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11
Morningstar FundInvestor
August
2015
Investors can hardly be blamed for worrying about
Greece. Seemingly every day for years, news reports
appear that describe the latest twist in the Greek
debt crisis, including how it’s affecting other Euro-
pean countries and their financial markets. The
positive developments have been far outnumbered
by the alarming headlines.
The good news for U.S.-equity fund investors is that
they almost certainly have little or no direct exposure
to Greek securities. A survey of fund portfolio hold-
ings shows extremely small or nonexistent positions
in Greek stocks or bonds.
That’s not surprising. First, even before the global
financial crisis in
2007
–
09
started the downward
spiral in Greece, that nation’s small stock market
contained few companies that attracted the attention
of global investors. Some funds owned one or
two of the bigger Greek banks, and more than a few
managers liked a legal, publicly traded sports-betting
firm based in Greece. But Greece never boasted the
type of large, multinational publicly traded companies
that would attract widespread ownership from U.S.-
based funds. In addition, the crisis has been going on
for so long now that even those managers who
did have some money in Greece have had plenty of
time to sell.
Thus, the averages for the foreign categories in the
Morningstar Style Box (foreign large-blend, foreign
small/mid-value, and so on) all show averages
of less than
1%
of assets invested in Greece. Even
the Europe-stock category average, with a limited
mandate, is well below
1%
.
Of course, averages could obscure larger stakes held
by individual funds. And a few small funds, typically
focusing on small-cap stocks, did have
4%
or
5%
stakes in Greece in their latest portfolios. However,
no equity funds in the Morningstar
500
had more
than
1%
of assets in Greece, save for
Third Avenue
International Value
TAVIX
and
Berwyn
BERWX
,
both of which were under
3%
. And a statement on
the Third Avenue Funds website dated June
30
,
2015
, says that no Third Avenue funds have any direct
exposure to Greece, implying that Third Avenue
International Value sold its position between April
30
(the latest published portfolio) and June
30
.
Greek holdings are similarly scarce on the fixed-
income side. A search of the latest portfolios shows
that Greece does not show up as a meaningful
exposure for taxable-bond funds sold in the United
States. No Morningstar
500
bond funds have mean-
ingful exposure to Greece.
The tiny or nonexistent Greece stakes among
Morningstar
500
funds—and in nearly all funds, for
that matter—does not, of course, mean that the
Greek debt crisis couldn’t have an impact on the port-
folios of
FundInvestor
readers. If recent trends that
appear to be containing the problem to Greece alone
go into reverse, it’s possible that crises would
develop in other European stock and bond markets.
If that happened, it would have a negative impact
on a wide variety of funds. After all, nearly all broad-
based foreign-stock funds have more than half of
their assets in Europe.
Even so, it would be tough to argue that investors
should take action to prevent damage. With foreign-
stock funds so exposed to Europe—and with many
U.S.-focused stock funds owning both European
stocks and U.S. companies with extensive business
in Europe—one would have to sell a wide variety
of funds to truly move out of the way. Such drastic
action is almost always inadvisable. Not only is it
very difficult to predict when such moves would truly
work to one’s advantage, but it’s also even harder
to know when to get back into the markets. One could
easily end up on the sidelines for years, and that’s
no way to build wealth for one’s future.
K
Contact Gregg Wolper at
gregg.wolper@morningstar.comDon’t Worry, Your Funds Probably Don’t
Own Any Greek Securities
Red Flags
|
Gregg Wolper
What is Red Flags?
Red Flags is designed to alert
you to funds’ hidden risks. Such
risks can take many forms,
including asset bloat, the
departure of a solid manager, or
a focus on an overhyped asset
class. Not every fund featured
in Red Flags is a sell, and in fact,
some are good long-term
holdings. But investors should
be prepared for a potentially
bumpier ride in the near future.