Considerations by Managers of Private Funds in Light of Potential Eurozone Crises
Kevin P. Scanlan, Matthew K. Kerfoot, M. Holland West and Jeremy I. Senderowicz
European financial markets have experienced volatility and have been adversely affected by concerns regarding rising government debt levels, credit rating downgrades, and possible defaults on or restructuring of government debt of various countries, most notably Greece. These events have affected the value and exchange rate of the euro and have had varying impacts on fund strategy, performance, investments, operations, liquidity and counterparties.
This turmoil has fed speculation that one or more European Union Member States that have previously adopted the euro might choose or be forced to abandon the euro and return to a national currency. Further, there is great uncertainty as to whether the euro can continue to exist as a single currency following a departure of one or more countries from the currency mechanism. Such events could have a dramatic impact on many aspects of fund management and investment, particularly for euro-denominated funds.