Greek Bonds: Europe’s Hidden Gem?

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firm thinks it has found the answer — buy Greek government bonds. Japonica Partners said it believed Greek debt was “massively undervalued” and should be rated several notches above the junk status assigned by the big credit rating agencies. Greece has been shut out of international bond markets since 2010, when its government borrowing spiraled out of control. It has been rescued twice by the European Union and International Monetary Fund and was forced to restructure its debt in March 2012, imposing losses of more than 100 billion euros on private bondholders. Related: Europe’s recovery is weak, warns ECB But hedge funds — such as Dan Loeb’s Third Point — and other niche investors who bought into Greek debt since the restructuring have made a killing. Yields on Greek 10-year debt in the secondary market have plunged from around 44% in March 2012 to 9%. Japonica’s statement was greeted with derision by some investors Thursday, but the firm that made its name restructuring bankrupt Allegheny International in the early 1990s believes it has spotted an opportunity others may have missed. It claims to have become one of the larger, if not the largest, holder of Greek government bonds, and has hired a former senior executive from Norway’s oil fund — one of the world’s biggest investors — to help manage the portfolio. Related: Investors embrace European stocks “Greece is one of history’s most extraordinary sovereign rejuvenations hidden in plain sight by pervasive systemic misperceptions,” Japonica said, adding it expected yields should break below 5% in 2014. It’s a bold prediction but Japonica may have a point. Greece’s headline economic data and social crisis remain as depressing as ever, and it may yet need another 10 billion euros in support. Still, the government is on track to deliver a primary budget surplus — stripping out the cost of servicing its massive debt this year — and hopes to return to the bond market in the first half of 2014.

Switzerland ETFs: Safest Play in Europe?

Switzerland ETFs to Consider Given strong fundamentals, Switzerland has been able to hold up quite well than most European countries so far this year (read: 3 European ETFs Holding Their Ground ). Investors willing to tap the opportunity in this growing economy could choose from the following two ETFs, any of which could be a decent pick. Both products are clearly outpacing the developed Europe market funds by wide margins in the year-to-date time frame. The product is heavily concentrated across both sectors and securities. More than two-thirds of the portfolio is allocated to the top three sectors – healthcare, financials and consumer staples. In terms of holdings, the top three firms collectively make up for more than 44%, suggesting that the top firms dominate the returns of the fund (see more in the Zacks ETF Center ). The fund has amassed nearly $940 million in its asset base. It is relatively cost efficient, charging 50 bps a year while trading nearly 507,000 shares a day. EWL is up nearly 120% in the year-to-date time frame. First Trust Switzerland AlphaDEX Fund ( FSZ ) This fund provides a slightly active choice as it uses AlphaDEX methodology to select the stock. The methodology seeks to narrow this European space to only the best positioned companies. It ranks the stocks by various growth and value factors, eliminating the bottom ranked 25% of the stocks.