Stock Aversion Hurts Turkey Pension Savers, Manager SaysBy
Proportion of funds in equities lower than other markets
Investors pay the price with modest returns: Gedik Portfoy
Turkish pension savers have an aversion to the best-performing asset class -- and it’s costing them, according to money manager Gedik Portfoy.
Stocks account for just 11.7 percent of assets held in Turkish funds, the latest figures from the country’s Capital Markets Board show. That’s “too little” for individual pension investments designed to deliver long-term returns, and lower than levels in both developed countries and other emerging markets, said Halim Cun, the firm’s chief executive officer.
Pension-fund investors don’t pay enough attention to their returns and seem more motivated about receiving the government’s 25 percent contribution and the portion paid by their employers, Cun said in a March 6 interview in Istanbul.
A January shake-up of Turkey’s pension industry intended to boost competition and returns has so far not delivered the desired effect, Cun said. The only outcome to date seems to be lower portfolio management fees, he said.
“It looks like they have pretty much halved,” said Cun, who is also vice president of the Turkish Institutional Investment Managers’ Association. “And pension companies distributed the funds to existing players in the system, with criteria mostly other than performance.”
The low proportion of stocks in the funds means average returns will be modest, said Cun, whose company has the second-best performing domestic equity fund over the past five years, according to figures from Turkey’s Electronic Fund Platform, or TEFAS.
In the past three years, the average return of 239 Turkish pension fund portfolios was 37.5 percent, according to calculations based on TEFAS data. That compares with a gain of 46 percent in the benchmark Borsa Istanbul 100 Index and a 32 percent increase in the consumer price index.
Since Jan. 1, the country’s 50 asset managers are allowed to oversee no more than 40 percent of any one fund, down from 100 percent previously.