Turkey's Corporate Bond Market: Why Independent Credit Analysis Remains a Bank-Dominated Fortress

If you want to understand why Turkey's corporate bond market works the way it does, start with a simple question: who does the credit analysis? In developed fixed income markets, the answer typically involves a mix of sell-side research desks, rating agencies, and independent buy-side analysts at asset managers, hedge funds, and pension funds. In Turkey, the answer is simpler: the banks. Bank treasury desks, bank-affiliated asset managers, and the internal credit departments of the same banks that both lend to and underwrite the issuers. This structural concentration has consequences that ripple through the entire market, from pricing to portfolio construction to the quality of information available to end investors.

The Architecture of Dominance

Turkey's domestic corporate bond market has grown meaningfully over the past decade. Non-financial corporate issuance, once a rarity, has become a regular feature of the capital markets calendar. Leasing companies, industrial conglomerates, energy firms, and real estate developers have all tapped the market with increasing frequency. The regulatory framework under the SPK has evolved to accommodate this growth, with standardised disclosure requirements and improved settlement infrastructure through Takasbank.

Yet the investor base has not diversified at the same pace as the issuer base. The primary buyers of Turkish corporate bonds remain bank treasury desks and the asset management subsidiaries of those same banks. This is not a quirk of market development; it is a structural feature of how the Turkish financial system is organised. The large commercial banks (Is Bankasi, Garanti BBVA, Yapi Kredi, Akbank, and others) each own asset management subsidiaries that collectively dominate the fund industry by AUM. These bank-affiliated managers run the majority of fixed income funds available through TEFAS, and they command the distribution networks (bank branches, digital platforms, relationship managers) that control how retail and institutional capital flows into funds.

The result is a market where the same institutions that originate corporate lending relationships, that underwrite bond issuances, and that hold corporate debt on their own balance sheets are also the primary buy-side participants evaluating those same credits on behalf of fund investors. The conflicts embedded in this structure are not a matter of individual misbehaviour; they are architectural. A bank-owned asset manager evaluating the creditworthiness of a corporate issuer that also has a lending relationship with the parent bank faces a set of incentives that an independent manager would not. The parent bank may have originated the bond, may hold the issuer's deposits, may have extended revolving credit facilities. None of this means the analysis is necessarily compromised. It means the structure creates pressures that investors should understand.

The Absence of Independent Buy-Side Credit Analysis

In more developed fixed income markets, buy-side credit analysis is a distinct discipline. Dedicated analysts at independent asset managers read loan covenants, model cash flows, conduct management meetings, assess sector dynamics, and form proprietary views on creditworthiness that may diverge from the consensus of rating agencies and sell-side desks. This analytical infrastructure is what allows bond markets to price risk efficiently, to distinguish between credits of varying quality within the same sector, and to identify mispriced securities before the broader market catches up.

In Turkey's independent asset management sector, this kind of systematic credit research capability is, for practical purposes, absent. The independent firms (those not affiliated with a major bank) that operate in fixed income tend to run government bond or money market strategies, where credit analysis is less relevant because the issuer is the sovereign. The few independent managers that venture into corporate bonds typically rely on rating agency assessments and publicly available financial statements rather than conducting the kind of deep, proprietary credit work that characterises fixed income boutiques in the US or European markets.

The reasons are partly economic. Building a genuine credit research capability requires hiring experienced analysts (who are expensive and in short supply in Turkey, since the banks employ most of them), maintaining access to issuers and their management teams (which is easier when you are also a lender), and investing in data infrastructure and legal expertise to evaluate bond documentation. For a small independent manager with limited AUM, the cost of building this capability may exceed the management fees it can generate. The economics of independent credit analysis depend on scale, and scale in Turkish asset management remains concentrated in the bank-affiliated firms.

The Sukuk Dimension

The growth of Turkey's sukuk market adds another layer to this picture. Sukuk, the Islamic fixed income instruments that comply with Shariah principles, have expanded significantly as a share of domestic capital markets issuance over the past decade. Regulatory encouragement from the SPK and Treasury, combined with genuine demand from investors who prefer Shariah-compliant instruments, has driven this growth. Participation banks (Turkey's Islamic banks) have been active issuers, and the sovereign has established a regular sukuk issuance programme.

Yet the sukuk market is, if anything, even less well-served by independent credit analysis than the conventional corporate bond market. The investor base for sukuk is heavily concentrated among participation banks and their affiliated asset managers, with investment decisions often driven primarily by the Shariah compliance screen rather than by independent credit evaluation. The assumption appears to be that if an instrument meets the religious criteria, the credit analysis is secondary. This creates a segment of the fixed income market where mispricings may persist for longer than in the conventional bond market, simply because fewer participants are doing the analytical work required to identify them.

For an independent manager willing to apply both Shariah compliance and rigorous credit analysis simultaneously, the sukuk market represents a genuine analytical opportunity. The question is whether the economics of serving this niche can support the cost of building the required expertise.

Why the Fortress Persists

Several structural factors reinforce the banks' dominance of credit analysis and, by extension, of the corporate bond market.

First, distribution. Bank-affiliated asset managers have captive distribution through the parent bank's branch network and digital channels. An independent manager seeking to raise assets for a corporate bond fund must compete for attention on TEFAS, where it sits alongside hundreds of other funds, without the benefit of a relationship manager steering clients toward its products. TEFAS has democratised access to funds, but it has not equalised the marketing and distribution advantages that bank affiliation provides.

Second, information access. Banks that lend to corporate issuers have access to information (financial projections, covenant compliance reports, management discussions about strategic direction) that is not available to non-lending investors. This informational advantage is not unique to Turkey; it exists in every market where banks are significant lenders. But in Turkey, where the independent buy-side is small and underdeveloped, the information asymmetry is more pronounced.

Third, talent. The pipeline of experienced credit analysts in Turkey runs through the banks. A young analyst who wants to build a career in fixed income will typically start at a bank's credit department or treasury desk, where compensation, deal flow, and career progression are all more attractive than what a small independent manager can offer. The banks are both the training ground and the long-term employer for most of Turkey's credit expertise, which makes it difficult for independents to recruit the people they would need to build a competitive research capability.

Fourth, the SPK licensing process for new asset management companies, while thorough and appropriate in its regulatory purpose, imposes time and cost burdens that weigh more heavily on independent entrants than on bank-affiliated firms that can absorb them within a larger corporate structure. The process can take twelve months or more, during which the applicant is investing in compliance, legal, and operational infrastructure with no revenue.

The Market Gap

None of this means the situation is permanent. Turkey's capital markets have evolved significantly over the past two decades, and the direction of travel, as evidenced by TEFAS, by improving disclosure standards, and by the SPK's own regulatory agenda, is toward greater competition and transparency. The structural case for independent fixed income management in Turkey is sound: as the corporate bond and sukuk markets continue to grow, as more non-financial issuers access the market, and as international institutional investors seek exposure to Turkish credit, the demand for conflict-free, research-driven credit analysis will grow with them.

The gap exists. The analytical opportunity is real. The question is whether the economics of the independent asset management sector in Turkey can support the kind of investment in people, process, and infrastructure that filling this gap requires. The banks built their fixed income capabilities over decades, with the advantages of scale, distribution, and information access. An independent challenger would need to match the analytical quality while operating without any of those structural advantages. It is a difficult business proposition, which is precisely why so few have attempted it.

The corporate bond market in Turkey is growing. The credit analysis infrastructure that a market of this size and complexity requires has not kept pace. Until that changes, the fortress holds.