Looking Through Cross-Border Positions in Investment Funds : Evidence from Italy

Motivated by the increasingly large weight of foreign investment funds on the portfolio of Italian residents, this paper provides an estimate of the composition, by instrument and by issuer country, of Italy's portfolio assets after “looking through” cross-border positions in investment funds. Our main findings suggest that removing the statistical opacity arising from cross-border positions in investment funds has a significant impact on the composition of Italy's portfolio investments. After “looking through” foreign funds' holdings, the share of debt securities on portfolio assets, which is equal to 40 per cent in the unadjusted data, rises to 75 per cent. The country composition of external portfolio assets also fundamentally changes in the direction of increasing its geographical diversification. The United States becomes Italy's main destination country; the shares of France, Germany, the United Kingdom and Spain also increase, while that of Luxembourg, where most of the foreign investment funds are domiciled, drastically falls