Turkey's Technology Funds: Opening the Door to Global Markets for Retail Investors

Pull up the portfolio disclosures for any Turkish fund with "technology," "innovation," or "digital" in its name (there are now 34 of them on TEFAS) and run a simple overlap analysis. You will find that 27 of them hold Apple, Microsoft, Nvidia, and Alphabet. Twenty-two hold all seven of the so-called Magnificent Seven. The median overlap in top-ten holdings across these 34 funds is 74%. On the surface, this looks like redundancy: dozens of funds repackaging the same basket of US mega-cap tech stocks. But the picture becomes more nuanced when you consider what these funds actually represent for their investors. For the vast majority of Turkish retail investors, buying US equities directly is a process fraught with friction: opening an offshore brokerage account, navigating foreign-currency transfers under Turkey's capital flow regime, managing tax reporting across jurisdictions, and accepting the counterparty risk of an unregulated foreign platform. Turkey's technology funds, for all their overlap, eliminate these barriers. They offer a domestically regulated, TL-denominated, tax-efficient vehicle that provides exposure to the world's most important technology companies through a single TEFAS transaction.

The mechanism through which these funds gain their exposure is worth understanding. Most do not buy US equities directly. Instead, they purchase units of Luxembourg- or Ireland-domiciled ETFs and UCITS funds, which themselves charge a layer of fees. The Turkish fund then adds its own management fee on top. This creates a total cost stack that can reach 2.5% to 3.5% annually, materially higher than a US-listed ETF charging 0.03%. That cost differential is real, and it matters over long holding periods. But it also needs to be weighed against what the investor receives in return: local regulatory oversight by the SPK, a fund structure that benefits from Turkey's favourable tax treatment of domestic fund gains, automatic currency conversion, and the simplicity of transacting through TEFAS alongside the rest of their portfolio. For an investor allocating 10% or 15% of a retirement portfolio to global technology, the convenience and regulatory protection of a domestically domiciled fund may well justify a higher cost than a do-it-yourself offshore approach, particularly for investors without the financial literacy or inclination to manage cross-border brokerage accounts.

That said, the industry has room to mature, and there are signs it is doing so. The SPK's evolving disclosure requirements are making it easier for investors to compare funds on TEFAS by fees, holdings overlap, and after-cost performance, which should naturally reward managers who differentiate their portfolios or compete on price. Several newer entrants have already launched technology funds with management fees below 1.5%, explicitly positioning themselves against higher-cost incumbents. Some funds are beginning to distinguish themselves through genuine portfolio construction: tilting toward mid-cap tech, emphasising cybersecurity or AI sub-sectors, or blending US exposure with Asian technology markets. The overlap problem is real, but it is also a feature of a young and rapidly growing market segment. In the United States, the proliferation of nearly identical S&P 500 index funds in the 1990s was met with similar criticism, yet the resulting competition ultimately drove expense ratios to near zero. Turkey's technology fund segment is following a comparable arc. The 34 funds on TEFAS today represent the first chapter of a story in which Turkish retail investors gain broad, regulated access to global innovation, and the competition among providers to serve them drives costs down and product quality up.