TURKISH WEALTH FUND CEO EXPLAINS HOW HIS TEAM EMBRACES A HARD TASK

TURKEY WEALTH FUND CEO ZAFER SONMEZ AND HIS FINANCIAL SWAT TEAM EMBRACES A HARD TASK

receives a call from Turkish ZAFER SONMEZ

President Recep Tayyip Erdogan in August 2018, while he is on a family holiday in a Turkish Mediterranean coastal town. He is offered the job of running the Turkey Wealth Fund (TWF). Soon after, he quits a reputable position with Khazanah Nasional, Malaysia’s Sovereign Wealth Fund. The challenge, as always, is too enticing to pass up.

This is the typical modus operandi of Sonmez: Take the risk, go out of your comfort zone, look to where no others are looking and get rid of your fears. Those principles have taken him to challenging posts, and he has never found an easy job or with the help of a headhunter. Now he works tirelessly in his office, sitting on the bank of the Bosphorus Strait.

His post requires him to help the markets stabilize in a stormy region and highly volatile world. He aims to make the TWF among the top-tier global sovereign wealth funds and triple its equity size to $100 billion by 2023. This means increasing the funds by an ambitious CAGR of 25 percent. But that’s not the hardest part.

Sonmez has to convince the Turkish public, as well as the global investment community, about the competency, professionalism, transparency and accountability of his organization. In addition, he also has to convince the political class to support his plans while keeping his organization impartial and independent at the same time.

•n both ends, it may seem like an impossible mission in a highly polarized country. Indeed, he is strongly committed to keep his ship afloat and reach ambitious targets in increasingly stormy weather. And he is aware that he has full political support behind him.

THE GOLDEN EGGS

Sonmez’s biggest strength could also be his weakest point. The Turkish public has been criticizing the TWF for being a political instrument of the president and the transfers of state-owned assets like state banks (Ziraat 100 percent and Halk Bank 51 percent) and Turkish Airlines (49.1 percent) to the fund as a shady move to avoid public scrutiny.

It is also accused of having a covert plan to loot and privatize portfolio companies indirectly, like the National Lottery, which many people describe as a process of privatization to kill the goose that lays the golden eggs.

In such a highly polarized political environment, it is natural to face such criticism, while trying to keep a balance. But Zafer Sonmez believes his team has done its homework. That is why he first wrote down the mandate of his organization, built on four pillars that aim to stabilize the

If there is a will, there is a way for

Zafer Sonmez and challenges are only opportunities, regardless of how strong the headwinds. economy and enhance the value of portfolio companies. He received a seal of approval by the Board before taking over leadership of the Fund.

•ne of his remarkable moves was the transfer of the operating license of the National Lottery to a revenue sharing model. In a previous privatization bid in 2016, the National Lottery was tendered for $2.75 billion, which failed after two front runners had to withdrew from the process after the auction. Then a process in 2019 held by the TWF with the new model ended up bringing around $5 billion to the Turkish Treasury over the next 10 years, Sonmez says. This was done without transferring the ownership but rather issuing a license, a major win for the Treasury. The fund is now working on a similar model for horse racing, which is expected to be finalized in H2 this year.

STRATEGIC INVESTMENT ARM

The TWF is indeed an asset-backed fund like Temasek, among others, and unlike equity-backed sovereign wealth funds that manage excess capital of states. In a recent interview with FT, Sonmez described the TWF as a “political animal”, in a bid to defend the political nature of the Fund.

The TWF is not a bank, nor the Treasury, Central Bank, Privatization Administration or a pension fund, Sonmez says. “We are Turkey’s strategic investment arm,” he notes. It aims to help Turkish companies go regional and global. Equity investments are under its mandate, too.