Brief Guide 


Mutual funds are defined as the collections of assets which have been established with the money to be collected from the public in return for participation certificates with the purpose of managing portfolios on capital market instruments, gold and precious metal on the account of the holders of these certificates on the basis of principle of risk distribution and fiduciary ownership.


Mutual funds are established in the form of open-end investment companies in Turkey. They do not have any legal entity. They are operated in terms of the rules stated in the internal statute of the fund, which includes general terms about management of the fund, custody of the assets, valuation principles and conditions of investing in the fund.


There are two different types of mutual funds in Turkey, Type A and Type B. Type A mutual funds are required to invest at least 25% of their assets in equities that are issued by Turkish companies. Mutual funds that have no such obligations are classified as Type B mutual funds.


Kinds of mutual funds are classified according to their asset allocation such as Variable, Balanced/Mixed, Affiliate Companies, Sector, Equity, Private, Index, Notes and Bonds, Liquid, Foreign Securities, Capital Protected, Capital Guaranteed and Hedge Funds.


Mutual fund founders are restricted to banks, insurance companies, non-bank intermediaries, unemployment funds and pension funds.


Either intermediary institutions that have been authorized to manage portfolios or portfolio management companies manage the portfolios of the mutual funds. The portfolio manager is responsible for managing the portfolio consistent with objectives stated in the internal statute of the fund. A written contract established between a mutual fund and a portfolio manager specifies the services. The portfolio manager is subject to numerous legal restrictions between the fund and itself.


In order to ensure that mutual funds' portfolios are sufficiently liquid and well diversified, law and regulations enforce some limitations on their portfolios. Some of the portfolio restrictions of the mutual funds are as follows;

  - To sustain the fair price in the transactions of the fund, which is the lowest

Price when buying and the highest price when selling an asset.

  - Not to invest in non-listed securities, with a limited exception for the securities, the founder or the portfolio manager of the fund underwrites.

  - Not to invest in the securities of a single issuer more than 10% of its net asset value.

  - Not to purchase more than 9% of one issuer's capital or voting rights.

  - Not to invest in the securities of the founder or the portfolio manager.

  - Not to be represented in the management of the companies whose shares it has purchased


Fund costs can be of two types. First type concerns the buying/selling commissions that are directly taken from investors. Second type concerns the cost that are paid out directly from the fund assets. All of these costs are disclosed at the internal statutes, fund prospectus. Also, they are disclosed at the web site of Board and disclosure web sites of funds.    


The founder is responsible for the protection and safekeeping of the fund's assets. Moreover, the fund's assets are separate from those of the founder. Mutual funds are required to protect securities in their portfolio by depositing them in a depository institution (The ISE Settlement and Custodian Bank, Inc.). The Board requires depositor to segregate mutual fund portfolio securities from other assets.


The assets of the mutual funds are subject to valuation on a daily basis. They are valued at weighted average prices or rates of the market in case such a price or rate exists. In case not, the valuation is based on the last existing market price for stocks and the internal rate of return for fixed income securities. After valuation is done for each of the assets, they are summed up to find the portfolio value. Finally, by including the credits and excluding the debts and other costs of the fund, the net asset value of the fund is reached.


Participation certificates represent the rights and the amount of the units the investors have on the fund. Investors invest in the fund by buying and selling these certificates. The price of a certificate - the unit price for a fund - is calculated every workday, by dividing the net asset value of the fund to the outstanding number of certificates. Thus, it daily reflects the income that is generated in the fund. That means an investor of a fund receives the profit that corresponds to his units during the period he has invested in the fund when he sells his certificates back to the fund and no other dividend is paid.


After being approved by the CMB the internal statute of mutual funds are announced in the Turkish Commercial Registry Journal. As well as that; the mutual funds have to prepare prospectus in the case of issuance and public offering of the units. Besides, they have to report their unit prices daily and prepare monthly and annual reports including their performance, net asset value and portfolio structure. Finally their annual and semiannual financial statements have to be audited by a certified external auditor.


Apart from the disclosure liabilities stated above, the founder is responsible for the protection and safekeeping of the fund's assets. The assets of the fund, which are separate from those of the founder and deposited in a central depository institution, may not be pledged or stated as a guarantee and the fund may not be seized by third persons. In the case of bankruptcy or liquidation of the founder or manager of the fund, the Board is empowered to take the necessary measures. That the assets of the fund are separate from those of the founder, provides a safety mechanism when the founder or fund manager goes bankrupt. Also, participation certificates are dematerialized on person basis at Central Registry Agency. Any investor can check his/her account any time through personal passwords.


As an incentive, Mutual Funds are exempted from corporate tax and income tax according to the Tax Code.


  • 1981 - Capital Markets Law.
  • 1986 - First Communiqué regulating mutual funds.
  • 1986 - Establishment of the first mutual fund in Turkey.
  • 1992 - Regulation on types of mutual funds and tax incentives for A types.
  • 1996 - Coming into force of a new comprehensive Communiqué that brought many innovations to the regulation of mutual funds, which are also currently in use.
  • After 1996- Various amendments in the Communiqué according to the changing needs of the sector.