THE prospect of Greece defaulting on its debt has long been viewed as the recipe for a global stock market disaster. Yet some fund managers are prospering by ignoring the risks of another financial crisis and moving more money into European stocks.

    The US$11.5 billion Thornburg International Value fund increased the percentage of European stocks such as French materials maker Compagnie de Saint-Gobain and French construction company Vinci by 10 percentage points since the end of 2014, making European stocks 65 percent of its total assets, said Brian Burrell, an analyst at the fund.

    Now, it’s reaping the rewards: with broad European stock markets up by 15 percent or more for the year to date, the fund is up 17.1 percent over the same time, a performance that ranks among the best international funds and leaves the 2.5 percent gain in U.S. stocks far behind.

    At a time when the average international fund tracked by Lipper has dropped its holdings of European stocks by 1 percentage point, to an average of 43 percent, funds like Thornburg International that went the other way are outperforming.

    Now, with Greece and the so-called “Troika” of primary creditors — the European Commission, the European Central Bank (ECB) and the International Monetary Fund — once again at an impasse, several of these fund managers say that they are ready to double down on European stocks should the market start to selloff if Greece does indeed default.

    “People are starting to react to headlines, and that’s when we start buying,” said Michael Testorf, a co-portfolio manager of the US$53.8 million RSQ International Equity fund.

    Chief among their reasons for bullishness: the conviction that Greece’s debt standoff, now drawn out for four years, has given Europe’s financial system enough time to prepare, preventing the sort of panic that sent stocks tumbling in 2008 when Lehman Brothers fell.

    At the same time, the ECB has expanded its quantitative easing program to lower interest rates, helping spur economic growth and leading to an 11 percent drop in the euro against the dollar in the first quarter.

    Combined with lower oil prices, the ECB now expects eurozone GDP to grow by 1.5 percentage points in 2015 and 1.9 percentage points in 2016. The eurozone economy rose by an annual rate of 1 percent in the most recent quarter.

    The significant decline in the value of the euro has eaten into the returns for some dollar-based investors. Burrell said that Thornburg had partial currency hedges in place during the early part of the first quarter, but that it has reduced its hedging after the euro’s decline. (SD-Agencies)