Investor Davide Serra isn’t panicking

Mr Serra, are you worried about the outcome of the elections in Italy?

David Serra: no As an investor, I’m not concerned because, firstly, we may have a clear majority. So there are people in government who can actually make a difference. Second, the key figure in this majority (Giorgia Meloni, ed.) has clearly declared her support for NATO and the US. It’s not really pro-Europe, but it’s not anti-EU either.

But the Fratelli d’Italia are also a populist party.

They’re people with maybe conservative views, but unlike the Cinque Stelle, they’re people who have actual jobs in the real world. I think we had one of the worst populist governments in Europe with the Cinque Stelle. With the citizens’ income, the “reddito di cittadinanza”, it has created an extremely unfair instrument. Around 1.6 million people receive 700 to 800 euros a month without having to get up from the sofa. The fact that the party that has the abolition of this instrument high on the agenda has now won the election is a good sign! This does not mean that the poor should not be looked at, but it is nonsense to give young people an incentive not to work.

What will happen in the markets in the next few days?

Not much because of Italy. Because it is positive that with Salvini and the Lega, the partner in the coalition who is really anti-EU and pro-Putin has lost votes. As you know, two T-shirts by Salvini are remembered: one with the inscription “Basta Euro” and one with a picture of Putin.

You are not afraid of a widening of the spread, i.e. the difference in yield between Italian and German government bonds?

Let’s be honest: the decision by Cinque Stelle, Berlusconi and Salvini to overthrow the Draghi government will go down as one of the worst decisions in history. And yes, the spread is bigger at the moment than it was before. But I don’t expect a dramatic deterioration.

So your message is: «Invest in Italy!»?

Well, let’s be realistic. We haven’t had any real growth in Italy for at least 20 years. But my point is: I don’t want to hit the panic button, as parts of the Anglo-Saxon press in particular are doing. I am not only an Italian but also a British citizen and I can assure you that parts of the Conservatives there are further to the right than Meloni. One key will be who the new Italian government installs as finance minister. I think she deserves a chance. The staff is certainly worlds better than that of the Cinque Stelle back then.

How do you rate the third force, the Terzo Polo with Carlo Calenda and Matteo Renzi, who you also supported financially?

That’s an interesting factor and it’s the two parties that are closest to me. Economically, the orientation is centre-right, socio-politically, however, centre-left. Who knows, maybe one day, because Berlusconi is not immortal either, there will even be a “normal” middle.

What is the biggest risk investors in Italy need to be wary of?

That would probably be if the government tried to change something in the recovery plan, i.e. the money from Europe for reconstruction after the pandemic. With this “billion dollar gift” from the EU, Italy must take account of the letter and the spirit of this agreement.

How are you or your company Algebris invested in Italy?

We invest globally and are headquartered in London. One of our funds focuses on small and mid-cap companies. If you look at Italian small and mid-cap companies over the last 15 years, these are the ones that have performed best in Europe: Small companies, unrelated to politics, export-oriented and be in competition. Italy is a country that has certain problems, but also quality. As long as you follow quality, you make money. We are therefore still optimistic for Italian small and medium-sized companies.

Does your optimism also apply to Italian banks?

It depends. Italian banks are closely intertwined with the economy, with the big corporations, with government bonds. There are also excellent companies here, such as Fineco or Banca Intesa Sanpaolo. The good news is that we will probably see the recapitalization of Bank Monte dei Paschi di Siena in the next few months. Then there will be no more big unsolved problems in the sector, no more walking skeletons. There has really been a transformation in Italy in recent years. Today, investors are probably more worried about a major Swiss bank than about an Italian one. Ten years ago it would have been different.

Do you actually feel more like an Italian or an Englishman?

I feel 99 per cent British-American, head-to-head and work-wise. 99 percent Milanese in heart, family, culture and values ​​- which is not the same as Italian.

Why did you move back to Italy from the UK?

I was a donor to the “Remainer” campaign, i.e. against Brexit. Brexit was a blow to me. For the first time in years I felt discriminated against, even by intelligent people. I also decided to take this step in the interests of my four children, who also have dual citizenship. But I could also imagine moving to Switzerland.