KUWAIT: Setting the course of the participation (Islamic) banking sector with its powerful capital, robust partnership structure, and 26-year history, Kuwait Finance House-Turkey (KFH-Turkey) will bring its customers investment products that are yet unavailable or uncommon on the Turkish investment market through its new undertaking, KT Portfoy. The first portfolio management firm ever to be established by a participation bank in Turkey, KT Portfoy will provide private portfolio management and investment consultancy services to legal and real persons besides dealing in collective investment products.

Declaring that they were going to play an active role on the Turkish capital market through KT Portfoy, KFH-Turkey Executive Vice President, Treasury and International Banking Dr Ahmet Albayrak said, "KFH-Turkey has become the first participation bank to assume an active role in capital markets through KT Portfoy which will operate as per the principles of sharia. The establishment of KT Portfoy was a key part of the overall strategy we'd been implementing in asset management for the last couple of years as a follow-up to KFH-Turkey's stepping up its operations in the field of sukuk in Turkey. Following our cooperation with Katilim Emeklilik ve Hayat A. (Participation Pension and Life plc) for the private pension system, we set up the first Private Banking Directorate in participation banking and now we've completed the big picture in our asset management strategy with KT Portfoy. I'm confident that KT Portfoy is going to make a significant contribution to the development of the Turkish capital markets in keeping with the principles of Islamic finance."

Meanwhile, KT Portfoy General Manager Tayfun Ozkan said, "We're going to both introduce new products and new investors - domestic and foreign - to the Turkish capital markets and bring new investment products to life through KT Portfoy. We want to draw the potential investors who are unable to find in Turkey products and services that comply with the principles of sharia as well as investors from the Gulf Region, with which Kuveyt Turk has intensive dealings through its subsidiaries, and from Europe to the Turkish capital markets by offering them a large variety of investment funds. We aim to contribute to the product diversity and transaction depth of the Turkish capital markets this way."

Tayfun Ozkan went on to say, "In a way, this means additional resources for the companies that finance their business and investments by issuing shares or sukuk or by using similar instruments sanctioned by the principles of Islamic finance on capital markets. Besides, channeling these resources to the nation's productive sectors will help reduce the current deficit and give an extra boost to Turkey's economy."

Explaining that funds were going to be set up that would allow investing in international sharia-compliant investment instruments and that local investors could easily access these instruments at low cost, Ozkan said, "KT Portföy is going to establish funds that will allow its customers to access the investment instruments outside Turkey by means of a diversified-risk portfolio or even by means of a foreign currency investment if they wish."

Tayfun Ozkan informed that two umbrella funds had been established; one being a "participation" fund and the other a "free" fund, and that KT Portfoy had applied to the Capital Markets Board (SPK) for the approval of the establishment of five investment funds under these umbrella funds. "Our customers will soon be able to access the funds we're going to establish under the "Participation Umbrella" from the internet branches of all banks thanks to the Turkey Electronic Fund Distribution Platform (TEFAS). They will be able to invest in the funds managed in accordance with Islamic finance principles by purchasing participation shares. As for the funds we're going to establish under the "Free Umbrella," they will be available at Kuveyt Turk," he said.

Drawing attention in his speech to the fact that the ratio of the total fund magnitude in the world to GDP had shrunk back to its pre-2008-crisis level, Ozkan observed, "We see that 'values-based investing' strategies have a special place in this vast market."

Evaluating participation-based asset size on a global scale, Ozkan commented, "Although the magnitude of the assets that are compliant with the principles of participation finance managed across the world represents a very small market share such as 0.1 percent, it's estimated to have reached $77 billion as of 2014. This figure was $56 billion in 2013. We believe there's a huge growth potential in this market niche. According to Thomson Reuters's Global Islamic Assets Management Report 2014, while corporate investors account for 70 percent of the overall investor base on the traditional fund management market, this ratio stands at 20 percent on the interest-free asset management market. This presents an opportunity for the sector. Corporate investors such as pension companies, takaful companies, and sovereign funds are proliferating and growing rapidly."

Ozkan noted that KT Portfoy was interested in managing the funds established on the basis of participation finance principles and that they had made their first deal in this area with Katilim Emeklilik providing for one of this organization's funds to be managed by KT Portfoy as of January 2016.

Set to serve its customers in all aspects of fund management, KT Portfoy will provide individual portfolio management and investment consultancy services along with collective investment products.