investment update

The impact of Greece’s financial issues on AvSuper

July 2015
Some of our members have contacted us this week to understand the impact and likely future impact of the “Greek situation” on their AvSuper investment.  




AvSuper has very little direct exposure to Greek investments, but it is clear that even in an Australian context, there has been some impact on Australian and international investment markets more generally.  We hope the following information, with commentary provided by our investment advisers, assists AvSuper members in understanding the situation as it stands. 

What’s happening in Greece

Greece’s financial and economic difficulties have prevailed for some years now. However, recent events involving Greece and its creditors – the International Monetary Fund (IMF), European Central Bank (ECB) and the European Commission – have raised the risk of default and possible withdrawal from the Euro zone. The situation is very fluid and is changing daily. However these are the basic facts that we know to date:

  • The Greek Government has announced plans to hold a referendum on 5 July on the terms of a €7.2 billion bailout package proposed by its creditors. The situation is very confusing as the Greek people will be voting on an offer which has now been taken off the table.
  • This package is conditional on Greece implementing a series of new austerity measures affecting pensions, sales tax and budget targets.
  • The current debacle is a product of failure of the two sides to understand each other’s point of view and an unwillingness to compromise. The Euro zone finance ministers refused to extend the current financial assistance agreement (i.e. bailout package) with Greece beyond its 30 June expiry. 
  • The IMF has confirmed that a €1.6 billion loan repayment due on 30 June has not been repaid. Greece also requested an extension of its repayment obligations, which we understand is yet to be considered by the IMF Board.
  • Faced with growing cash withdrawals by Greece’s citizens, the ECB has announced that it will maintain (but not increase at this point) the Emergency Liquidity Assistance to Greek banks. In a bid to contain the risk of a run on Greek banks, Greek authorities imposed an extended bank holiday (to 5 July referendum) and placed caps on cash withdrawals.   

While the chance of another last minute compromise and further negotiations between Greece and its creditors can’t be ruled out, the risk of a default by Greece is elevated, as is the potential for its departure from the Euro zone. Aside from the €1.6 billion loan repayment that is now due, the next crucial date is 20 July when Greece has to make a €3.5 billion payment to the ECB. In the absence of an agreement being reached between now and that date, uncertainty will continue and markets are more than likely to be volatile.

AvSuper’s view and potential implications for members

The situation remains fluid but we are able to make the following observations:

  • Greece’s desperate situation is not new news and the Euro zone is in a far stronger position to contend with the consequences of default than it was three or five years ago.
  • Market volatility will likely persist while the situation remains unresolved. The potential for volatility is exacerbated by the lack of liquidity in some markets as investors stand on the sidelines.
  • In isolation, the economic consequences of a Greek default and possible exit from the Euro zone should be very limited (though painful for the Greek population). Greece represents only 2% of Euro zone GDP and just 0.3% of world GDP.
  • The ECB’s main concern will be around contagion risk to other ‘peripheral’ Euro zone countries such as Spain, Portugal and Ireland. The ECB’s aggressive Quantitative Easing program will help dilute the consequences for the Euro zone should default occur.
  • On a medium term basis, the key question is the extent to which an exit of Greece from the Euro zone, and likely subsequent collapse of its banking system and economy, has on the economic fundamentals of the rest of Europe, which have been improving. Here the main issue is consumer and business confidence, and to what degree that is shaken.
  • Since the GFC, we have enjoyed a strong rally in equity markets and all other ‘risk’ assets, including credit, property and infrastructure. This rally has been punctuated by periods of extreme volatility, usually caused by issues in Europe (such as in 2011 and 2012). This could be another of those periods, or it could be the beginning of a significant correction, particularly if the contagion effects discussed above take hold.

Importantly for members, for some time now, AvSuper’s Investment Committee has been ensuring that our assets are positioned conservatively – underweight equities; overweight unlisted assets; overweight defensive and liquid alternatives; overweight to foreign currency – and maintaining adequate cash balances.  We have also continued to ensure that there is sufficient cash/liquidity (including planning for potential losses on currency and asset allocation overlay hedges) and been cautious implementing transitions and other significant transactions at the present time.


It is important to remember that this situation is constantly changing and that super is a long term investment. We will update this factsheet as relevant information comes to hand.





Email:  |  Freecall: 1800 805 088  |  Phone: 02 6268 5073  |

This information is of a general nature only and does not take into account your personal objectives, situation or needs. Before making a decision about AvSuper, you should consider your own requirements and the relevant Product Disclosure Statement (PDS). For a copy call us or visit the AvSuper website, AvSuper Pty Ltd (ABN 46 050 431 797, AFSL 239078) is the Trustee of the AvSuper Fund (ABN 84 421 446 069). FS6120.1 07.2015



Live Chat Support Software

Phone 1800 805 088 (Free call)