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How the foreign fund market profited from the Greek crisis – Michalis Fessas explains – part 1 of 2

Greek people didn’t only rush to ATMs to withdraw cash in response to their fears Greece could be forced out of the euro.

Greek savers withdrew some €28bn from their bank deposits between June 2014 and July 2015, according to data from Greece’s central bank. However, a significant chunk of this money is not stored as cash in matresses. Rather, it was transferred to foreign funds, says Fessas.

“The foreign fund market in Greece grew from €4bn in June 2014 to €12.3bn in June 2015, meaning it tripled in size over this year,” he explains.

This big move reflects the fear of Greek investors that their assets could be wiped out if they kept them as deposits in Greek bank accounts. “They found another way to diversify out of Greek risk by investing in foreign funds, bringing their money abroad,” he explains.

Foreign asset managers were the main beneficiaries of this. Eurobank AM was the only Greek asset manager that saw significant inflows as a result of this trend, because it has a Luxembourg-domiciled fund range. “Assets of our own money market fund rose from €150m in 2014 to €2.2bn in 2015,” he says. 

The bulk of the inflows went to money market funds like this, says Fessas. “There is an opportunity now for foreign fund managers and Greek distributors to move this money into assets with market exposure.”

Watch part two of this video interview to hear what assets Fessas would like to move his money market fund clients into next.

Part of the Bonhill Group.