Italian Pension Fund Reform Nearing Completion

Washington, DC, December 17, 1998 - Italy significantly revised its pension system in 1995 with a law that permits defined contribution pension plans. After more than three years, most of the implementing regulations are in place and pension plans are beginning to be formed under the new system.

Under the new rules, there are relatively few limitations on the types of investments that pension plans may make. In particular, pension plans may invest in U.S. mutual funds and other securities, subject to certain nondiscriminatory asset allocation limitations. For example, investments in closed-end funds are limited to 20% of the pension plan's assets and 25% of the closed-end fund's assets. No distinction is made between shares of a U.S. closed-end fund or an Italian closed-end fund for purposes of these limitations. The absence of general investment restrictions is consistent with the Institute's long-standing position that asset allocation limitations and restrictions on foreign investment by pension plans should be eliminated.

Pension plans are also permitted under the new rules to delegate management duties to "authorized investment companies."