The CMB has revised the legislation on Mutual Funds with a view
to abolish certain limitations, to provide new investment options
for Fund portfolios and to initiate competition among the Funds.
The new perspective which is expected to light the fire of
competition in Mutual Funds depends on full disclosure of
management fees, entry and exit commissions, and also authorizes
CMB to set a ceiling for management fees when it deems necessary.
In addition to the above, new investment options together with the
abolishment of certain limitations are expected to provide
flexibility to the Mutual Funds and thus to boost the efficiency of
Below is a brief highlight of the key aspects of the
Disclosure of Fees and Commissions
The Amendment, with the purpose of establishing a competitive
Mutual Fund Market, requires disclosure of management fees and
entry and exit commissions through the web site of Fund Founders.
As per the CMB Resolution dated 30.07.2010 and numbered 22/677,
Founders shall also notify Central Registry Agency of the fees and
commissions and the Agency shall disclose such costs altogether in
order to let investors to make comparison among Funds' fee
Limitation on Management Fees
According to the Amendment the CMB is authorized to set an upper
limit for management fees when it deems necessary. The CMB has used
such authority and envisaged that daily management fees shall not
exceed 0, 00010 of the Funds' total value until 31.03.2011.The
CMB clearly states that Hedge Funds, by their nature, are not
subject to such limitation. Also, Funds which have determined
higher fee rates through their bylaws/prospectuses are required to
apply the rate of 0, 00010 as the management fee until the
abovementioned date and thereby are not required to make any
amendments in said documents.
Abolishing Certain Limitations and Granting New
Capital Protection Oriented Funds and Capital Guaranteed Funds
can be marketed not only through the branches of banks and
brokerage firms but also through alternative distribution channels
like internet or telephone banking.
Investments in stocks of real estate investment companies,
infrastructure real estate investment companies and venture capital
investment companies are excluded from the limitation which had
envisaged that investments in mutual funds, exchange traded funds,
investment trusts and the abovementioned investment companies shall
not exceed 10% of the value of a Fund's portfolio.
Sector Funds may invest in stocks of a company operating in the
relevant sector for up to 15% of its portfolio value.
Fund Baskets, as a principle, shall invest in funds which are
registered with the CMB. However, as per the Amendment, it is
possible for Fund Baskets to invest in foreign exchange traded
funds which are not registered with the CMB.
Capital Protection Oriented funds and Capital Guaranteed Funds
may invest in options and futures contracts based on economic
Funds may invest in warrant, a relatively new instrument in
Turkish Capital Markets. The Amendment governs portfolio
limitations with regard to such investments in detail.
B- Type Funds, in addition to A-Type Funds, may also enter into
repo and reverse repo transactions for fulfilling cash needs which
may arise in relation to redemption requests.
Funds may invest in ISE traded foreign debt instruments,
including Eurobonds, through the over the counter transactions.
Additionally, Funds may enter into over the counter repo and
reverse repo transactions which are based on bank bonds and/or ISE
traded/registered private sector debt instruments. The Amendment
has envisaged detailed disclosure requirements for over the counter
repo and reverse repo transactions to be conducted by Funds.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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