Turkey’s economic pain felt as far as Tennessee

Turkey’s economic pain felt as far as Tennessee

NEW YORK
Turkey’s economic pain felt as far as Tennessee

Turkey’s currency crisis has roiled emerging-markets investors far and wide, including the U.S. state of Tennessee, where the state’s retirement system is the biggest institutional holder in a Turkey exchange-traded fund (ETF), as Reuters has reported.

The Tennessee Consolidated Retirement System (TCRS), which manages a retirement plan for public employees statewide, was the largest institutional shareholder in the U.S.-based iShares MSCI Turkey ETF, according to Thomson Reuters data based on public filings as of June 30, with more than with 880,000 shares valued at around $19 million as of Aug. 24 value.

The Turkey ETF has lost around half its value for the year to date. The lira is down more than 37 percent this year and the country’s BIST 100 stock index is down around 22 percent.

It was a reversal from the prior year, when the Turkey ETF generated a total return of nearly 38 percent in 2017, including dividends, according to Thomson Reuters data.

Still, the investment was a small part of the fund, which at the end of its fiscal year on June 30 had a value estimated at $49.7 billion and an annual return of 8.19 percent, according to data the fund provided, as reported by Reuters on Aug. 27.

The retirement system had a strategy of building up a passive portfolio of single-country ETFs so it could exclude countries that ranked poorly on third-party indexes of corruption and democracy. That meant excluding the largest emerging market, China, according to one of the fund’s investment reports.

The portfolio weights individual country ETFs by their market size relative to the overall benchmark. TCRS said it did not take an active position, either positively or negatively, on Turkey.

ETF, Turkish Lira, Tennessee