ON TOP OF THINGS

Turkey 2016 | FINANCE | INTERVIEW

TBY talks to Reşat Karabıyık, Managing Director of Bizim Menkul Değerler (BMD), on position in the market, introducing a participation index, and plans for the short-term future.

Reşat Karabıyık
BIOGRAPHY
Reşat Karabıyık was born in 1969, and studied mechanical engineering and business administration at Istanbul Technical University and Marmara University respectively. He went on to work at Yıldız Holding in 1993, and then Taç Yatırım Ortaklığı until 2006, when he took on his current position. He was also board member of Takasbank between 2012 and 2013.

How would you describe your position in the market currently?

Our company is a middle-to-large scale investment institution ranking fifth in assets under custody excluding foreign investors and that has complete range of investment products and services except derivatives. In terms of competition we focus on service quality instead of price competition. We treat our customers with fairness and transparency, something the competition does not always reflect onto their customers. We do not want to compete over commissions. If our customers want to do a flat business transaction on the Borsa Istanbul, IPOs, or sukuk (Participation bonds), we are transparent about it. We do business with these kinds of customers. If you want to do business in the right way, BMD is the place you should be as a customer.

How many customers do you have?

We have over 90,000 customers now. As a customer base, we are almost in the top 10; and we are in fifth place in terms of custody without including our foreign clients. Because of our services for Participation Banks forming economies of scale and without creating costs to them, our client base is rapidly developing.

What strategy has allowed you to achieve your rate of growth?

The rules of play are changing. On the brokerage side, we do not have any competition, nor do we want it. However, on the portfolio management side we need to grow faster and implement new tools, such as the participation index and products based on we cooperated with all the participation banks. We maintained a strategy of being in the middle, equidistant from all of them. We were the banks' trusted partners and we provided all the capital market products and services to their clients. This was the main reason for our growth. However, now the environment is changing. There are some new growth areas, such as pension funds. The government sukuk issues are also important for the same reason. Both conventional and Participation pension funds are there. We need to grow more on the asset management side, and this is one of our main issues. We are also working on a revenue sharing business model for asset management in that no additional costs incurred by the Participation Banks like we exactly do in the brokerage services. We think that only a structure in that the Participation Banks get service for their clients and obtain revenue without capital investment can be a sustainable one.

How important is foreign investment for developing the participation sector in Turkey?

The participation sector is dealing very closely with the real sector. Normally the conventional banking system deals with money, but the participation sector is dealing with the real sector. So, the Gulf countries and other countries can easily make direct investments in Turkey with the participation sector and their financial vehicles.

You are currently working on creating a participation index. How significant is the new index for BMD?

The index has a methodology in line with international standards. We will also launch a sukuk index in the near future, which will give investors basic tools for asset allocation so they can easily pick up whatever they want. This system is a bit low-cost and more understandable for investors. We have had two years with a participation index. It included 30 stocks trading on the Borsa Istanbul, but we have added two new indices, one with 50 shares and the other which is quant index called model portfolio index. Hence, now we have three indices in the participation index family, and we are trying to create more.

What is the development timeline for the ETF and the new indices?

The next indices will be easier compared to the first one. The first one lasted two years or so. All the participation banks had to be brought together to approve the rules, and that took some time. We created the new indices based on the same rulebook as the participation index, therefore these should take less than a year or thereabouts. Actually, the calculation is made by the Istanbul stock exchange. We chose the stocks every three months for the model portfolio every two weeks and send the new stock list to the exchange, and they calculate and broadcast the index for us.