Barış Öney
For the past 7 years, USD 130 billion FDI capital has landed in Turkey and USD 15 billion of these investments were made by Private Equity Funds. Over 200 Turkish companies received capital from these funds. Even though there were 25 investments in 2013, this number dropped to 13 as of 2014. Some sources might indicate that these numbers might be higher because they include investments made by angel investors, Turkish Holding investments or foreign direct investments which were done by some investment groups. Private Equity investments were much lower than those reported numbers.
Accumulated Funds in Turkey’s Private Pension System (abbreviated as BES in Turkish), Should Be Made Available to Invest in Private Equity
Though there are some examples, generally speaking, Turkish companies don’t commit capital to Private Equity Funds. These funds are gathered from development and investment banks called IFI’s, such as IFC, EBRD, DEG, FMO, EIF or foreign private funds, pension funds and endowment funds. We should be in a position to also direct Turkish financial sources to Private Equity Funds. This is extremely important for Turkey. For example even if a very small percentage of the Private Pension money could invest in these kinds of funds, SMEs will have the ability to tap into this resource as an alternative to raising capital. Furthermore the private equity fund management sector will flourish and Turkey will reach a point to improve the region as well.
It Is Crucial to Raise Local Private Equity Funds for Angel Investors. Why?
Having local Private Equity Funds, will increase angel investors’ appetite to invest in start-ups. Angel investments just provide seed capital for start-ups to expand and grow. However, these companies require capital again in 1 to 3 years. At that point Private Equity Funds need to step in mostly by buying Angel Investors’ shares and putting more money. Today, there aren’t any funds which could possibly invest in companies, who receive angel investments until funding requirements exceed USD 15-20 million. Angel investors apparently cannot fund start-ups until they reach that level. These companies need Early Stage Private Equity Funds which could possibly be fulfilled by local funds supported by the Private Pension Money.
Individuals who have savings in private pension system are already directing their savings to treasury bills, liquid funds, stock market and instruments like foreign currencies. They should be presented with the opportunity to invest into Private Equity funds as well. This will create a high return alternative to stock markets which will enable Turkish firms to receive capital and funds from other sources outside of the stock market and banks. This will also enable Turkish firms to gain more access to these kinds of sources.
