High interest rates lure hedge funds, investors to Türkiye: FT

ISTANBUL

Hedge funds and other traders, lured by high interest rates, have pumped billions of dollars into the Turkish Lira in recent months, the Financial Times has reported.

Money managers have since October last year poured around $24 billion into trades that seek to profit from Türkiye’s high interest rates — currently 50 percent, said the FT, referring to data from Istanbul-based Bürümcekçi Research and Consultancy.

The race into the lira is the latest sign of how Türkiye’s pivot toward conventional economic policies, which began last summer, is helping to draw back international fund managers who had fled the market in recent years as unorthodox measures fueled runaway inflation, according to the FT.

“The lira . . . has been a very popular trade,” said Grant Webster, co-head of emerging market sovereign and foreign exchange at investment manager Ninety One.

Türkiye has seen meaningful foreign inflows as a result of high interest rates and a shift away from unorthodox economic policies, he added.

Investors are running the biggest position in the Turkish lira above the benchmark index weighting in about five years, the FT said, citing a June survey of JPMorgan clients.

The head of a large emerging markets hedge fund that has allocated a substantial amount to carry trades said he “liked Türkiye” right now. Turkish savers fled to dollars but now they are coming back, he added.

Another hedge fund manager running a carry trade in the lira said he was less worried about foreign investors exiting the market and more focused on the risk of local savers losing confidence in the currency and moving their savings back into dollars and euros.

A significant portion of the influx has been in the form of “fast money” flows — investors such as hedge funds who can rapidly exit in the event of international or domestic shocks, analysts and investors say.