Turkey wealth fund sees expanded role in markets, economy

Turkey’s sovereign wealth fund expects to play an enhanced role in financial markets and the wider economy, its chief executive officer said on Thursday.

Zafer Sönmez, appointed by President Recep Tayyip Erdoğan to head the fund’s day-to-day operations – Erdoğan is chairman – said the institution would be active in the country’s debt markets in particular.

“In my view, in the next three to five years, sovereign-owned entities and sovereign funds will play an important role in the equity part of the game, Sönmez told CNBC television in an interview. “In terms of debt, the equity response should come from the sovereign wealth funds.”

Turkey’s wealth fund controls the country’s largest state-owned economic enterprises such as Turkish Airlines and three state-run banks. Erdoğan established the fund in 2016, wresting oversight of the firms it now controls from parliament and other supervisory bodies. The fund oversees assets worth just over $30 billion, a small amount compared with equivalent institutions in the Middle East and Asia.

Turkey was seeking to triple the value of the fund to $100 billion by 2023, the country’s centenary, before the coronavirus epidemic swept through the economy.

“When we look into Turkey, this kind of a platform was lacking in the economy. And we are a newly established fund,” Sönmez said. “This is new for Turkey, but we will be more active, we will offset these volatile periods to help as an equity solutions provider of the sovereign.”

The fund took control of about one-third of the shares of Vakıfbank this month as part of a capital injection of 21 billion liras ($3.1 billion) for all three state-run lenders.

The main opposition Republican People’s Party (CHP) is calling for companies under the fund to come back under parliament’s control in a “renationalisation” of state assets. It has warned that the governing Justice and Development Party (AKP) could use the fund’s assets in a partisan manner, including awarding loans from state-run banks to favoured businessmen.