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Friday Letter Postcard from Turkey

European investors are still interested in emerging markets, even in times of uncertainty. 

Over lunch on the terrace of the Ciragan Kempinski Palace Hotel in Istanbul, a Portuguese funds manager says his firm intends to launch a Turkey fund. A few tables away sits a fund manager from a London-based firm, Cordea Savills, that has just done so.

Thus is the interest in the emerging markets, even in times of uncertainty. The Kempinski was the setting this week of the annual conference of INREV, the European Association for Investors in Non Listed Real Estate Vehicles.

Key note speaker Hamish McRae, an associate editor at The Independent newspaper, said at the outset of the conference that turbulence in established markets leads to greater interest in emerging markets. This was proven when, in a snap poll on the second day of the event, 64 percent of delegates said they were already active in emerging markets and an additional 22 percent said they were interested. Indeed, fund managers seem to have anticipated investors’ appetite for transforming economies. At a nearby table one fund manager slips into the hands of an investor a prospectus outlining plans to raise up to $250 million for his Brazil Real Estate Opportunities Fund.

However it was Turkey that INREV was pushing during the conference, at least as far as the program was concerned. The second day was opened by former Dutch minister of foreign affairs Bernard Bot, who was talking up the long-term chances of Turkey joining the European Union. He cited a recent report by Goldman Sachs that rated Turkey among the top 11 emerging economies in the world. He said if it were already a member of the EU, Turkey would be the 6th largest member by economy out of the existing 25 members. It would also be the second largest by population.

Turkey is historically fiercely secular, but increasing religiosity in the government is casting a shadow over the country’s future economic integration. However, Bot pointed to the ‘economic miracle’ taking place in the country as a sign of its long term potential. Revenues generated from privatizations for example have generated $8 billion over 18 years. Those revenues are $33 billion today. Along with other economic changes, the economy is now the 17th largest in the world.

The Portuguese fund manager sitting nearby knows that though Turkey’s aspiration to join the EU may not be fulfilled any time soon, the window of opportunity for his firm to launch the Turkey vehicle is closing fast, given the level of investment and fundraising activity in the country. Such is the level of interest in emerging markets. Fund managers are under pressure to take action now, or cede such emerging markets to others.