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Equity-weighted mutual fund against hyperinflation

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Ufuk Korcan

The weather in the markets is mixed. There are dark clouds, the wavelength has increased and the eye cannot see due to the fog created by the uncertainty. The whole world is engaged in an all-out fight with inflation, which has reached its peak in 40 years.

Countries, particularly the US Federal Reserve (Fed), are pulling the interest weapon one after another. The Fed made the strongest rate hike in 28 years, up 75 basis points in the previous week.

The current economic situation is so slippery that the Swiss National Bank has had to raise the policy rate for the first time in 15 years. On the one hand, the increase in interest rates in the fight against inflation, on the other hand, the fears of recession that cause concern due to the increase in interest rates …

Global risk appetite has decreased

The Russia-Ukraine war puts pressure on the prices of raw materials, especially food. Quarantine measures that could disrupt the supply chain in China’s fight against COVID-19 are another cause for concern. Internally, the “low interest” policy implemented under the title of the new economy model has created upward pressure on exchange rates and inflation.

Difficult to follow the agenda

As you can see, we are in a period where internal and external uncertainty has increased, risk appetite has decreased and, most importantly, it has become difficult to predict when this picture will change. In the trend of “unknown multiple equations”, it becomes difficult for savers to make rational decisions.

In cases where immediate developments can affect prices in both directions, it is not easy for a single investor to follow these developments and change their position from moment to moment.

In this case, professionally managed mutual funds who have the ability to make quick decisions and take action stand out as a good alternative.

Fixed income instruments, whose yields are far below inflation rates, are not included in the investor preference scale at this stage, mainly due to the low interest rate policy.

Not all shares have risen

Currency Protected Deposits (KKM) and Income-Indexed Notes (GES) stand out as measures to encourage the Turkish lira. However, savers’ priority is to prevent their savings from melting in the face of inflation. Equities appear to have no alternatives for this segment. But not all stocks protect their investors from inflation.

When we look at the last 1-year period, the share of stocks with a return above inflation is less than 20%.

In other words, only 1 in 5 stocks protected their investors from inflation. Those who do not have the knowledge to choose the qualifications that will stand out in the current situation can entrust the work to the competent and take advantage of the opportunities offered.

It earned 329 percent from its investor in 1 year

When we look at the 1-year performance of mutual funds, it is remarkable that equity funds rank high. While annual inflation was 73.50% in May, many mutual funds have been seen to provide returns above 100%. While Istanbul Portfolio’s Yıldız Hedge Private Fund gained 329% in 1 year, Hedef Portfolio’s Zen Equity Intensive Fund offered a 260% return to its investor. Again, the Perform Portfolio Equity Intensive Fund increased 197% in 1 year. Hedge funds are mutual funds with minimal restrictions and an investment strategy that is as flexible as possible. Therefore, such funds can move quickly according to the economic situation and change their portfolio.

Commodity funds have come to the fore

Equity index funds have also nearly protected their investors from inflation over the past year. İş Portfolio İşbank Subsidiaries Index Fund appreciated 106 percent in 1 year. Mükafat Portfolio BIST 30 Index Equity Fund offered its investors 82% over a 1 year period.

Those who invested in commodity funds have also benefited from the rise in commodities over the past year and were able to protect their money from inflation. AK Portfolio Petrol Foreign Fund Basket Fund achieved a return of 241% over 1 year and 483% over 5 years.

Is Portfolio Commodity Foreign Fund Basket, on the other hand, ranked high with a 165% gain in one year.

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