Three bond funds managed by Greece-based investors delivered returns of over 100 per cent this past year, according to data provided by Morningstar, a respected U.S. investment firm, the Wall Street Journal reports.
NBG Asset Management’s €83 million DELOS Domestic Bond Fund delivered a total return of 108 per cent in the past 12 months, making it the world's top-performing bond fund. Eurobank Asset Management’s €30 million LF Government Bond Fund and the €137 million Interamerican Fixed Income Domestic Bond Fund, both run by Eurobank, returned returned 107 and 105 per cent, respectively, during the same period.
No other bond funds tracked by Morningstar globally have offered such returns, according to the Wall Street Journal. The world's best-performing dollar-bond fund delivered returns of 34 per cent from asset-backed securities, while the best-performing emerging-market fund returned 31 per cent.
The investment strategy that paid off so well was to buy Greek government bonds at the height of the euro zone debt crisis and hold onto them when other investors were steering clear.
“Greek bonds were the single most hated asset class in the world at some point and we thought that there was not much to lose at the bottom of the market,” Eurobank fund manager Aris Papageorgakopoulos told the WSJ.
In recent weeks, investors such as Canada’s Fairfax, Mark Mobius (who manages more than $40 billion in emerging-market assets at Franklin Templeton) and hedge fund billionaire John Paulson have commented favourably on investing in Greek assets.
The turning point came after the June 2012 elections, when fears of a Greek exit from the euro zone were allayed. But according to analysts, timing plays a vital role. If an investor had bought into the Eurobank fund before March 2012, part of the portfolio would have consisted of Greek bonds which then suffered a 75 per cent hair cut, as part of a debt reduction deal between Greece and its private sector creditors (PSI). Now, the value of that bond (i.e. 25 per cent of its original value) is rising to approximately 80 per cent of its value after the March 2012 hair cut.
The March 2012 debt deal, however, presented other advantages, such as transferring jurisdiction of Greek government-bonds to courts outside of Greece, providing enhanced security to investors.
In July, a hedge fund was paid in full when a Greek government-bond denominated in Swiss francs matured. Greece paid €537 million to investors who most probably had bought the asset well below face value. The bond had not been part of the March 2012 debt deal. According to newspaper Kathimerini, the Greek state has paid more than €2.8 billion to investors not covered by the PSI deal.
National Bank of Greece and Eurobank that own NBG Asset Management and Eurobank Assent Management respectively, are among Greece’s so called ‘big four’ banks and have received tens of billions of euros in bailout loans and state-backed guarantees, from Greek and European taxpayers.
Despite excellent performances in certain asset classes as of late, the real Greek economy is not faring as well. The government is forecast to show a small surplus of a few hundred million euros before payment of interest, and the economy is set to grow marginally in 2014. Unemployment remains high at over 27 per cent and, according to the state-sanctioned KEPE think tank, may rise even further next year.
