World's two largest money managers with $10T in assets invest in Türkiye

US investment giants Pimco and Vanguard have bought local Turkish assets in recent months, senior executives have said, betting that the country will continue to maintain strong economic policies.

The executives of the two of the world's biggest investors, which together manage nearly $10 trillion in assets, have demonstrated trust in Türkiye since it adopted new economic policies, including rate hikes in June, following President Recep Tayyip Erdogan's re-election.

Pimco and Vanguard did not elaborate on the specific size of their purchases, but their investments are a sign of confidence in Tükriye's market.

"We are constructive on Turkish assets, in particular local currency assets, due to the tightening in financial conditions to rein in spending and control inflation and the gradual easing of regulations that distort the asset prices," said Pramol Dhawan, managing director and head of emerging markets at Pimco, which oversees nearly $2 trillion in assets.

Investors pour in

Vanguard, the world's second-largest money manager with nearly $7.5 trillion, bought Turkish local bonds without hedging late last year after Nick Eisinger, co-head of Emerging Markets Active Fixed Income, and a few other investors visited the country for meetings.

Interest from abroad hit a six-year high last month while credit default swaps (CDS), a key risk measure, have plunged to less than half of levels in May.

In June, President Erdogan named a new cabinet and central bank chief, Hafize Gaye Erkan, who has since hiked rates by 3,400 basis points to 42.5%.

The bank says it will halt rate hikes as soon as possible but maintain tight monetary policy as long as needed.

Authorities are also working to untangle regulations to free up the banks and financial markets.

A new era

After getting reelected in May, President Erdogan's administration brought in a new economy team, overseeing a tightening in monetary policy as the Central Bank gradually raised its interest rate from a mid-year low of 8.5% to 42.5% as of last week.

Following Mehmet Simsek's appointment as the Minister of Treasury and Finance after May elections, significant transformations have unfolded in Türkiye's economic landscape.

Simsek identified lowering inflation, fiscal discipline, and reforms as the key pillars of Türkiye's medium-term economy programme (MTP), spanning 2024-2026.

The course change also saw the Central Bank's international reserves hit an all-time high of $142.53 billion as of December 15, with the bank revealing the most recent $1.15 billion surge over the previous week.