The US$39 billion Turkiye Varlik Fonu (Turkey Wealth Fund, TVF) is set to launch a US$250 million technology fund, to bolster Turkey’s evolving tech sector.
CEO Arda Ermut said: “We aim to invest in value-added, leading areas of the new economy that will fill the gap in the ecosystem in our country.”
Turkey’s tech sector has already attracted interest from foreign sovereign investors. In 2021, Abu Dhabi’s ADQ and Mubadala backed online grocery deliverer Getir in a Series D round, while ADQ joined with Qatar’s QIA to back e-commerce platform Trendyol, Turkey’s first “decacorn” and one of Europe’s biggest startups.
While Gulf SWFs have recently grown interested in Turkey’s market potential and strategic economic position, TWF has tended to position itself as a holding company for national state-owned assets.
The decision to branch out into tech financing indicates the importance Ermut’s leadership is giving to Turkey’s considerable tech potential. By establishing a tech fund, TVF is following a strategy also employed by Indonesia’s INA, with potential partnerships involving other state-owned investors.
E-commerce is a focus of interest, although presently Turkey is beset with problems associated with high inflation and the depreciation of the Turkish lira. Inflation is having a downward effect on consumption growth, while depreciation is undermining asset values.
Yet, long-term investors like sovereign funds are focused on the strategic opportunities Turkey can deliver due to its human resource base and access to regional markets in Europe and the Middle East. Inflation and depreciation are passing phases and TVF has demonstrated that it can act as a catalyst for foreign direct investment.
In November, TWF secured a deal with its US$110 billion Abu Dhabi counterpart ADQ on the sidelines of a conference between Turkish President Recep Tayyip Erdoğan and Abu Dhabi Crown Prince Mohammed bin Zayed (MBZ). ADQ announced that the UAE had created a US$10 billion fund to support strategic investments in Turkey, including in the energy and health sectors. It also signed a partnership pacts with the Turkey Investment Office to explore opportunities in energy and utilities, healthcare and pharma, agriculture, transportation and logistics. With CCN Holding, it also plans joint investments in hospitals and clinics.
One of ADQ’s wholly-owned portfolio companies AD Ports signed a strategic partnership with TVF to collaborate on investment opportunities at port developments and operations, including logistics. Abu Dhabi Securities Exchange (ADX) and Borsa Istanbul, also portfolio companies of ADQ and TVF respectively, agreed to further develop the financial services sector in the UAE and Turkey.
The UAE-Turkey agreement has positioned TVF as a conduit for bilateral investment deals. Established in 2016, it took control of SOEs and other state assets, but endured a bumpy start due to the currency crisis.