Down but not out: Greece's fund management industry

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Greece's fund managers are determined to weather the economic storm that is pushing Greece close to collapse

PRODUCT DIVERSITY

According to the association’s figures from September, funds in domestic assets were €3.08bn – representing 52% of total assets under management – compared to €2.89bn for funds in foreign assets – or 48% of the total.

The fund management industry in Greece works under European Union and Ucits rules, and funds are open ended, fully liquid and transparent, Xenofos says.

“We offer a wide variety of products, equity funds, balanced funds, money market funds and even special purpose funds with more sophisticated products that incorporate traditional assets along with derivatives and derivative instruments.

“In the past decade, the Greek fund industry has ­developed its expertise, product offering and distribution. But we have been hit by conditions in the Greek market in the last three years.”

As in other southern European markets, notably Spain and Portugal, investors tend to favour the more conservative investment vehicles which are perceived as providing greater safety.

According to the association, bond funds remained the most popular and accounted for 33% of the market, fund of funds 9%, special purpose funds 7%, and money market funds 15%.

Balanced funds were 14% and equity funds were 21% of total assets under management.

HOME TRUTHS

The domestic market has always been important, but the market is gradually evolving, Xenofos says.

This is partly because there are more products available and partly due to greater expertise among fund managers.

The local industry has also developed closer links with ­foreign investment houses and become more international.

But there is room for the market to develop. The volume of assets under management represents only about 3% of gross domestic product, which is a much lower proportion than the European average. Ideally it should be about 15% of GDP, he says.

There are other factors besides the ongoing crisis inhibiting growth. One is weak savings and the absence of long-term savings schemes.

Xenofos says more long-term savings would provide greater depth to the market and help protect it against big swings in asset values.

“To that extent, we are one step back from where we should be,” he adds.
The association, with its 35 members, has urged the government to consider introducing tax incentives to encourage long-term savings, but so far to little effect.

Instead, tough austerity and fiscal policies introduced by the government have led to a sharp fall in deposits and in the liquidity available to funds in the Greek market.

This has had a domino effect, Xenofos says, with funds available for investment diminishing every year.

Politicians and lawmakers are focused on resolving the crisis as the country struggles to avoid default and Greek bonds tumble.

Xenofos admits that in the circumstances, he and his fund manager colleagues will probably have to wait for the crisis to ebb before much progress can be made.  

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