Oyak set to invest abroad

Turkey’s army pension fund is preparing to invest outside of the country for the first time, with $3 billion to spend on purchases in Europe this year. The $25 billion Ordu Yardimlasma Kurumu fund, known as Oyak, may use some of the money for infrastructure investments, such as roads and bridges, Chief Executive Officer Coskun Ulusoy said in an interview. He is also interested in mines that may provide raw materials for Oyak’s steelmaking venture. Turkey’s biggest pension fund oversees the savings of about 240,000 serving and retired officers. Until now, most of the money has been invested in local companies. Oyak controls Eregli Demir & Celik Fabrikalari TAS, Turkey’s biggest steelmaker, and part-owns a joint venture with French automaker Renault SA. «We’re looking west,» Ulusoy, 58, said at his Istanbul headquarters, which oversee the Bosporus, the 17-mile stretch of water that runs through the city and separates Europe from Asia. «I’m going to diversify.» The fund returned an average 46 percent a year from 2000 to 2006, compared with 14 percent for Istanbul’s benchmark ISE-100 stock index. It raised $2.7 billion from the sale of Oyak Bank AS last year to ING Groep NV. The fund is selling its insurance business to Axa SA, Europe’s second-largest insurer, for $525 million. ‘Solid and profitable’ Oyak may spend some of the proceeds to expand its energy venture with Germany’s Evonik Industries AG, which produces about 7 percent of Turkey’s electricity at a power plant in Iskenderun on the Mediterranean coast, Ulusoy said. He declined to give further details of what he may buy. Oyak has a «successful profitability track record,» Standard & Poor’s said in a report last month that affirmed the fund’s BB rating, one step above Turkey’s sovereign rating. Its auto business is «solid and profitable» and Oyak’s power plant will generate «significant and very resilient dividend streams in the future,» S&P said. The fund has grown amid a boom for the country. The ISE-100 index has quadrupled in value since November 2002, when Prime Minister Recep Tayyip Erdogan won elections with a pledge to promote Turkey’s European Union membership and pursue economic growth. The $650 billion economy has grown at an annual average pace of more than 7 percent since then. EU talks Turkey started EU membership talks in October 2005. Still, EU leaders including France’s Nicolas Sarkozy and Germany’s Angela Merkel have said they are opposed to the mainly Muslim nation joining the bloc. Ulusoy manages the fund under the scrutiny of a board that’s mostly made up of retired generals. The army has ousted four governments in the past half century. A 2004 draft report by the EU’s parliament cited Oyak as an example of military influence «which is not consistent with EU values in respect of the rule of law, democracy and market organization.» The parliament dropped the reference to Oyak in the final version of the report. Ulusoy said he persuaded EU officials the fund isn’t a military front. «This organization functions purely on returns,» he said. «They don’t tell you to manage it for some other, higher purposes. They say: ‘Here’s my money. I want it back at retirement.’» Ulusoy cited Oyak Bank AS as an example of the fund’s investing achievements. The unit had 11 branches and just one automated teller machine when he took over as Oyak CEO in 2000. Ulusoy added a «hodgepodge» of failed lenders acquired from Turkey’s regulators for $36,000, which it sold to ING, the largest Dutch financial services company. The only overseas assets the fund held in the past were bank branches in Germany that were part of its larger Turkish business. Shares in Erdemir have risen 80 percent, almost triple the benchmark index, since October 2005 when Oyak beat off bids from Arcelor SA and Mittal Steel Corp to win a government auction for the company. Ulusoy taught military strategy before starting his business career as a banker when he was recruited in the 1980s by then-President Turgut Ozal to run state-owned lenders Turkiye Halk Bankasi AS and TC Ziraat Bankasi AS. At Ziraat, Ulusoy said he obtained the first credit rating a Turkish bank ever had – and was almost prosecuted for his pains. Lawmakers accused him of betraying state secrets by providing information about the lender to Moody’s Investors Service and Standard & Poor’s. Military heroes While his investment managers study the strategies of larger funds such as the California Public Employees’ Retirement System and the endowments of Harvard and Yale Universities, Ulusoy said his personal heroes are more likely to manage armies than funds. Ulusoy cited Hannibal, Napoleon and George S. Patton, and said the study of war has much to teach investors. «You defend when you don’t want to lose what you have,» he said. «If you want to add to it, the only way to do it is to attack. These are all military rules, learned by blood and tears and centuries. We can’t change them.» (Bloomberg)

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