Europe's funds industry braces for Greek default as Monaco gathering begins

(Corrects paragraph 15 to refer to European rather than specifically Greek assets)

By Carolyn Cohn

MONACO, June 30 (Reuters) - Fund managers have already shifted Greece into emerging market portfolios, offloaded shares in all but the most robust of Greek companies and shed billions of euros of bond investments by moving "underweight" against benchmark indexes.

But those at the FundForum conference in Monaco say there is little else to do except sit and wait for the outcome of Greece's referendum on its bail-out, which could trigger its exit from the euro zone.

More than 1,300 speakers and delegates are due to attend the three-day conference, which starts in full on Tuesday with Greece set to default on a payment due on its loan from the International Monetary Fund.

A few hundred attended a day of pre-conference summits on Monday, which had lost "only one or two people" as a result of the Greek crisis, according to Edward Jones, head of business development at FundForum.

With Greek stock markets closed and capital controls imposed, investors pointed to a relative lack of panic in European stocks on Monday, even though markets suffered their biggest one-day loss since 2011.

"We are not considering adding further protection at this stage," said Florian Ielpo, head of macroeconomic research in the cross-asset solutions team at Unigestion, by email.

"While some volatility will likely hit global markets, we believe that the systemic implications of a Greek default are not as significant as they used to be."

Greece was relegated to emerging market status when its stocks were demoted by index provider MSCI (NYSE: MSCI - news) two years ago.

While most debt is held by official creditors, reducing the threat of contagion, some Greek bonds are held by emerging debt absolute return funds, investors said, after they were ejected from mainstream bond indexes.

RISK APPETITE

These emerging market investors have a bigger appetite for risk, with an enforced stock market closure in Egypt during the Arab Spring of 2011, for example, still fresh in their minds. This has made them less anxious about running for the exits, some fund managers said.

However, Greece was a subject of conversation around the coffee tables in between the pre-conference summits, with attendees mostly saying they had little or no Greek exposure, but unsure what to expect.

Marcus Svedberg, chief economist at fund manager East Capital (Other OTC: CGHC - news) , which specialises in emerging markets, said he would take part in a conference call with clients wanting to talk about Greece. "What else is there to talk about?" he said.

Greece makes up around 4 percent of the MSCI emerging Europe equities index, but East Capital is heavily underweight, owning only stocks which are more export-oriented or consumer oriented, Svedberg said. He declined to name the stocks.

Other pre-conference speakers and delegates also said they held a few Greek assets.

Henry Middleton, head of European business development at Babson Capital Management, said Monday's losses in European over-the-counter instruments such as syndicated loans were creating some buying opportunities, adding the firm was invested in some debt where "we expect those loans to be repaid at par."

For asset managers with life insurer parents, there were other things to think about.

A spokesman at Standard Life (LSE: SL.L - news) said that due to the capital controls, the firm was contacting its 30-odd customers in Greece who received pensions in euros into their Greek bank accounts, to ask how they would like to be paid in future. (Editing by Sinead Cruise and David Holmes)