Missoni is an example of a family-owned business which is well known abroad but not listed on a stock exchange and struggling to compete in what is a tough global market for luxury goods.

Small independent brands are increasingly rare in an industry dominated by large conglomerates such as LVMH, owner of Louis Vuitton and Christian Dior, or Kering, parent to Gucci and Saint Laurent.

Missoni, which has annual sales worth 150 million euros, will focus on growing internationally - particularly in the important Chinese market, extending its product range and boosting its retail network.

Fondo Strategico Italiano (FSI), which has a policy of backing strong Italian brands, will invest mainly through a capital increase, a joint statement said on Friday.

FSI is controlled by Italian state lender Cassa Depositi e Prestiti, which is in turn is majority-owned by the Treasury. It is the fund's first investment in the fashion sector.

The Missoni family will keep the remaining 58.8 percent of the group they founded in 1953.

"Our goal was to leave a healthy company in the hands of the third generation," said Angela Missoni, the daughter of the group's founders who has been at the creative helm of the group for the last two decades.

THREE GENERATIONS

Missoni added that the group was considering a future stock market floating and FSI Chief Executive Maurizio Tamagnini said the fund may eventually cut its stake through the listing, but that there was "no rush."

Michele Norsa, a long-time executive at luxury group Salvatore Ferragamo who joined FSI last year, will become vice-chairman at Missoni.

He said he expected Missoni sales to grow as much as by double figures in the next five years by opening new shops, boosting online sales and moving away from a wholesale-based model to a retail-based one.

"With the support of the FSI and the strategic vision of the incoming vice-chairman, we will be able to lead this precious family jewel into a bright future," Angela Missoni said.

The brand famous for its rainbow coloured creations and its signature 'Fiammato' -- flamed, zig-zag pattern -- was founded as a knitwear business by couple Ottavio and Rosita Missoni in the small northern Italian town of Gallarate.

Contacts between FSI and the Missoni family started in February last year and the deal was finalised in the last months.

Angela said she would continue as both creative director and chairwoman. Current Director General Emilio Carbonera Giani is set to stay on with broader powers.

Giacomo Missoni, part of a third generation of the family, will sit on the new seven-board member of the group, with oversight on the commercial strategies of the group.

Missoni debuted on the catwalk in Florence in 1967 and despite its small size - only 300 employees - became one of the top names in the fashion industry, a favourite with celebrities.

(Editing by Toby Chopra and Keith Weir)

By Giulia Segreti and Claudia Cristoferi