Thanksgiving Special: Behind the Turkey ETF (TUR)

by on November 27, 2014 | ETFs Mentioned:

As the U.S. observes Thanksgiving today, markets will be closed as families gather to celebrate the national holiday. Of course, one of the most prevalent traditions for every Thanksgiving is to eat turkey. In the spirit of the holiday we decided to take a dive into a different kind of turkey. The MSCI Turkey ETF (TUR) to be exact. Below, we outline the country-focused ETF and what investors need to know about this fund [for more ETF news and analysis subscribe to our free ETFdb Daily Roundup].

A Look at Turkey

Before we dive into the ETF, let’s take a look at the Turkish economy. Turkey is classified as an emerging market with its borders spanning between southeastern Europe and western Asia. Here are some of the key facts and attributes of the emerging economy:

GDP $820B
Per Capita GDP $8,716
Government Parliamentary Republic
Currency Turkish Lira
Unemployment Rate  10.1%
Inflation Rate  8.96%
Corporate Tax 20%
Interest Rate 8.25%

Though Turkey has seen some solid growth over the years, it has not been without its bumps along the road. Protests in 2013 brought tough times for the economy, as its stock market plunged for the better part of the year. In fact, the ETF has yet to recover from the damage the protests did despite having a favorable performance thus far in 2014.

One more thing to note about the Turkish economy is that it is one of the few emerging markets not dependent on China from an economic standpoint. Many have shied away from China in recent years as it appears its growth has begun to slow, which has in turn, impacted other emerging markets that rely on China for goods and services. Turkey’s geographical location makes it an ideal trading hub and most of its exports are focused on nations besides China.

TurkeyThe Turkey ETF (TUR)

TUR was the first and only fund to offer exclusive exposure to the Turkish equity market, debuting in early 2008. The fund invests in approximately 85 securities with a focus on the financial services sector (42%). The holdings of TUR split primarily between large- and mid-cap stocks, giving it a nice overall diversity. The fund also offers a small dividend of about 1.6%, adding some income to this growth-oriented investment. TUR has approximately $450 million in assets under management and trades more than 320,000 shares each day.

When it comes to emerging market investments, investors are concerned with growth and performance. Here is a look at how TUR has performed over the years compared to SPY.

Year SPY Return TUR Return
2009  26.4%  103.1% 
2010  15.1%  25.6% 
2011  1.89%  -35.6% 
2012  16.0%  65.6% 
2013  32.3%  -27.3% 
YTD  13.0%  16.6% 

TUR has shown the potential to outperform SPY, but it has also had its share of trying times, as evidenced by dismal returns in 2011 and 2013. From a forward looking perspective, the Turkish economy is predicted to move forward at a relatively slow pace, growing just below 2% each year through 2030 according to some. Others see GDP growth picking up as soon as next year, with Turkey on track to solve some of its political issues and move forward with decent growth.

Investing in TUR certainly has its risks, including political instability and the potential for low growth in the coming years, but the fund has flashed signs of a strong investment in its short lifespan. This ETF would likely not be  a major holding in your portfolio but rather a compliment to an already-diversified set of holdings. 

Follow me on Twitter @JaredCummans.

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Disclosure: No positions at time of writing.