Stocks and shares, unlisted securities need more attention

They are (probably) not considered investments in the strict sense. But holders of Italian and foreign shares and participations - which, according to Bank of Italy data, amount to a total of EUR 1,754 billion (30.1% of total household financial assets) - should manage the possible risks arising from some of these 'instruments'. However, in order to properly understand the item described by Palazzo Koch under 'Shares and shareholdings', we need to make some necessary distinctions. Let us go in order.

Of the EUR 1,754 billion (as mentioned, almost one third of the financial assets of households and companies), Italian shares and holdings account for the lion's share: 1,608 billion (27.8%), while the remaining 146 billion are invested in foreign shares. Of these 1,754 billion lire, however, only 78 billion lire (4.4%) are individual listed shares in the portfolio of Italian families: the remaining 1,676 billion lire does not refer to the stock market but to unlisted companies, i.e. direct holdings by Italians in companies - and family businesses - through shares in companies. No direct investments in individual stocks listed on the Stock Exchange, therefore, except for the share of equity instruments present within asset management products (about 850 billion lire, 100 billion more than a year earlier). Not a small increase, which could perhaps counter the idea of the Italian investor being particularly averse to equities and mainly tied to bonds (especially if made in BTp).

Delving deeper into the data, one can see that since the end of 2019, i.e. just before Covid, these magnitudes have grown in a totally different way. "Total unlisted equity wealth," explains economist Giampaolo Galiazzo, "has risen from 990 billion to 1,608 billion, a growth of 62%. The unlisted equity wealth of Italians abroad also grew robustly, by 70%, from 86 to 146 billion. The wealth of Italians in listed shares, on the other hand, grew much less, by 26%, from 61 to 78 billion. What makes us think even more is that the values of unlisted companies are calculated with balance sheets, and thus, to use a term in vogue in financial circles, with a price/book ratio of 1. Listed shares, on the other hand, are valued with a price/book ratio of 1.57. If we applied this parameter to unlisted companies,' Galiazzo continues, 'we would have a value of as much as 2,524 billion. Perhaps this is the real treasure that Italians do not realise they have at their disposal'.

The Bank of Italy, therefore, considers the risk related to family businesses within the equity risk. "Entrepreneurs," warns Rocco Probo, analyst at Consultique Scf, "underestimate this danger at the financial planning level due to behavioural biases that tend to underestimate the risk of investments over which they have more direct control. Instead, this risk must be properly considered, especially in terms of diversification, also because they are 'instruments' that are more difficult to sell than a listed share. This risk - transposing the percentage of the assumed portfolio to that of a specific investor - must also be adequately considered and evaluated'.