TURKEY - Declining interest rates have forced Turkey to ease pension asset allocation regulations, but for some the reforms have not gone far enough.

For the year to the end of June, Turkish pension funds returned 3.6% on average, after having returned 21.6% in 2009, according to the Pension Monitoring Centre (EGM), a subsidiary of the Treasury.

Over the same period, the funds had around 8.7% in equities and almost 91% in government bonds and bills, reverse repo and bank deposits.

A spokesman for the EGM pointed out that Turkish pension funds’ portfolios “completely depend on participants’ preferences” and were “relatively conservative”.

But he added that funds had increased efforts to offer “new investment alternatives” to participants due to the low interest rate environment, and that funds were now allowed to invest in derivatives according to their respective risk profiles, and for purposes other than hedging.

Some quantitative investment limits - on deposits and mutual funds, for example - have been relaxed, while investment in ‘participation banks’, or those working on an Islamic shariah basis, have been allowed.

The EGM said: “With these new perspectives, various stakeholders in the industry are also calling for further regulatory action to allow for new alternatives such as precious metals, real estate, exchange traded funds and so on.”

Meanwhile, the voluntary second pillar further increased both in assets - reaching TRY10.35bn (€5.35bn) at the end of the second quarter - and in participants, as more than 2.1m have now joined the system.