managers. We quantified a ca 3bps (or ca €15m in absolute terms) benefit from the
renegotiation of conditions with third parties. As we mentioned above, the bigger a company,
the higher the margins. With €53bn AuM and €104bn TFA, Fineco is certainly in a position to
obtain more favourable conditions from its partners.
2) We see a further 3bps benefit from the continued repositioning from à la carte funds to guided
products, also thanks to the recently introduced new incentive scheme, which rewards
products with a better risk management component (namely in-house products). Guided
products represented 75% of the total AuM in the first half. Our assumption is that an
incremental €5bn could be switched by 2024. And this comes on top of the €6bn/year net
flow into FAM products. This also means that we expect FAM to more than double its AuM to
€47-48bn by end-2024 (from the current €22bn, ie >100% increase from the current levels).
3) As indicated by the company during the first half 2021 conference call, Fineco expects to
gather €6bn/year by 2024, with 100% of these flows going into FAM products. In our
simulation, we project an average net margin of 80-90bps on these products, and this is how
we get to a 5-7bps uplift in margins on those €18bn cumulative flows.
In conclusion, the ambitious target of raising pre-tax margins by 12bps (which means an expansion
of 24bps before distribution costs) is achievable. It mainly relies on the distribution of high-margin
in-house products (sub-advisory mandates, advisory contracts or semi-passive solutions) and
switch from third-party, à la carte, products to FAM solutions. We also believe that the overall
size of the business and its growth (€4.9bn inflows in AuM in 8M21 and €7.3bn overall) put Fineco
in a position to renegotiate more favourable conditions with third-party asset managers.
As elaborated earlier, such “search for margins” is also reflected in the launch of (short) Target
Date funds in which the investment component is passive, but the pricing is comparable to that
of active products. We acknowledge that the value of these new flagship products lies in the level
of service and not in the investment style of the underlying assets. However, we wonder whether
this would be questioned by customers, particularly in case of less benign markets and in the light
of the equivalent cost of similar passive instruments (eg, ETFs’ replicating the same indexes).
Is this asset management or just structured finance? This is the key question to us.
Fineco – Pre-tax margin (after distribution costs) evolution

PRE-TAX MARGIN AFTER DISTRIBTUTION COSTS
+5-7bps 75bps
+3bps
+3bps
63bps
1H21 current Renegotiation cost Improvement in the mix €6bn/year net flows Target 2024
pre-tax margin Of sub-advisory (hp. €5bn from à la carte into FAM products
with third-parties into FAM)
Source: Mediobanca Securities, Fineco company data and targets
11 October 2021 ◆ 19
Who has an upside potential from margin

optimisation
To sum up, asset gatherers can obtain significantly more value from their asset management
businesses via the optimisation of their product mix. In most cases, the initiatives needed were
already disclosed or we even got targets (eg, Fineco). In other cases, some measures were just
mentioned without divulging many details regarding net benefits. The aim of this section is to
conclude who has the strongest upside potential and, above all, who could surprise from such
measures. In this exercise, we are not including the effect of a richer mix in terms of equity
exposure, as it sounds more like a macro call rather than a company-driven strategic move. Fineco
has already unveiled its cards, and it’s expected to improve net margins by a hefty 12bps by
2024E. Aside from Fineco, Banca Generali could have room for improvement. We are not referring
to the repricing of its products, as the company recently revisited the pricing structure of its BG
fund management funds. Improved efficiency could be the outcome of a better in-house vs third-
party mix, and further upside could result from negotiating better conditions with third parties.
Equally, the contribution of the expected growth is material, even sharper than that at Fineco,
due to the higher gearing towards net fees. We don’t believe consensus expects major
improvements in the mix and margins at Banca Generali over the next three years, with the only
potential uptick driven by the recently announced re-pricing. A lot has been done already at
Mediolanum, but extending the strategy of reducing the scope of sub-advisory on the assets where
it hasn’t been applied to yet could offer further upside potential in margins. The message we want
to pass is that we still see upside potential on companies’ margins and earnings, but mainly as a
reflection of a more efficient management of the value chain and not a result of higher total
expense ratios.
Fineco: the strongest – but well disclosed - upside potential

Pressure on the net interest income, lower brokerage revenues compared to last year and overall
structural mid-single-digit growth in the cost base are the reasons behind the efforts being made by
Fineco to improve the margin of its asset management business.
As commented, Fineco is working on three layers: a) renegotiating terms and conditions with third-
party asset managers; b) switching from à la carte to in-house funds and c) leveraging FAM’s existing
and new (high-margin) solutions to channel new flows.
In order to provide a magnitude of the measures to be put in place by the company and underlying the
recently disclosed target of 75bps by 2024E, we note the following:
1) Fineco reported €150.9m net management fees in 1H21 (recast). Assuming margins to remain
stable at 63bps, the contribution of management fees at year-end would stand at €310-320m.
If we isolate the contribution of the 6bps uplift in margins (net of distribution costs) from
higher efficiency in the back book (+3bps from renegotiations with third parties and +3bps
from a better mix, as indicated on page 20), we obtain a €30m incremental contribution to
net revenues. We could argue that more efficiency on the back book at Fineco accounts for
ca 6% of the 2020 operating profit - quite material, in our view.
2) The expected growth, ie €6bn/year in 2022-24E, is expected to contribute €150m to both net
revenues and operating profit, ca 20% and 30%, respectively, of 2020 data.
The combination of the two above-mentioned factors leads to a robust €180m increase in operating
profit in 2024E. This corresponds to a ca 35% increase on 2020 reported result - something material,
which well testifies the impact of managing the product offer in a more appropriate way. However,
this is now well reflected in consensus numbers after the company disclosed its targets in the 1H21
conference call.
11 October 2021 ◆ 20
Banca Generali: the potential – unexpected - play on margins

Aside from Fineco, Banca Generali could have room for improvement. We are not referring to a
repricing of its products, as the company recently revisited the pricing structure of its BG fund
management funds.
The first comment we would make relates to Banca Generali. As we mentioned earlier in the note,
Banca Generali has €22bn of mutual funds in retail class, with third-party funds representing 56% and
in-house products making up the remainder. We believe the company has room for increasing the share
of in-house products to 60%, exactly where the mix was in 2015. In absolute terms, such a change in
the mix would imply that €3.5bn could be switched to in-house solutions – LUX IM, for example – with
a potential benefit of ca 30bps, or €10.5m, at the gross margin level. The benefit could stand at €6.5m
net of distribution costs, or 3% of 2020A operating profit (excluding performance fees). This could
appear modest compared to the target cited by Fineco, but we believe it’s not and it’s not reflected
in consensus expectations.
In addition, if we were to consider the newly launched trackers and the new strategies of LUX IM, the
€9bn cumulative flows we expect in 2022-24E could return ca €150m gross management fees (ca €90m
net of distribution costs), assuming all new flows are invested in in-house solutions, similar to what
Fineco disclosed. This corresponds to 23% of the 2020 reported operating profit (36% on operating
profit ex performance fees), which would bring the overall impact on 2020 operating profit to some
25% (or 39% ex performance fees).
Aside from these two factors (ie, more in-house vs third-party and all new flows from 2021E to 2024E
going to in-house products), we believe Banca Generali could renegotiate the terms with third-party
asset managers and, eventually, lower the incidence of the sub-advisory mandate, similar to
Mediolanum.
It’s fair to say that the company never mentioned the possibility of reducing the incidence of sub-
advisory mandates on the total NAV and that a renegotiation of the conditions with third-party fund
managers already took place at the time of the establishment of LUX IM.
That said, given the robust commercial performance the company has had this year (€360m average
monthly inflow into managed assets) and the size of the business (€37.4bn managed solutions, €53.8bn
including traditional life products), we believe Banca Generali still has room to extract more value
from its existing business. In theory, if we were to limit the impact of such an exercise to a 2bp net
margin on its ca €20bn retail funds (which compares to the 3bps we estimated for Fineco on a similar
exercise), we would end up with €4m additional net fees. This means 1% of the 2020A operating profit,
or ca 2% excluding performance fees. To conclude, more efficiency from a better in-house vs third-
party mix could add 3% of the 2020 operating profit ex performance fees (2% including performance
fees), and a further 2% (1.5% including performance fees) could eventually come from negotiating
better conditions with third parties. And the cumulative 5% impact (3.5% including performance fees)
is not much different from the 6% expected at Fineco. A reduction in the percentage of the sub-
advisory mandate à la Mediolanum is something we are not taking into account here, as the company
never mentioned it, but it’s not impossible either.
Equally, the contribution of the expected growth is material, summarised by a 25% indication
(including performance fees). In this case, the expected growth is even stronger than the 20% indicated
by Fineco and is basically due to the fact that Banca Generali is more geared towards net fees than
Fineco (hence, higher margins in asset management translates into higher operating profit compared
to Fineco’s).
We don’t believe consensus expects a major improvement in the mix over the next three years, with
the only expansion in margins being driven by the recently announced re-pricing. We actually believe
there could be more to come in the mid-term, as the company has all the ingredients to improve its
mix towards the attractive LUX IM platform (either considering a better mix on the back book or in
making the LUX IM the flagship solution for the new business) and room to renegotiate with third
parties.
11 October 2021 ◆ 21
Banca Mediolanum: a lot been done already, but more efficiency still
possible
Mediolanum has probably been the first to work on the value chain of its mutual fund offer. Also, the
company has been the first to restructure its pricing to clients, changing from monthly to annual
calculation of performance fees and increasing the so-called other investment management fees.
No increase in the overall total expense ratio took place (rather, the opposite), but the company
leveraged two factors to maximise/improve its net margins: a) a favourable market environment
allowed a sharp increase in the equity component of its funds. We remind that ca 90% of its net inflow
in 2020 went into equity funds, with the percentage of equities on the total stock of AuM currently in
the 55% region. However, this was more a market-driven aspect rather than a company decision. b)
The other area in which Banca Mediolanum made strong efforts is restructuring its Challenge SICAF
offer. The company merged some funds, renegotiated conditions with third parties and reduced the
incidence of sub-advisory to increase the component directly managed by its fund managers in Dublin.
A similar exercise was conducted on the Best Brands funds of funds offer in which the company worked
on internalising part of the underlying assets, adding a component of securities (stocks, bonds, ETFs,
etc.) fully managed in-house by Mediolanum’s PMs. Equally, the remaining part constituted by mutual
funds had a reduction in the component under sub-advisory mandate (as a percentage of the NAV)
and/or had new, more favourable, terms and conditions by third parties.
We assume that part of the fund offer has 40-45% of the NAV fully managed in-house now (and the rest
is a sub-advisory mandate). We expect this trend to keep increasing over the next few years to virtually
cover the entire AuM base.
The end objective is to utilise the Irish team as much as possible in order to reduce the overall cost
retained by third-party asset managers. Also, it is relevant to note that the company did not
experience a negative implication on performance of those products.
To translate this into upside potential by fully restructuring Challenge, if we simply assume that half
of the €18.8bn AuM is managed with the help of Mediolanum’s PMs and another 50% is in the process
of such a transformation, we see the company potentially recovering some 12bps (on a 200bp TER) on
this portion of assets, as per the illustrative example reported on page 6.
This means a possible increase of ca €12m in gross commissions, or ca €8m net of distribution costs.
The impact of such an additional efficiency measure would be ca 2% of the 2020 operating profit.
Yet, the same optimisation could be applied to the €24.5bn AuM in Best Brands. The uplift here would
be more modest in terms of basis points, however. Again, assuming half of Best Brands’ AuM to recover
an additional 3bps of profitability (before distribution costs), the overall increase in commissions
would stand at €4m before distribution costs, and ca €3m after including such a component - a further
1% of the 2020 operating profit (excluding performance fees).
We, finally, quantify the contribution of growth. We expect Mediolanum to gather €14bn net inflows
from asset management products in 2022-24E. Assuming it invests these flows at 209bps (Mediolanum
reported 206bps in 1H21, to which we add 3bps as the blend of the potential upside we still see on
Best Brands and Challenge), we believe the company could add ca €290m gross commission by 2024E.
Or ca €200m net of distribution costs, which corresponds to 38% of its 2020 operating profit (51% ex
performance fees).
11 October 2021 ◆ 22
Optimising the value chain: net margins can grow without increasing
pricing to clients
As discussed in this section, without assuming a particular action on the pricing applied to clients (an
increase or decrease) or a change in the pay-out to the network, asset gatherers can find some ways
to improve their margins. Most of the greater efficiency will (or might) come from a scrupulous
evaluation of the value chain of their mutual fund offer and via the optimisation of the current mix.
Equally important is the accretive effect on margins from the concentration of the expected net flows
in 2022-24E into the most innovative, in-house solutions.
As we show in the table below, we expect Fineco to improve its net margins (net of distribution costs)
by 12bps by 2024E, perfectly in line with recently disclosed guidance of 75bp net margin by 2024E.
According to our calculations, +3bps will be achieved from the renegotiation of better terms with
third-party asset managers and further +3bps from an expected €5bn switch from à la carte to in-
house products. The remaining +5/+7bps will be achieved from the accretion that the new flows,
mainly injected in in-house flagship solutions (as per company indication), might bring. Less obvious,
and probably unexpected, is the upside potential we see at Banca Generali. We calculate a theoretical
+8bps uplift on top of the already expected effect of the repricing of the BGFML product offer (and
likely in consensus numbers already).
We believe this could be possible thanks to three levers: 1) despite the renegotiation of the terms and
agreements with third-party fund managers at the time of the launch of LUX IM, we believe this is an
ongoing process and Banca Generali could take advantage of its €53bn AuM (including €16bn of Life
traditional reserves) and growth (ca €3.3bn inflows into managed solutions ex traditional life in 8M21).
2) The mix of retail funds saw a decline in the component of in-house funds from 60% in 2015 to the
current 44%. We believe the company has the right products to revert to such a mix in the near term.
3) Assuming the company will infuse the growth in inflows expected in 2022-24E into its flagship in-
house solutions, the expected accretion on the margin of its AuM business could stand in the 5bps
ballpark.
The company is not putting much emphasis on any expected growth in margins, apart from the effects
of the repricing recently implemented. Our view is that some positive surprises on this front could
emerge in the mid-term.
We, finally, elaborate on Banca Mediolanum. More than trying to quantify the benefit generated by
renegotiating the conditions with third-party asset managers, something that the company widely did
already, we simulated the possible effects of the incremental use of its Dublin-based PMs to add
coverage to its products. This is another way to say that we expect Mediolanum to keep reducing the
incidence of sub-advisory mandates on the total NAV. The conclusion is that we see a further +3bps
impact by 2024E, assuming the company manages to roll-out its strategy to the entire Challenge and
Best Brands asset base. On the other hand, we don’t see any evident opportunity in optimising the
product mix more, as it looks very efficient already. Lastly, given the company’s already high margins
in asset management (206bp gross management fees in 1H21), we limit the possible accretive effect
of new flows invested at higher margins thanks to the “efficiency exercise” described above to stand
at 1bp. Overall, we see a limited 4bp upside potential for Banca Mediolanum, but this well reflects an
already outstanding starting point.
Select Italian asset gatherers – Potential net margin uplift from better mix and optimisation of value chain
More efficiency Expected accretion from Potential net margin
In bps Better mix
on back book 2022-24E net flows uplift on AuM by 2024E
FBK +3bps +3bps +5-7bps +12bps

BGN +2bps +1bps +5bps +8bps
BMED +3bps - +1bp +4bps
11 October 2021 ◆ 23
To give a better sense of how the incremental profitability illustrated above might turn into additional
profit, we summarise below the sensitivity using the 2020A operating profit (excluding performance
fees) as a reference.
The reason Fineco is expected to report the strongest growth in margins but the lowest in terms of
impact on profit is merely a consequence of the lower incidence of asset management profit on the
total group result (with the complement being banking and brokerage). Banca Generali and Banca
Mediolanum are more “asset management”-driven companies and, hence, the results illustrated
below.
Select Italian asset gatherers – Potential impact on profit from better mix and optimisation of value chain
As % of 2020 operating profit (ex Impact from 2022-24E net
Impact of greater efficiency Better mix
performance fees) flows
FBK 3.0% 3.0% 30.0%

BGN 2.0% 3.0% 36.0%
BMED 3.0% - 51.0%
11 October 2021 ◆ 24
Mind the risks

We have identified two risks Italian asset gatherers should carefully bear in mind, as they could
result in major threats for the AuM growth trajectory we are forecasting in our models. We are
referring to the ESG hype the asset management industry is experiencing and asset inflation driven
by ultra-accommodative CB policies. The former is better known as “greenwashing”, which is
defined as a process conveying misleading information about how a company’s products are
environmentally sound. This may expose financial companies to legal actions from consumer-rights
organisations or legislators seeking to verify whether the ESG criteria are respected. A recent case
involving DWS testifies the risks of overstating this aspect in an attempt to take advantage of the
strong flows these products are attracting. Equally important is the assessment of the risks that
might trigger a risk-off market, particularly after the robust rebound following the vaccine
announcement. The main risk from a potential new bear market cycle seems to be – at this stage
– inflation. Despite reassuring messages from both the FED and the ECB regarding the temporary
surge in prices, a prolonged period of global inflation could spark a jump in risk premia linked to
fears related to the sustainability of sovereign debt levels. Several large emerging markets have
raised interest rates aggressively this year in an attempt to keep accelerating inflation under
control. Ukraine has raised its policy rate by 2 percentage points, Russia by 2.25 points and Brazil
by 3.25 points. But pressures remain strong and need to be carefully monitored, going forward.
1) Greenwashing: the dark side of the “green”

The current regulatory systems at the European and international levels have been interested by
dedicated actions, put in place to develop plans and documents on new sustainability requirements.
The introduction of the 2030 Agenda for Sustainable Development, the Paris Agreement signed in 2015
and the European Green Deal presented by the EU Commission posed milestones to reform the
international legislative environment, which led legislators to rethink about the role of finance. A
large part of the final objectives has been devoted to defining targets in terms of climate change,
pollution prevention, circular economy, sustainability and healthiness of systems. All these are
frequently summarised in the ESG acronym. As a consequence, the financial sector adjusted its policies
and investment solutions, extending the portfolio of services and products to the green world.
ESG asset management market – Global market, Europe and US
The Global Market
$35tr, +15% in Set to grow up Hedge funds:

Listed Equity:51% Retail: 25% 64%:low/no ESG
2018-20, to $53tr in 2025
Bonds: 36% Institutional: 75% integration
36% of all AUM (1/3 of global AuM)** 7%: high integration***
Europe
$12tr, -13% in 2018-20

(due to change of definition)
Equity:46% Retail: 31% Active:77%
42% of all AUM Bonds: 40% Institutional: 69%* (different perimeter)
US
$17tr,
Retail:27% Active: 60%
+42% in 2018-20
33% of all AUM Institutional: 73%* (different perimeter)
Note: Data as of 2019

*Data as of 2017
** Bloomberg intelligence estimate
*** 2021 survey
Source: 2020 GLOBAL SUSTAINABLE INVESTMENT REVIEW, Mediobanca Securities
11 October 2021 ◆ 25
The family of ESG financial products includes funds that invest in instruments focusing on
sustainability, environmental impact, social and governance factors. ESG-labelled investments have
become a major asset class in fund management, as the sustainability theme is becoming more and
more a major social issue. Nonetheless, restrictive requirements must be respected in order to finalise
this classification. The demand for environmentally sensitive products is growing fast, but it is
becoming incrementally challenging to provide accurate and credible information. According to the
2020 Global Sustainable Investment Review (containing 2019 data), ESG inflow in the EU was increasing
by +€14bn while non-ESG outflow was €77bn. In the beginning of 2020, global sustainable investments
reached $35.3tn (a +15% increase in 2018-20) in the five major markets.
Greenwashing is defined as the process of conveying a false impression or misleading information about
how a company’s products are environmentally sound. This may expose financial companies to legal
actions from consumer-rights organisations or legislators planning to verify whether the ESG criteria
are respected.
The DWS case
On 26 August, the Wall Street Journal reported that the US Securities and Exchange Commission
(together with US federal prosecutors) and German Financial Supervisory Authority (BaFin) had
initiated separate investigations into DWS - the mutual fund arm of Deutsche Asset Management
majority-owned by Deutsche Bank. In detail, the group has been the object of allegations labelled by
a former employee regarding DWS’s approach to sustainable investing. Desiree Fixler, a former head
of sustainability, argued about DWS’s way of representing the ESG metrics used to analyse companies
across its entire investment platform. The second listed asset manager in Europe (after Amundi) is
accused of overestimating the weights of its ESG criteria, consequently providing misleading
information regarding the green investment products provided. An amount of around $1tn is under the
lens of the investigators, as highlighted by the Wall Street Journal. According to the 2020 annual
report published in March 2021, more than half of DWS’s assets under management (totalling $900bn)
were invested in ESG-friendly companies. Despite the asset manager’s statements, the SEC is
continuing its evaluation given the persistent accusation of overestimated sustainable investment
metrics.
Greenwashing’s risks and effects
The negative impact of greenwashing in finance is broader. The market’s confidence and reputational
risk are the main threats. These two factors could reduce the demand for ESG products and reliability
in financial operators eventually involved in the greenwashing scandal. Loses in the function of
supporting sustainable projects will be generate considering greenwashing in the sense of providing
false information. Meanwhile, legislators’ penalties may increment the amount of costs if
greenwashing relates to misleading or erroneous respect of ESG fundamental requirements. A crucial
risk is loss of reputation, which is a significant element to consider when dealing with financial
companies managing funds of private clients.
The European Commission is taking steps to introduce rules to regulate greenwashing. The 2020
Circular Economy Action Plan will be the first initiative to force companies to quantify green claims
using standardised methods. These requirements will come into force in 2021 as part of a package
designed to support green transition. Moreover, the US Securities and Exchange Commission (SEC) has
established a new enforcement unit targeting companies that fail to fulfil the regulatory requirements.
2) A central bank-driven (asset) inflation

Sky-high valuations and signs that the flood of cheap cash washing around financial markets may be
subsiding suggest the record-breaking run in shares is about to hit the buffers.
In another possible warning sign, the equity risk premium - extra returns investors receive for holding
stocks over risk-free government bonds – has reached the lowest levels since 2002 (source: BCA
11 October 2021 ◆ 26
Research – a consultancy). Moreover, the MSCI's World equity index is close to a record high, and it has
nearly doubled from the lows in March 2020, when pandemic-driven hysteria triggered a firesale of
assets. The gains have been oiled by vast amounts of stimulus from central banks as well as
governments, while economic growth and corporate profits have recovered faster than expected.
Bond yields could come under upward pressure from rising inflation and as policymakers begin to scale
back the pandemic-era stimulus. The European Central Bank recently took a small step towards dialling
back bond purchases, following the Reserve Bank of Australia’s decision to stick to its tapering
schedule.
In simple terms, the current excess liquidity triggered excess private and public debt. Any weakness
in global growth rates, for example below 2%, could pose serious questions on the solvency of the
system and its sustainability.
Inflation could spark a new global financial crisis

In the beginning of September, Russia’s central bank warned that a new financial crisis on the scale
of the 2008 collapse could happen in less than 18 months if global inflation was not kept in check.
In its annual monetary policy forecast, the Bank of Russia warned that a surge in public- and private-
sector debt levels during the recovery from the pandemic could lead the global economy to
“deteriorate drastically and rapidly” if the US Federal Reserve has to raise interest rates to control
inflation. According to the report, global gross domestic product growth could slow to just 1.1% as
higher interest rates prompt investors to dump risky assets.
Emerging market countries with high levels of foreign debt would be particularly hit. According to the
central bank, risk premiums will increase significantly and the most indebted countries will struggle
to service their debt. Equally, a significant financial crisis will begin in the global economy in the first
quarter of 2023 — one comparable to the 2008-09 crisis, with a long period of uncertainty.
The forecast is not the central bank’s central scenario, however. It instead foresees a broad economic
recovery, with inflationary pressures dissipating by the end of this year. Even so, the warning indicates
Russia’s growing concern over increasing inflation worldwide.
Whereas US and European central bank officials have said they consider price increases to be
temporary, Russian central bank governor stated in July that growing inflationary pressure in Russia
was likely to be a long-term phenomenon.
Consumer and producer price inflation reached multi-year highs in July and shows no sign of easing.
Several large emerging markets have raised interest rates aggressively this year in an attempt to keep
accelerating inflation under control. Ukraine has raised its policy rate by 2 percentage points, Russia
by 2.25 points and Brazil by 3.25 points. But pressures remain strong.
Inflation in Brazil stands at 9%, well above the central bank’s 3.75% target. Economists expect the
policy rate to rise to 7.5% by the end of the year from 5.25% today.
Inflation could also generate stagflation and then deflation

One of the highest risks connected to deteriorating inflation is the potential generation of an economic
cycle leading to stagflation, where high inflation is coupled with high unemployment and stagnant
demand - a scenario already experienced in the ’70s.
A rapid increase in prices might be a significant deterrent to economic development, generating a

deep-dive into a negative spiral. As prices continue to climb towards high levels, people may be
discouraged from buying and concluding investments, driving the economy to low levels of growth
because of an indirectly contained goods and services demand. With the intention to provide a solution
to this situation, central banks could start playing a role in fine-tuning their strategy, which aims at
equilibrating the system’s liquidity and money stock allocation. However, inappropriate
11 October 2021 ◆ 27
macroeconomic policies and supply shocks could be a breeding ground for inflation combined with
stagnation.
As history teaches us, the discouraging result at the end of 2011 shows how severe unemployment,
stagnant demand and overcapacity may drive the annual inflation rate at the zero-lower bound,
turning stagflation into something even more dangerous. Like the rollercoaster ride, going up and
down, a rapid increase in prices may leave space for a deflationary phase continuing the vicious cycle
of an inflationary spiral. Prices could start decreasing, and the economy could start to slow down.
Supply and demand curves will shift, rising in the former and falling in the latter. Meanwhile, the
supply of money will decrease. Economic growth will not be favoured, and unemployment may rise
consequently.
In this negative scenario, risks arise one after the other: from asset gatherers’ perspective, a low
propensity to invest will characterise people’s way of living, mainly influenced by a lack of trust in
the future.
11 October 2021 ◆ 28
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11 October 2021 ◆ 29
SECTION II – KIIDs don’t lie, part 2

In 2017, we published a detailed note containing the results of the analysis of 113 funds
representing €50bn AuM, or one-third of the managed assets of the four listed asset gatherers.
The key findings of that research were the following:
1) Mutual funds had average ongoing charges of ca 300bps in 2016 - too high, in our view.
2) 29 funds (or 27% of the AuM of the sample under analysis) earned performance fees,
despite clients’ losing money during the year - not sustainable.
3) Including performance fees, funds charged an average (weighted for AuM) of 363bps. This
meant that ongoing charges and performance fees eroded 50% of gross performance
reported by those funds (ie, 756bps) in 2016 - again, unjustifiable.
This time, we extended the scope of our analysis to 330 funds, totalling ca €120bn AuM, almost
three times the scope compared to our former research. We added Anima in our analysis.
For each company, we selected the 40 largest mutual funds by assets under management and
across categories (equities, balanced, flexible, multi-assets and fixed-income), taking into account
each fund class (accumulation, distribution, S-class vs L-class, currency hedged or not, etc.) and
weighting costs and performances for the fund size of a specific fund.
To make the comparison among companies even more comprehensive, we did not limit the
analysis to the top 40 funds by AuM for each company which is, in any case, a good proxy of the
average asset allocation of a client. We also analysed the top 20 funds in every category. Or, the
top 5/10/15 if a specific category didn’t offer a wide enough sample.
We would finally stress that the aim of such an analysis is not to comment on 2020 performance,
as an asset manager cannot be evaluated on single year’s performance. And we refrain from
drawing conclusions on the back of higher (or lower) performance in a single year compared to
competitors’. We are more interested in flagging the key changes that occurred in the pricing of
the mutual funds (if any) and potential further initiatives that might be taken to increase the
transparency of this industry.
The conclusion is that, compared to our previous analysis, we see tangible improvements in the
product offer of Banca Generali and Banca Mediolanum, with ongoing charges, finally, not too far
from the best-in-class – once again Fineco. It is worth reminding that in 2016, the two companies
were 137bps and 35bps, respectively, above Fineco’s, on average, ongoing charges applied to
clients. On the other hand, Azimut has emerged as an outlier, with the highest ongoing charges,
272bps, on average, and ca 50bps above the average of the three peers. We also note that such a
level is not different from the results of our previous analysis.
The analysis concerning the incidence of performance fees is also interesting. Banca Generali
earned 73bps last year, as the LUX IM SICAV still calculated variable fees on a 12-month rolling
basis and benefited from a strong contribution in 1Q - before the Covid-19-related sell-off - and
4Q, when the vaccine-triggered rally took place. Generous 13.7% (weighted average) gross
performance achieved by LUX IM translated the incidence of performance fees on gross
performance delivered to clients into 5%, below the 11% reported by Azimut (which delivered
5.9% lower gross performance to its clients) but above Mediolanum’s 4%, which has adopted, since
2019, the new ESMA rule of charging performance fees only once a year.
In conclusion, Banca Generali and Banca Mediolanum managed to significantly reduce the costs of
their products via a brand new SICAV (Banca Generali’s LUX IM), thanks to a progressive decline
in the distribution of the most expensive fund categories (eg, Mediolanum abandoned the
expensive S-classes to favour the cheaper – even after the repricing – L-classes). Mediolanum also
had the distinction of adopting more stringent rules for calculating performance fees since the
beginning of 2019. As such, none of its funds charged performance fees, despite negative
11 October 2021 ◆ 30
performance delivered to clients (vs 23% of its funds in 2016, and 15% and 25% of Banca Generali’s
and Azimut’s respectively, in 2020).
On a less positive note, our analysis shows that no major progresses has been made by Azimut in
reducing the cost of its products which, in some cases, sees total expense ratios reaching 600bps
- too high, in our view. Fineco, on the other hand, confirms the good results already seen in 2016
from a pricing discipline perspective, although its equity funds didn’t shine in terms of
performance.
In general, we find it hard to justify the presence of performance fees in fixed-income funds in
this historical period. This fund category delivered, on average, 1.1% net returns to clients, with
Anima being an outlier, at 1.57%. Total expenses of these funds represented 45% of gross
performances at Anima, which is the most virtuous. In general, costs of this fund’s category
represented approximately two-thirds of gross performance, while they eroded almost entire
performance of Banca Mediolanum’s funds. In this context, we wonder whether it makes sense
for clients to buy products in which, on average, two-thirds of performance is retained by the
distributor and net performance is around 1%.
In the case of Banca Generali, average gross performance was 3.53%, triggering 40bps of
performance fees, which represented almost 30% of net performance delivered to clients. Put in
a different way, without performance fees, clients would have had ca 30% higher returns (from
135bps to 175bps), still remunerating the company with ongoing charges of 178bps (thus lowering
the incidence of overall costs on gross performance from 62% to 50%). A similar argument could
be applied to Azimut, while the fact that no net performance was registered in Mediolanum’s
fixed-income funds (with Mediolanum being the cheapest thanks to a sharp incidence of short-
term bonds or monetary funds) makes such an argument even more sensitive. In such an
environment, performance fees simply shouldn’t be applied to fixed-income funds, in our view.
Focusing too much on fixed-income funds could be deemed to be misleading by FA networks, as

some of them are clearly focusing more on equity investments. Yet, total expense ratios of ca
200bps for an asset class that returned, on average, 300bps in a positive year should raise some
doubts over its sustainability.
Also, we raised some concerns in the past over the use (or abuse) of the flexible fund category to
manage equity-like funds. In our view, the only reason to over-use this category was the possibility
of having monetary-like benchmarks that made the monthly calculation of performance fees more
rewarding. The shift to annual calculation also led to the general adoption of a high-watermark,
with a spread (typically 3M Euribor +300/400bps spread on equity/flexible funds). We believe this
is not an indicator of the capability to generate alpha, but merely a market call. And performance
fees should reward the former, not the latter.
11 October 2021 ◆ 31
The methodology: 330 funds and €120bn AuM

under analysis
In this updated analysis, we examined 330 mutual funds overall, worth ca €120bn of assets under
management. This compares to 113 funds and €50bn in our previous exercise.
The methodology we used involved the selection of the most relevant funds in each category (equity,
flexible, balanced, multi-class, fixed-income), extrapolating only the most relevant class in each fund
(in some cases, every fund was declined in 8 classes) and considering retail classes only.
Whenever we could, we selected the 20 largest funds, with an ideal cut-off of €30m AuM per fund.
When it was not possible to identify a sample of 20 funds, we limited ourselves to the largest 15 or
10. In general, we avoided including funds below €30m AuM, considering them irrelevant for our
analysis.
The sources we used were mainly companies’ websites for the fund list and KIIDs; nonetheless, we
cross-checked the data with Morningstar’s website in order to have precise data with reference to the
related fund’s class and size.
We had a look at the largest 40 funds by size, regardless of the category they belonged to, merely as
a proxy of a potential portfolio of a client.
We would, finally, stress that the aim of such an analysis is not to comment or judge on 2020
performance, as an asset manager cannot be evaluated on a single year’s performance. And we refrain
from drawing conclusions on the back of better (or worse) performance in a single year compared to
competitors’. We are more interested in flagging the key changes that occurred in the pricing of the
products (if any) and potential further initiatives that might be taken to increase the transparency of
this industry.
The sample in our analysis covers ca 50% of the total AuM the selected asset gatherers/managers have
in mutual funds.
Italian asset gatherers/managers - Scope of analysis, Eur mn

140,000 67% 70%
117,025 65%
120,000
57% 60%
100,000 55%
46% 50%
80,000 44%
45%
60,000
40%
33% 43,438
38,347
40,000 35%
28%
17,709 30%
20,000 11,905
5,625 25%
0 20%
Banca Generali Banca Fineco Bank Azimut Anima Total
Mediolanum
# funds 60 80 40 70 80 330
AuM funds in the sample as a % of total mutual funds' AuM
Note: For Banca Generali, the denominator of the percentage is calculated on retail classes only, and the sample mainly includes
LUX IM
11 October 2021 ◆ 32
BGN: the strongest effort to have a sustainable

new flagship product
During our 2017 exercise, we identified Lux-based BG SICAV/BG Selection as the products with the
highest ongoing charges (3.89% on average) and highest overall fees (4.57%) once performance fees
are added. Such a high fee implied that 86% of gross performance returned to clients in 2016 was
eroded by costs - unsustainable, in our view.
Admittedly, the company discontinued the sale of the retail classes of the two products and capped
the presence of their institutional classes as underlying of the wrappers to 20-30%. In parallel, the
company developed a new SICAV called LUX IM, with a more sustainable pricing and some innovative
solutions such as the first “industrial advisory” on some thematic lines.
Five years later, results have spoken for themselves. We have analysed more than 100 funds that are
part of the LUX IM SICAV (breakdown by asset class is provided in the picture below), although we have
excluded 20 equity funds, 7 flexible and other fixed-income funds as new products with no market
performance data available for 2020. We also excluded 20 funds from our analysis as their fund size
(below €80m) was deemed to have little relevance for our analysis.
We finally clarify that we are considering retail classes only, and we don’t take entry fees into account.
Banca Generali LUX IM: composition of offer by asset class
4.7%
26.2% 39.3%
29.9%
Equity Fixed-Income Flexible Alternative
Source: Banca Generali website, Mediobanca Securities
As shown in the table below, the 40 biggest funds of the LUX IM SICAV had a weighted average ongoing
charge of 2.28% last year, 161bps less than what we calculated in 2017 for BG SICAV and BG Selection.
We also note that only 6 of the 40 funds, ie 15% of the sample, charged performance fees, despite
clients’ losing money. This compares to 37% in our previous note.
Even more interesting is that weighted average performance of these 40 funds (gross of all costs) was
a hefty 13.7%, meaning that overall costs of 3.02% (ongoing charges and performance fees) resulted in
an incidence of 22% (vs 86% in 2016).
11 October 2021 ◆ 33
Banca Generali – Lux IM SICAV, 40 largest funds by AuM

Fund Ongoing 2020 net Gross
€m Fund Name Perf. fees Total costs
size fees returns returns
UBS Active Defender D L 636.74 2.29% 0.26% 2.55% -0.90% 1.65%

Pictet Future Trends D L 455.06 2.47% 0.86% 3.33% 6.20% 9.53%
Fidelity Global Low Duration D L 378.64 1.18% 0.20% 1.38% 1.20% 2.58%
LUX IM Green Energy D L 369.26 2.62% 0.40% 3.02% 104.00% 107.02%
Pictet Thematic Risk Control D L 263.36 2.45% 1.04% 3.49% 5.90% 9.39%
LUX IM Innovation Strategy D L 210.15 2.57% 1.90% 4.47% 11.50% 15.97%
Twentyfour Global Strategic Bond D L 207.75 2.08% 0.94% 3.02% 4.60% 7.62%
Eurizon Contrarian Approach D L 203.82 2.47% 0.33% 2.80% 2.00% 4.80%
Pictet Asian Equities D L 186.93 2.48% 1.82% 4.30% 15.20% 19.50%
BlackRock Credit Defensive Strategies Fund D L 185.4 2.08% 0.57% 2.65% 2.70% 5.35%
UBS Asia Balanced Income D L 152.87 2.47% 1.45% 3.92% 7.80% 11.72%
LUX IM Global Medtech D L 152.47 2.87% 1.4% 4.28% 8.80% 13.08%
Algebris Algebris Financial Credit Bond D L 141.26 1.94% 0.55% 2.49% 3.30% 5.79%
BlackRock Global Equity Dividend D L 128.01 2.47% 0.70% 3.17% 0.00% 3.17%
LUX IM ESG Ambienta Alpha Green D L 113.47 2.38% 0.9% 3.29% 2.70% 5.99%
Invesco Belt & Road Evolution D L 113.18 2.25% 0.6% 2.83% 1.60% 4.43%
LUX IM Consumer Tech D L 83.82 2.57% 1.29% 3.86% 19.10% 22.96%
Amundi ESG Sustainable Alpha D L 80.6 2.24% 0.74% 2.98% 4.70% 7.68%
Vontobel Global Active Bond D L 74.73 1.93% 0.34% 2.27% 2.00% 4.27%
JP Morgan Short Emerging Debt D L 73.01 2.09% 0.45% 2.54% -7.60% -5.06%
Morgan Stanley ESG Global multi-asset D L 71.36 2.24% 0.20% 2.44% -4.40% -1.96%
Morgan Stanley Active Coupon Strategy D L 68.9 1.83% 0.00% 1.83% 0.70% 2.53%
Morgan Stanley Global Infrastructure Equity fund D L 67.95 2.49% 1.31% 3.80% -12.30% -8.50%
Goldman Sachs Global Equity Opportunities D L 66.85 2.48% 0.72% 3.20% 2.40% 5.60%
Vontobel Millennial D L 66.79 2.33% 1.61% 3.94% 9.60% 13.54%
Morgan Stanley US Equities D L 62.22 2.48% 0.98% 3.46% 4.40% 7.86%
LUX IM Sustainable Allocation Flex D L 60.94 2.59% 1.95% 4.54% 11.70% 16.24%
JP Morgan Short Emerging Debt D H L 57.19 1.94% 0.02% 1.96% 0.60% 2.56%
Vontobel New Frontier Debt D L 54.51 1.94% 0.35% 2.29% -4.10% -1.81%
IMPact Active Global Allocation D L 51.89 2.18% 0.07% 2.25% -3.70% -1.45%
LUX IM Flexible Global Equities D L 47.68 2.22% 0.78% 3.00% 6.00% 9.00%
LUX IM Diversified Trend Following D L 46.36 2.74% 0.28% 3.02% -6.70% -3.68%
BNP Paribas ESG Isovol D L 41.89 2.30% 0.29% 2.59% -2.20% 0.39%
JP Morgan Emerging Market Income D L 41.56 2.24% 0.31% 2.55% 0.60% 3.15%
LUX IM Thematic Approach D L 41.16 2.98% 1.69% 4.67% 17.20% 21.87%
Muzinich Short Term Credit D H L 40.4 1.94% 0.21% 2.15% 1.30% 3.45%
Invesco Global Income Opportunities D L 39.04 2.24% 0.94% 3.18% 5.40% 8.58%
Intermonte Focus Italia D L 38.76 2.54% 0.67% 3.21% 5.80% 9.01%
LUX IM Dama D L 38.27 2.59% 0.04% 2.63% -0.20% 2.43%
BlackRock Multiasset Factor Investing D L 35.54 2.26% 0.28% 2.54% -1.60% 0.94%
Total 5,239.8
Weighted Average 2.28% 0.73% 3.02% 10.71% 13.73%
11 October 2021 ◆ 34
To sum up, we believe Banca Generali has done a great job in restructuring its fund offer. Compared
to the BG SICAV, LUX IM is a more “sustainable” product in the sense that ongoing charges are
significantly lower and not too far from those of its peers. Equally relevant is the fact that the company
materially lowered the incidence of performance fees charged to clients calculated as a percentage
of gross performance (13% in the exercise we performed in 2017 on 2016 results and 6% now). One of
the reasons behind this is probably the shift from the monthly (and/or three-month rolling) calculation
of performance fees to the 12-month calculation.
As widely anticipated by the company, repricing of LUX IM is ongoing, with the expected outcome
being an upward revision in management fees and ongoing charges by 5/6bps, offset by a 4/6bp decline
in the incidence of performance fees. Overall, the overall TER to clients should remain somewhat
unchanged, and it doesn’t alter our overall conclusions.
Banca Generali – 2020 vs 2016 performance

2016 2020 Difference
Ongoing charges 3.89% 2.28% -161bps

Performance fees 0.68% 0.73% +5bps
Total costs 4.57% 3.02% -155bps
% funds earnings perf. fees despite negative perf. 37% 15% -22p.p.
Gross perf. (weighted avg) 5.3% 13.73%

Incidence perf. fees on gross perf. 13% 5% -8p.p.
Incidence total costs on gross perf. 86% 22% -64p.p.
11 October 2021 ◆ 35
Equity funds: happy clients, thanks to Green Energy

We isolated the 20 largest equity funds within the LUX IM platform. Results speak for themselves.
The weighted average ongoing charge stood at 255bps, with the incidence of performance fees at
103bps. In return, these funds generated gross performance of 28.3%, which puts the incidence of the
358bps total expenses at a low 13% and that of performance fees alone at 4%. It’s fair to say that such
outstanding performance was mainly driven by the +107% achieved by LUX IM Green Energy, the
second-largest equity fund managed with the industrial advisory of Solar Ventures. Excluding this
successful fund, overall gross performance would have been 10.8%, less than half. As a reference,
Mediolanum equity funds reported 12.3% gross performance in 2020.
We consider LUX IM the reference point in the sector, as it provides the most sophisticated investment
solutions, taking advantage of the know-how of industrial specialists via innovative advisory
agreements. The pricing of the product is nowhere near the level of the former BG Selection/BG SICAV
(in our former analysis, we calculated ongoing charges at 389bps for the 30 biggest funds, including
fixed-income solutions), and this demonstrates the commitment of management in putting in run-off
an overly expensive solution and replacing it with a “state-of-the-art” product. Management promptly
reacted to a potential issue that could have threatened the credibility of the offer, particularly
considering the reference market of Banca Generali. We believe this should be properly emphasised.
Well-deserved credit for such a remarkable achievement.
With the announcement of repricing, which will raise management fees by 5/6bps, performance fees
will fully align with the ESMA rules.
Banca Generali – Lux IM SICAV, 20 largest equity funds by AuM

€m Fund Perf. fees Total costs
Pictet Future Trends D L 445.06 2.47% 0.86% 3.33% 6.20% 9.53%

LUX IM Green Energy D L 369.26 2.62% 0.40% 3.02% 104.00% 107.02%
LUX IM Innovation Strategy D L 210.15 2.57% 1.90% 4.47% 11.50% 15.97%
Pictet Asian Equities D L 186.93 2.48% 1.82% 4.30% 15.20% 19.50%
LUX IM Global Medtech D L 152.47 2.87% 1.41% 4.28% 8.80% 13.08%
BlackRock Global Equity Dividend D L 128.01 2.47% 0.70% 3.17% 0.00% 3.17%
LUX IM Consumer Tech D L 83.82 2.57% 1.29% 3.86% 19.10% 22.96%
Morgan Stanley Global Infrastructure Equity fund D L 67.95 2.49% 1.31% 3.80% -12.30% -8.50%
Goldman Sachs Global Equity Opportunities D L 66.85 2.48% 0.72% 3.20% 2.40% 5.60%
Morgan Stanley US Equities D L 62.22 2.48% 0.98% 3.46% 4.40% 7.86%
LUX IM Flexible Global Equities D L 47.68 2.22% 0.78% 3.00% 6.00% 9.00%
LUX IM Thematic Approach D L 41.16 2.98% 1.69% 4.67% 17.20% 21.87%
LUX IM/Intermonte Focus Italia D L 38.76 2.54% 0.67% 3.21% 5.80% 9.01%
LUX IM World Equities D L 28.12 2.48% 0.82% 3.30% 4.60% 7.90%
LUX IM ESG European Equities D L 21.74 2.49% 0.48% 2.97% -5.40% -2.43%
Sycomore ESG Sycomore European Equities E 21.74 2.48% 0.39% 2.87% -1.20% 1.67%
Generali Invest ESG Generali Inv Diversif Strategy D L 19.5 2.50% 0.32% 2.82% -1.60% 1.22%
LUX IM Small-mid Cap Euro Equities D L 18.71 2.50% 1.01% 3.51% 6.00% 9.51%
LUX IM Global Emerging Equities D L 15.41 2.47% 1.06% 3.53% 5.80% 9.33%
JP Morgan European Research Driven Fund D L 8.52 2.07% 0.40% 2.47% -6.30% -3.83%
Total 2,034.1
11 October 2021 ◆ 36
Flexible funds: 210bps net performance delivered to clients

While Banca Generali’s equity funds performed creditably, its flexible funds reposition the argument
to a more normal level.
Gross performance reported in 2020 stood at 5.1%, of which 58% was used to remunerate Banca
Generali’s ongoing charges and performance fees. Admittedly, such results were a bit penalised by
the main flexible fund distributed by LUX IM – UBS Active Defender, which had limited 1.65% gross
returns and lowered overall weighted performance of this fund’s category.
Banca Generali – Lux IM SICAV, 20 largest flexible funds by AuM

Ongoing 2020 net Gross
€m Fund Fund size Perf. fees Total costs
fees returns returns
UBS Active Defender D L 636.74 2.29% 0.26% 2.55% -0.90% 1.65%

Pictet Thematic Risk Control D L 263.36 2.45% 1.04% 3.49% 5.90% 9.39%
Eurizon Contrarian Approach D L 203.82 2.47% 0.33% 2.80% 2.00% 4.80%
UBS Asia Balanced Income D L 152.87 2.47% 1.45% 3.92% 7.80% 11.72%
Invesco Belt & Road Evolution D L 113.18 2.25% 0.6% 2.83% 1.60% 4.43%
Amundi ESG Sustainable Alpha D L 80.6 2.24% 0.74% 2.98% 4.70% 7.68%
Morgan Stanley ESG Global multi-asset D L 71.36 2.24% 0.20% 2.44% -4.40% -1.96%
Vontobel Millennial D L 66.79 2.33% 1.61% 3.94% 9.60% 13.54%
LUX IM Sustainable Allocation Flex D L 60.94 2.59% 1.95% 4.54% 11.70% 16.24%
IMPact Active Global Allocation D L 51.89 2.18% 0.07% 2.25% -3.70% -1.45%
BNP Paribas ESG Isovol D L 41.89 2.30% 0.29% 2.59% -2.20% 0.39%
JP Morgan Emerging Market Income D L 41.56 2.24% 0.31% 2.55% 0.60% 3.15%
Invesco Global Income Opportunities D L 39.04 2.24% 0.94% 3.18% 5.40% 8.58%
LUX IM Dama D L 38.27 2.59% 0.04% 2.63% -0.20% 2.43%
BlackRock Multiasset Factor Investing D L 35.54 2.26% 0.28% 2.54% -1.60% 0.94%
Fidelity Global Income Blend D L 31.84 2.75% 0.24% 2.99% 1.50% 4.49%
Sycomore ESG Next Generation D L 25.9 2.25% 0.29% 2.54% 1.70% 4.24%
Pimco Global Risk Allocation D L 20.45 2.64% 0.37% 3.01% 1.30% 4.31%
Alliance Bernstein Amalia D L 12.98 2.24% 0.29% 2.53% 0.60% 3.13%
M&G Alpha Generation D L 9.41 2.60% 0.08% 2.68% -0.60% 2.08%
Total 1,998.4
11 October 2021 ◆ 37
Fixed-income funds: 135bps net performance

We report the 15 largest fixed-income funds available in the LUX IM offer. Ongoing charges stand at
178bps, fairly in line with the average for such a category.
Performance fees were 40bps, 20bps lower than that charged by flexible funds. The overall average
gross performance stood at 3.53%, reducing to a net performance of 1.35% once considering total
costs.
We, therefore, can argue that the fixed-income component managed to return slightly positive net
performance, amplified by flexible funds and, finally, largely improved by excellent performance of
the equity funds.
Banca Generali – Lux IM SICAV, 15 largest fixed-income funds by AuM

Fidelity Global Low Duration D L 378.64 1.18% 0.20% 1.38% 1.20% 2.58%
Twentyfour Global Strategic Bond D L 207.75 2.08% 0.94% 3.02% 4.60% 7.62%
BlackRock Credit Defensive Strategies Fund D L 185.4 2.08% 0.57% 2.65% 2.70% 5.35%
Algebris Algebris Financial Credit Bond D L 141.26 1.94% 0.55% 2.49% 3.30% 5.79%
Vontobel Global Active Bond D L 74.73 1.93% 0.34% 2.27% 2.00% 4.27%
JP Morgan Short Emerging Debt D L 73.01 2.09% 0.45% 2.54% -7.60% -5.06%
Morgan Stanley Active Coupon Strategy D L 68.9 1.83% 0.00% 1.83% 0.70% 2.53%
JP Morgan Short Emerging Debt D H L 57.19 1.94% 0.02% 1.96% 0.60% 2.56%
Vontobel New Frontier Debt D L 54.51 1.94% 0.35% 2.29% -4.10% -1.81%
Pimco Multi Alpha Credit D L 29.25 2.23% 0.11% 2.34% 0.60% 2.94%
Anima High Yield Short-term Opportunities D B L 25.51 1.73% 0.22% 1.95% 0.40% 2.35%
Invesco Global Multi-Credit D L 22.88 2.17% 0.17% 2.34% 0.40% 2.74%
M&G Floating Rate Approach D L 19.47 2.09% 0.00% 2.09% -3.10% -1.01%
Oddo Corporate High Income D L 18.47 1.88% 0.36% 2.24% 2.10% 4.34%
UBS Dynamic Credit High Yield D L 18.02 1.72% 0.09% 1.81% 0.40% 2.21%
Total 1,375
11 October 2021 ◆ 38
Alternative funds: 40bp net performance

We finally report the 5 alternative funds available in the LUX IM offer. Ongoing charges stand at
235bps, fairly in line with the average for such a category.
Performance fees were 62bps, in line with those applicable to flexible funds and lower with respect
to both equity and fixed-income funds. In this case, the sub-classification reports the totality of
alternative funds offered, whose average gross performance stood at 3.38%. Performance fee
incidence was 18%, without which the total cost incidence on gross returns would have been 70bps.
Banca Generali – Lux IM SICAV, 5 largest alternative funds by AuM

LUX IM ESG Ambienta Alpha Green D L 113.47 2.38% 0.9% 3.29% 2.70% 5.99%
LUX IM Diversified Trend Following D L 46.36 2.74% 0.28% 3.02% -6.70% -3.68%
Muzinich Short Term Credit D H L 40.4 1.94% 0.21% 2.15% 1.30% 3.45%
Algebris Best Ideas D L 13.2 2.09% 0.84% 2.93% 3.40% 6.33%
ODDO ESG Europe Low Vol D L 4.52 2.08% 0.00% 2.08% -1.10% 0.98%
Total 0,218
11 October 2021 ◆ 39
BMED: higher margins come with lower TER

In the 2017 exercise, we calculated weighted average running costs at 287bps, soaring to 352bps once
performance fees were taken into account. We argued that the overall fee charged to clients,
particularly those in the €500k-1m bracket, was certainly too high.
Since then, Banca Mediolanum has repriced its fund offer, raising investment management fees and
shifting from monthly to annual performance fee calculation (with a cap set at 1%).
In parallel, the company reinforced its team of asset managers in Dublin and started to optimise the
cost of sub-advisory, limiting the incidence of the mandates to some 60% of the NAV of each fund
(complemented by the activity of the PMs).
At the same time, the company discontinued the distribution of funds in the S-class category (higher
management fees and lower entry fees) to favour L-class funds (same fund but with lower management
fees).
The overall effect of such a move was two-fold:
1) The overall pricing applied to clients did not grow on the back of the re-pricing. Actually, a
decline in TER following the discontinuation of the S-class funds more than offset the effect
of an increase in investment management fees.
2) The margin for the bank did grow thanks to the optimisation of the cost of third-party asset
managers.
As shown below, the company managed to improve its net margins (from 185-200bps before repricing
to the current 205-210bps), achieving, at the same time, a reduction in overall costs charged to clients.
Banca Mediolanum – Yearly bps on average assets (management fees + investment management
fees before distribution costs)
215
210
Repricing
205
200
195
190
185
180
175
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 1H21
In the following table, we analyse the cost and performance of the main Irish funds of Banca
Mediolanum, either funds of funds (Best Brands) or SICAF (Challenge).
The conclusion of our exercise is that Mediolanum’s weighted average ongoing charge applied to clients
stood at 234bps in 2020, which compares to 287bps we derived in our previous report, to which 35bps
should be added, representing the incidence of performance fees in 2020 (65bps in 2020). Overall total
costs charged to clients last year is estimated at 269bps, down from 352bps we derived in our previous
exercise.
11 October 2021 ◆ 40
Banca Mediolanum – Best Brands and Challenge, 40 largest funds by AuM

Fund Ongoing Perf. 2020 net Gross
€m Fund Total costs
size fees fees returns returns
Mediolanum CH Provident 1 A P 2,949.1 3.03% 0.00% 3.03% -3.00% 0.03%

Morgan Stanley Global Selection A L 2,635.7 3.30% 1.00% 4.30% 19.00% 23.30%
Mediolanum BB Euro Fixed Income A L 2,540.5 0.62% 0.20% 0.82% 0.80% 1.62%
Mediolanum CH Liquidity Euro Fund A L 1,839.7 0.31% 0.00% 0.31% -0.10% 0.21%
Mediolanum CH North American Equity A L 1,782.5 2.42% 0.00% 2.42% 3.80% 6.22%
Mediolanum CH Technology Equity Evolution A L 1,697.7 2.41% 1.00% 3.41% 38.90% 42.31%
Mediolanum CH International Equity A L 1,287.6 2.72% 0.00% 2.72% 2.20% 4.92%
Morgan Stanley Global Selection A H L 1,048.5 3.30% 1.00% 4.30% 23.90% 28.20%
Mediolanum BB Innovative Thematic Opportunities A L 976.2 2.76% 1.00% 3.76% 15.70% 19.46%
Mediolanum CH Industrials & Materials Equity Ev A L 724.5 2.41% 1.00% 3.41% 11.20% 14.61%
Mediolanum BB Global Leaders A L 718.1 2.91% 0.80% 3.71% 8.50% 12.21%
Mediolanum CH European Equity A L 697.2 2.37% 0.00% 2.37% -8.50% -6.13%
Mediolanum BB Coupon Strategy Collection B H S 639.3 3.34% 0.00% 3.34% 1.70% 5.04%
Mediolanum CH Euro Income Fund A L 630.0 1.20% 0.00% 1.20% -0.50% 0.70%
Morgan Stanley Global Selection A S 611.7 3.71% 1.00% 4.71% 18.70% 23.41%
Mediolanum BB Dynamic International Value Opp A L 588.4 2.94% 0.00% 2.94% -14.80% -11.86%
Mediolanum CH Healthcare Equity Evolution A L 559.8 2.41% 0.00% 2.41% -3.50% -1.09%
Mediolanum CH Euro Bond Fund A L 558.0 1.36% 0.68% 2.04% 3.90% 5.94%
Mediolanum CH Emerging Markets Equity A L 527.5 2.63% 0.00% 2.63% 2.90% 5.53%
Mediolanum CH Financial Equity Evolution A L 523.9 2.42% 0.00% 2.42% -16.10% -13.68%
Mediolanum BB Global High Yield B H S 512.0 2.53% 0.00% 2.53% 1.30% 3.83%
Mediolanum CH Provident 2 A P 492.3 2.43% 0.00% 2.43% 0.30% 2.73%
Mediolanum BB Financial Income Strategy A L 451.3 1.87% 0.92% 2.79% 4.90% 7.69%
Carmignac Strategic Selection A L 445.2 2.73% 1.00% 3.73% 10.00% 13.73%
Mediolanum CH International Bond A L 441.1 1.61% 0.00% 1.61% -0.70% 0.91%
Mediolanum BB Coupon Strategy Collection B H L 441.0 2.94% 0.00% 2.94% 2.20% 5.14%
Mediolanum BB Coupon Strategy Collection B S 438.3 3.34% 0.00% 3.34% -0.30% 3.04%
Mediolanum CH Pacific Equity A L 436.0 2.52% 1.00% 3.52% 9.80% 13.32%
Mediolanum CH Energy Equity Evolution A L 392.9 2.43% 0.00% 2.43% -37.20% -34.77%
Mediolanum BB Global High Yield B S 373.6 2.53% 0.00% 2.53% -4.40% -1.87%
Invesco Balanced Risk Coupon Selection B S 372.1 3.01% 0.00% 3.01% -3.40% -0.39%
Mediolanum BB US Collection A L 367.3 2.79% 0.50% 3.29% 7.20% 10.49%
Mediolanum BB Global High Yield A L 362.2 2.22% 0.00% 2.22% -4.10% -1.88%
Mediolanum BB Coupon Strategy Collection B L 345.2 2.94% 0.00% 2.94% 0.2% 3.14%
Mediolanum BB Global High Yield B H L 321.1 2.22% 0.00% 2.22% 1.60% 3.82%
Morgan Stanley Global Selection A H S 320.9 3.71% 1.00% 4.71% 23.50% 28.21%
Mediolanum BB Global High Yield B L 309.0 2.22% 0.00% 2.22% -4.10% -1.88%
Mediolanum CH International Bond A H L 303.2 1.61% 0.42% 2.03% 2.70% 4.73%
Mediolanum BB New Opportunities Collection A L 284.1 3.00% 0.51% 3.51% 5.10% 8.61%
Total 32,004.6
11 October 2021 ◆ 41
To sum up, Mediolanum managed to be the first mover in adapting to the new ESMA rules on the
calculation of performance fees, offsetting any negative impact from a change in the methodology via
a repricing of recurring fees, which at the end was not passed through to clients as the company
progressively abandoned S-class funds. At the same time, the company made strong efforts to optimise
margins in the value chain and managed to improve its net remuneration.
Also notable is that none of the funds charged performance fee given the loss reported by clients (vs
23% of the funds’ charging performance fee, despite negative net performance of clients in 2016).
The incidence of performance fees on gross performance of the funds halved from 8p.p. to 4p.p.,
while the overall incidence of costs on gross performance declined by 8 percentage points, from 42%
to 34%.
A very comprehensive move from the company, in our view.
Banca Mediolanum – 2020 vs 2016 performance


Performance fees 0.65% 0.35% -30bps
Total costs 3.52% 2.69% -83bps
% funds earning perf. fees, despite negative perf. 23% 0% nm

Incidence perf. fees on gross perf. 8% 4% -4p.p.
Incidence total costs on gross perf. 42% 34% -8p.p.
11 October 2021 ◆ 42
Equity funds: fair pricing, despite common perception

As we did for Banca Generali, we isolated the 20 largest equity funds within the Mediolanum Irish
platform. As a preliminary comment, we can say that Mediolanum is undeservedly perceived in the
market as one of the most expensive networks. This is not entirely true, and we hope our analysis
helps clarify this misconception.
The table below shows costs and performance of the 20 largest equity funds sold by Banca Mediolanum.
The weighted average ongoing charge stood at 267bps, 12bps above the equity funds of Banca Generali
and Fineco, but 65bps below Azimut’s equity solutions.
In addition, Mediolanum’s equity funds added 32bps of performance fees, one-third of the incidence
of performance fees at Banca Generali (103bps). Mediolanum adopted the rule of charging
performance fees only once a year, putting a 100bp cap regardless of the magnitude of over-
performance generated by the fund. Another reason behind the difference in the weight of
performance fees is performance itself. Banca Generali stands out with its 19.3%, while Mediolanum
reported +7.35%.
Overall, what is praiseworthy is the fact that total costs represented less than half of gross
performance (41%), while the incidence of performance fees was 4% only.
Banca Mediolanum – Best Brands and Challenge, 20 largest equity funds by AuM

Mediolanum CH North American Equity A L 1,782.5 2.42% 0.00% 2.42% 3.8% 6.22%
Mediolanum CH Technology Equity Evolution A L 1,697.7 2.41% 1.00% 3.41% 38.9% 42.31%
Mediolanum CH International Equity A L 1,287.6 2.72% 0.00% 2.72% 2.2% 4.92%
Mediolanum BB Innovative Thematic Opportunities A L 976.2 2.76% 1.00% 3.76% 15.7% 19.46%
Mediolanum CH Industrials & Materials Equity Evol A L 724.5 2.41% 1.00% 3.41% 11.2% 14.61%
Mediolanum BB Global Leaders A L 718.1 2.91% 0.80% 3.71% 8.5% 12.21%
Mediolanum CH European Equity A L 697.2 2.37% 0.00% 2.37% -8.5% -6.13%
Mediolanum BB Dynamic Intern Value Opportunity A L 588.4 2.94% 0.00% 2.94% -14.8% -11.86%
Mediolanum CH Healthcare Equity Evolution A L 559.8 2.41% 0.00% 2.41% -3.5% -1.09%
Mediolanum CH Emerging Markets Equity A L 527.5 2.63% 0.00% 2.63% 2.9% 5.53%
Mediolanum CH Financial Equity Evolution A L 523.9 2.42% 0.00% 2.42% -16.1% -13.68%
Mediolanum CH Pacific Equity A L 436.0 2.52% 1.00% 3.52% 9.8% 13.32%
Mediolanum CH Energy Equity Evolution A L 392.9 2.43% 0.00% 2.43% -37.2% -34.77%
Mediolanum BB US Collection A L 367.3 2.79% 0.50% 3.29% 7.2% 10.49%
Mediolanum CH Italian Equity A L 255.5 2.39% 0.00% 2.39% -8.8% -6.41%
Mediolanum BB European Small CAP Equity A L 251.7 3.05% 0.15% 3.20% 5.7% 8.90%
Mediolanum BB Dynamic Int Value Opportunity A H L 235.6 2.94% 0.00% 2.94% -10.7% -7.76%
Mediolanum CH International Equity A H L 228.5 2.72% 0.40% 3.12% 6.7% 9.82%
Mediolanum BB Innovative Thematic Opport A H L 193.6 2.76% 1.00% 3.76% 20.1% 23.86%
Total 15,393.5
11 October 2021 ◆ 43
Flexible funds: small positive net performance delivered to clients

Flexible funds returned slightly positive performance of 117bps to clients. The key reason was the
Provident 5 fund, which represents 21% of the overall AuM of this category and basically reported zero
(gross and net) performance. Excluding such a fund from the computation, net performance would
have stood at 152bps, between Azimut’s and Banca Generali’s flexible funds.
As per our commentary on Banca Mediolanum’s product strategy earlier in the report, it should be
remembered that the company is not distributing the more expensive S-classes of its funds, while the
new business is concentrating on the cheaper L-classes. Our exercise is driven by the AuM of each fund
in each category. Hence, we believe it reflects well what effectively happened to clients’ portfolio.
But it’s fair to say that prices should go down in the mid-term, which could generate a more favourable
representation in the (near) future.
We finally note that the overall cost of a flexible fund is 19bps below equity funds’ at Banca
Mediolanum.
Banca Mediolanum – Best Brands and Challenge IM SICAV, 20 largest flexible funds by AuM

Mediolanum BB Coupon Strategy Collection B H S 639.3 3.34% 0.00% 3.34% 1.7% 5.04%
Mediolanum BB Coupon Strategy Collection B H L 441.0 2.94% 0.00% 2.94% 2.2% 5.14%
Mediolanum BB Coupon Strategy Collection B S 438.3 3.34% 0.00% 3.34% -0.3% 3.04%
Invesco Balanced Risk Coupon Selection B S 372.1 3.01% 0.00% 3.01% -3.4% -0.39%
Mediolanum BB Coupon Strategy Collection B L 345.2 2.94% 0.00% 2.94% 0.2% 3.14%
Mediolanum BB New Opportunities Collection A L 284.1 3.00% 0.51% 3.51% 5.1% 8.61%
Mediolanum CH Solidity & Return A L 278.2 1.66% 0.26% 1.92% 4.1% 6.02%
Mediolanum BB Coupon Strategy Collection A L 196.0 2.93% 0.00% 2.93% 0.2% 3.13%
Mediolanum CH Solidity & Return A S 161.9 1.88% 0.22% 2.10% 3.9% 6.00%
Mediolanum CH Solidity & Return B S 160.9 1.88% 0.22% 2.10% 3.9% 6.00%
Mediolanum BB Coupon Strategy Collection A H L 156.1 2.93% 0.00% 2.93% 2.2% 5.13%
Mediolanum BB New Opportunities Collection A H L 153.9 3.00% 0.94% 3.94% 7.1% 11.04%
Mediolanum BB Coupon Strategy Collection A S 123.2 3.34% 0.00% 3.34% -0.3% 3.04%
Mediolanum BB Coupon Strategy Collection A H S 111.9 3.34% 0.00% 3.34% 1.7% 5.04%
Mediolanum BB US Coupon Strategy Collection B L 52.5 2.57% 0.00% 2.57% -1.9% 0.67%
Mediolanum BB US Coupon Strategy Collection B S 52.4 2.87% 0.00% 2.87% -2.2% 0.67%
Mediolanum BB US Coupon Strategy Collection A L 48.8 2.56% 0.00% 2.56% -1.9% 0.66%
Mediolanum BB US Coupon Strategy Collection B H S 39.1 2.87% 0.24% 3.11% 4.1% 7.21%
Mediolanum BB US Coupon Strategy Collection B H L 39.0 2.57% 0.30% 2.87% 4.3% 7.17%
Total 5,154.2
11 October 2021 ◆ 44
Balanced funds: not cheap, but provider of excellent performance

The balanced fund category of Banca Mediolanum is mainly represented by the distribution of Morgan
Stanely Global Selection, which in all its classes account for more than half of this category.
Performance of the fund has been excellent, driving entire (weighted average) performance of the
balanced category to a remarkable 16.3% gross. Net of all costs, performance delivered to clients
stood at 12.6%.
Overall costs of this category are not low, as we calculate a weighted average of 303bps, with further
70bps of performance fees on top in 2020. However, looking at our “top 40” selection, the weight of
this product gets diluted and, overall, this does not generate an abnormal deviation from an overall
reasonable pricing.
Banca Mediolanum – Best Brands and Challenge IM SICAV, 20 largest balanced funds by AuM
Morgan Stanley Global Selection A L 2,635.7 3.30% 1.00% 4.30% 19.0% 23.30%
Morgan Stanley Global Selection A H L 1,048.5 3.30% 1.00% 4.30% 23.9% 28.20%
Morgan Stanley Global Selection A S 611.7 3.71% 1.00% 4.71% 18.7% 23.41%
Mediolanum BB Financial Income Strategy A L 451.3 1.87% 0.92% 2.79% 4.9% 7.69%
Carmignac Strategic Selection A L 445.2 2.73% 1.00% 3.73% 10.0% 13.73%
Morgan Stanley Global Selection A H S 320.9 3.71% 1.00% 4.71% 23.5% 28.21%
Mediolanum BB Premium Coupon Collection B H S 266.8 2.84% 0.00% 2.84% 1.3% 4.14%
Mediolanum BB Financial Income Strategy B L 220.1 1.88% 0.89% 2.77% 4.9% 7.67%
Invesco Balanced Risk Coupon Selection A L 217.4 2.70% 0.00% 2.70% -3.1% -0.40%
Mediolanum BB Premium Coupon Collection B S 199.1 2.84% 0.00% 2.84% 0.3% 3.14%
Mediolanum BB Premium Coupon Collection A S 193.8 2.84% 0.00% 2.84% 0.3% 3.14%
Invesco Balanced Risk Coupon Selection A S 157.8 3.01% 0.00% 3.01% -3.4% -0.39%
Mediolanum BB Premium Coupon Collection A L 153.4 2.53% 0.00% 2.53% 0.6% 3.13%
Invesco Balanced Risk Coupon Selection B L 140.0 2.71% 0.00% 2.71% -3.1% -0.39%
Mediolanum BB Emerging Markets Multi Asset Coll A L 138.8 3.12% 0.00% 3.12% -0.6% 2.52%
Mediolanum BB Socially Responsible Collection A L 131.8 2.90% 0.05% 2.95% 5.2% 8.15%
Mediolanum BB Premium Coupon Collection B H L 94.9 2.54% 0.00% 2.54% 1.6% 4.14%
Fidelity Asian Coupon Selection A L 94.8 2.76% 0.00% 2.76% 0.3% 3.06%
Mediolanum BB Premium Coupon Collection B L 80.2 2.54% 0.00% 2.54% 0.6% 3.14%
Total 8,094.3
11 October 2021 ◆ 45
Fixed-income funds: less expensive, but also less profitable

The 20 largest fixed-income funds distributed by Banca Mediolanum show weighted average ongoing
charges of 127bps, the lowest we have calculated in this category, explained by the fact that 26% of
this category is invested in a short-term monetary product, which has a low 62bps ongoing charge.
Net performance delivered to clients last year was 0.17%.
We finally remind that Mediolanum is mainly an equity house, as 55% of its assets under management
are invested in equities. Hence, fixed-income funds are showing a fair pricing, but modest net
performance. However, this is not the core of the company’s offer and strategy.
Banca Mediolanum – Best Brands and Challenge IM SICAV, 20 largest fixed-income funds by AuM
Mediolanum BB Euro Fixed Income A L 2,540.5 0.62% 0.20% 0.82% 0.8% 1.62%
Mediolanum CH Liquidity Euro Fund A L 1,839.7 0.31% 0.00% 0.31% -0.1% 0.21%
Mediolanum CH Euro Income Fund A L 630.0 1.20% 0.00% 1.20% -0.5% 0.70%
Mediolanum CH Euro Bond Fund A L 558.0 1.36% 0.68% 2.04% 3.9% 5.94%
Mediolanum BB Global High Yield B H S 512.0 2.53% 0.00% 2.53% 1.3% 3.83%
Mediolanum CH International Bond A L 441.1 1.61% 0.00% 1.61% -0.7% 0.91%
Mediolanum BB Global High Yield B S 373.6 2.53% 0.00% 2.53% -4.4% -1.87%
Mediolanum BB Global High Yield A L 362.2 2.22% 0.00% 2.22% -4.1% -1.88%
Mediolanum BB Global High Yield B H L 321.1 2.22% 0.00% 2.22% 1.6% 3.82%
Mediolanum BB Global High Yield B L 309.0 2.22% 0.00% 2.22% -4.1% -1.88%
Mediolanum CH International Bond A H L 303.2 1.61% 0.42% 2.03% 2.7% 4.73%
Mediolanum BB Global High Yield A H L 252.5 2.22% 0.00% 2.22% 1.6% 3.82%
Mediolanum CH International Income A H L 161.0 1.52% 0.00% 1.52% -1.0% 0.52%
Mediolanum BB Emerging Markets Fixed Income A L 155.0 2.22% 0.00% 2.22% -5.8% -3.58%
Mediolanum BB Global High Yield A S 125.2 2.53% 0.00% 2.53% -4.4% -1.87%
Mediolanum BB Convertible Strategy Collection B H S 121.7 2.79% 1.00% 3.79% 13.4% 17.19%
Mediolanum BB Global High Yield A H S 118.3 2.53% 0.00% 2.53% 1.3% 3.83%
Mediolanum BB Emerging Markets Fixed Income A H L 103.9 2.22% 0.00% 2.22% -0.1% 2.12%
Total 9,705.2
11 October 2021 ◆ 46
FBK: the cheapest, but also the most prudent

Fineco came out well from our 2017 research. The company emerged as the one with the lowest
ongoing charges and no performance fees. Hence, we did not see the need or urgency to revise its
pricing scheme, despite the introduction of MiFid 2 being imminent.
In line with Fineco’s competitors, we performed our analysis by selecting the 40 largest mutual funds
by AuM within the Fineco Asset Management product offer. Overall, we analysed 89 funds, considering
both in-house solutions (white label) and 34 third-party products distributed.
Fineco – FAM offer Fineco - FAM offer by asset class
2%
5%
35% 40%
24%
65%
29%
Equity Balanced Fixed-Income

FAM Third parties
Flexible Alternative
Our updated analysis confirms the evidence in the previous report. In 2020, Fineco charged an average
(weighted for the AuM) of 223bps, 5bps less than BGN and 11bps less than BMED. Most importantly, no
performance fees were added on top.
It’s also worth mentioning that, different from BGN and BMED, Fineco didn’t resort to repricing nor
does it have such plans. Rather, as discussed in the first section of this report, the company is targeting
an uplift in the overall margins of its investing business, thanks to the reconversion of à la carte funds
to in-house solutions, some savings generated from the renegotiation of conditions with third parties
and concentration of new flows into FAM products.
The best result on the cost side doesn’t necessarily mean the best performance returned to clients,
however. As our analysis shows, net performance delivered to clients was 935bps below BGN’s LUX
IM’s and ca 400bps lower than BMED funds’. This is merely a consequence of the far more prudent
asset allocation of Fineco, which penalised the company in the risk-on market during the second half
of last year.
11 October 2021 ◆ 47
Fineco – FAM, 40 largest funds by AuM

FAM Core Series Champions E 1,068.3 2.87% 0.00% 2.87% 0.5% 3.37%
Fidelity Fidelity World Fund A 741.1 2.47% 0.00% 2.47% 9.3% 11.77%
FAM Core Series Core Coupon E 656.1 2.21% 0.00% 2.21% 2.1% 4.31%
M&G Optimal Income Fund A 563.9 1.81% 0.00% 1.81% 1.7% 3.51%
FAM Core Series Core Dividend E 493.8 3.38% 0.00% 3.38% -6.1% -2.72%
Schroder Invest Euro Bond Fund A 488.4 1.36% 0.00% 1.36% 4.2% 5.56%
Vontobel Global Equity Fund A 441.8 2.48% 0.00% 2.48% 7.1% 9.58%
FAM Core Series Balanced Opportunity E 388.7 2.65% 0.00% 2.65% 1.4% 4.05%
FAM Advisory 4 L 357.6 1.46% 0.00% 1.46% 1.0% 2.46%
Nordea Stable Performance Fund A 340.7 2.44% 0.00% 2.44% -1.1% 1.34%
JP Morgan European Equity Fund A 328.1 1.92% 0.00% 1.92% -4.1% -2.18%
FAM Core Series Multi-Asset Income E 322.1 2.39% 0.00% 2.39% -0.9% 1.49%
Fidelity Fidelity Global Dividend Fund A 321.3 2.47% 0.00% 2.47% -1.1% 1.37%
FAM Advisory 5 L 308.9 1.52% 0.00% 1.52% 1.1% 2.62%
BlackRock Euro Short Duration Bond Fund A 301.7 2.10% 0.00% 2.10% -1.2% 0.90%
FAM Advisory 6 L 288.5 1.90% 0.00% 1.90% 0.6% 2.50%
FAM Core Series FAM Sustainable E 275.2 2.97% 0.00% 2.97% 9.4% 12.37%
JP Morgan US Equity Value Fund A 269.4 2.38% 0.00% 2.38% -6.9% -4.52%
FAM Core Series Balanced Conservative E 266.4 2.20% 0.00% 2.20% 2.1% 4.30%
BlackRock EM Bond Hard Currency Fund L 262.3 1.88% 0.00% 1.88% -2.6% -0.72%
FAM Core Series All Europe E 243.4 3.18% 0.00% 3.18% -6.8% -3.62%
Invesco Global Total Return Bond Fund A 241.8 1.87% 0.00% 1.87% 2.8% 4.67%
Henderson Euro Corporate Bond Fund A 232.9 1.34% 0.00% 1.34% 3.7% 5.04%
FAM Advisory 7 L 220.5 1.97% 0.00% 1.97% -0.9% 1.07%
FAM Mega Trends Target L 211.5 1.16% 0.00% 1.16% 3.7% 4.86%
FAM Core Series EM Bond E 211.3 2.71% 0.00% 2.71% -4.3% -1.59%
Eurizon Eurizon Flexible Equity Strategy Fund A 201.3 1.93% 0.00% 1.93% 3.0% 4.93%
FAM Core Series Income Opportunity E 194.6 1.61% 0.00% 1.61% 1.3% 2.91%
Jupiter Flexible Income Fund L 192.2 1.40% 0.00% 1.40% 2.4% 3.80%
FAM Core Series US Strategy E 188.8 3.20% 0.00% 3.20% 6.1% 9.30%
HSBC Euro High Yield Bond Fund A 187.3 1.55% 0.00% 1.55% 1.6% 3.15%
FAM Advisory 3 L 174.3 1.76% 0.00% 1.76% -0.4% 1.36%
Amundi Strategic Bond Fund A 155.2 1.84% 0.00% 1.84% 2.5% 4.34%
DWS Euro Corporate Bonds Fund L 151.0 0.93% 0.00% 0.93% 3.1% 4.03%
FAM Core Series EM Equity E 130.9 3.47% 0.00% 3.47% 4.5% 7.97%
HSBC Euro Credit Bond A 129.1 1.30% 0.00% 1.30% 2.8% 4.10%
FAM Core Series Target All 50 E 124.9 2.90% 0.00% 2.90% 2.5% 5.40%
FAM Core Series Champions EM E 100.8 3.06% 0.00% 3.06% -0.8% 2.26%
FAM Advisory 9 L 91.6 2.61% 0.00% 2.61% 5.2% 7.81%
FAM Core Series Target All 25 E 90.9 2.43% 0.00% 2.43% 2.7% 5.13%
Total 11,958.2
11 October 2021 ◆ 48
Below we summarise the key findings of the two exercises.
Fineco – 2020 vs 2016 performance


Performance fees - - -
Total costs 2.52% 2.23% -29ps
% funds earning perf. Fees, despite negative perf. - - -

Incidence perf. fees on gross perf. - - -
Incidence total costs on gross perf. 44% 62% +18p.p.
11 October 2021 ◆ 49
Equity funds: not the year for Fineco’s equity funds

Looking at the top 15 equity funds by size, we immediately spot two things: 1) the 265bps ongoing
charges are in line with the 255bps charged by Banca Generali and below Mediolanum’s equity
products’ 267bps. 2) Looking at the top 15 funds, four of them posted negative gross performance.
The best performers were the products with the smallest assets.
We, therefore, believe that in 2020, Fineco and Banca Generali stood at the two ends of the spectrum.
One benefited from 107% absolute performance of its Green Energy fund, which was widely present in
client portfolios, while the other suffered from the presence of four funds that reported losses.
As a further data point to help put things in the right context, excluding these outliers from both
companies, Banca Generali would have reported 10.8% gross, while Fineco would have posted 7.1%
excluding the four unlucky funds - still a difference, but not 28.3% versus 4.4%.
A final observation regarding the difference in terms of the presence of ESG and thematic funds: while
9 funds of Banca Generali out of 20 equity funds were thematic or ESG, we counted only 2 of them at
Fineco (FAM Mega Trends and Core Series FAM Sustainable).
It’s fair to remind that FAM is a relatively recent initiative, with new funds and solutions being
introduced constantly. This is also something that should be borne in mind, in our view.
Fineco Bank - FAM, 15 largest equity funds by AuM

FAM Core Series Champions E 1,068.3 2.87% 0.00% 2.87% 0.5% 3.37%
Fidelity Fidelity World Fund A 741.1 2.47% 0.00% 2.47% 9.3% 11.77%
FAM Core Series Core Dividend E 493.8 3.38% 0.00% 3.38% -6.1% -2.72%
Vontobel Global Equity Fund A 441.8 2.48% 0.00% 2.48% 7.1% 9.58%
JP Morgan European Equity Fund A 328.1 1.92% 0.00% 1.92% -4.1% -2.18%
Fidelity Fidelity Global Dividend Fund A 321.3 2.47% 0.00% 2.47% -1.1% 1.37%
FAM Core Series FAM Sustainable E 275.2 2.97% 0.00% 2.97% 9.4% 12.37%
JP Morgan US Equity Value Fund A 269.4 2.38% 0.00% 2.38% -6.9% -4.52%
FAM Core Series All Europe E 243.4 3.18% 0.00% 3.18% -6.8% -3.62%
FAM Mega Trends Target L 211.5 1.16% 0.00% 1.16% 3.7% 4.86%
Eurizon Eurizon Flexible Equity Strategy Fund A 201.3 1.93% 0.00% 1.93% 3.0% 4.93%
FAM Core Series US Strategy E 188.8 3.20% 0.00% 3.20% 6.1% 9.30%
FAM Core Series EM Equity E 130.9 3.47% 0.00% 3.47% 4.5% 7.97%
FAM Advisory 9 L 91.6 2.61% 0.00% 2.61% 5.2% 7.81%
FAM Core Series Agressive Fund E 85.4 3.15% 0.00% 3.15% 2.6% 5.75%
Total 5,091.8
Balanced funds: fair pricing, but limited positive performance

Fineco has only 3 funds classified as flexible and 10 as balanced. As such, we are monitoring the
balanced funds instead of flexible funds, as we did for Fineco’s competitors.
Overall, ongoing charges stood at 183bps, with gross returns of 244bps. As such, balanced funds
returned 0.61% net performance to clients.
11 October 2021 ◆ 50
Fineco Bank - FAM, 10 largest balanced funds by AuM

M&G Optimal Income Fund A 563.9 1.81% 0.00% 1.81% 1.7% 3.51%
FAM Advisory 4 L 357.6 1.46% 0.00% 1.46% 1.0% 2.46%
Nordea Stable Performance Fund A 340.7 2.44% 0.00% 2.44% -1.1% 1.34%
FAM Advisory 5 L 308.9 1.52% 0.00% 1.52% 1.1% 2.62%
FAM Advisory 6 L 288.5 1.90% 0.00% 1.90% 0.6% 2.50%
FAM Advisory 7 L 220.5 1.97% 0.00% 1.97% -0.9% 1.07%
Jupiter Flexible Income Fund L 192.2 1.40% 0.00% 1.40% 2.4% 3.80%
FAM Advisory 3 L 174.3 1.76% 0.00% 1.76% -0.4% 1.36%
FAM Core Series Champions EM E 100.8 3.06% 0.00% 3.06% -0.8% 2.26%
FAM Advisory 6 Target L 77.6 1.04% 0.00% 1.04% 0.5% 1.54%
Total 2,624.8
Fixed-income funds: not the cheapest funds

Fineco’s fixed-income funds have a pricing slightly above the 178bps we calculated for Banca
Generali’s and Mediolanum’s 187bps.
Gross performance stood at 328bps, better than Mediolanum’s 279bps but lower than the 353bps
reported by Banca Generali.
Net performance delivered to clients stood at 134bps, perfectly in line with Banca Generali’s and
better than Azimut’s and Banca Mediolanum’s.
Fineco Bank - FAM, 15 largest fixed-income funds by AuM

FAM Core Series Core Coupon E 656.1 2.21% 0.00% 2.21% 2.1% 4.31%
Schroder Invest Euro Bond Fund A 488.4 1.36% 0.00% 1.36% 4.2% 5.56%
FAM Core Series Balanced Opportunity E 388.7 2.65% 0.00% 2.65% 1.4% 4.05%
FAM Core Series Multi-Asset Income E 322.1 2.39% 0.00% 2.39% -0.9% 1.49%
BlackRock Euro Short Duration Bond Fund A 301.7 2.10% 0.00% 2.10% -1.2% 0.90%
FAM Core Series Balanced Conservative E 266.4 2.20% 0.00% 2.20% 2.1% 4.30%
BlackRock EM Bond Hard Currency Fund L 262.3 1.88% 0.00% 1.88% -2.6% -0.72%
Invesco Global Total Return Bond Fund A 241.8 1.87% 0.00% 1.87% 2.8% 4.67%
Henderson Euro Corporate Bond Fund A 232.9 1.34% 0.00% 1.34% 3.7% 5.04%
FAM Core Series EM Bond E 211.3 2.71% 0.00% 2.71% -4.3% -1.59%
FAM Core Series Inccome Opportunity E 194.6 1.61% 0.00% 1.61% 1.3% 2.91%
HSBC Euro High Yield Bond Fund A 187.3 1.55% 0.00% 1.55% 1.6% 3.15%
Amundi Strategic Bond Fund A 155.2 1.84% 0.00% 1.84% 2.5% 4.34%
DWS Euro Corporate Bonds Fund L 151.0 0.93% 0.00% 0.93% 3.1% 4.03%
HSBC Euro Credit Bond A 129.1 1.30% 0.00% 1.30% 2.8% 4.10%
Total 4,188.8
11 October 2021 ◆ 51
AZM: confirming former evidence

In our previous exercise, Azimut emerged as cheaper than peers on ongoing charges (273bps vs the
sector average of 300bps), but among the most expensive when adding performance fees on top
(391bps vs 363bps, on average).
Since then, the company has resorted to repricing to gradually charge performance fees on an annual
basis while offsetting the shortfall in revenues via higher fixed recurring fees. The company did not
take both steps (ie, charging performance fees annually instead of monthly and increasing the
recurring fees) at the same time. Starting mid-February 2019, the company revised recurring fees
upwards, while performance fees were revisited partially in 2019 and partially in 2020. Hence, 2020
benefited from both higher management fees and still part of the AuM charging performance fees on
a monthly basis.
It is worth mentioning that we focused on the liquid product offer, and we remind that the company
is currently making efforts to gain exposure to illiquid solutions to improve performance of its client’s
portfolios.
Our analysis considered 65 funds, of which 60 were managed in Luxembourg.
Azimut – AZ Fund and Azimut SGR products Azimut – Azimut offer by asset class
1%
5%
28% 31%
14%
27%
93%
AZ Fund 1 AZ Multi-Asset Azimut SGR Fixed-Income Equity Alternative Allocation
4 years since our former exercise, we can say that nothing has really changed materially. With an
average of 272bps, Azimut has now surpassed Banca Generali and Banca Mediolanum and has the most
expensive products (considering the weighted average cost of the top 40 funds). Equally, the overall
cost seems to be fairly in line with what we calculated in 2017 (273bps).
In addition, the high volatility experienced in 2020, coupled with a good portion of assets still charging
performance fees monthly, led to 64bps in performance fees (vs 73bps at BGN and 35bps at BMED).
Hence, total costs charged to clients in 2020 came in at in 337bps - the highest compared to BGN’s
302bps, BMED’s 269bps and FBK’s 212bps.
Such pricing didn’t reflect in better performance. The largest 40 funds of Banca Generali’s LUX IM
platform generated 13.73% gross performance, compared to Mediolanum funds’ ca 8%, Azimut’s 5.8%
and Fineco’s 3.4%.
However, when calculating net performance delivered to clients, the gap between Azimut and Fineco
narrowed (2.4% net for AZM, compared to 1.25% net for Fineco), while the gap between Banca Generali
and Banca Mediolanum widened (10.7% net for BGN vs 5.3% net for BMED).
11 October 2021 ◆ 52
Azimut – 40 largest funds by AuM

AZ Fund 1 Enhanced Yield A 1,385.1 0.52% 0.04% 0.56% 0.2% 0.76%

AZ Fund 1 Trend A 1,230.2 2.99% 0.45% 3.44% -3.9% -0.46%
AZ Fund 1 Trend B 1,037.1 2.99% 0.44% 3.43% -3.9% -0.47%
AZ Fund 1 Escalator A 881.2 2.50% 0.74% 3.24% 2.1% 5.34%
AZ Fund 1 Dynamic FoF A 809.6 3.90% 0.56% 4.46% 9.2% 13.66%
AZ Fund 1 Balanced FoF A 524.7 3.28% 0.34% 3.62% 3.1% 6.72%
AZ Fund 1 America A 515.5 3.16% 0.37% 3.53% 6.2% 9.73%
AZ Fund 1 Global FoF A 441.8 3.99% 1.39% 5.38% 11.3% 16.68%
AZ Fund 1 Income Dynamic A 401.5 1.33% 0.12% 1.45% 0.4% 1.85%
AZ Fund 1 Emerging Asia FoF A 382.3 3.71% 2.19% 5.90% 16.5% 22.40%
AZ Fund 1 Target 2024 A 376.8 2.20% 0.29% 2.49% 3.0% 5.49%
AZ Fund 1 Global Growth A 374.2 3.06% 1.29% 4.35% 8.8% 13.15%
AZ Fund 1 Balanced FoF B 359.9 3.28% 0.35% 3.63% 3.1% 6.73%
AZ Fund 1 Global ESG A 344.7 4.00% 2.30% 6.30% 10.2% 16.50%
AZ Fund 1 Alternative Capital Enhanced A 344.3 0.80% 1.09% 1.89% 2.3% 4.19%
AZ Fund 1 Escalator B 341.2 2.50% 0.74% 3.24% 2.1% 5.34%
AZ Fund 1 Hybrids A 341.2 2.39% 0.84% 3.23% 1.5% 4.73%
AZ Fund 1 Italian Trend A 337.9 2.97% 0.94% 3.91% -7.6% -3.69%
AZ Fund 1 Dynamic FoF B 321.5 3.91% 0.56% 4.47% 9.2% 13.67%
AZ Fund 1 Bond Corporate A 285.8 2.25% 0.01% 2.26% 0.6% 2.86%
AZ Fund 1 Emerging Asia FoF B 269.6 3.68% 2.15% 5.83% 16.5% 22.33%
AZ Fund 1 Aggregate Bond Euro A 265.2 2.37% 0.30% 2.67% 2.1% 4.77%
AZ Fund 1 Europe A 261.0 2.98% 1.01% 3.99% -5.6% -1.61%
AZ Fund 1 Patriot A 235.8 2.38% 0.71% 3.09% 10.7% 13.79%
AZ Fund 1 European Dynamic A 228.6 2.65% 0.15% 2.80% -3.2% -0.40%
AZ Fund 1 Global Balanced A 227.6 2.64% 0.14% 2.78% -8.4% -5.62%
AZ Fund 1 Hybrids A 213.0 2.40% 0.84% 3.24% 1.5% 4.74%
AZ Fund 1 Target 2020 Equity Options A 211.9 2.53% 0.69% 3.22% -5.8% -2.58%
AZ Fund 1 Conservative FoF B 204.9 2.94% 0.04% 2.98% -0.5% 2.48%
Azimut SGR Azimut Trend 197.3 2.55% 0.00% 2.55% -2.6% -0.05%
AZ Fund 1 Global Income A 196.6 2.87% 0.03% 2.90% -7.5% -4.60%
AZ Fund 1 Islamic Global Sukuk A 185.1 2.50% 0.12% 2.62% -6.3% -3.68%
AZ Fund 1 Global Balanced B 184.7 2.64% 0.14% 2.78% -8.4% -5.62%
AZ Fund 1 Conservative FoF A 183.1 2.96% 0.07% 3.03% -0.5% 2.53%
AZ Fund 1 Convertible A H 179.7 2.69% 1.33% 4.02% 11.8% 15.82%
AZ Fund 1 Asset Timing A 174.2 2.91% 0.28% 3.19% 7.9% 11.09%
AZ Fund 1 Global Growth B 167.4 3.08% 1.37% 4.45% 8.8% 13.25%
AZ Fund 1 Global FoF B 166.6 3.99% 1.34% 5.33% 11.3% 16.63%
AZ Fund 1 Small Cap Europe FoF A 156.7 4.18% 1.46% 5.64% 6.7% 12.34%
AZ Fund 1 Global Emerging FoF A 154.9 4.09% 1.45% 5.54% 12.6% 18.14%
Total 15,100.1
11 October 2021 ◆ 53
A comparison with our former exercise shows that overall costs declined 49bps only, due to a lower
incidence of performance fees on less positive performance (5.4% in 2020 vs 10.9% in 2016). However,
the incidence of performance fees on gross performance reported by funds is somehow similar (11% in
2020 vs 11% in 2016).
On a more positive note, we flag that the partial repricing of performance fees helped reduce the
number of funds charging performance fees despite clients’ losing money at year-end. Such a
percentage stood at 37% in 2016, while it decreased to 25% in 2020 (11 funds of the selected 40 largest
ones).
Needless to say, the highest costs in the sample, coupled with second-worst performance in the peer
group, led to the incidence of costs over performance at 58% - in line with Fineco’s 62% and far above
Mediolanum’s 34% and Banca Generali’s 22%.
Azimut – 2020 vs 2016 performance


Performance fees 1.19% 0.64% -55bps
Total costs 3.91% 3.37% -54ps
% funds earnings perf. fees, despite negative perf. 37% 25% -12p.p.

Incidence perf. fees on gross perf. 11% 11% -
Incidence total costs on gross perf. 36% 58% +22p.p.
11 October 2021 ◆ 54
Equity funds: good performance, but costs remain too high

We selected the 20 largest equity funds at Azimut. We immediately noticed three factors:
1. Performance has been good last year, as equity funds reported 10.8% weighted average gross
returns.
2. Azimut’s equity funds are far more expensive than peers’ equity products. As seen earlier in
the report, equity funds generally have ongoing charges of 250-270bps. In the case of Azimut,
we calculated average ongoing charges were 332bps, 60-80bps higher than peers’.
3. Performance fees added 122bps on top, which means a sizeable part of Azimut’s AuM still
charged monthly performance fees in 2020. Starting 2021, all funds shifted to an annual
calculation, with the monthly algorithm remaining a prerogative of the Unit Linked solutions.
Overall, the total expense ratio was in excess of 450bps, with some funds even touching
600bps of total expenses. Excluding performance fees, many funds have ongoing charges in
excess of 370bps (median value) - too high in our opinion.
To sum up, 10.8% weighted average performance achieved by Azimut’s equity products was good
and in line with the 10.8% reported by Banca Generali ex Green Energy (but 28.3% including the
stellar performance of this product) and Banca Mediolanum’s 7.4%. What is different, however, is
that Banca Generali’s equity funds had a total cost of 358bps, while Mediolanum limited total
expenses to 300bps. This means a 100bps difference compared to Banca Generali’s and 150bps
distance from Mediolanum.
Put in a different way, 42% of gross performance of the equity funds at Azimut was eroded by
costs. As mentioned, Azimut benefited from the double whammy effect of having the repricing
fully in place and still charging monthly performance fees on a sizeable part of its funds. As such,
we expect the situation to improve this year (ie, costs to go down) vs 2020.
11 October 2021 ◆ 55
Azimut – AZ SGR and AZ FUND, 20 largest equity funds by AuM

AZ Fund 1 Escalator A 881.2 2.50% 0.74% 3.24% 2.1% 5.34%

AZ Fund 1 America A 515.5 3.16% 0.37% 3.53% 6.2% 9.73%
AZ Fund 1 Global FoF A 441.8 3.99% 1.39% 5.38% 11.3% 16.68%
AZ Fund 1 Emerging Asia FoF A 382.3 3.71% 2.19% 5.90% 16.5% 22.40%
AZ Fund 1 Global Growth A 374.2 3.06% 1.29% 4.35% 8.8% 13.15%
AZ Fund 1 Global ESG A 344.7 4.00% 2.30% 6.30% 10.2% 16.50%
AZ Fund 1 Escalator B 341.2 2.50% 0.74% 3.24% 2.1% 5.34%
AZ Fund 1 Emerging Asia FoF B 269.6 3.68% 2.15% 5.83% 16.5% 22.33%
AZ Fund 1 Europe A 261.0 2.98% 1.01% 3.99% -5.6% -1.61%
AZ Fund 1 Global Growth B 167.4 3.08% 1.37% 4.45% 8.8% 13.25%
AZ Fund 1 Global FoF B 166.6 3.99% 1.34% 5.33% 11.3% 16.63%
AZ Fund 1 Small Cap Europe FoF A 156.7 4.18% 1.46% 5.64% 6.7% 12.34%
AZ Fund 1 Global Emerging FoF A 154.9 4.09% 1.45% 5.54% 12.6% 18.14%
AZ Fund 1 Global Quality A 146.3 3.84% 0.14% 3.98% 4.1% 8.08%
AZ Fund 1 Global Infrastructure A 144.0 2.95% 0.95% 3.90% -20.8% -16.90%
AZ Fund 1 Small Cap Europe FoF B 100.2 4.18% 1.45% 5.63% 6.7% 12.33%
AZ Fund 1 America B 88.3 3.17% 0.38% 3.55% 6.2% 9.75%
AZ Fund 1 Japan A 87.1 3.64% 1.33% 4.97% 8.9% 13.87%
AZ Fund 1 Global ESG B 80.7 3.99% 2.52% 6.51% 10.2% 16.71%
AZ Fund 1 Global Infrastructure B 62.1 2.95% 0.92% 3.87% -20.9% -17.03%
Total 5,165.6
11 October 2021 ◆ 56
Flexible and balance funds (Allocation): not much net returns for clients
Azimut classifies flexible and balanced funds under the “allocation” category. Overall, this category
shows slightly lower ongoing charges compared to equity funds (308bps vs 332bps), but also a lower
incidence of performance fees (40bps vs 122bps). Overall, total expenses were 348bps, 105bps below
the 453bps we identified for equity funds.
Performance of this category was not brilliant last year, +2.57%, and costs eroded all the returns,
generating a net loss of -0.9%. However, excluding Azimut Trend (both class A and class B) from the
computation, gross performance of this category would have been 4%, with a net result to clients of
0.6%.
As a way of comparison, this category appears more expensive than the flexible funds of Banca
Generali and Banca Mediolanum, while it’s in line with the pricing of Mediolanum’s balanced products.
Azimut – AZ SGR and AZ FUND, 20 largest flexible and balanced funds by AuM (allocation category)
AZ Fund 1 Trend A 1,230.2 2.99% 0.45% 3.44% -3.90% -0.46%

AZ Fund 1 Trend B 1,037.1 2.99% 0.44% 3.43% -3.90% -0.47%
AZ Fund 1 Dynamic FoF A 809.6 3.90% 0.56% 4.46% 9.20% 13.66%
AZ Fund 1 Balanced FoF A 524.7 3.28% 0.34% 3.62% 3.10% 6.72%
AZ Fund 1 Balanced FoF B 359.9 3.28% 0.35% 3.63% 3.10% 6.73%
AZ Fund 1 Italian Trend A 337.9 2.97% 0.94% 3.91% -7.60% -3.69%
AZ Fund 1 Dynamic FoF B 321.5 3.91% 0.56% 4.47% 9.20% 13.67%
AZ Fund 1 European Dynamic A 228.6 2.65% 0.15% 2.80% -3.20% -0.40%
AZ Fund 1 Global Balanced A 227.6 2.64% 0.14% 2.78% -8.40% -5.62%
AZ Fund 1 Target 2020 Equity Options A 211.9 2.53% 0.69% 3.22% -5.80% -2.58%
AZ Fund 1 Conservative FoF B 204.9 2.94% 0.04% 2.98% -0.50% 2.48%
Azimut SGR Azimut Trend 197.3 2.55% 0.00% 2.55% -2.60% -0.05%
AZ Fund 1 Global Income A 196.6 2.87% 0.03% 2.90% -7.50% -4.60%
AZ Fund 1 Global Balanced B 184.7 2.64% 0.14% 2.78% -8.40% -5.62%
AZ Fund 1 Conservative FoF A 183.1 2.96% 0.07% 3.03% -0.50% 2.53%
AZ Fund 1 Asset Timing A 174.2 2.91% 0.28% 3.19% 7.90% 11.09%
AZ Fund 1 Global Conservative B 125.5 2.39% 0.02% 2.41% -1.00% 1.41%
AZ Fund 1 Target 2022 Equity Options B 116.6 2.52% 1.21% 3.73% -6.20% -2.47%
AZ Fund 1 Global Income B 105.1 2.87% 0.02% 2.89% -7.50% -4.61%
AZ Fund 1 Global Conservative A 104.7 2.39% 0.02% 2.41% -1.00% 1.41%
Total 6,881.5
Weighted Average 3.08% 0.40% 3.48% -0.91% 2.57%
11 October 2021 ◆ 57
Alternative funds: overall fair pricing and good performance

Azimut has added a further category of funds named Alternative. Such a category includes strategies
such as insurance-linked securities, merger arbitrage, long/short arbitrage, systematic and
commodity. In the table below, we recap the key characteristics of the 10 main strategies.
Overall, these products show a fair pricing, 194bps ongoing charges, with 68bps of performance fees
on top. In 2020, gross returns reached 5.13%, while the net remuneration was 2.5%.
Excluding Alternative Capital Enhanced, a product that invests (long or short) via options or futures
and has a low 0.80% ongoing charge, the overall costs would soar ca 40bps (from 262bps total costs to
303bps, including 45bps performance fees), but also gross returns would be ca. 50bps higher (566bps
vs 513bps).
Hence, we would consider such a product category interesting and fairly priced.
Azimut – AZ SGR and AZ FUND, 20 largest alternative funds by AuM

AZ Fund 1 Alternative Capital Enhanced A 344.3 0.80% 1.09% 1.89% 2.3% 4.19%
AZ Fund 1 Alternative Core Brands B 120.5 2.60% 0.57% 3.17% 5.4% 8.57%
AZ Fund 1 Alternative Core Brands A 110.9 2.60% 0.59% 3.19% 5.4% 8.59%
AZ Fund 1 Alternative Capital Enhanced B 80.5 0.80% 0.65% 1.45% 2.3% 3.75%
AZ Fund 1 Alternative Global Macro Opport A 74.7 2.96% 0.56% 3.52% 1.9% 5.42%
AZ Fund 1 Alternative Multistrategy FoF A 67.0 3.61% 0.03% 3.64% -1.0% 2.64%
AZ Fund 1 Alternative Global Macro Opportun B 59.2 2.96% 0.53% 3.49% 1.9% 5.39%
AZ Fund 1 Alternative Multistrategy FoF B 38.7 3.61% 0.03% 3.64% -1.0% 2.64%
AZ Fund 1 Alternative Arbitrage A 37.2 2.71% 0.00% 2.71% -1.9% 0.81%
AZ Fund 1 Alternative Cat Bonds A H 30.9 1.67% 0.51% 2.18% 3.8% 5.98%
Total 963.9
11 October 2021 ◆ 58
Fixed income: fair pricing, but no net returns for clients

We finally observed the 20 largest fixed-income funds. The overall result is impacted by AZ Fund
Enhanced Yield - the largest fixed-income fund and one with the lowest costs (but also net returns to
clients of 0.2%).
As a result, weighted average ongoing fees stood at 174bps in 2020 (225bps excluding Enhanced Yield),
in line with Banca Generali’s 178bps, above Mediolanum’s 127bps and in line with Fineco’s 195bps.
Overall, this fund category returned weighted average net returns of 1.09% last year, below the 1.35%
of Banca Generali, better than the 0.17% delivered by Mediolanum and below the 1.95% net reported
by Fineco.
Among the reasons behind better net performances of Fineco’s fixed-income funds compared to
Azimut’s but also Banca Generali’s and Mediolanum’s, one is certainly the application of performance
fees by Fineco’s competitors. Banca Generali earned 40bps vs Azimut’s 30bps and Mediolanum’s 12bps.
With modest net returns granted by this fund category in the current low-rate environment, even
30bps or 40bps could make a difference on final performance of any network.
Azimut – AZ SGR and AZ FUND, 20 largest fixed-income funds by AuM

AZ Fund 1 Enhanced Yield A 1,385.1 0.52% 0.04% 0.56% 0.2% 0.76%

AZ Fund 1 Income Dynamic A 401.5 1.33% 0.12% 1.45% 0.4% 1.85%
AZ Fund 1 Target 2024 A 376.8 2.20% 0.29% 2.49% 3.0% 5.49%
AZ Fund 1 Hybrids A 341.2 2.39% 0.84% 3.23% 1.5% 4.73%
AZ Fund 1 Bond Corporate A 285.8 2.25% 0.01% 2.26% 0.6% 2.86%
AZ Fund 1 Aggregate Bond Euro A 265.2 2.37% 0.30% 2.67% 2.1% 4.77%
AZ Fund 1 Patriot A 235.8 2.38% 0.71% 3.09% 10.7% 13.79%
AZ Fund 1 Hybrids B 213.0 2.40% 0.84% 3.24% 1.5% 4.74%
AZ Fund 1 Islamic Global Sukuk A 185.1 2.50% 0.12% 2.62% -6.3% -3.68%
AZ Fund 1 Convertible A H 179.7 2.69% 1.33% 4.02% 11.8% 15.82%
AZ Fund 1 BTPortfolio A 118.5 1.63% 0.27% 1.90% 2.0% 3.90%
AZ Fund 1 Bond Renminbi Opportunities A 115.2 2.31% 0.00% 2.31% -4.1% -1.79%
AZ Fund 1 Emerging Local Currency FoF B 113.5 3.20% 0.00% 3.20% -10.4% -7.20%
AZ Fund 1 Target 2024 B 106.9 2.21% 0.27% 2.48% 3.0% 5.48%
AZ Fund 1 Convertible B H 82.0 2.68% 1.37% 4.05% 11.7% 15.75%
AZ Fund 1 Euro Aggregate Short Term A 68.7 2.00% 0.02% 2.02% -2.0% 0.02%
AZ Fund 1 Emerging Local Currency FoF A 65.0 3.20% 0.02% 3.22% -10.4% -7.18%
Azimut SGR Azimut Trend Tassi 54.7 1.59% 0.11% 1.70% 3.2% 4.90%
AZ Fund 1 USD Aggregate Short Term A 52.2 2.41% 0.11% 2.52% -8.2% -5.68%
AZ Fund 1 International FoF A 52.1 3.10% 0.27% 3.37% -5.4% -2.03%
Total 4,698.1
11 October 2021 ◆ 59
ANIM: good value for money

In this second analysis, we started mapping Anima’s funds, too. Admittedly, a comparison between
the funds’ KPIs and products sold by Italian asset gatherers could be misleading because of the
following two factors:
1) FA networks have to remunerate advisors, and this component is typically embedded in the
management fee. Anima mainly distributes via retail banks; hence, the fee structure cannot
be compared.
2) Anima funds’ asset allocation is less exposed to equities. Equity funds represented only 13.6%
of total AuM in 1H21 (vs 26.7% for the Italian asset management industry), to which part of
the 34.9% flexible funds should be added (vs 20.3% for Italian peers). However, even assuming
that half of the flexible funds could be considered equity-like, the overall equity exposure
would stand at ca 30% - well below other asset gatherers’ included in the analysis.
Against this background, we calculate 154bps ongoing charges (weighted average) for retail classes,
to which a further 12bps of performance fees should be added on top. It is worth mentioning that
Anima didn’t need to reprice its performance fee mechanism in the recent past, as all its funds are
domiciled in Italy and compliant with Bank of Italy’s rules.
The overall total expense ratio of its funds, therefore, stood at 165bps in 2020, and gross performance
returned to clients was 3.31%. This means that Anima’s funds generated net returns to clients of ca
1.7%. As mentioned, performance fees accounted for just 12bps.
11 October 2021 ◆ 60
Anima – 40 largest funds by AuM

Anima SGR Anima Sforzesco A 3,862.6 1.27% 0.00% 1.27% 1.2% 2.47%
Anima SGR Anima Visconteo A 3,022.4 1.47% 0.00% 1.47% -0.1% 1.37%
Anima SGR Etica Obbligazionario Misto R 1,762.9 1.28% 0.00% 1.28% 2.3% 3.58%
Anima SGR Etica Bilanciato R 1,744.8 1.93% 0.00% 1.93% 2.6% 4.53%
Anima SGR BancoPosta Mix 2 A 1,164.1 1.34% 0.00% 1.34% 2.35% 3.69%
Anima SGR Anima ESaloGo Bilanciato A 1,093.8 1.71% 0.00% 1.71% 1.8% 3.51%
Anima SGR Anima Magellano A 1,051.0 1.86% 0.00% 1.86% -0.2% 1.66%
Anima SGR Anima Crescita Italia A P 1,021.3 1.47% 0.00% 1.47% -0.7% 0.77%
Anima SGR Banco Posta Mix 1 A 1,011.3 1.14% 0.00% 1.14% 1.92% 3.06%
Anima SGR Anima Valore Globale A 903.9 2.13% 0.00% 2.13% -6.6% -4.47%
Anima SGR Gestielle Cedola Multiasset III 759.8 1.99% 0.00% 1.99% -1.8% 0.19%
Anima SGR Gestielle Cedola Multi Target V 730.0 1.72% 0.21% 1.93% 0.9% 2.83%
Anima SGR BancoPosta Az Internazionale 699.8 1.74% 0.00% 1.74% -0.2% 1.54%
Anima SGR Anima Vespucci A 695.8 1.46% 0.00% 1.46% 1.5% 2.96%
Anima SGR Anima Sforzesco D A 695.2 1.27% 0.00% 1.27% 1.2% 2.47%
Anima SGR Etica Impatto Clima R 672.4 1.72% 0.00% 1.72% 0.0% 1.72%
Anima SGR Anima Risparmio A 647.4 1.11% 0.14% 1.25% 0.8% 2.05%
Anima SGR Anima Selection A 628.6 2.27% 0.00% 2.27% 5.8% 8.07%
Anima SGR Anima Fondo Trading F 625.9 0.99% 0.63% 1.62% -0.1% 1.52%
Anima SGR Anima Alto Potenziale Europa A 615.8 1.76% 1.44% 3.20% 13.0% 16.20%
Anima SGR Anima Invest Robotica&AI 2024 612.8 1.52% 0.39% 1.91% 2.7% 4.61%
Anima SGR Etica Rendita Bilanciata R 594.9 1.62% 0.00% 1.62% 2.4% 4.02%
Anima SGR Anima Sforzesco Plus A 589.7 1.42% 0.00% 1.42% 0.9% 2.32%
Anima SGR Anima Traguardo 2023 Flex 581.1 1.34% 0.19% 1.53% 1.1% 2.63%
Anima SGR Gestielle Profilo Cedola II 567.6 2.03% 0.00% 2.03% -0.8% 1.23%
Anima SGR Anima America A 544.4 2.13% 0.57% 2.70% 12.7% 15.40%
Anima SGR Anima Pianeta A 539.7 1.32% 0.00% 1.32% -1.8% -0.48%
Anima SGR Anima Programma Cedola 2023 II 539.7 2.01% 0.46% 2.47% 3.5% 5.97%
Anima SGR Anima Alto Potenziale Europa F 536.6 0.76% 2.09% 2.85% 13.5% 16.35%
Anima SGR Etica Rendita Bilanciata D R 533.6 1.62% 0.00% 1.62% 2.4% 4.02%
Anima SGR Anima Selezione Europa B 520.1 2.48% 0.00% 2.48% 3.6% 6.08%
Anima SGR Anima Investimento ENG 2025 451.0 1.41% 0.00% 1.41% 1.2% 2.61%
Anima SGR Etica Azionario I R 427.8 2.04% 0.00% 2.04% 1.3% 3.34%
Anima SGR Anima Visconteo D A 417.2 1.47% 0.00% 1.47% -0.1% 1.37%
Anima SGR Anima Obbligazionario Euro MLT F 413.3 0.51% 0.13% 0.64% 4.9% 5.54%
Anima SGR Anima Visconteo Plus A 411.5 1.73% 0.00% 1.73% 0.0% 1.73%
Anima SGR Anima Risparmio F 408.8 0.58% 0.21% 0.79% 1.2% 1.99%
Anima SGR Anima Programma Cedola 2023 405.3 2.01% 0.45% 2.46% 3.6% 6.06%
Total 34,063.6
11 October 2021 ◆ 61
Equity funds: fair pricing, limited performance

Below, we have reported the key indicators of Anima’s 20 largest equity funds. We calculate a
weighted average ongoing charge of 211bps. As mentioned, this is hardly comparable with Banca
Generali’s and Fineco’s ca 252bps and Mediolanum’s 267bps (not to mention Azimut’s equity funds’
333bps), as FA networks need to remunerate financial advisors, too. And, in an equity fund, such
remuneration for FAs could easily be in the 70-80bps ballpark.
Also, it is fair to remind that, aside Azimut, the other three asset gatherers are mainly utilising sub-
advisory mandates, which means that they are basically distributing a white label of third-party funds.
On the contrary, Azimut and Anima are the only companies fully managing funds in-house (with the
exception of a small portion of third-party products distributed by Azimut).
That being said, gross returns delivered by Anima’s equity funds have been 394bps, which means that
costs eroded 56% of performance, allowing clients to earn a limited 1.7% net.
It is fair to note, however, that Anima Valore Globale – the largest equity fund managed by Anima –
had an unlucky year. Netting the performance from this fund, Anima’s equity funds would have
returned 531bps gross and 306bps net performances.
Anima – Anima SGR, 20 largest equity funds by AuM

Anima SGR Anima Valore Globale A 903.9 2.13% 0.00% 2.13% -6.6% -4.47%
Anima SGR BancoPosta Azionario Intern 699.8 1.74% 0.00% 1.74% -0.2% 1.54%
Anima SGR Anima America A 544.4 2.13% 0.57% 2.70% 12.7% 15.40%
Anima SGR Anima Selezione Europa B 520.1 2.48% 0.00% 2.48% 3.6% 6.08%
Anima SGR Etica Azionario I R 427.8 2.04% 0.00% 2.04% 1.3% 3.34%
Anima SGR Anima Iniziativa Italia A P 379.3 2.13% 0.00% 2.13% -8.1% -5.97%
Anima SGR Anima Europa A 364.8 2.13% 0.65% 2.78% -0.4% 2.38%
Anima SGR Anima Selezione Globale B 332.6 2.49% 0.00% 2.49% 2.2% 4.69%
Anima SGR Anima Megatrend A 258.6 2.11% 0.01% 2.12% 6.1% 8.22%
Anima SGR Anima Iniziativa Europa A 251.6 2.14% 0.64% 2.78% 7.1% 9.88%
Anima SGR Anima America B 249.9 2.38% 0.00% 2.38% 13.1% 15.48%
Anima SGR Anima ESaloGo Azionario Globale A 229.6 2.14% 0.01% 2.15% 4.6% 6.75%
Anima SGR Anima Emergenti A 188.0 2.18% 0.00% 2.18% 7.8% 9.98%
Anima SGR Anima Italia B 181.8 2.39% 0.00% 2.39% -9.9% -7.51%
Anima SGR Anima Emergenti B 176.3 2.43% 0.00% 2.43% 7.5% 9.93%
Anima SGR Anima Pacifico A 170.9 2.17% 0.00% 2.17% 9.2% 11.37%
Anima SGR Anima Italia A 159.3 2.14% 0.00% 2.14% -9.7% -7.56%
Anima SGR Anima Valore Globale F 156.2 1.05% 0.00% 1.05% -5.6% -4.55%
Anima SGR Anima Iniziativa Europa B 155.5 2.39% 0.00% 2.39% 7.5% 9.89%
Anima SGR Anima Pacifico F 135.1 1.06% 0.20% 1.26% 10.2% 11.46%
Total 6,485.4
11 October 2021 ◆ 62
Flexible funds: fair pricing, but limited returns

Wherever possible, flexible funds have achieved performance similar to equity funds’, even with a
stronger discipline on pricing. Ongoing charges were, on average, 154bps, with performance fees
adding further 18bps on top. Overall, the 171bps total cost returned 3.44% gross performance.
Therefore, Anima’s flexible funds returned 1.7% net to their clients.
The two flagship Sforzesco and Visconteo make up ca 50% of the sample we analysed. Hence, results
are skewed towards these two products which, in 2020, failed to make a difference in terms of
performance. Excluding these two funds in all their classes, gross performance of the flexible fund
category would have been 4.8%, with net performance of 2.8%.
Anima – Anima SGR, 20 largest flexible funds by AuM

Anima SGR Anima Sforzesco A 3,862.6 1.27% 0.00% 1.27% 1.2% 2.47%
Anima SGR Anima Visconteo A 3,022.4 1.47% 0.00% 1.47% -0.1% 1.37%
Anima SGR Anima ESaloGo Bilanciato A 1,093.8 1.71% 0.00% 1.71% 1.8% 3.51%
Anima SGR Anima Magellano A 1,051.0 1.86% 0.00% 1.86% -0.2% 1.66%
Anima SGR Gestielle Cedola Multiasset III 759.8 1.99% 0.00% 1.99% -1.8% 0.19%
Anima SGR Gestielle Cedola Multi Target V 730.0 1.72% 0.21% 1.93% 0.9% 2.83%
Anima SGR Anima Vespucci A 695.8 1.46% 0.00% 1.46% 1.5% 2.96%
Anima SGR Anima Sforzesco D A 695.2 1.27% 0.00% 1.27% 1.2% 2.47%
Anima SGR Anima Selection A 628.6 2.27% 0.00% 2.27% 5.8% 8.07%
Anima SGR Anima Fondo Trading F 625.9 0.99% 0.63% 1.62% -0.1% 1.52%
Anima SGR Anima Alto Potenziale Europa A 615.8 1.76% 1.44% 3.20% 13.0% 16.20%
Anima SGR Anima Investim Robotica& AI 2024 612.8 1.52% 0.39% 1.91% 2.7% 4.61%
Anima SGR Anima Sforzesco Plus A 589.7 1.42% 0.00% 1.42% 0.9% 2.32%
Anima SGR Gestielle Profilo Cedola II 567.6 2.03% 0.00% 2.03% -0.8% 1.23%
Anima SGR Anima Programma Cedola 2023 II 539.7 2.01% 0.46% 2.47% 3.5% 5.97%
Anima SGR Anima Alto Potenziale Europa F 536.6 0.76% 2.09% 2.85% 13.5% 16.35%
Anima SGR Anima Investimento ENG 2025 451.0 1.41% 0.00% 1.41% 1.2% 2.61%
Anima SGR Anima Visconteo D A 417.2 1.47% 0.00% 1.47% -0.1% 1.37%
Anima SGR Anima Visconteo Plus A 411.5 1.73% 0.00% 1.73% 0.0% 1.73%
Anima SGR Anima Programma Cedola 2023 405.3 2.01% 0.45% 2.46% 3.6% 6.06%
Total 18,312.4
11 October 2021 ◆ 63
Balanced funds: similar pricing and similar performance of flexible funds

The balanced fund category is very similar to the flexible one in terms of both fee structure and
performance. Ongoing charges were, on average, 160bps last year, with performance fees virtually
non-existent. Overall, the 162bps total cost returned 3.37% gross performance. Therefore, Anima’s
balanced funds generated 1.75% net returns for their clients.
Anima – Anima SGR, 20 largest balanced funds by AuM

Anima SGR Etica Bilanciato R 1,744.8 1.93% 0.00% 1.93% 2.6% 4.53%
Anima SGR Anima Crescita Italia A R 1,021.3 1.47% 0.00% 1.47% -0.7% 0.77%
Anima SGR Etica Impatto Clima R 672.4 1.72% 0.00% 1.72% 0.0% 1.72%
Anima SGR Etica Rendita Bilanciata R 594.9 1.62% 0.00% 1.62% 2.4% 4.02%
Anima SGR Etica Rendita Bilanciata D R 533.6 1.62% 0.00% 1.62% 2.4% 4.02%
Anima SGR Anima Forza Moderato N 363.8 1.93% 0.00% 1.93% 1.9% 3.83%
Anima SGR Anima Obiettivo Cedola 2024 333.7 1.52% 0.23% 1.75% 2.0% 3.75%
Anima SGR BP Cedola Chiara Maggio 2022 261.8 1.28% 0.00% 1.28% 2.6% 3.86%
Anima SGR Anima Forza Equilibrato N 227.7 2.13% 0.00% 2.13% 2.4% 4.53%
Anima SGR Anima Obiettivo Cedola 2025 166.5 1.51% 0.12% 1.63% -0.4% 1.23%
Anima SGR BancoPosta Mix 3 D 156.5 1.44% 0.00% 1.44% 2.6% 4.06%
Anima SGR Etica Impatto Clima D R 148.1 1.72% 0.00% 1.72% 0.0% 1.72%
Anima SGR Anima Obiettivo Cedola 2024 II 146.3 1.50% 0.19% 1.69% 1.5% 3.19%
Anima SGR BancoPosta Mix 2 D 131.7 1.34% 0.00% 1.34% 2.4% 3.69%
Anima SGR BP Cedola Chiara Giugno 2023 128.4 1.39% 0.00% 1.39% 2.5% 3.86%
Anima SGR Anima Forza Moderato A 119.3 1.45% 0.00% 1.45% 2.4% 3.85%
Anima SGR Anima Obiettivo Cedola 2022 109.1 1.08% 0.00% 1.08% -2.9% -1.82%
Anima SGR Anima Forza Equilibrato A 107.2 1.65% 0.00% 1.65% 2.9% 4.55%
Total 9,206.3
11 October 2021 ◆ 64
Fixed-income funds: low cost, fair performance

The fixed-income category is relevant in size, €9.4bn if we consider the top 20 funds, which compares
to €24.8bn for the largest equity and flexible funds we analysed.
The pricing of fixed-income funds is quite low compared to that of peers, as we calculate a 120bps
average ongoing charge. Performance fees are negligible, only 6bps. Gross performance has been
limited to a low 2.83%. But thanks to a disciplined fee structure, net performance to clients was 1.57%,
in line with (or better than) peers’ fixed-income funds’.
Anima – Anima SGR, 20 largest fixed-income funds by AuM

Anima SGR Etica Obbligazionario Misto R 1,762.9 1.28% 0.00% 1.28% 2.3% 3.58%
Anima SGR Banco Posta Mix 1 A 1,011.3 1.14% 0.00% 1.14% 1.9% 3.06%
Anima SGR Anima Risparmio A 647.4 1.11% 0.14% 1.25% 0.8% 2.05%
Anima SGR Anima Pianeta A 539.7 1.32% 0.00% 1.32% -1.8% -0.48%
Anima SGR Anima Obbligazionario Euro MLT F 413.3 0.51% 0.13% 0.64% 4.9% 5.54%
Anima SGR Anima Risparmio F 408.8 0.58% 0.21% 0.79% 1.2% 1.99%
Anima SGR Anima Obbligazionario Euro BT A 388.1 0.71% 0.00% 0.71% -0.4% 0.31%
Anima SGR Gestielle Cedola Corporate 353.1 1.69% 0.00% 1.69% 1.3% 2.99%
Anima SGR Anima Obbligazionario Corporate A 349.9 1.22% 0.00% 1.22% 0.9% 2.12%
Anima SGR Anima Obbligazo Corporate Blend A 319.7 1.33% 0.00% 1.33% 3.1% 4.43%
Anima SGR Anima Obbligazionario Euro MLT A 310.0 1.11% 0.00% 1.11% 4.4% 5.51%
Anima SGR Anima Traguardo 2023 307.6 1.35% 0.23% 1.58% 1.4% 2.98%
Anima SGR Etica Obbligaz Breve Termine R 294.8 0.68% 0.00% 0.68% 0.0% 0.68%
Anima SGR Anima Obbligazionario Emergente A 285.4 1.34% 0.00% 1.34% 2.8% 4.14%
Anima SGR Anima Obbligazionario High Yield B 271.6 1.82% 0.00% 1.82% 0.3% 2.12%
Anima SGR Anima Forza Prudente N 259.5 1.68% 0.00% 1.68% 1.6% 3.28%
Anima SGR Anima ESaloGo Obbligaz Corporate A 222.6 1.23% 0.00% 1.23% 1.4% 2.63%
Anima SGR Gestielle Cedola Bond Opportunity 222.5 1.70% 0.00% 1.70% 1.4% 3.10%
Total 9,433.8
11 October 2021 ◆ 65
Conclusions: some progresses made, but further

efforts needed
The conclusion of our exercise is that the sector has made good progress over the past four years. As
we wrote in our “KIIDs don’t lie” piece, Mifid2 was on its way, and the fee structure of some products
was simply unsustainable. Equally, even before ESMA’s new rules on the calculation of performance
fees were published, we argued that too many funds were charging performance fees, despite clients’
losing money throughout the year - unacceptable, in our view.
Four years later, we can highlight the following encouraging messages:
1) Banca Generali made strong efforts in putting the expensive product BG Selection/BG SICAV
in run-off, replacing it with a “state-of-the-art” solution - LUX IM. Pricing is now fair, and
gross (and net) returns to clients were excellent last year. We also appreciate the fact that
the company is a pioneer in adopting so-called industrial advisory for some thematic lines.
Management deserves credit for having proactively addressed an issue of concern with a
brilliant solution. Yet, the product kept charging performance fees in a favourable way for
the company (12-month rolling, instead of once a year), but this is being solved with the
repricing initiative already announced and currently being implemented (and we do not
expect such repricing to change our positive conclusions on the sustainability of the pricing
of this SICAV).
2) Banca Mediolanum is widely considered the most expensive in the market. Our analysis shows
that this is not true, at least the fund offer (ie, excluding Unit Linked). Despite the repricing
carried out in 2019 to reduce the incidence of performance fees, offset by higher investment
management fees, we note that the company progressively lowered the final cost to clients
via the run-off of the expensive S-classes of its funds, favouring the cheaper L-classes. To
simplify, we could say that the company raised investment management fees for its clients,
but such an increase in prices was absorbed by the replacement of the expensive fund classes
with the most convenient ones. Also, it is fair to say that the adoption of the annual
calculation of performance fees with a cap set at 100bps made the overall contribution from
variable fees absolutely reasonable (35bps in 2020). And no funds charged a performance fee
in case of negative performance in 2020 (vs 23% in 2016). Interestingly enough, we also note
that the company managed to widen its net margins (from 185bps to 200bps before repricing
to the current 205-210bps) thanks to a reduction in the scope of the sub-advisory mandates
(from 100% of the NAV to some 60%). In simple terms, the company achieved, at the same
time, a reduction in overall costs charged to clients, with better margins for the bank - a
great achievement, in our view.
3) Thanks to ESMA’s new rules, no funds will progressively charge performance fees in a year in
which a client loses money. Banca Generali and Azimut still did in 2020, simply because they
were not fully aligned with the new regulation. We flagged this issue in our 2017 report, and
we are glad to see that the intervention of regulators put an end to such a practice.
There are also less positive aspects, which need to be highlighted:
1) Azimut is turning to be the most expensive asset gatherer, considering both ongoing charges
and total costs. Ongoing charges on its equity funds were 332bps (weighted average), ca 80bps
above peers’. Considering the overall top 40 funds in terms of AuM, ongoing charges reached
272bps, ca 50bps above peers’. If we take into account performance fees, too (we remind
that in 2020, Azimut still charged performance fees on a monthly basis on a sizeable amount
of funds), the total expenses charged to clients reached a hefty 337bps overall and 453bps
on equity funds only. This means that 58% of gross performance achieved by Azimut’s fund
managers remained within the company, while clients received only 42%. And 25% of its funds
charged performance fees, despite the fact that clients lost money. On the last issue, the full
11 October 2021 ◆ 66
adoption of the indication from ESMA should help improve things from 2021. On the high
pricing, we don’t expect any particular action from the company to lower it. However, we
cannot avoid noticing the gap in terms of net performance delivered to clients with respect
to Banca Generali and Banca Mediolanum.
2) In general, we find it hard to justify the presence of performance fees in fixed-income funds
in this historical period. This fund category delivered, on average, 1.1% net returns to clients,
with Anima being an outlier, at 1.57%. The total expenses of this fund category represented,
on average, 45% of gross performance at Anima, which is the most virtuous, while costs
represented about two-thirds of gross performance achieved at Banca Generali, Fineco and
Azimut. We wonder whether it makes sense for clients to buy products in which two-thirds of
performance is retained by the distributor and net performance is a low 1.1%. In such an
environment, performance fees simply shouldn’t be applied, at the least.
3) In the past, we have been critics of the use (or abuse) of the flexible fund category to manage
equity-like funds. In our view, the only reason to over-use this category is the possibility of
having monetary-like benchmarks that make the monthly calculation of performance fees
more rewarding. The migration to annual calculation also led to the general adoption of a
high watermark, with performance fees calculated as a percentage (generally 20%) of over-
performance of a fund to spread (typically 3M Euribor +300/400bps spread on equity/flexible
funds). However, we believe this is not an indicator of the capability to generate alpha, but
merely a market call. Performance fees should reward the former, not the latter.
Top 40 funds (weighted by AuM)

Banca
Mediolanum
Ongoing charges 2.28% 2.34% 2.23% 2.72% 1.54%

Total costs 3.02% 2.69% 2.23% 3.34% 1.65%

2020 net performance 10.71% 5.28% 1.36% 2.39% 1.66%

11 October 2021 ◆ 67
Equity fund category

Banca
Mediolanum
Ongoing charges 2.55% 2.67% 2.65% 3.32% 2.11%

Total costs 3.58% 2.99% 2.65% 4.53% 2.23%

2020 net performance 24.72% 3.31% 1.72% 6.26% 1.72%

Flexible fund category

Banca
Mediolanum
Ongoing charges 2.35% 2.48% 1.54%

Performance fees 0.60% 0.09% 0.18%
Total costs 2.96% 2.57% 1.71%
2020 gross performance 5.06% 3.74% 3.44%

2020 net performance 2.10% 1.17% 1.73%
Total costs as % of gross perf. 58% 69% 50%

Perf. fees as % of gross perf. 12% 2% 5%
% funds earning perf. fees despite neg. perf. 10% 0% 0%
Balanced fund category

Banca
Banca Generali Fineco Bank Azimut (*) Anima
Mediolanum
Ongoing charges 3.03% 1.83% 3.08% 1.60%

Performance fees 0.70% 0.00% 0.40% 0.01%
Total costs 3.73% 1.83% 3.48% 1.62%
2020 gross performance 16.30% 2.44% 2.57% 3.37%

2020 net performance 12.57% 0.61% -0.91% 1.75%
Total costs as % of gross perf. 23% 75% 135% 48%

Perf. fees as % of gross perf. 4% 0% 15% 0%
% funds earning perf. fees despite neg. perf. 0% 0% 50% 0%
(*): Allocation category, which includes both balanced and flexible funds
11 October 2021 ◆ 68
Alternative fund category

Banca
Mediolanum
Ongoing charges 2.35% 1.94%

Performance fees 0.62% 0.68%
Total costs 2.97% 2.62%
2020 gross performance 3.38% 5.13%

2020 net performance 0.40% 2.51%
Total costs as % of gross perf. 88% 51%

Perf. fees as % of gross perf. 18% 13%
% funds earning perf. fees despite neg. perf. 20% 0%
Fixed-income fund category

Banca
Mediolanum
Ongoing charges 1.78% 1.27% 1.95% 1.74% 1.20%

Total costs 2.18% 1.38% 1.95% 2.04% 1.26%

2020 net performance 1.35% 0.17% 1.34% 1.09% 1.57%

11 October 2021 ◆ 69
Annexes
11 October 2021 ◆ 70
Italian asset gatherers - Headline P/E (on consolidated earnings)

2021E 2022E 2023E
Azimut 8.1 9.8 9.1

Banca Generali 14.0 14.9 13.8
Mediolanum 11.7 13.4 12.1
Fineco 30.0 28.4 27.3
Anima 6.3 8.7 8.7
AVG 14.0 15.0 14.2
Priced on 1st October
Italian asset gatherers - P/Es on recurring earnings (perf fees valued @ 6x PE)
2021E 2022E 2023E
Azimut 9.4 11.1 10.1

Fineco 30.0 28.4 27.3
Anima 6.3 8.7 8.7
AVG 16.9 16.2 15.1
Median 13.2 16.3 14.8
Italian asset gatherers - DPS

Eur per share 2021E 2022E 2023E
Azimut 1.20 1.20 1.20

Fineco 0.35 0.37 0.39
Anima 0.28 0.19 0.19
Italian asset gatherers – Dividend yield

2021E 2022E 2023E
Azimut 5.1% 5.1% 5.1%

Banca Generali 4.5% 4.7% 5.0%
Mediolanum 4.7% 4.9% 5.1%
Fineco 2.3% 2.4% 2.5%
Anima 6.7% 4.5% 4.6%
11 October 2021 ◆ 71
Italian asset gatherers – P/TFA (AuM + Custody)

2021E 2022E 2023E
Azimut 4.2% 3.9% 3.6%

Mediolanum 6.8% 6.4% 6.0%
Fineco 9.1% 8.2% 7.5%
Anima 0.7% 0.7% 0.7%
Italian asset gatherers – PBT margin (pre-tax profit on TFA)

2021E 2022E 2023E
Azimut 0.66% 0.50% 0.50%

Mediolanum 0.78% 0.63% 0.66%
Fineco 0.48% 0.45% 0.42%
Anima 0.13% 0.10% 0.10%
Italian asset gatherers – P/BV

2021E 2022E 2023E
Azimut 2.8 2.4 2.1

Fineco 4.7 4.4 4.1
Anima 1.1 1.1 1.1
Italian asset gatherers – ROE

2021E 2022E 2023E
Azimut 34.7% 25.0% 23.5%

Mediolanum 21.4% 17.7% 18.3%
Fineco 15.5% 15.4% 15.0%
Anima 16.9% 12.8% 12.8%
11 October 2021 ◆ 72
Value map on 2021E results - R2: 0.61 Value map on 2022E results – R2: 0.76
10.0% 9.0%
Fineco
9.0% 8.0%
Fineco
8.0% 7.0%
7.0% Banca
6.0% Mediolanum
Banca Generali Banca Banca Generali
6.0%
Mediolanum 5.0%
P/TFA
P/TFA
5.0%
4.0% Azimut
4.0%
Azimut 3.0%
3.0%
2.0% 2.0%
1.0% 1.0%
Anima
Anima
0.0% 0.0%
0.05% 0.25% 0.45% 0.65% 0.00% 0.10% 0.20% 0.30% 0.40% 0.50% 0.60% 0.70%
Gross operating margin/TFA Margine lordo/TFA
11 October 2021 ◆ 73
Company Section
11 October 2021 ◆ 74
Anima Holding
11 October 2021 Asset Gatherers DCF Update
Price: € 4.14 Target price: € 5.00 Outperform
10.6% total returns and M&A optionality Gian Luca Ferrari

Equity Analyst
+39 02 8829 482
A €60m buy-back programme just announced
Gianluca.Ferrari@mediobanca.com
Last week Anima announced the start of a share buy-back plan. The maximum
amount of purchases has been set at €60m, or ca 3.9% of the capital. This new
plan comes on top of the 10.72m treasury shares, corresponding to 2.91% of the
share capital, already present on the balance sheet. Furthermore, applying the
50% dividend payout guidance to our current estimates, we derive a cash DPS of
€0.28 this year, equal to a 6.7% yield. As such, the newly announced buy-back
program could push total returns to a hefty 10.6% this year.
The M&A angle is here to stay…
Anima remains a play on Italian banks’ M&A, with positive scenarios outweighing
risks. We remind that: 1) Anima has ca €600m of cash to be potentially used for
M&A; 2) Anima has an agreement with BancoBPM (major shareholder of Anima,
19.38% stake) until 2038, with minimum targets in terms of NNM and share of
Anima’s assets, and 3) the distribution agreement with BMPS has fewer
quantitative protection compared to BAMI and PST, but it still foresees the right 2019 2020 2021E 2022E
of first choice and Anima’s rights to access BMPS’s sales network. EPS adj. (€) 0.50 0.55 0.66 0.48
For all the reasons above, Anima could play an active role in the upcoming DPS (€) 0.21 0.22 0.28 0.19
consolidation wave. It will be key, however, to see Unicredit’s moves first. We BVPS (€) 3.69 3.79 3.93 3.75
remind that the agreement between UCG and Amundi terminates in 2026, four
years before the partnership between Anima and BMPS ends. As such, the UCG- EV/EBITDA (x) 5.4 4.9 4.4 5.1
P/E adj. (x) 8.2 7.5 6.2 8.6
BMPS combination could see the new group working with the French asset
P/FCF 7.5 7.2 6.1 8.5
manager or Anima. That being said, the potential involvement of BAMI would
Yield (%) 5.0 5.3 6.7 4.5
significantly raise the chances of the new banking conglomerate’s taking over
Anima. On the other hand, in case BAMI is not part of Unicredit’s plan, and a third
banking combination involving BPER and Sondrio is planned, we see good chances Market data
of Anima’s looking at Arca SGR. Market cap. (€m) 1,479
Shares out. (m) 357
…in the meantime, flows are on a clear recovery path
PMI (%) 15
On a separate note, we flag the continued robust improvement in monthly flows. Free float (%) 70
After overall modest performance in 2020, marked by €600m net inflows, 2021 52-week range (€) 4.70-3.14
Rel. perf. vs STOXX EUROPE 600 BANKS E (%)
had a very weak start, with €0.3bn outflows. The situation reversed, recovering
-1m -7.0%
sharply from the second quarter. Inflows reached €1.3bn in 2Q21 and added €1bn
-3m -6.1%
in July and August. August, in particular, was remarkable, as it was not affected
-12m -29.4%
by the usual seasonality linked to a reduction in commercial activity during the 21dd avg. vol. 775,001
summer break. The month turned out to be the second best this year, thanks to Reuters/Bloomberg ANIM.MI/ANIM IM
performance of Anima’s funds and rotation from the enormous amount of
liquidity held in the current accounts of retail customers. Overall, we see good
momentum from a flow perspective, double-digit total returns considering both
the cash dividend and the buy-back and M&A optionality. As such, we reiterate
our OUTPERFORM rating on the stock. Target price of €5.00/share confirmed.
Anima Holding
Valuation Matrix
Profit & loss account (€ m) 2019 2020 2021E 2022E Multiples 2019 2020 2021E 2022E
Net interest income na na na na P/E adj. 8.2 7.5 6.2 8.6
Net fee and commission income 358.3 380.2 419.5 360.5 P/E 10.5 9.5 7.4 11.1
Net trading income na na na na P/CEPS na na na na
Other income na na na na P/TBV -4.1 -5.1 -6.1 -4.8
Total income 358.3 380.2 419.5 360.5 P/FCF 7.5 7.2 6.1 8.5
Growth 10.6% 6.1% 10.3% -14.1% P/total deposits (%) na na na na
Total costs -133.2 -138.0 -133.4 -134.9 P/AUM 0.8% 0.8% 0.7% 0.7%
Growth 10.6% 6.1% 10.3% -14.1% EV/revenues 4.2 3.9 3.5 3.8
of which personnel costs -43.4 -47.6 -52.8 -54.4 EV/EBITDA 5.4 4.9 4.4 5.1
Net operating income 222.3 240.2 278.7 216.9 EV/EBIT 6.7 6.1 5.3 6.4
Growth 10.6% 6.1% 10.3% -14.1% EV/cap. employed na na na na
Provisions & write-downs na na na na Yield 5.0% 5.3% 6.7% 4.5%
EBITDA 277.7 299.1 331.5 269.9
EBITDA margin 77.5% 78.7% 79.0% 74.9%
EBITDA growth 15.5% 7.7% 10.8% -18.6% Per share data (€) 2019 2020 2021E 2022E
Depreciation & amortisation 0.0 0.0 0.0 0.0 EPS adj. 0.50 0.55 0.66 0.48
EBIT 222.3 240.2 278.7 216.9 EPS adj. growth 7.4% 9.9% 20.2% -27.8%
Exceptional items na na na na EPS 0.40 0.43 0.56 0.37
Tax -59.1 -74.8 -66.0 -68.9 EPS growth 23.2% 9.9% 28.5% -33.0%
Tax rate 28.8% 32.5% 24.9% 34.0% TBVPS -1.02 -0.81 -0.68 -0.86
Minorities na na na na DPS ord. 0.21 0.22 0.28 0.19
Discontinued businesses na na na na
Net profit 145.9 155.4 199.6 133.7
Growth 19.5% 6.5% 28.5% -33.0% Key figures & ratios 2019 2020 2021E 2022E
Adjusted net profit 185.1 197.1 237.0 171.2 Avg. n° of shares (m) 357 357 357 357
Growth 4.2% 6.5% 20.2% -27.8% EoP n° of shares (m) na na na na
Avg. market cap. (m) 1,272 1,318 1,479 1,479
Balance sheet (€ m) 2019 2020 2021E 2022E

Customer loans net na na na na NII/total income (%) na na na na
Growth (%) na na na na Fees/total income (%) na na na na
Customer deposits na na na na Trading/total income (%) na na na na
Growth (%) na na na na
Shareholders’ funds 1,319.5 1,355.4 1,403.1 1,338.2 Cost/income ratio 37.2% 36.3% 31.8% 37.4%
Intangibles 1,696.1 1,646.0 1,646.0 1,646.0 Compensation ratio 12.1% 12.5% 12.6% 15.1%
Minorities na na na na
Total assets 2,238.8 2,206.8 2,297.2 2,232.3 NPL ratio na na na na
Provisions/loans na na na na
Customer funds (€ m) 2019 2020 2021E 2022E Dividend payout 40.8% 39.9% 42.1% 39.0%
Assets under management 185,681 194,323 202,205 205,462 ROE 11.1% 11.5% 14.2% 10.0%
Growth 7.3% 4.7% 4.1% 1.6% ROTE -38.7% -53.5% -82.2% -43.4%
Total net new money 0 1 2 2 ROA 6.52% 7.04% 8.69% 5.99%
CRMs na na na na Basel III core Tier 1 ratio na na na na
AuM/CRMs na na na na
Total assets under custody 185,681 194,323 202,205 205,462 Tier I ratio (%) na na na na
11 October 2021 ◆ 76
Azimut Holding
Price: € 23.57 Target price: € 24.00 Neutral
Exposure to illiquid solutions and high pricing Gian Luca Ferrari

Equity Analyst
+39 02 8829 482
The opportunity cost of illiquid investments…
Azimut gathered €3.4bn inflows from asset management products in the first
eight months of this year, including ca €1.5bn from private markets. The overall
share of illiquid products on total AuM reached 7%, but this is expected to grow
materially in the medium term. Illiquid solutions certainly have the merit of
offering interesting returns in the context of low rates and stretched equity
markets. On the other hand, we wonder whether there are risks in exposing retail
clients, although affluent, to illiquid solutions if markets were to turn more
volatile. In other words, is there an “opportunity cost” of illiquid investments?
This also comes with a pricing far from being low. If we consider the major PE
fund Demos I, the management fee stands at 275bps for investments up to €250k.
Not a low level, although in line with Azimut’s liquid equity funds. The
commercial appeal to clients and the economics for the company are, therefore,
clear. Recently, there have been instances in the asset gathering space where it
became difficult to liquidate illiquid products (admittedly we refer to some
securitisations, but a similar argument could be applied to the exit of investments 2019 2020 2021E 2022E
difficult to make if market conditions do not allow so). EPS adj. (€) 2.25 2.30 3.12 2.47
DPS (€) 1.00 1.00 1.20 1.20
…and a high pricing of its liquid offer
BVPS (€) 5.31 6.61 8.72 9.99
The analysis performed in this report shows little improvements with regard to
the pricing of liquid solutions compared to our former exercise. The overall EV/EBITDA (x) 4.9 4.9 5.5 6.1
P/E adj. (x) 10.5 10.2 7.6 9.6
272bps weighted average ongoing charges of the top 40 funds, and 337bps overall
P/FCF 10.9 10.9 9.2 10.8
including performance fees, made Azimut the most expensive asset gatherer. On
Yield (%) 4.2 4.2 5.1 5.1
the other hand, the two companies that previously showed the highest ongoing
charges, ie Banca Generali and Banca Mediolanum, took significant steps to
improve their pricing and align with the best-in-class (Fineco). Azimut products, Market data
therefore, have 44bps higher recurring fees compared to peers’, with most of the Market cap. (€m) 3,377
gap in equity funds (332bps vs the 262bp peer average). On a more positive note, Shares out. (m) 143
fixed-income funds do not diverge too much from those of competitors in both Timone Fiduciaria (%) 13
performance and costs. Free float (%) 75
52-week range (€) 24.41-14.17
Conclusion: the stock structurally trades at a discount to peers on a PE basis Rel. perf. vs STOXX EUROPE 600 BANKS E (%)
-1m -3.0%
In the beginning of the year, we published an extensive note in which we
-3m 8.3%
elaborated on the reasons (i) we see a disconnect between Azimut’s profit and
-12m -11.0%
cash generation and (ii) the latter is a more appropriate way to value the 21dd avg. vol. 774,961
company. Without repeating all the reasons (but we remind, as an example, the Reuters/Bloomberg AZMT.MI/AZM IM
lengthening of the amortisation of recruitment costs from 3 years before 2018 to
the current 8/10 years), we believe cash generation didn’t move in parallel with
IFRS profit - hence, the focus of investors on the former and the apparently high
discount to peers on the latter. This is also well reflected in the fact that cash
dividend of €1.00/share has remained flat since 2016, despite IFRS profit more
than doubling over the same period. For these reasons and in the light of the
above remarks, we retain our NEUTRAL rating on the stock and our €24.0 target
price.
Azimut Holding
Valuation Matrix
Net interest income 0.0 0.0 0.0 0.0 P/E adj. 10.5 10.2 7.6 9.6
Net trading income 0.0 0.0 0.0 0.0 P/CEPS 10.6 10.2 7.6 9.6
Other income 18.4 9.8 15.0 9.8 P/TBV 29.3 11.2 5.6 4.3
Growth 177.8% -0.7% 27.8% -12.7% P/total deposits (%) na na na na
Total costs -224.6 -240.8 -258.7 -270.1 P/AUM 7.2% 7.1% 6.1% 5.6%
Growth 177.8% -0.7% 27.8% -12.7% EV/revenues 5.1 5.3 5.8 6.7
Growth 177.8% -0.7% 27.8% -12.7% EV/cap. employed 0.3 0.3 0.4 0.4
EBITDA 469.8 485.7 606.6 540.3
EBITDA margin 104.3% 108.6% 106.2% 108.3%
EBITDA growth 125.2% 3.4% 24.9% -10.9% Per share data (€) 2019 2020 2021E 2022E
EBIT 445.4 456.7 576.6 510.3 EPS adj. growth nm 2.4% 35.4% -20.9%
Exceptional items 0.7 -7.8 -7.8 -7.8 EPS 2.24 2.36 3.17 2.52
Tax -64.9 -50.7 -38.9 -73.6 EPS growth nm 5.0% 34.6% -20.5%
Tax rate 14.6% 11.3% 6.8% 14.7% TBVPS 0.80 2.11 4.22 5.49
Minorities -16.2 -7.0 -7.7 -8.4 DPS ord. 1.00 1.00 1.20 1.20
Net profit 314.5 324.4 439.3 347.5
Growth 202.9% 3.2% 35.4% -20.9% EoP n° of shares (m) 141 141 141 141
Avg. market cap. (m) 2,303 2,380 3,322 3,322
Balance Sheet (€ m) 2019 2020 2021E 2022E

Customer loans net 0.0 0.0 0.0 0.0 NII/total income 0.0% 0.0% 0.0% 0.0%
Growth na na na na Fees/total income 100.0% 100.0% 100.0% 100.0%
Customer deposits na na na na Trading/total income 0.0% 0.0% 0.0% 0.0%
Growth na na na na
Shareholders’ funds 674.2 839.5 1,080.4 1,318.8 Cost income ratio 49.9% 53.9% 45.3% 54.2%
Intangibles 618.3 634.3 634.3 634.3 Compensation ratio 44.4% 47.4% 40.0% 48.1%
Minorities 23.8 25.0 27.5 30.3
Growth 15.5% 1.8% 16.7% 7.8% ROTE 563.5% 158.2% 98.5% 50.8%
Total net new money 4,612 4,517 16,000 5,000 ROA 4.23% 4.29% 5.72% 4.46%
CRMs 1,774 1,824 1,874 1,924 Basel III core Tier 1 ratio na na na na
AuM/CRMs 25.9 25.7 29.1 30.6
Total assets under custody 59,097 60,437 79,928 86,696 Tier I ratio na na na na
11 October 2021 ◆ 78
Banca Generali
The right managerial decision Gian Luca Ferrari

Equity Analyst
+39 02 8829 482
Discontinuing BG Selection/BG SICAV was the right thing to do, and it did it
In our previous “KIIDs don’t lie” report, we concluded that the retail classes of
BG Selection and BG SICAV had an unsustainable pricing (389bps, on average,
with monthly performance fees on top). The merit of current management is
reflected in its putting the old products in run-off and replacing them with a new
SICAV (LUX IM), which is fairly priced and commercially appealing. As we stated
in the note, LUX IM also provides the first “industrial advisory” solutions on some
thematic lines - an interesting innovation we didn’t see elsewhere. And more
thematic and ESG lines will be released this year, alongside the introduction of
trackers of flagship strategies of key asset management partners. In a nutshell,
an offer leveraging an overly expensive traditional SICAV has now turned into a
fairly priced, state-of-the-art investment solution.
Too much noise on health-related securitisations
Along with the first-half results, Banca Generali announced a €80m provision on
health-related securitisations worth a notional €478m. As clearly explained by 2019 2020 2021E 2022E
management during the conference call, the company expects some write-ups in EPS adj. (€) 2.35 2.36 2.71 2.54
due course, as the €80m provision was deemed to be overly conservative. DPS (€) 0.00 3.30 1.70 1.80
Approximately 400 clients and 300 FAs were directly involved in the matter, BVPS (€) 7.87 10.22 9.63 10.47
meaning that the issue is treated on a case-by-case basis in order to avoid

reputational issues. Other clients might be indirectly involved, as those EV/EBITDA (x) 11.3 7.8 10.5 8.2
P/E adj. (x) 16.2 16.1 14.0 14.9
securitisations are part of wrappers or other structured solutions. However, the
P/FCF 13.7 12.8 10.1 11.6
impact on them is considered immaterial. Domestic and international press have
Yield (%) 0.0 8.7 4.5 4.7
widely commented on this matter; however, we think the issue has been largely
overly emphasised. What is true, however, is our comments on the push Azimut
is making on illiquid products. We refer to the fact that there is an opportunity Market data
cost attached to illiquid products, and this is an example. Market cap. (€m) 4,223
Shares out. (m) 111
Stock reflecting the €3.30 DPS and may be some speculative appeal
Generali (%) 51
Banca Generali recently unveiled the dates of payment of the €3.30/share Free float (%) 49
dividend linked to the 2019-20 exercises. The first tranche of €2.70/share will be 52-week range (€) 39.30-24.16
distributed on 22 November (record date on 23 November, payment due on 24
-1m -0.8%
November). A further €0.60/share is expected to be distributed on 21 February
-3m 0.1%
2022 (record date on 22 February and payment date on 23 February). Banca
-12m -18.5%
Generali is, therefore, due to distribute an 8.7% yield over the next five months, 21dd avg. vol. 450,188
and further €1.70 2021E DPS is expected to be paid in May 2022 (4.5% yield). The Reuters/Bloomberg BGN.MI/BGN IM
company will, therefore, generously reward its shareholders. Our target price of
€32 is calculated excluding the €3.30 dividend, and this means the stock is also
incorporating some M&A premium linked to the recent corporate actions at
Generali, which we don’t include in the definition of our fair value. NEUTRAL
rating confirmed.
Banca Generali
Valuation Matrix
Other income 5.4 4.6 8.0 6.0 P/TBV 7.1 4.8 5.0 4.3
Growth 14.7% 6.7% 19.3% -11.3% P/total deposits 46.7% 38.1% 31.2% 26.2%
Total costs -226.7 -231.9 -238.9 -245.0 P/AUM 8.8% 8.2% 7.5% 7.0%
Growth 14.7% 6.7% 19.3% -11.3% EV/revenues 5.1 4.9 6.0 6.7
Growth 14.7% 6.7% 19.3% -11.3% EV/cap. employed 2.4 2.0 2.8 2.6
Provisions & write-downs -5.4 -0.7 -4.0 -2.0 Yield 0.0% 8.7% 4.5% 4.7%
EBITDA 262.1 386.8 423.4 537.5
EBITDA margin 44.9% 62.2% 57.0% 81.7%
EBITDA growth -3.2% 47.6% 9.5% 26.9% Per share data (€) 2019 2020 2021E 2022E
Tax -53.2 -72.4 -57.8 -73.9 EPS growth 51.7% 0.4% 14.7% -6.1%
Tax rate 16.3% 20.8% 15.5% 20.0% TBVPS 5.31 7.94 7.63 8.75
Minorities 0.0 0.0 0.0 0.0 DPS ord. 0 3.30 1.70 1.80
Net profit 273.9 275.1 315.6 296.3
Avg. market cap. (m) 2,964 3,021 4,425 4,425

Customer loans net 6,403.7 7,225.8 7,525.8 7,825.8 NII/total income 12.7% 14.4% 11.8% 13.5%
Growth 66.3% 12.8% 4.2% 4.0% Fees/total income 84.0% 81.7% 84.7% 82.8%
Customer deposits 10,877.9 13,358.9 15,858.9 18,358.9 Trading/total income 2.4% 3.2% 2.4% 2.7%
Growth 27.3% 22.8% 18.7% 15.8%
Shareholders’ funds 826.3 1,055.1 1,157.9 1,172.2 Cost income ratio 38.9% 37.3% 32.2% 37.2%
Minorities 0.0 0.0 0.0 0.0
Growth 18.3% 6.5% 9.5% 7.1% ROTE 43.7% 35.6% 34.8% 31.0%
CRMs 2,035 2,085 2,135 2,185 Basel III core Tier 1 ratio 14.7% 17.1% 12.8% 13.0%
AuM/CRMs 24.8 25.8 27.6 28.9
Total assets under custody 69,032 74,488 82,723 89,878 Tier I ratio 16.1% 18.4% 13.9% 14.0%
11 October 2021 ◆ 80
Banca Mediolanum
Price: € 9.27 Target price: € 9.30 Outperform
Not as expensive as commonly perceived Gian Luca Ferrari

Equity Analyst
+39 02 8829 482
Pricing of mutual funds now aligned to best practices…
The first, and probably the main, evidence of this report is that Mediolanum’s
funds are not among the most expensive, as commonly perceived, but rather the
opposite. As clarified in the note, we are simply looking at mutual funds and have
excluded life insurance products from the analysis. Yet, the 80 mutual funds
taken into account in our analysis show very encouraging results. Our former
analysis showed average ongoing charges of 287bps, 53bps higher than the result
of this new analysis. This is even more remarkable considering that the company
undertook a repricing activity in the meantime and managed to materially reduce
the incidence of performance fees, too. How was it made possible? The answer
lies in the discontinuation of former, expensive, fund classes in favour of cheaper
solutions (eg, from S-class to L-class).
…but margins are benefiting from an accurate management of the value chain
Lower expenses charged to clients came with better margins for the company, as
reported on page 41 of the note. In this case, the merit of Mediolanum has been 2019 2020 2021E 2022E
to work on reducing the cost of the sub-advisory mandates thanks to the use of EPS adj. (€) 0.86 0.60 0.80 0.70
its fund management team. As a matter of fact, the company reinforced its team DPS (€) 0.00 0.78 0.44 0.46
of fund managers domiciled in Dublin, and it’s now leveraging them to actively BVPS (€) 3.19 3.75 3.73 3.96
pick ETFs, single stocks or bonds in order to complement the utilisation of

mandates within its funds. We described the overall result with regard to margins EV/EBITDA (x) 6.0 8.2 8.7 9.8
P/E adj. (x) 10.8 15.6 11.6 13.2
on page 13. Compared to the traditional sub-advisory mandate, this approach can
P/FCF
return 6% more margins. On 200bps mutual funds, this means internalising 12bps
Yield (%) 0.0 8.4 4.7 5.0
more at a negligible incremental cost. Such activity has been performed so far
on ca 50% of the AuM of Challenge and Best Brands. Hence, more could be on
offer in terms of an improvement in margins and/or cost reduction for clients. Market data
Double-digit dividend yield over next few weeks Market cap. (€m) 6,802
Shares out. (m) 734
Similar to Banca Generali, Mediolanum will reward its shareholders with generous Fam. Doris (%) 41
dividends over the next few weeks. On 18 October, the company will distribute Free float (%) 30
€75.33 DPS related to 2019-20. At current price, this corresponds to a 7.8% yield. 52-week range (€) 9.27-5.80
In addition, we expect Mediolanum to distribute a €22c interim dividend in the
-1m 3.2%
second half of November, which adds a further 2.3% yield. In total, the company
-3m 6.4%
will return 10% to its shareholders in less than two months. Excluding the €75.33c
-12m -13.1%
DPS, the stock still offers a mid-single-digit upside potential to our fair value of 21dd avg. vol. 1,753,336
€9.3/share - not high, but interesting considering the dividend flow. In addition, Reuters/Bloomberg BMED.MI/BMED IM
sound commercial performance and outlook on margins offer an upside risk to
our estimates and valuation. We finally note that excluding the dividend
expected to be paid in October, Mediolanum trades at 12.7x our 2022E earnings,
or 13.6x valuing performance fees, with a low 6x PE. Overall, undemanding
multiples for a fast growing company such as Mediolanum. OUTPERFORM rating
confirmed.
Banca Mediolanum
Valuation Matrix
Net fee and commission income 1,008.6 747.1 822.8 820.3 P/E 10.8 15.6 11.6 13.2
Other income na na na na P/TBV 3.2 2.7 2.7 2.5
Total income 2,381.3 1,844.9 2,016.5 2,024.4 P/FCF na na na na
Growth 60.5% -22.5% 9.3% 0.4% P/total deposits 39.1% 33.5% 31.3% 30.7%
Total costs -606.8 -614.4 -641.3 -660.7 P/AUM 10.7% 9.9% 9.0% 8.4%
Growth 60.5% -22.5% 9.3% 0.4% EV/revenues 2.1 2.6 3.4 3.4
of which personnel costs na na na na EV/EBITDA 6.0 8.2 8.7 9.8
Growth 60.5% -22.5% 9.3% 0.4% EV/cap. employed 10.3 9.4 12.5 11.6
EBITDA 825.8 589.7 785.7 696.3
EBITDA margin 34.7% 32.0% 39.0% 34.4%
EBITDA growth 65.0% -28.6% 33.2% -11.4% Per share data (€) 2019 2020 2021E 2022E
Depreciation & amortisation na na na na EPS adj. 0.86 0.60 0.80 0.70
EBIT 736.2 499.8 700.8 611.4 EPS adj. growth nm -30.9% 34.5% -12.2%
Tax -165.4 -88.7 -140.2 -122.3 EPS growth nm -30.9% 34.5% -12.2%
Tax rate 22.5% 17.7% 20.0% 20.0% TBVPS 2.93 3.49 3.47 3.70
Minorities 0.0 0.0 0.0 0.0 DPS ord. 0 0.78 0.44 0.46
Net profit 565.4 436.6 587.2 515.7
Growth 112.7% -22.8% 34.5% -12.2% Key figures & ratios 2019 2020 2021E 2022E
Growth 112.7% -22.8% 34.5% -12.2% EoP n° of shares (m) 734 734 734 734
Avg. market cap. (m) 4,946 4,863 6,802 6,802

Growth 9.7% 16.9% 7.0% 2.0%
Shareholders' funds 2,340.2 2,751.4 2,739.7 2,906.0 Cost income ratio 25.5% 33.3% 31.8% 32.6%
Intangibles 193.8 193.8 193.8 193.8 Compensation ratio na na na na
Minorities 0.0 0.0 0.0 0.0
Growth 16.2% 8.0% 10.1% 7.6% ROTE 26.3% 17.1% 23.1% 19.0%
AuM/CRMs 12.1 12.6 13.5 14.1
Total assets under custody 84,716 93,347 101,777 108,037 Tier I ratio 20.8% 23.5% 22.1% 22.2%
11 October 2021 ◆ 82
Fineco Bank
Time to fix the (possible) MREL shortfall Gian Luca Ferrari

Equity Analyst
+39 02 8829 482
New MREL target achievable with organic capital generation…
At the end of August, Fineco informed it had received the Resolution decision
from Bank of Italy with the agreement of the Single Resolution Board. The Italian
authority established specific levels that must be met by the bank starting
January 2024: 18.33% TREA (measure of the total risk exposure), 5.18% LRE (total
leverage exposition) and 4.11% intermediate target, which have to be met by
January 2022. The company commented that the new targets are achievable
without changing the dividend policy, and potentially without the need to issue
bonds if the switch from deposits to asset management keep its fast pace.
…while we would fix the (potential) capital issue, once for all. And we would
do it now
We believe the company could meet the new capital requirements under the
following two hypotheses: 1) stable assets on the balance sheet till 2024 and 2)
65-70% dividend payout in 2021-24E (compared to consensus of 70%). We do not
consider it obvious that the asset base will be stable over the next three years. 2019 2020 2021E 2022E
The company is effectively managing to keep deposits (almost) flat this year, EPS adj. (€) 0.44 0.51 0.62 0.59
thanks to the effective strategy of converting deposits into asset management. DPS (€) 0.00 0.00 0.35 0.37
That said, we also note that current conditions are ideal for such a move (low BVPS (€) 2.27 2.77 3.42 3.69
rates, low volatility, record-high equity markets), and it’s not a given that these
conditions are here to stay. We also remind that Fineco gathered ca €3bn/year EV/EBITDA (x) 14.5 13.0 16.4 15.7
P/E adj. (x) 35.4 30.4 25.2 26.2
of deposits in 2018-20, a scenario that could easily materialise again. Hence, we
P/FCF 33.9 31.4 28.5 26.4
think the company shouldn’t rely too much on financial markets, as they are not
Yield (%) 0.0 0.0 2.3 2.4
under its control. Rather, we think the company has a great opportunity in locking
current favourable conditions instead of running the risk of being forced to tap
the capital gap in a moment of high volatility (which is probably the reason the Market data
balance sheet will start growing). Market cap. (€m) 9,412
Shares out. (m) 606
Placing €500m senior unsecured bonds could cost 0.3/0.4%. Worth doing it
Unicredit (%) 35
We believe Fineco could place senior unsecured bonds in the 0.3/0.4% ballpark. Free float (%) 100
This means a maximum earnings dilution of <0.5% on EPS - negligible. On the 52-week range (€) 16.39-11.27
other hand, the risk of being forced to place €500m senior bond in volatile market
-1m -5.5%
conditions or during a risk-off environment could prove to be far more expensive
-3m 1.3%
and trigger a relevant earnings dilution. Hence, we believe investors would
-12m -22.5%
appreciate a proactive approach, with the company reducing the risk, in advance 21dd avg. vol. 1,925,568
and at a negligible cost. On fundamentals, we consider the stock fairly priced, Reuters/Bloomberg FBK.MI/FBK IM
and we therefore reiterate our NEUTRAL rating. The target price remains
unchanged at €15.0. The stock trades at 28x our 2022E earnings, approximately
double the multiple we calculate for Banca Mediolanum, which is also expected
to distribute a >10% yield over the next few weeks. We appreciate the solidity of
the platform and its scalability (also outside the domestic border). However,
aggressive guidance on margins in asset management is also exposing it to some
risks. As elaborated in this report, we are convinced that pushing aggressively
semi-passive solutions (but priced as actively managed), such as the new family
of Target Date funds, could expose the company to some questions.
Fineco Bank
Valuation Matrix
Other income na na na na P/TBV 7.3 5.9 4.8 4.4
Growth 4.7% 18.3% 4.5% 4.8% P/total deposits 39.2% 34.9% 32.0% 29.2%
Total costs -249.6 -269.6 -259.0 -273.9 P/AUM 23.3% 20.9% 17.9% 15.8%
Growth 4.7% 18.3% 4.5% 4.8% EV/revenues 9.5 8.9 11.7 11.2
Growth 4.7% 18.3% 4.5% 4.8% EV/cap. employed 3.4 3.3 3.0 4.1
Provisions & write-downs -2.0 -3.3 -4.0 -4.0 Yield 0.0% 0.0% 2.3% 2.4%
EBITDA 428.1 530.3 577.1 602.2
EBITDA margin 65.4% 68.5% 71.3% 71.0%
EBITDA growth 9.8% 23.9% 8.8% 4.3% Per share data (€) 2019 2020 2021E 2022E
Tax -95.1 -137.5 -114.8 -146.8 EPS growth 19.5% 12.1% 21.8% -3.5%
Tax rate 24.8% 29.8% 22.5% 27.8% TBVPS 2.13 2.62 3.27 3.54
Minorities 0.0 0.0 0.0 0.0 DPS ord. 0 0 0.35 0.37
Net profit 288.4 323.6 394.6 380.8
Avg. market cap. (m) 6,226 6,905 9,463 9,463

Growth 16.4% 9.4% 8.8% 9.7%
Shareholders’ funds 1,179.1 1,534.8 1,884.4 2,165.4 Cost income ratio 38.1% 34.8% 32.0% 32.3%
Minorities 0.0 0.0 0.0 0.0
Customer Funds (€ m) 2019 2020 2021E 2022E Dividend payout 0.0% 0.0% 54.1% 59.2%
Assets Under Management 40,505 45,382 52,743 59,957 ROE 24.5% 21.1% 20.9% 17.6%
Growth(%) 24.7% 12.0% 16.2% 13.7% ROTE 26.5% 22.4% 22.0% 18.3%
Total Net New Money 5,840 9,283 10,500 10,500 ROA 1.09% 1.08% 1.19% 1.06%
AuM/CRMs 15.9 17.4 19.5 21.4
Total Assets Under Custody 81,419 91,709 104,121 116,314 Tier I ratio 39.7% 41.7% 42.2% 41.7%
11 October 2021 ◆ 84
Disclaimer
GENERAL DISCLOSURES
This research report is prepared by Mediobanca - Banca di credito finanziario S.p.A. (“Mediobanca S.p.A.”), authorized and supervised by
Bank of Italy and Consob to provide financial services, and is compliant with the relevant European Directive provisions on investment and
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11 October 2021 ◆ 85
Disclaimer
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11 October 2021 ◆ 86
Disclaimer
COMPANY SPECIFIC REGULATORY DISCLOSURES
MARKET MAKER
Mediobanca S.p.A. is currently acting as market maker on equity instruments, or derivatives whose underlying financial instruments are
materially represented by equity instruments, issued by the following companies: Azimut Holding, Banca Mediolanum, Fineco Bank.
ISSUER SIGNIFICANT FINANCIAL INTERESTS ON MEDIOBANCA S.P.A.

The following companies own 3% or more of common equity securities of the securities in Mediobanca S.p.A.: Banca Mediolanum. Please
consult the Consob website for details.
INVESTMENT AND ANCILLARY SERVICES

In the last 12 months, Mediobanca S.p.A. or one or more of the companies belonging to its group has entered into agreements to deliver
investment and ancillary services to the following companies Anima Holding, Azimut Holding, Banca Generali, Fineco Bank or one or more of
the companies belonging to their group.
RATING
The present rating in regard to Anima Holding has not been changed since 02/07/2019.The present rating in regard to Azimut Holding has
not been changed since 24/01/2019.The present rating in regard to Banca Generali has not been changed since 14/04/2020.The present
rating in regard to Banca Mediolanum has not been changed since 02/11/2020.In the past 12 months, the rating on Banca Mediolanum has
been changed. The previous rating, issued on 14/04/2020, was Neutral.The present rating in regard to Fineco Bank has not been changed
since 06/10/2016.
INITIAL COVERAGE
Anima Holding initial coverage as of 25/03/2015.Azimut Holding initial coverage as of 01/08/2005.Banca Generali initial coverage as of
17/01/2007.Banca Mediolanum initial coverage as of 19/03/2003.Fineco Bank initial coverage as of 06/08/2014.
COPYRIGHT NOTICE
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END NOTES
The disclosures contained in research reports produced by Mediobanca S.p.A. shall be governed by and construed in accordance with Italian
law.
Additional information is available upon request.
The list of all recommendations disseminated in the last 12 months by Mediobanca's analysts is available here
Date of report production: 08 Oct 2021 - 17:26
11 October 2021 ◆ 87
Mediobanca S.p.A.
Andrea Filtri/Javier Suarez - Co - Heads of European Equity Research
+44 203 0369 571 / +39 02 889 036
Banks
Adam Terelak IBK/Private Banks +44 203 0369 574 adam.terelak@mediobanca.com
Alberto Nigro Italy/Spain/Greece +44 203 0369 575 alberto.nigro@mediobanca.com
Andrea Filtri Italy/Spain +44 203 0369 571 andrea.filtri@mediobanca.com
Anna Pezzini Italy/Spain +44 203 0369 623 anna.pezzini@mediobanca.com
Fahad Changazi UK +44 203 0369 536 fahad.changazi@mediobanca.com
Matthew Clark France +44 203 0369 564 matthew.clark@mediobanca.com
Noemi Peruch Italy/Spain/Portugal +44 203 0369 645 noemi.peruch@mediobanca.com
Riccardo Rovere Italy/Nordics/CEE/Germany +39 02 8829 604 riccardo.rovere@mediobanca.com
Robin van den Broek Benelux +44 203 0369 672 robin.vandenbroek@mediobanca.com
Insurance
Fahad Changazi UK +44 203 0369 536 fahad.changazi@mediobanca.com
Gian Luca Ferrari Global multi-liners/Italy/Asset Gatherers +39 02 8829 482 gianluca.ferrari@mediobanca.com
Philip Ross Insurance +44 203 0369 681 philip.ross@mediobanca.com
Robin van den Broek Benelux +44 203 0369 672 robin.vandenbroek@mediobanca.com
Vinit Malhotra Global multi-liners/Reinsurers +44 203 0369 585 vinit.malhotra@mediobanca.com
Luxury Goods
Chiara Rotelli Branded Goods/Consumers Goods +39 02 8829 931 chiara.rotelli@mediobanca.com
Gilles Errico Branded Goods/Consumers Goods +39 02 8829 558 gilles.errico@mediobanca.com
Utilities/Infrastructures
Javier Suárez SE Utilities (Italy/Iberia) +39 02 8829 036 javier.suarez@mediobanca.com
Nicolò Pessina SE Transport Infra (Italy/Iberia) +39 02 8829 796 nicolo.pessina@mediobanca.com
Sara Piccinini SE Utilities (Italy/Iberia) +39 02 8829 295 sara.piccinini@mediobanca.com
Italian Country Research
Alberto Nigro Banks +44 203 0369 575 alberto.nigro@mediobanca.com
Alessandro Pozzi Oil & Oil Related / Defence +44 203 0369 617 alessandro.pozzi@mediobanca.com
Alessandro Tortora Industrials/Building Materials/Capital Goods +39 02 8829 673 alessandro.tortora@mediobanca.com
Andrea Balloni Auto & Auto-Components / Industrials +39 02 8829 541 andrea.balloni@mediobanca.com
Andrea Filtri Banks +44 203 0369 571 andrea.filtri@mediobanca.com
Chiara Rotelli Branded Goods/Consumers Goods +39 02 8829 931 chiara.rotelli@mediobanca.com
Gilles Errico Branded Goods/Consumers Goods +39 02 8829 558 gilles.errico@mediobanca.com
Fabio Pavan Media/Telecommunications/Towers +39 02 8829 633 fabio.pavan@mediobanca.com
Gian Luca Ferrari Global multi-liners/Asset Gatherers +39 02 8829 482 gianluca.ferrari@mediobanca.com
Isacco Brambilla Industrials / Small Caps +39 02 8829 067 isacco.brambilla@mediobanca.com
Javier Suárez Utilities +39 02 8829 036 javier.suarez@mediobanca.com
Marco Vitale Industrial / Small Cap +39 02 8829 444 marco.vitale@mediobanca.com
Nicolò Pessina Infrastructure +39 02 8829 796 nicolo.pessina@mediobanca.com
Noemi Peruch Banks +44 203 0369 645 noemi.peruch@mediobanca.com
Riccardo Rovere Banks +39 02 8829 604 riccardo.rovere@mediobanca.com
Sara Piccinini Utilities +39 02 8829 295 sara.piccinini@mediobanca.com
Simonetta Chiriotti Real Estate/ Financial Services +39 02 8829 933 simonetta.chiriotti@mediobanca.com
Stefano Dova – Head of Markets Division

Stefano Dova - Head of Sales Roberto Romeo - Head of Equity Trading and Structuring
+39 02 8829 3522 - stefano.dova@mediobanca.com +39 02 8829 597 - roberto.romeo@mediobanca.com
Carlo Pirri - Head of Equity Sales (UK) Gianmaria Barbiero - Head of Cash Equity Trading
+44 203 0369 531 - carlo.pirri@mediobanca.com +39 02 8829 9541 - gianmaria.barbiero@mediobanca.com
Angelo Vietri +39 02 8829 989 angelo.vietri@mediobanca.com Ambra De Chiara +39 02 8829 669 ambra.dechiara@mediobanca.com
Christopher Seidenfaden +44 203 0369 610 christopher.seidenfaden@mediobanca.com Ciro Fonzo +39 02 8829 759 ciro.fonzo@mediobanca.com
Eugenio Vergnano +44 203 0369 505 eugenio.vergnano@mediobanca.com Giovanni Orlando +39 02 8829 433 giovanni.orlando@mediobanca.com
Giuseppe Puglisi +39 02 8829 998 giuseppe.puglisi@mediobanca.com Julian Bradley +44 203 0369 605 julian.bradley@mediobanca.com
Matteo Agrati +44 203 0369 629 matteo.agrati@mediobanca.com Roberto Riboldi +39 02 8829 639 roberto.riboldi@mediobanca.com
Massimiliano Pula +1 646 839 4911 massimiliano.pula@mediobanca.com Tommaso Manicone +39 02 8829 789 tommaso.manicone@mediobanca.com
Pierandrea Perrone +39 02 8829 572 pierandrea.perrone@mediobanca.com Vito Pinto +39 02 8829 542 vito.pinto@mediobanca.com
Pierluigi Gastone +1 212 991 4745 pierluigi.gastone@mediobanca.com Cedric Hanish - Head of Cash Equity FIG Trading
Robert Perez +1 646 839 4910 robert.perez@mediobanca.com +44 203 0369 584 - cedric.hanisch@mediobanca.com
Sara Trevenen +39 02 8829 9543 sara.trevenen@mediobanca.com Marco Cannata - Head of Equity Derivatives Trading
Timothy Pedroni +44 203 0369 635 timothy.pedroni@mediobanca.com +39 02 8829 569 - marco.cannata@mediobanca.com
Massimiliano Murgino Gianmarco De Sisto Samuele Badii - Head of Complex Equity Trading
Co Head of Equity Derivatives Sales Co Head of Equity Derivatives Sales +39 02 8829 801 - samuele.badii@mediobanca.com
+39 02 8829 020 +44 203 0369 664
Alessandro Moro - Head of Fixed Income Trading
massimiliano.murgino@mediobanca.com ginamarco.desisto@mediobanca.com
+44 203 0369 538 - alessandro.moro@mediobanca.com
Stephane Langlois +44 203 0369 582 stephane.langlois@mediobanca.com
Elyes Zouari +39 02 8829 954 elyes.zouari@mediobanca.com Joel Bensoor +44 203 0369 561 joel.bensoor@mediobanca.com
Sophie Gagnè – Head of FI Sales Dario Manicardi +44 203 0369 539 dario.manicardi@mediobanca.com
+39 02 8829 368 - sophie.gagne@mediobanca.com Lorenzo Penati +44 203 0369 512 lorenzo.penati@mediobanca.com
Salvatore Guardino – Head of Corporate Broking
+39 02 8829 826 – salvatore.guardino@mediobanca.com
Enrico Baraldini +39 02 8829 978 enrico.baraldini@mediobanca.com
Nicolo Bottaro +39 02 8829 429 nicolo.bottaro@mediobanca.com
Francesco D’Addosio – Head of International Clients Solutions
+39 02 8829 072 – francesco.daddosio@mediobanca.com
FOR US PERSON receiving this document and wishing to effect transactions in any securities discussed herein, please contact MBS USA LLC.
MEDIOBANCA – Banca di Credito Finanziario S.p.A.

Piazzetta Enrico Cuccia, 1 - 20121 Milano - T. +39 02 8829.1
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Italian Asset Gatherers: Paradigm Shift, Part 4

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Italian Asset Gatherers: Paradigm Shift, Part 4

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Italian Asset Gatherers

11 October 2021 Update

Paradigm shift, part 4 Gian Luca Ferrari

GUIDED OPEN ARCHITECTURE /

Sub-advisory mandates Structured solutions

Funds of third-party funds Advisory

Source: Mediobanca Securities

Illustrative example of different profitability for each solution

In-house funds Advisory Sub-advisory mandate Third-party

Source: Mediobanca Securities

Product strategies: three alternative options

IN-HOUSE FUND MANAGEMENT

SIZE OF ASSETS UNDER MANAGEMENT

Source: Mediobanca Securities

FBK +3bps +3bps +5-7bps +12bps

Source: Mediobanca Securities

SECTION II – KIIDs don’t lie, part 2

Top 40 funds (weighted by AuM)

Ongoing charges 2.28% 2.34% 2.23% 2.72% 1.54%

2020 gross performance 13.73% 7.97% 3.59% 5.76% 3.31%

Total costs as % of gross perf. 22% 34% 62% 58% 50%

Source: Morningstar, KIIDs, Mediobanca Securities

SECTION I - From an open platform vs in-house,

Italian households – incidence of mutual funds within financial wealth

14.0% 13% 13%

Source: Bank of Italy

GUIDED OPEN ARCHITECTURE /

Sub-advisory mandates Structured solutions

Funds of third-party funds Advisory

Source: Mediobanca Securities

Illustrative example of different profitability for each solution

NET MARGIN FOR THE DISTRIBUTOR

In-house funds Advisory Sub-advisory mandate Third-party

Source: Mediobanca Securities

Product strategies: three alternative options

IN-HOUSE FUND MANAGEMENT

SIZE OF ASSETS UNDER MANAGEMENT

Source: Mediobanca Securities

In search of extra basis points: three examples

Illustrative example of different profitability for each solution

In-house funds Advisory Sub-advisory mandate Third-party

Source: Mediobanca Securities

1) Banca Mediolanum: reducing the incidence of the sub-advisory

Illustrative example: margins of sub-advisory mandate with cap

NET MARGIN FOR THE DISTRIBUTOR

In-house funds Sub-advisory mandate Sub-advisory mandate Third-party

Source: Mediobanca Securities

3) Banca Generali: sub-advisory, advisory for thematic and trackers

Source: Mediobanca Securities Source: Mediobanca Securities

What the optimal product strategy looks like

First a bit of history

Optimal product strategy: an ongoing process to find the right balance

Product strategies: three alternative options

IN-HOUSE FUND MANAGEMENT

SIZE OF ASSETS UNDER MANAGEMENT

Source: Mediobanca Securities

Search for margins gone too far? The Fineco case

Fineco – Pre-tax margin (after distribution costs) evolution

Source: Mediobanca Securities, Fineco company data and targets

Who has an upside potential from margin

Fineco: the strongest – but well disclosed - upside potential

Banca Generali: the potential – unexpected - play on margins

FBK +3bps +3bps +5-7bps +12bps

Source: Mediobanca Securities

FBK 3.0% 3.0% 30.0%

Source: Mediobanca Securities