Skip to Content
Fund Spy

Will These Bond Funds Star in a Greek Tragedy?

Some good funds hold debt from Greece and other financially shaky nations.

Mentioned: , , ,

Greece hasn't typically been a country at the forefront of the world economy, but in recent weeks it has been making a lot of financial headlines. In late 2009, Greece announced that it had underestimated the size of its deficit, and then in early February of this year, fears began spreading that Greece might default on its sovereign debt (bonds issued by the Greek government), causing the cost of insuring that debt against default to skyrocket.

Although the immediate crisis eased when other European Union countries agreed to support Greek debt, the incident has put a spotlight on the problems of Greece and other debt-laden countries in the euro zone, especially Italy, Portugal, Spain, and Ireland. These five economies at the periphery of western Europe have been especially hard-hit by the financial crisis, and European authorities are now trying to help them stay fiscally sound without causing too many unintended consequences elsewhere. All this has put a strain on the euro, which all five of these countries use, and which has dropped in value relative to the U.S. dollar.

It remains to be seen exactly how widely this crisis will affect mutual fund investors; that depends on whether the problems can be contained to these few countries, or whether they're the tip of the proverbial iceberg, like the subprime mortgage crisis that emerged almost three years ago. We dug into our database to identify funds that could be directly affected--namely bond funds with exposure to bonds from Greece, Portugal, Italy, Ireland, and Spain. Of funds actively covered by Morningstar analysts, the following four, all of which are in the world-bond category, have the highest combined percentage of their bond portfolios in those five countries.

David Kathman does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.

We’d like to share more about how we work and what drives our day-to-day business.

We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.

How we use your information depends on the product and service that you use and your relationship with us. We may use it to:

  • Verify your identity, personalize the content you receive, or create and administer your account.
  • Provide specific products and services to you, such as portfolio management or data aggregation.
  • Develop and improve features of our offerings.
  • Gear advertisements and other marketing efforts towards your interests.

To learn more about how we handle and protect your data, visit our privacy center.

Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.

To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.

Read our editorial policy to learn more about our process.