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Investment funds manage portfolios consisting of equity (stocks), public or private sector debt instruments (bonds), capital market instruments such as reverse repo, and precious metals such as gold. Investment funds are established and managed by portfolio management companies.
An investment fund participation share is a capital market instrument that carries the rights of the investor and shows participation in the fund. Investors join the fund by purchasing investment fund participation shares, which represent a portion of the fund's portfolio, and thus their savings are pooled with other investors. Portfolio managers invest the amount of the new shares in various investment instruments.
Investing in an investment fund offers the opportunity to invest in multiple products at the same time without having to carry out and track multiple transactions. It also facilitates access to both the Turkish and global capital markets. Investment funds are managed by experienced professional portfolio managers who aim to take advantage of the best opportunities in the markets.
Risk
It should be known that every investment fund carries a certain level of risk when invested in. The value of the capital market instruments included in the fund portfolio can increase or decrease, and you may lose part of your principal. It should be considered that as the return expectation increases, the risk ratio and the probability of loss may also increase, and on the other hand, the investment fund can provide higher returns in cases where the asset groups in which the fund invests perform well. You should determine your risk tolerance and choose investment funds accordingly.
Maturity
Your investment's maturity date determines how long you will be investing in the investment fund, as this will be a determining factor in your investment choices.
Purpose of Your Investment
Whether you are investing towards a specific goal or to protect the value of your savings, or to achieve high returns, will affect the level of risk you are willing to take.
Information on the Investment Fund
The following items should be known beforehand to benefit from choosing an investment fund:
It would be useful to consult experts on the subject and/or review the fund's informational documents before making your investment to determine the purpose, risk, and alignment of the fund with the risk you plan to take.
A fund can generate returns in three ways:
When investors sell their participation shares, they share in the value increases/decreases that have occurred in the fund's portfolio up to that point in proportion to their participation shares in their portfolios.
Income from investment funds is subject to a 10% tax rate. However, this rate can vary depending on the type of fund, the holding period, and whether the investor is a legal or natural person. According to the above:
In terms of income tax, those who are resident in Turkey (those who have their place of residence in Turkey) or those who are considered resident in Turkey (those who have stayed in Turkey for more than 6 months in a calendar year. Excluding those who come for specific and temporary tasks or jobs, as well as those who stay for more than 6 months due to incarceration, imprisonment, or illness), as well as official agencies, institutions, or enterprises with headquarters in Turkey, are considered fully taxable. In terms of income tax, full taxability means that an individual is subject to income tax on income earned in Turkey or abroad.
In terms of corporate tax, capital companies, economic public institutions, economic enterprises owned by associations and foundations, and institutions and organizations such as partnerships, where legal or business centers are located in Turkey, are fully taxable.
In terms of income tax, limited taxpayer status applies to individuals who are not resident or deemed resident in Turkey and are subject to income tax only on income they earn in Turkey.
In terms of corporate tax, limited taxpayer status applies to legal entities such as capital companies, economic public institutions, economic enterprises belonging to associations and foundations, and partnerships, among others, that do not have legal or business centers in Turkey.
All information about investment funds can be obtained from the fund's issuer's website and the Public Disclosure Platform page for the fund. Additionally, information about investment funds can be found on the official website of the Turkey Electronic Fund Distribution and Trading Platform (TEFAS).
The trading of investment funds can be carried out through institutions where the purchase and sale of fund participation units, as announced in the prospectus of the fund by the founder and/or the founder, can be made.
Funds traded on the Turkey Electronic Fund Trading Platform (TEFAS) can be bought and sold through platform member institutions within the trading hours on the TEFAS platform.
The prices of investment funds can be found on the issuer's website and the official website of TEFAS at www.tefas.gov.tr .
The Turkey Electronic Fund Trading Platform (TEFAS) is a central fund distribution platform that was established with the permission of the Capital Markets Board and provides the ability to compare all investment funds on a single system and access all funds on the market with a single investment account. For more detailed information about the platform, please visit https://www.tefas.gov.tr/ .
A Hedge Fund is a type of fund that is only open to investment by individuals and entities that meet the definition of "qualified investor" as determined by the Capital Markets Board of Turkey and is not subject to any restrictions on its investment strategy or the types of assets it can invest in. Unlike other investment funds, Free Funds have the flexibility to take advantage of opportunities in both rising and falling markets (long/short) and can engage in over-the-counter derivative transactions, short selling, and margin trading.
Investment funds, retirement investment funds, securities investment trusts, venture capital investment trusts, real estate investment trusts, brokerage firms, banks, insurance companies, private financial institutions, portfolio management companies, pension and aid funds, foundations, funds established according to temporary article 20 of the Social Security and General Health Insurance Law, public benefit associations, and other investors that are similar in nature to these institutions as determined by the Board, as well as real and legal persons who own at least TRY 1 million worth of Turkish and/or foreign currency and capital market instruments as of the date of the public offering, are defined as Qualified Investors in the law.
The management of risks in investment funds involves the effective identification, measurement, management, monitoring, and reporting of the risks of the funds being managed. The risks to which investment funds are exposed are described in the funds' prospectuses. These risks include market risk, counterparty risk, liquidity risk, operational risk, etc. The risks that the funds may be exposed to are identified, the methods for measuring these risks and the risk model to be used are determined and implemented, and are reported to the Board of Directors. Risk limits are determined by the Board of Directors. Compliance with the determined risk limits is controlled and reported on a daily basis. A backtesting exercise is carried out to measure the accuracy and performance of the risk measurement model used. The risk model is regularly reviewed in the context of changing portfolio and market conditions, and any necessary changes to the model are made. Depending on the investment strategy and risk profile of the portfolio, stress test scenarios are created that reflect changes in risk factors that may affect the fund's net asset value, and measures to be taken are determined through the analysis of the effects on the portfolio. Kullanılan risk ölçüm modelinin doğruluğunu ve performansını ölçmek amacıyla geriye dönük test uygulanır. Değişen portföy ve piyasa koşulları çerçevesinde risk modeli düzenli olarak gözden geçirilir ve varsa modelde gerekli görülen değişiklikler yapılır. Portföyün yatırım stratejisi ve risk profiline bağlı olarak fon toplam değeri üzerinde etkisi olabilecek risk faktörlerinin değişimini yansıtacak stres testi senaryoları oluşturularak portföye etkilerinin analizi ile alınacak önlemler belirlenir.
Investment funds are required to keep the assets that may be held in their portfolios with portfolio custodians in accordance with the principles specified in the Capital Markets Board's Custody Regulations. Portfolio custody services include the safekeeping and/or recording of the fund's financial assets, the verification and tracking of ownership of other assets, the keeping of records, the control of transactions related to the movement of assets and cash, and other tasks specified in the Regulations. The portfolio custodian provides custody services for all financial assets that can be recorded in the financial asset accounts directly or indirectly under its own records and all financial assets that can be physically delivered to the portfolio custodian for financial assets that are eligible for safekeeping in the fund portfolios. The portfolio custodian is responsible for safeguarding the assets in accordance with the principles set forth in the Regulations and for providing the fund management company with the information and documents it needs to perform its duties in relation to the assets in the fund portfolio.
Private portfolio management, or individual portfolio management, is the management of portfolios consisting of financial assets on behalf of each individual client. Private portfolio management allows experienced and knowledgeable portfolio managers who closely follow market trends to quickly take action based on changing market conditions, enabling the management of the portfolio, providing investors with access to a wide range of products traded on the capital markets, and creating a portfolio that is consistent with the investor's risk-return preferences based on the criteria set by the investor.
A suitability test is a standard form prepared in written form for the purpose of evaluating whether the services offered to an individual client within the scope of individual portfolio management or investment consulting are compatible with the client's investment objectives, financial situation, and knowledge and experience, by authorized institutions. In this form, the authorized institution collects written information from the client regarding:
Individual portfolio management or investment consulting services are provided in accordance with the result of the suitability test.
A private fund is a fund that is allocated to a pre-determined institution, or to a single individual or individuals. The advantages of a private fund include the creation of an investment strategy that is consistent with the specific risk-return preferences of the allocated individual(s) or institution, and the determination of the investors in the fund by the fund's investor. In addition, if the investor in the fund is a corporate investor, it offers advantages such as promotion and membership.
A venture capital investment fund (VCIF) is a non-corporate asset that is established by portfolio management companies and venture capital portfolio management companies that are authorized by the Capital Markets Board, for the purpose of managing a portfolio of assets and transactions determined by the Capital Markets Board, based on the principles of fiduciary ownership, using the money collected from qualified investors in exchange for participation shares, for a certain period of time. VCIFs are generally funds that provide resources to start-ups that are technology-focused, innovative, and have a fast growth potential and need resources to succeed.
The main differences of VCIFs from other investment funds are as follows: