Grexit: the admin angle

AristotleWith a 50% probability of a Grexit, fund firms should be asking their tech and admin providers about the technical implications for portfolio administration and accounting. The technical consequences can vary depending on whether a fund invests in Greece, or provides investment to Greek clients. In the former case, an Athens-listed equity may change from euro to drachma and a new currency will need adding to accounting systems; but fundamentally, an equity is still an equity. For bonds and derivatives, the workload depends on what issuers and counterparties do post-Grexit, such as breach contracts by closing old agreements and opening new ones. Simcorp, an investment software and services provider, highlighted these and other issues in a recent client note focusing on the potential technological challenges of a Grexit. With further proposals from Greece under scrutiny from Eurozone finance ministers, many ratings agencies now give Grexit a 50% probability, Simcorp says. Currency would be a key concern in responding to the fallout of a Grexit, Simcorp says. When servicing a Greek client, simply changing a portfolio currency from euro to drachma for auditing purposes is not an option. This is because auditors insist that the “past must be documented true and fair” and means, therefore, fund management firms must duplicate whole portfolio structures in the new currency and move open positions from old to new, converting portfolio currencies in the process. The tech aspects may be limited in a best-case scenario. For example, bonds may continue to run in euros, with no breaches. But, as with the investment implications of a Grexit, the technical aspects of portfolio management will be in unchartered territory, too. If Greece leaves the euro, then all the resources spent on systems automation by fund managers in recent years may feel like money well spent. ©2015 funds europe

Executive Interviews

INTERVIEW: Put your money where your mouth is

Jun 10, 2016

At Kempen Capital Management, they believe portfolio managers should invest in their own funds. David Stevenson talks to Lars Dijkstra, CIO of the €42 billion manager.

EXECUTIVE INTERVIEW: ‘Volatility is the name of the game’

May 13, 2016

Axa Investment Managers chief executive officer, Andrea Rossi, talks to David Stevenson about bringing all his firm’s subsidiaries under one name and the opportunities that a difficult market...


ROUNDTABLE: Beyond the hype

Oct 13, 2016

The use of smart beta investing continues to grow. Our panel, made up of both providers and users, discusses what the strategy actually means, how it should be used and the kind of pitfalls that may arise when using this innovative investment technique.

MIFID II ROUNDTABLE: Following the direction of travel

Sep 07, 2016

Fund management firms Aberdeen and HSBC Global meet with specialist providers to speak about how the industry is evolving towards MiFID II.