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Norris: Why I’m buying Greek equities

12 December 2013

The FE Alpha Manager says the best time to invest in a country is towards the end of a recession and points out that in the last month alone, foreign businesses have announced plans to invest €1bn in Greece.

By Alex Paget,

Reporter, FE Trustnet

It is time for investors to venture back into Greek equities, according to FE Alpha Manager Barry Norris, who has been upping his exposure to the troubled country in his £193m IM Argonaut European Alpha fund.

Greece's huge level of sovereign debt has been one of the major causes of trouble in the European economy over the past few years.

The fact that it has seen a six-year long recession has weighed very heavily on its stock markets, with the MSCI Greece index losing a staggering 46 per cent over three years.

Performance of indices over 3yrs

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Source: FE Analytics

However, Norris (pictured) is confident that the worst is over. The manager says the emergence of Greece from recession will soon be officially recognised and its recovery will be one of the most important political and economic events next year.

ALT_TAG Because of that, Norris has moved early and has begun buying some of the country’s bombed out stocks.

“The best time to invest in a country is often when its economy is emerging from recession and all of the bad news is in the rear-view mirror,” he said.

“We have highlighted the European banking sector as the most obvious stock market beneficiary on many occasions and it should come as no surprise that the Greek banks are the most geared equity investments to the ‘Grecovery’. They offer some compelling investment opportunities.”

Norris is not alone in dipping back into Greece. On the fixed income side, FE Alpha Manager Ariel Bezalel has been buying Greek corporate debt to maintain the high yield of his Jupiter Strategic Bond fund.

Norris says the main reason why he is buying Greek equities again – the last time he had exposure to the region was in 2006 – is because its economy has regained its competitiveness.

“The Greek economy has had six years of recession, with real GDP having contracted 26 per cent from its peak of €233bn in 2008,” he said.

“Unemployment has now stabilised at 27 per cent (from 10 per cent in 2008) with wages for those employed down around 25 per cent on average.”


“This painful internal devaluation has however resulted in Greece regaining all of its lost competitiveness since joining the euro in 2000, with its current account moving from a deficit of 13 per cent in 2008 to a surplus of 1 per cent today and exports rising from 19 per cent to 27 per cent of GDP.”

“Foreign capital is returning to Greece, with more than €1bn of foreign direct investment or privatisations announced in the last month alone.”

“The Greek economy has actually been expanding on a quarter-on-quarter basis since Q2 2013 and the return to year-on-year growth is likely to be confirmed early in 2014,” he added.

Despite his optimism, Norris thinks the Greek government’s debt burden is unsustainably high, which could create pockets of volatility.

However, the manager is confident that the issue will gradually be resolved, because the cost to the Greek government of servicing the debt is far less corrosive than many of the headline figures suggest.

Norris understands why certain investors will still want to steer clear of Greek equities given their recent history. However, he says the ones who wait too long to buy could miss out on huge returns.

“Greece has been the epicentre of concerns over the euro and it is hard to avoid the conclusion that if Greece were ever going to leave the euro, this event would have already occurred,” Norris explained.

“That Greece has achieved the rebalancing of its economy through a slow, painful internal devaluation – rather than a quick external currency devaluation – will be seen by all but the most ardent anti-euro ideologues as a validation of the euro as an (albeit imperfect) political and economic project.”

“As such, it should lead to greater confidence from financial markets and business leaders in the economic prospects of the continent as a whole,” he added.

Norris has managed the IM Argonaut European Alpha fund since its launch in May 2005.

According to FE Analytics, his fund is a top-quartile performer in the IMA Europe ex UK sector over five years with returns of 94.28 per cent, beating its benchmark – the MSCI Europe ex UK index – by more than 30 percentage points in the process.

Performance of fund vs sector and index over 5yrs

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Source: FE Analytics

The fund is a top-quartile performer over that time for both its alpha generation and risk-adjusted returns.

The fund sits in the second quartile over three years because it missed out on much of the rally in European equities in 2012. However, it has since bounced back and is one of the sector's best performers over 12 months.


The fund's returns have tended to be very consistent and it is a top-quartile performer in five of the last eight discrete calendar years since its launch.

IM Argonaut European Alpha has an ongoing charges figure (OCF) of 1.81 per cent and requires a minimum investment of £1,000.
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Data provided by FE fundinfo. Care has been taken to ensure that the information is correct, but FE fundinfo neither warrants, represents nor guarantees the contents of information, nor does it accept any responsibility for errors, inaccuracies, omissions or any inconsistencies herein. Past performance does not predict future performance, it should not be the main or sole reason for making an investment decision. The value of investments and any income from them can fall as well as rise.