When we asked a crowd of Belgian fund selectors back in January about the possibility of a Greek exit from the euro, only 13% deemed that likely to happen. At our Pan-European Congress in Rome last month, the share of Grexit-believers had almost tripled to 37%. At Expert Investor Denmark earlier this week, it exceeded 50% for the first time. Some 52% of the 35 fund selectors in the room believe Greece will leave the common currency.
But what do fund managers think? And what would be the consequences for investors? There happened to be six fund managers in the room in Copenhagen who could answer these questions. They turned out to be just as split on the issue as the audience.
Does Greece deserve a Grexit?
“This [a Grexit] is a big risk and it’s increasing,” said Paul McNamara, emerging market debt specialist for GAM. “Syriza have done everything they can not to make an agreement with their creditors.”
William Healey, head of smart beta credit for AXA IM, is even less tolerant of the Greeks. “I think they will be forced to leave and will leave, but who cares?”, he puts it bluntly. “I think Europe was not prepared for it to happen a few years ago, but in terms of investor mentality it is now,” he said. Healy thinks markets will digest a Grexit quite smoothly. “It is a larger version of Cyprus in terms of the effect it will have on the markets,” he said referring to the Cypriot banking crisis a couple of years ago.
So according to the American, there’s nothing that stops Europe from kicking Greece out. “Europe’s political leadership and central bankers have been very tolerant and very forgiving of Greece’s interventions for far too long, frankly.
Elissa Johnson, manager of the Henderson Secured Loans Fund, took a more conciliatory approach. “If Greece leaves the euro, the population will possibly suffer for a generation to come. It will take a significant amount of time to restructure their economy, so I’m sure that at some point common sense will return,” she said.
Ewout van Schaick, head of multi-asset strategies for NN Investment Partners, agreed with Healey that investors are ready to let Greece go. “But politically it is not in our interest, and especially Germany would not want to let it happen.
A Grexit would also have considerable repercussions on eurozone government bonds. “Every country would have a spread of the possibility it would leave the eurozone multiplied by the impact it would have, so government bonds would be more volatile and spreads would widen”, he said.