Fee Compression Is Coming: How Transparency Is Reshaping Turkey's Fund Industry

The global asset management industry has spent the past decade in a fee war. In the United States, the average equity fund expense ratio has fallen to 0.42%. In Europe, it sits around 0.80%. In Turkey, according to Fonkuşu's analysis of every equity and variable fund listed on TEFAS as of January 2026, the average annual management fee is 1.87%, and the distribution is right-skewed: forty-one funds charge management fees above 2.5%, twelve charge above 3.0%, and the highest we found was 3.65%, levied by a small-cap equity fund with 340 million TL in AUM. When measured against a simple BIST-100 tracker, 34 of those 41 high-fee funds (83%) underperformed over three years, and the figure rises to 89% over five years. The cumulative fee drag for an investor who held the median fund in this group for five years was approximately 16.2 percentage points of return. These numbers are sobering, but they also tell only half the story. The other half is that they are now visible to every investor in Turkey with an internet connection, and that visibility is beginning to reshape the competitive landscape.

TEFAS, Turkey's electronic fund distribution platform, has done something that many mature markets still struggle with: it has placed standardised, comparable fee and performance data for every fund in the country on a single, publicly accessible platform. Before TEFAS, an investor comparing fund costs had to request prospectuses from individual firms, decode fee schedules buried in legal footnotes, and perform their own after-fee return calculations. Today, a retail investor can sort every equity fund by management fee, compare net returns side by side, and identify the cost outliers in under a minute. This transparency has already begun to produce results. Over the past two years, at least nine portfolio management companies have reduced management fees on their flagship equity funds, in some cases by 50 basis points or more. Several new entrants, including digital-first firms unburdened by legacy cost structures, have launched equity funds with management fees below 1.0%, explicitly marketing themselves as low-cost alternatives. The pattern mirrors what happened in the United States after the SEC mandated standardised fee disclosure in the 2000s: once investors could easily compare costs, capital began flowing toward cheaper products, and incumbents were forced to respond.

The transition will not happen overnight. Turkey's fund distribution system remains heavily intermediated through bank branch networks, and bank-affiliated portfolio managers still benefit from a captive distribution channel where the branch adviser earns commissions on house-fund sales. But even here, the pressure is building. TEFAS's platform allows investors to purchase funds from any provider, breaking the historical lock-in that tied investors to their bank's proprietary products. Younger, digitally native investors are increasingly bypassing the branch altogether. Industry data shows that the share of fund purchases initiated through TEFAS's direct platform and third-party digital channels has risen from 8% in 2022 to an estimated 19% in 2025. As that share grows, the economics of high-fee funds become harder to sustain. The 41 funds charging above 2.5% still manage a combined 12 billion TL, but their market share has been declining for three consecutive years. Fee compression, the same force that transformed the US and European fund industries, is arriving in Turkey, and TEFAS is the mechanism making it possible. The funds that adapt to this new transparency will thrive. Those that do not will find their investors have already moved on.