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International Research Journal of Finance and EconomicsISSN 1450-2887 Issue 36 (2010) EuroJournals Publishing, Inc. 2010http://www.eurojournals.com/finance.htm

An Evaluation of the Attributes Considered by InvestmentProfessionals in Selecting Mutual Funds: The

Case of Turkey 1

Onur Gzba Erciyes University, Faculty of Economics and Administrative Sciences, Turkey

E-mail: [email protected]: +90-352-4374937/30111; Fax: +90-352-4375239

Levent tak Erciyes University, Faculty of Economics and Administrative Sciences, Turkey

E-mail: [email protected] Tel: +90-352-4374937/30111

Abstract

Over the past decade Turkey has been catching up with the developments in theglobal mutual fund industry. Using conjoint analysis, this study investigates the relativeimportance of the attributes considered by Turkish portfolio managers and investmentadvisors in selecting mutual funds. It also investigates how the levels of these attributes arevalued. The findings indicate that the attributes that matter the most are listed in their order of importance as expense ratio, past performance and experience of the fund manager.

While the affiliation of the fund and size of the fund appear to be of moderate importance,it is found that investment advisors and portfolio managers attach even less importance tothe number of funds managed by a particular founder and the fund managers investmentstyle. In the mutual fund industry with increasing diversification and competition, theresults of the study is expected to contribute to the process of structuring the fundsmanaged by founders and to offer an insight to individual investors in their mutual fundselection.

Keywords: Mutual Fund Selection, Portfolio Manager, Investment Advisor, ConjointAnalysis.

Jel Classification Codes: G20, G11

1. IntroductionBecoming increasingly competitive, the mutual fund industry has lately been growing dramaticallywith a more complex structure and increasing diversification. Therefore, determining the salientcharacteristics of mutual funds demanded by investment professionals are of great importance for themutual fund founders when introducing new funds and structuring the funds under their management.Furthermore, identifying such characteristics might guide small investors in their investment decisions.This paper aims to evaluate the attributes that portfolio managers and investment advisors consider

1 This study is a revised version of a paper presented at the 11th National Finance Symposium in Turkey.

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International Research Journal of Finance and Economics - Issue 36 (2010) 181

when selecting a mutual fund and to determine the relative importance of these attributes as well their preferences at the levels forming these attributes. To this end, following Ramasamy and Yeun(2003), this study uses the conjoint analysis.

Mutual funds could be defined as financial institutions channeling smaller savings into financmarkets in an organized manner and allowing all kinds of investors to convert their savings ininvestment with different combinations of risk and return. Anderson and Ahmed (2005: 1) attribute t popularity of mutual funds to the following factors: (1) easy purchase and sale of fund participatcertificates (2) opportunities for smaller investments (3) professional services (4) professional portfomanagement (5) availability of mutual funds with a variety of investment objectives (abundance investment alternatives relative to expectations of risks and returns). Since Massachusetts InvestmeTrust, the first mutual fund in its modern sense established in 1924, the global mutual fund industry hwitnessed an enormous progress. The total asset value of mutual funds around the world amounted26.13 trillion dollars by the end of 2007 (Appendix 1).

Table 1: Mutual Funds in Turkey

Mutual Funds in Turkey

Net Asset ValueNumber of Mutual Funds

(Thousand Turkish Lira)Year

A Type* B Type Total A Type B Type Total

Number of Investors

1987 - - - 0 53 53 N/A

1998 96 101 197 71.879 275.185 347.064 N/A

2000 145 121 266 520.294 1.417.318 1.937.611 N/A

2002 134 108 242 434.884 8.911.788 9.346.672 N/A

2004 123 130 253 780.370 23.663.404 24.443.774 2.632.462

2005 126 149 275 1.033.635 28.340.487 29.374.122 2.959.573

2006 126 163 289 831.518 21.180.058 22.011.576 2.470.9092007 129 168 297 919.383 25.461.778 26.381.161 2.998.454

2008 126 209 335 596.212 23.376.136 23.972.348 2.938.904

*Mutual funds in Turkey are subject to a classification: Mutual funds with at least 25% of the portfolio value made of thshares of the firms established in Turkey form the A Type and others constitute the B Type.

Source: Capital Markets Boards of Turkey, December 2008 Monthly Statistical Bulletin

While the legal arrangements concerning the mutual funds in Turkey were enacted in 1981 wthe Capital Markets Board Law, the first mutual fund was founded in 1987 by a private bank. Sinthen, mutual funds in Turkey have experienced a considerable increase in terms of their numbetypes, and net asset value (Table 1). Furthermore, the introduction of private pension funds into tsystem from 2003 onwards could be considered as a remarkable development regarding the growthinstitutional investments in Turkey. By December 2008, the number of participants in the priva pension system rose to 4.97 million persons, and the portfolio size of the existing 121 pension funrose to 6.04 billion Turkish Lira (Capital Markets Board of Turkey, 2008).

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instance, 1. 100-150 hours,2. 151-200 hours,3. longer than 200 hours) and different dimensions,respectively. Conjoint analysis can be applied to any problem of choice, and allows estimatin preference decisions both for each individual respondent and for all respondents.

Another advantage of this type of analysis is that respondents reveal the order of importance fcertain attributes and their preferences at various levels by scoring or rating product or service profiwithin certain attributes. In other words, the respondents are not given a list of the product or servattributes and not asked to rate them by their order of importance; rather, they are asked to rate or sco product or service profiles with different combinations of attribute levels. Thus, respondents are facwith a purchasing decision similar to a real-life decision (Ross et al., 2003: 230). Instead independently evaluating product or service attributes, respondents assess a product or serviincluding combinations of different levels of all attributes. An assessed combination may also consof various features considered when buying a financial product (Moskowitz; Krieger, 2001: 344).

Most commonly employed as a marketing research instrument, conjoint analysis has varioareas of use such as industrial products, transport services and financial services marketing. Relatedfinancial decision making, Hooper (2001) uses conjoint analysis to determine the importance of factothat affect international capital budgeting decisions by multinational corporations. Murphy and Sou(2004) use conjoint analysis to survey the attributes that influence individual investors when they maa decision to buy shares. Ramasamy and Yeung (2003) investigate the importance of facto

considered important in the selection of mutual funds in Malaysia.In applying the conjoint analysis, full-factorial conjoint design, which consist of the use of alcombinations of attribute levels (all possible levels of all attributes), makes it impossible frespondents to thoroughly evaluate all profiles simultaneously. For example, there are 243 possibcombinations (35 = 3x3x3x3x3) for 5 attributes with three levels for each. Due to its high cost and thdifficulty for respondents in thoroughly evaluating so many combinations, researchers often preffractional factorial design (Kuhfeld et al., 1994: 546). Therefore, the number of profiles that couldthoroughly assessed by respondents in a conjoint analysis is usually determined by the fractionfactorial design.

Selection of a mutual fund with high return at a tolerable risk level could be considered ascomplex process, because there are many factors that affect mutual fund selection (Ramasamy a

Yeung, 2003:123). A review of literature reveals that the mostly considered criterion in assessingmutual fund is past performance. Many studies have examined the effects of the past performancof mutual funds on their future performance.2 Grinblatt and Titman (1992) demonstrated that the past performance of 279 funds in the period between 1974 -1984 constituted a sound reference for future. Goetzman and Ibbotson (1994) analyzed 728 mutual funds in the US for the period betwe1976- 1988 to arrive at a similar result. Carhart (1997) and Brown and Goetzman (1995) also obtain partially similar results in their studies. Ramasamy and Yeung (2003) found that past performance wthe most significant attribute considered by Malaysian investment advisors in selecting mutual funIn contrast, Philpot et al. (1998) examined bond mutual funds and observed that the past performanof these funds can not estimate future performance. This study investigates the three levels identififor the attribute of funds past performance and the following growth preferences of manage

steady growth, impressive growth or supernormal growth (Table 2).Various expenses of mutual funds are transferred to fund investors. The expense ratio (the ratioof total expenses to net asset value), is a meaningful criterion used in inter-fund comparisons andusually referred to in academic studies (Madura, 2006: 661). It could be suggested that mutual funwith high expense ratios can not usually yield sufficient returns to meet this ratio. Consequently, maanalyses on the expenses of mutual funds have found a considerably negative relationship between texpense ratio and fund performance (Haslem, 2003: 317). Carhart (1997), and Grinblatt and Titm

2 A quite comprehensive study examining the literature on the past performance of investment funds was published in 20 by SIRCA (Securities Industry Research Centre of the Asia Pacific) under the title A Review of the Research on the PPerformance of Managed Funds. For accesshttp://www.asic.gov.au/asic/pdflib.nsf/LookupByFileName/FMRC_Report.pdf/$file/FMRC_Report.pdf

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184 International Research Journal of Finance and Economics - Issue 36 (2010)

(1989) underline the reverse relationship between mutual fund performance and expense ratio. Blake,Elton and Gruber (1993) recommend bond fund investors to prefer funds with low expense ratios. For the European mutual funds, expense ratio and age are found to be negatively related to risk adjusted performance by Otten and Bams (2002). Rompotis (2008) finds that the expenses negatively affectGreek mutual fund performance. The present study identified three levels ( 10%) for expense ratio, calculated as Total Expenses/ Average Fund Size. These levels are identified byexamining the 2006 expense ratios for Turkish mutual funds, given in Appendix 3 and Appendix 3-A.

One possible problem in mutual fund selection is the question of whether the performances of large and small funds are different. Using the data for the period 1975-1984 and Jensens criterion,Grinblatt and Titman (1989) demonstrated that small mutual funds have a better performance than thelarge ones. Despite the view that large mutual funds yield high performance as additional informationabout them is accessible through further research and investors incur lower expenses due to their volumes (sizes), it is argued that small-scale funds may exhibit superior performance largely becauseof their flexible structures and their intolerance to high operation costs for diversification (Haslem,2003: 273275). In this study, the number of circulating participation certificates (CPC) is used torepresent the attribute of fund size considered in mutual fund selection. Three levels that form theattribute (CPC< 100 million, 100 million 500 million) are identified byexamining the numbers of circulating participation certificates for Turkish mutual funds, which are

provided in Appendix 4.Obviously, the performance of a mutual fund mainly depends on the quality of the mutual fundmanager. Therefore, it could be argued that there is a need to disclose to the public the explanatoryinformation about the mutual fund managers. On the issue, Chevalier and Ellison (1999) examined therelationship between certain characteristics of fund managers and fund performance, and found thatfactors such as the age or MBA degree of fund managers may lead to differences in mutual fund performance. Shukla and Sign (1994) find that portfolio managers professional education may resultin superior fund performance. In developed countries, chiefly in the US, there are institutions that provide investors with data on mutual fund managers (See Morningstar 2007). However, to the best ofour knowledge, there are no efforts made to this end in Turkey. Assuming that portfolio managers andinvestment advisors have such information about mutual fund managers to determine whether they

would consider such information in fund selection, we chose to include in our analysis the attributes ofinvestment style of fund manager and fund managers experience. To ascertain whether qualitativeand quantitative characteristics of mutual fund managers do affect fund selection, we evaluate theattribute fund managers experience at three levels and investment style of fund manager at twolevels, as seen in Table 2.

An examination of the market shares of Turkish mutual fund founders reveals that occupyingthe top ten positions among 67 fund founders, commercial banks hold the bulk of the market with atotal share of 84.2% (Appendix 2). Thus, corporate personality of fund founders can be considered inmutual fund selection. The attribute fund founder was included in the analysis at three levels so as toassess the effect of the corporate personality of a fund founder on mutual fund selection. Turkishmutual fund industry exhibits diversity in terms of the number of funds managed by fund founders.

While particularly the founders such as Trkiye I Bankas , Akbank and Garanti Bankas withrelatively high market shares manage more then ten funds, not more than one fund is managed byfounders such as nc Menkul Deerler A.. and Halk Yat r m Menkul Deerler A.. (Appendix 2).Therefore, as observed in Table 2, the attribute the number of funds managed by the fund founder isanalyzed at three levels in order to determine whether fund selection is affected by the number of funds managed by a mutual fund founder.

Consequently, seven attributes that may, in our opinion, be considered in mutual fund selectionare identified through literature review and expert opinion; and as seen in Table 2, three levels for eachof the six attributes and two levels for one attribute are identified to be used in fractional factorialdesign.

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Table 2: Attributes in Mutual Fund Selection and their Levels

Attributes Attribute LevelsSteady growth in the last 5 yearsImpressive performance during the last year A- Funds Past PerformanceSupernormal growth in the last 3 years0-3 years

4-7 yearsB- Fund Managers Experience More then 7 yearsCautious

C- Investment Style of Fund Manager AggressiveSmall (CPC

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Data Collection

In the study, for data collection, professional fund managers employed in Intermediary Institutions,Portfolio Management Companies and Private Pension Companies in Turkey were asked to rate on awebsite 22 fund profiles identified by fractional factorial design in a range of 1-10 (Appendix 5). Tothis end, top-level executives employed in 18 portfolio management companies and 11 private pensioncompanies were contacted via telephone. To contact the portfolio managers and investment advisors

employed in intermediary institutions, we resorted to the Association of Capital Market IntermediaryInstitutions of Turkey (TSPAKB). Thereupon, TSPAKB informed its members about our research via public letter Nr. 509 on its website. In the end, 47 portfolio managers and/or investment advisors participated in our study. Of the respondents 49% are employed in portfolio management companies,32% in intermediary institutions and 19% in private pension companies. 28% of the respondents arefemale, and 75% have an experience of more than 5 years in their current positions.

4. Research FindingsThe conjoint analysis revealed the order of relative importance attached by portfolio managers andinvestment advisors to the seven attributes included in the model as well as the order of preference for

the attribute levels. Furthermore, the analysis also revealed the number of respondents scoring in thesame and reverse directions to our expectations about the rated score and the direction of the level preferred in the attributes. The results of the analysis also provide information about the individualorder of importance and the order of preference for the attribute levels for each respondent. However,as we aimed to evaluate as a whole the order of importance and preferences for the factors considered by portfolio managers and investment advisors in mutual fund selection, we have evaluated thestatistical data concerning the entire model. Table 4 presents the correlation coefficients andsignificance levels for the entire model.

Table 4: Coefficients of Correlations between the Observed and Estimated Preferences

Correlation Coefficient ProbabilityPearson R 0,976 0,000Kendall Tau 0,826 0,000Kendalls Tau for Holdouts 0,667 0,087

Pearsons R and Kendalls Tau correlation coefficients are used to measure the power of estimation performance concerning the importance values attached to the attributes and the preferential priority (utility estimations) for attribute levels. A high performance between the estimated values andobserved values for preferences indicates a good estimation performance. When the number of model parameters and the number of rated profiles are close to each other, the correlation between theobserved and estimated scores might be artificially increased. In such cases, correlation coefficients for holdout profiles can better indicate the model fit. It is always the case that the correlation coefficients

calculated for holdout profiles are lower than the correlation coefficients of real profiles (SPSS, 2005:3435). As indicated by Table 4, the correlation between the observed and estimated preferences washigh considering both types of correlation coefficients. The statistically significant coefficient values of 0.976 and 0.826 are a sign of a good estimation power for the model. Moreover, the correlationcoefficient computed for the holdout profiles is also very high and statistically significant at asignificance level of 10%.

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4.1. Relative Performance Attached to the Attributes by Portfolio Managers and Investment

Advisors

The scores rated by 47 portfolio managers and investment advisors for 22 fund profiles were subjecto conjoint analysis, which revealed the relative importance values for the seven attributes believed be considered in mutual fund selection (Figure 2).

Figure 2: Importance Values of Considered Attributes in Mutual Fund Selection

A

B

C D

E

F

G

0

5

10

15

20

25

Etkenler

Attributes Importance ValuesA- Funds Past Performance 21,67932 (2)B- Fund Managers Experience 16,42188 (3)C- Investment Style of Fund Manager 7,594218 (7)D- Fund Size 8,37847 (5)E- Fund Founder 13,02499 (4)F- Number of Funds Managed by the Fund Founder 8,3535 (6)G- Expense Ratio of the Fund 24,54762 (1)

Importance values are expressed in percentage and the sum of values is 100%. Importanvalues represent the degree of effectiveness on preference of the attributes considered in mutual fuselection. The figures given in parentheses next to the importance values represent the order of relatimportance for the attribute in question. Evidently, of the 7 attributes included in the model, the movalued attribute in fund selection was the expense ratio of the fund with a percentage of 24.55%. Tsecond most valued attribute is the past performance of the mutual fund. Although high retur

previously yielded by mutual funds are not usually regarded as a guarantee for high future returns investment professionals, the respondents believe that past performance is also a considerabimportant attribute in mutual fund selection.

The importance values show that the third attribute in order of importance is fund managerexperience. The fourth and the fifth attributes are the institutional founder of mutual fund and fund srepresented by the number of circulating participating certificates, respectively. It could be suggestthat the portfolio managers and investment advisors attach a medium degree of importance to tinstitutional founder and fund size when selecting a mutual fund. Figure 2 shows that the last twattributes to which portfolio managers and investment advisors attach the least importance are tnumber of funds managed by the fund founder and the investment style of the fund manager. SinceTurkey a portfolio manager or an investment advisor in the process of mutual fund selection can n

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possibly obtain information about the investment style unless they personally know the founder of themutual fund, it is quite natural for the attribute in question to be the least important one among allseven attributes.

Our study is inspired by the work of Ramasamy and Yeung (2003). To the best of our knowledge, their study is the only attempt to employ the conjoint analysis to determine the importanceof factors in the selection of mutual funds. To compare, for the first two attributes, the findings are parallel to those of Ramasamy and Yeung (2003), who found past performance as the most importantfactor followed by expense ratio in mutual fund selection for Malaysian investment professionals. Onthe other hand, while Malaysian financial advisors attach greater importance to fund size (3rd of the 8attributes) and the number of managed funds (4th of the 8 attributes), they turned out to be of moderateimportance (5th and 6th of the 8 attributes) for Turkish professionals. In contrast, Turkish professionalsattach greater importance to fund managers experience and affiliation of the fund in the 3rd and the4th ranks, respectively; however, Malaysians found these attributes relatively less important in the 5thand the 6th ranks.

What is most striking in both studies is that the investment style of fund managers is thought tohave very little significance, contrary to the case in the developed countries.

4.2. Evaluation of the Attribute Levels

Table 5 presents the utility estimations for the various levels of seven attributes included in the model.For each attribute, the level with the highest utility estimation among the values of levels pertaining tothe attributes indicates the most preferred level, while the level with the lowest utility estimationrepresents the least preferred level. For each attribute, the utility estimation of the level most preferred by portfolio managers and investment advisors is shown in bold font. As they are expressed with acommon unit, utility estimations can be added to give the total utility for any combination of levels(SPSS, 2005: 32). For instance, the total utility of (a) a large mutual fund with (b) steady growth in thelast 5 years, (c) a fund manager with an experience of more than 7 years, (d) an aggressive investmentstyle adopted by their managers, (e) a bank as a founder, (f) more than 10 funds managed by their founders, and (g) an expense ratio lower than 3% is calculated by adding the constant and the utilityestimations shown in bold fonts in Table 5:

The total utility of such a fund is (0.522 + 1.809 + 0.073 + 0.335 + 0.061 + 0.585 1.076 +6.158 =) 8.467.

The utility estimations for the various levels of past performance of the fund, which is thesecond most valued attribute by portfolio managers and investment advisors in mutual fund selection,indicates that steady growth is considered as most important (utility estimation = 0.522) level. To put itanother way, the steady growth of a mutual fund in the last 5 years contributes most to the total utilityof the mutual fund according to the investment professionals in terms of past performance. Mutualfunds with supernormal growth in the last three years are the second preferred fund type (utilityestimation = 0.109), while the least preferred mutual funds are those with impressive performanceduring the last year (utility estimation = -0.630). These results demonstrates that portfolio managersand investment advisors more commonly prefer the funds that yield medium-level but steady returns inthe long run, when compared to the mutual funds which yield high returns only during the last year or yield supernormal returns in recent years.

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Table 5: Utility Scores of Considered Attributes in Mutual Fund Selection

Attributes Attribute Levels UtilityEstimationStandard

ErrorSteady Growth in the last 5 years 0,522 0,126Impressive Performance during the last year -0,630 0,126A- Funds Past PerformanceSupernormal Growth in the last 3 years 0,108 0,1260-3 years 0,603 0,1094-7 years 1,206 0,219B- Fund Managers ExperienceMore then 7 years 1,809 0,328Cautious -0,073 0,095C- Investment Style of Fund

Manager Aggressive 0,073 0,095Small (CPC

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An examination of Table 5 reveals that, among the levels of the attribute the number of fundsmanaged by fund founders, the mutual funds with fund founders managing more than 10 funds havethe highest utility estimation (utility estimation = 0.585). It is also observed that utility estimationdecreased in parallel with a decrease in the number of funds managed by the fund founder. Thisindicates that portfolio managers and investment advisors tend to prefer more commonly the mutualfunds with fund founders managing a greater number of funds.

Among the seven attributes included in the model, the utility estimations for the attributeexpense ratio, which is shown to be the most valued attribute by portfolio managers and investmentadvisors, indicate that utility estimations decrease with increasing expense ratios. Since the utilityestimations gets the highest for the expense ratio lower than 3%, mutual funds with low expense ratiostend to be preferred more than those with higher expense ratios.

When the utility estimations of the level values for all attributes are examined as a whole, portfolio managers and investment advisors tend to prefer (a) large mutual funds with (b) steadygrowth in the last 5 years, (c) the longest manager experience, (d) an aggressive investment styleadopted by their manager, (e) bank as a founder, (f) the highest number of funds managed by their founders and (g) the lowest expense ratios.

We had pre-expectations about four of the seven attributes in the model as indicated in Table 3.Here are the number of respondents whose ratings are contrary to our expectations about the

relationship between respondent scores for the four attributes in question and the direction of the levelthey preferred:1) B- Attribute Fund Managers Experience = 4 (4 of 47 respondents tended to prefer

more the funds with less experienced managers).2) D- Attribute Fund Size = 17 (17 of 47 respondents tended to prefer smaller funds).3) F- Attribute The Number of Funds Managed by the Found Founder = 17 (17 of 47

respondents tended to prefer mutual funds with a fund founder managing fewer funds).4) G- Attribute Expense Ratio of the Fund= 2 (2 of 47 respondents tended to prefer mutual

funds with higher expense ratios).The scores of most of the respondents (43/47= 91% and 45/47= 96%) on the attributes fund

managers experience and expense ratio of the fund confirmed our expectation. The scores of a

considerable majority (30/47 = 64%) on the attributes fund size and the number of funds managed by the fund founder also confirmed our expectations. The preferences of a group of 36% who tends to prefer smaller funds and mutual funds with founders managing fewer funds could be attributed to theconcerns that growth might lead to management problems and high operation costs.

ConclusionThis study aimed to determine the attributes considered by Turkish portfolio managers and investmentadvisors in mutual fund selection as well as the relative importance of these attributes. In the Turkishmutual fund industry which has assumed a complex structure with increased diversification andcompetition, it is important, in our opinion, to determine which attributes are prominent in the

preferred funds. As a matter of fact, having access to reliable information about these attributes will notonly assist restructuring of the current funds and the funds to be included in the system, but will alsoindirectly offer insights to small investors in their selection of mutual funds.

The results of the study conducted through the participation of professional fund managers andinvestment advisors employed in intermediary institutions, portfolio management companies and private pension companies reveals that expense ratio of the fund is the most valued attribute, which isfollowed by the attributes past performance and fund managers experience respectively. While theinstitutional founder of the fund and fund size have medium level of importance, it is observed thatinvestment advisors and portfolio managers cares even less about the investment style of fundmanagers. When the utility estimations for the attributes and their level values are examined as awhole, the most preferred mutual funds are found to be large-scale mutual funds with a steady growth,

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a relatively experienced manager with an aggressive investment style, the highest number of funmanaged by their founders , a bank as a founder and the lowest fund expense ratios.

The results obtained through the conjoint analysis are largely consistent with those in thliterature. Nevertheless, it is obvious that the performance of a mutual fund mainly depends on tquality of a mutual fund manager. Yet, in our study, as well as in Ramasamy and Yeungs (2003study, there is a lack of consideration on the part of professionals for the attribute investment style fund managers in contrast to the studies in the literature and our expectations, which might indicathat public opinion is not adequately provided with explanatory information about the mutual fumanagers in emerging markets. Therefore, it is believed that Turkey shall benefit from theestablishment of institutions and similar rating systems that inform the public about mutual fumanagers, as is the case in developed countries. Nevertheless, investment professionals found tinvestment style of fund managers as the least important attribute, while fund managers experience believed to be relatively and distinctly important. This is an interesting finding of the study. Ramasamand Yeung (2003) also obtained the same result, which may point to the need for a general ratisystem for the fund managers in emerging countries. Furthermore, this study may guide institutiothat offer financial services in the use of conjoint analysis for new product design or restructuringcurrent products.

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Append ces

Appendix 1: Worldwide Total Net Assets of Mutual Funds (Millions of U.S. dollars, year-end)

2002 2003 2004 2005 2006 2007World 11.324.128 14.048.311 16.164.795 17.771.027 21.807.505 26.129.564Americas 6.776.289 7.969.541 8.792.450 9.763.921 11.469.062 13.421.149Europe 3.462.999 4.682.836 5.640.452 6.002.261 7.803.906 8.934.864

France 845.147 1.148.446 1.370.954 1.362.671 1.769.258 1.989.690Germany 209.168 276.319 295.997 296.787 340.325 372.072Italy 378.259 478.734 511.733 450.514 452.798 419.687Luxembourg 803.869 1.104.112 1.396.131 1.635.785 2.188.278 2.685.065 Netherlands 84.211 93.573 102.134 94.357 108.560 1Romania 27 29 72 109 247 390Russia 372 851 1.347 2.417 5.659 7.175Slovenia N/A N/A N/A N/A 2.484 Spain 179.133 255.344 317.538 316.864 367.918 396.534Sweden 57.992 87.746 107.064 119.059 176.943 194.955Switzerland 82.622 90.772 94.407 116.669 159.515 176.282Turkey 6.002 14.157 18.112 21.761 15.463 22.609United Kingdom 288.887 396.523 492.726 547.103 755.156 897.460Others in Europe 527.310 736.230 932.237 1.038.165 1.461.302 1.654.967Asia and Pacific 1.063.857 1.361.473 1.677.887 1.939.251 2.456.511 3.678.330Africa 20.983 34.460 54.006 65.594 78.026 95.221

Source: 2009 Investment Company Fact Book

Appendix 2: Market Shares of the Founders of Mutual Funds in Turkey

No Founder Net Asset Value (Turkish Lira) Market Share(%)

1 T. Bankas A.. 4.412.795.358 20,342 Akbank T.A.. 2.860.183.238 13,183 T.Garanti Bankas A.. 2.736.574.572 12,614 Yap Ve Kredi Bankas A.. 2.095.989.033 9,665 Kobank A.. 1.766.322.832 8,14

6 T.C. Ziraat Bankas

A.. 1.310.853.335 6,047 Trkiye Vak flar Bankas T.A.O. 1.001.137.473 4,618 HSBC Bank A.. 828.291.198 3,829 Oyakbank A.. 664.342.597 3,06

10 Trk Ekonomi Bankas A.. 588.556.050 2,7111-67 Others 3.432.614.757 16

Total 21.697.660.442 100Source: Capital Markets Board of Turkey February 2007, Monthly Statistical Bulletin.

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Appendix 3: Expense Sizes for All Mutual Funds in Turkey

Expense Type Amount (Turkish Lira) PercentExport Permit Expenses 9.000,00 0,0008Expenses of Registration and Announcement 173.852,00 0,0147Insurance Expenses 0 0 Notary Expenses 125.213,00 Independent Auditing Fee 2.291.166,00 0,1934

Publishing Expenses for Participation Certificate 3.496,44 0,0003Deposit Fee 4.176.320,14 0,3526Fund Management Fee 1.037.868.525,00 87,617Stock Commission 10.282.360,00 0,868Bond Commission 4.613.501,00 0,3895Commission on Overnight Reverse Repo 22.137.838,00 1,8689Commission on Short-Term Reverse Repo 3.426.494,00 0,2893Commission on Money Market 487.242,00 0,0411Commission on Foreign Securities 39.962,00 0,0034Taxes and Other Expenses 98.309.059,00 8,2993Other 607.367,00 0,0513Total 1.184.551.385,58 4,5Total Value of Average Funds within the Period 26.322.224.819,00 100

Source: Capital Markets Board of Turkey (2007a) Appendix 3-A .: Total Expenses / Average Fund Size Ratio for Mutual Funds

3,00 9,00

15,00 21,00 27,00 33,00

1 20 39 58 77 96 115 134 153 172 191 210 229 248 267 2006 Total Expenses / Average Fund Size Ratio in Ascending Order

%

Source : Capital Markets Board of Turkey (2007a), http://www.spk.gov.tr/indexpage.aspx?pageid=278, (Accessed March06, 2007)

Appendix 4: Tabulation for the Number of Circulating Participation Certificates

Value Count Percent Cumulative Percent[0, 100.000.000) 209 53,45 53,45

[100.000.000, 500.000.000) 81 20,72 74,17[500.000.000, 3.57e+010) 101 25,83 100,00

Total 391 100 100.00

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Appendix 5: Questionnaire (Sample)

Please, rate the following fund profiles in the range of 1 to 10Criterion Mutual Fund Profile 1 Mutual Fund Profile 2Past Performance Supernormal growth in the last 3 years Steady growth in last 5 yearsFund Managers Experience More than 7 years 4- 7 yearsInvestment Style of Fund Manager Aggressive Cautious

Fund Size Number of circulating participationcertificates< 100 million Number of circulating participationcertificatesbetween 100 million and 500million

Founder of Fund Bank Insurance Company Number of Funds Managed by FundFounder 1 1

Expense Ratio (Total Expenses/ Avarege Fund Size ) Between 3%- 10% Lower than 3%

Your Score

irjfe_36_13

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