This Post considers the Italian Strategic Fund.
FSI participates in the corporate governance of its portfolio companies following the principle of the non-operating investor with a patient, medium/long-term view in line with the best market practices.
Given its timescale, FSI defines agreements with the other shareholders of the investee companies with the aim of: (i) ensuring an adequate level of representation and active governance; (ii) ensuring a constant information flow; (iii) identifying options for the development and liquidation of the investment at market conditions.
When exiting the investment, FSI sets itself the objective of leaving the company larger and more competitive, capable of prospering on global markets and continuing to generate sustainable employment and wealth. (FSI Governance Within the Investee Companies).
The ISF is organized as a state owned enterprise. It is operated through a board of directors, "and is subject to the control of a Board of Statutory Auditors. Alongside these bodies, the Articles of Association envisage the presence of an Investments Committee and a Strategic Committee." (FSI Corporate Bodies).
FSI is subject to the management and co-ordination activities of Cdp and has drawn up a series of procedures representing its corporate regulatory system, in line with the best market practice for companies operating in the investments sector.The organization chart may be accessed HERE.
In accordance with the best market practices, FSI has adopted a series of compliance procedures including: (i) a conflicts policy; (ii) a procedure for the establishment and keeping of the register of individuals who have access to confidential information; (iii) a procedure relating to personal transactions by significant parties; (iv) a procedure for related party transactions; (v) a procedure for dealings with the press.
Lastly, FSI has approved operating procedures aimed at ensuring management efficiency and transparency, including: (i) expense reimbursement procedure; (ii) entertainment expenses; (iii) sponsorships and donations; (iv) staff assessment and incentive procedure; (v) procedure regarding the fulfilment of administrative, accounting and tax requirements and audits pursuant to Italian Law No. 262/2005. (FSI Corporate Documents).
All in all the FSI represents a curious throwback. While it may be operated in sovereign wealth form, and even adopt the long term shareholder language of SWF master narratives, it remains, at its core, a means of providing strategic resources to enterprises that the state would like to favor. But it is presented in new form,. As a strategic development fund it funnels money from the Italian state to the Italian private sector. And it hopes, like a bank, to make money in the process. But it is a very different organization from SWFs with the aim to project their economic power abroad directly through fund investment.