Mediolanum Flexible Development Italy: Opinions and Features

You have been offered a mutual fund, in particular Mediolanum Flexible Development Italy?

It is a category fund PIR, therefore designed for a medium-long term investment. The level of risk is medium-high, considering that the management style is flexible.

Don’t worry, we will be able to explore these issues calmly in the course of the article. If you want to know more about the costs, performance and convenience of this product then continue reading – don’t forget the paragraph with my opinions because they will be very useful for you.

Enjoy the reading.

Identikit of the fund

Mediolanum Flexible Development Italy is a mutual fund a active management controlled by SGR Mediolanum Fund Management. It is a flexible fund, therefore it adopts a very free investment policy with few constraints.

By analyzing the manager’s strategy, the portfolio’s risk/return profile and maintenance costs, you can effectively understand whether or not this fund meets your needs.

All the information you need for a correct evaluation can be found in KIID (Key Investor Information Document), but you need to know how to read them critically.

For example, understanding the management style is really important…

You need to know what a flexibly managed portfolio is lacking a reference benchmarki.e. that objective parameter you need to “measure” the performance of the fund and the impact that costs have on the return.

Furthermore, the manager operates a free asset allocation without following a basket of indices as a reference, but strategically choosing which instruments to buy and which markets to invest in in order to optimize returns and limit losses.

Flexible funds are a real riskprecisely because the stakes that limit the manager in his choices are very few.

I emphasize that the fund must be understood as a long-term investment. To achieve the set objectives and to limit losses, it is necessary to maintain the invested capital for several years.

L’asset allocation

Despite everything, Mediolanum Flessibile Sviluppo Italia is also managed in compliance with some (few) constraints. That is to say:

• Financial instruments of an equity nature cannot exceed 35% of the assets in the portfolio;
• Most of the financial instruments must come from issuers based in Italy – in compliance with the requirements necessary to be included in the qualified investments intended for the establishment of individual long-term savings plans (PIR);
• Most of the financial instruments are denominated in euros and to a lesser extent in other currencies (the exposure to exchange rate risk is residual);
• The fund must comply with a certain level of risk identified with a VaR (Value at Risk) of 9.0% (the maximum potential loss with 99% probability over a time horizon of one month).

In practice, this fund is predominantly bond since debt securities and monetary instruments can also represent the totality of investment activities.

Apart from these few stakes, the SGR can diversify its investments in all product sectors and in all geographical areas, ranging between issuers of various kinds and also including alternative instruments and derivatives.

What is a PIR

I open a brief parenthesis to explain what a PIR is.

The Individual Savings Plans (PIR) are a form of investment introduced in our country with the aim of promoting the growth of the real national economy.

PIR funds make it possible to channel a part of investors’ savings into small and medium-sized Italian enterprises.

To be eligible, a fund must invest, directly or indirectly, at least 70% of its total value in corporate issuers based in Italy or in Member States of the European Union, or parties to the Agreement on the European Economic Area with a permanent establishment in Italy for at least two thirds of each calendar year.

Each person can subscribe to a single PIR for a maximum investment of 30,000 euros per year and up to the threshold of 150,000 euros. The interesting thing is that these investments guarantee tax exemption if maintained for at least 5 years.

Risk profile of the fund

On the basis of the variability of returns implicit in the VaR figure, the fund is classified as having a medium-high risk level (category 5 on a scale of 1 to 7).

But since the composition of the portfolio can change over time, it is possible that the level of risk changes too, without your knowledge!

Before subscribing to the product, make sure that the risk and return profile is compatible with your expectations and possibilities.

How to join

As the product is a open bottominvestors can subscribe to shares at any time, and with the same freedom they can request reimbursement from the SGR.

You can join the fund by making a lump sum payment (PIC): minimum €5,000 for the initial payment and €500 for any additional payments.

Or you can open a PAC (an accumulation plan) and gradually enter the investment. In this case, the minimum amount to invest initially is €1,800, and each additional payment must be at least €150.

The unit class we are analyzing is an accumulation class. If you are interested in receiving periodic coupons, you need to subscribe to a different class.

Costs and fees

Now let’s analyze the cost schedule, which we need to evaluate the real convenience of the investment. Don’t forget the expenses they eat up part of your equity and the return you make, even those not directly charged to you but charged to the fund’s assets.

The expenses you have to bear for the investment are divided into:

• One-time entry feefrom a minimum of 0% to a maximum of 3%;
• Management fees taken from the fund each yearequal to 1.5% of the collective assets;
• Performance fee corresponding to 20% of the fund’s return differential with respect to the return objective indicated in the Regulations, if the percentage change in the value of the unit is positive and higher.

The ongoing charges listed here are based on last year’s expenses and may change in the future.

Past returns

Finally let’s look at the past performancesbearing in mind that they are not indicative of future ones.

Since there is no benchmark as a comparison, it is difficult to understand whether this type of management has been advantageous compared to the market or other similar tools.

It would be appropriate to compare the returns of this fund with those of another basket that presents the same level of risk, to have a clearer picture of the returns and the impact that costs have had, year on year.

Opinions of Affari Miei: is it worth investing?

In the light of what has been said: it is better or not to invest in the fund Mediolanum Flexible Development Italy?

Assuming that there is no right answer to this question, my advice is to evaluate this investment carefully and not to make any missteps.

For the reasons I have already explained, flexible managed funds are very risky. It’s already not easy to understand the portfolio of a conventional fund, imagine how difficult it can be to understand the investment choices of a fund that doesn’t follow a benchmark.

You have no yardsticks on your side, you blindly rely on the manager, and blindly trusting is imprudent.

If the manager is competent, the flexible policy can be an added value; but since there is no certainty, the risk that the manager makes wrong choices it adds to everything else.

It is a big mistake to subscribe to a complex and expensive tool without knowing what you are getting into. So think carefully before investing. Ask yourself if, compared to a less free investment policy and a less expensive product, there really is a convenience.

The strategy comes before the choice of tools

Before investing, in the presence of doubts and uncertainties, it would be better to increase financial training and redefine the investment strategy.

An informed investor, aware of his goals and with a well-defined strategy, will hardly buy ineffective and potentially harmful tools. In this regard, I strongly recommend that you look at the free video course “Invest with Common Sense”.

On Affari Miei you will also find guided paths for investing, suitable for the different stages of savings and life:

I just have to wish you a good investment and hope that you will follow my advice to study and increase your skills.

Good continuation.