TURKEY - The global finance crisis is encouraging Turkish pension savers to transfer their assets to fixed income pension funds, according to Meral Egemen, general manager of AvivaSA, the €631m joint venture between Aviva Plc and Turkey's Sabanci group.
"There is a movement to fixed income funds especially these days as fixed income has started yielding better returns," Egemen said.
The Turkish private pension system, launched in October 2003, currently consists of 10 companies which manage 110 mutual funds.
According to Turkey's Capital Markets Board, the funds' portfolios were in September 69% invested in government fixed income, while 17.5% was in reverse repo transactions, 7.5% was in equities, a further 0.5% was in foreign fixed income and 5.5% was in other instruments.
"Whereas elsewhere equity funds dominate the pension investment landscape by making some 60-70% of all funds available, in Turkey the situation is completely the opposite: Turkish investors are not yet ready to take so many risks," Egemen said.
Over the first ten months of 2008, Avivasa's assets increased from TRY1.13bn to TRY1.33bn while the Turkish private pensions system currently has some 1.71 million members and total assets of TRY5.88bn (€2.77bn).
Egemen forecasts the system will reached an asset volume of TRY20bn and four million participants in 10 years.
"The penetration of life and pension products in Turkey is 1.8% of the total GNP. In Western Europe the same rate is around 8%, meaning we are still very much behind," Egemen said, noting the current situation provides notable growth potential for the country's private pensions sector.
While the sector is likely to experience notable growth, Turkey's social security gap is also expected to widen notably, according to Egemen.
"Turkey's social security deficit has since 1994 grown from 1% of the GNP to some 5%. It is unfortunately expected to reach 7-8% of the GNP in the future," he said.
On the other hand, the impact of the global crisis is likely affect Turkey notably less than, for example, the United Kingdom and Japan, suggested Anupam Sahay, member of the executive committee at Aviva Plc.
"In Europe the most affected countries are Ireland and Spain where the property bubble collapsed alongside with other troubles of the economy and that is now going through to businesses and consumers," Sahay said.
"Turkey is witnessing a slowdown in growth and not a recession. Turkey still seems to be in a better position compared to many other countries," he explained.