Turkish Treasury to Invest in Venture Capital Funds

Recent development

The Council of Ministers' decision no. 2018/11662, published in the Official Gazette on 5 June 2018, paved the way for the Undersecretariat of Treasury ("Treasury") to invest in venture capital funds ("funds").

While the decision determines the general framework applicable to the Treasury's investments in these funds, the Treasury, through the protocol to be executed with the each fund, will determine the specific rules applicable to each fund and the management of the investment.

Accordingly, the decision sets forth the scope and framework for transferring resources to funds; the selection of funds and fund managers; eligible investments; the auditing of funds; investment sizes; and expenses.

Investment process

Specifications — The Treasury will announce the upper limit and eligible investments options for the investment sources, financing options and other details relating to the management of the investment. The specification announcement will be published on the Treasury's website in both Turkish and English. 

Application/Assessment — The assessment committee examines applications by considering the specifications and

  • the fund manager's experience, including their profitability in previous investments;
  • the funds’ administrative expenses; and
  • the capital other investors committed.

Approval — the relevant Minister, to whom the Treasury reports, is entitled to determine the fund manager, investment size and option by considering the assessment committee’s opinion.

Fund manager's qualifications

A fund manager must be someone who:

  • as a fund manager, invested or executed investment decisions in at least five different companies, and
  • in the last ten years, profitably exited at least one of their investments.

Alternatively, a person, who does not satisfy above criteria, can be classified as fund manager, if it always employs a person in its management team who satisfies the above criteria.

However, the above criteria for fund managers may not be required if other investors commit to 50% or more of the fund.


Total Commitment Limit

Until December 31, 2023, the Treasury can commit up to TRY 2 billion in total to the venture capital funds, excluding costs, fees and currency losses.

The Council of Ministers is authorised to determine the total commitment limit for the upcoming five year periods after December 31, 2023.

Commitment per Investment

In principle, the Treasury's capital commitment to a fund cannot exceed 30% (the Minister is authorised to increase the rate up to 45%) of the total amount committed to that fund.​

However, capital committed to a newly established fund can be up to 50% (the Minister is authorised to increase the rate up to 75%) of the total amount committed to that fund.

Transfer and Disposal

Cash and other resources must be transferred to the fund’s account at a Turkish bank.​

The fund can use the resources by investing in projects; injecting cash into capital companies; buying structured debt instruments of capital companies; lending through financial institutions; or investing in debt instruments of private equity firms.

Costs and Fees

The Treasury can pay up to 2% of the capital it committed for the fund’s incorporation costs.

In any case, the total amount of annual costs and fees the Treasury can pay must not exceed 2.5% of the total capital it committed.

The Treasury cannot make performance payments to a fund manager exceeding 20% of the Treasury’s yield.

Performance payment to an angel investor co-invested to projects or companies along with the fund cannot exceed 25% of the Treasury’s yield.

Parties agree on that the performance payment will be subject to the condition of yield exceeding predetermined thresholds. If the yields exceed the predetermined threshold, the Treasury can pay the fund manager additional fees up to 10% of the residual yield surpassing the predetermined threshold.​

Eligible investments

Funds the Treasury invests in cannot invest in:

  • tobacco and alcoholic beverages manufacturing;
  • guns and armory production and trade, except for the defense industry;
  • businesses principally related to real-estate;
  • infrastructure investments;
  • activities restricted by law; and
  • areas specifically restricted in the protocol.


An independent auditor approved by the Treasury must annually audit the fund. In addition, if the Treasury deems appropriate, it may audit the fund itself.


The 2014 regulatory changes enabled the Treasury to invest in funds of funds (“FoF”), which invest in venture capital funds. However, the investor community deemed the changes insufficiently flexible and attractive to draw foreign funds' attention to invest in Turkey.

In order to attract foreign fund investments in Turkey, the Public Finance and Debt Management Law No. 4749 was modified in November 2017 to allow the Treasury to invest directly in venture capital funds, in addition to its capability to invest in FoFs. In line with this amendment, the Council of Minister's latest decision regulates and specifies the framework and scope of investments into venture capital funds.

Through the introduction of the decision, Turkey intends to provide the Treasury with alternative investment options, to increase venture capital activities, and to cultivate more fund managers.

Muhsin Keskin is a partner and head of the Banking & Finance and Capital Markets practices and co-head of the EMI practice at Esin Attorney Partnership. Muhsin has extensive experience advising domestic and international financial institutions and Turkish corporates and issuers and specializes in banking and finance and capital markets law in various areas, including acquisition finance, project finance, corporate finance, securitization and structured finance, asset finance, Islamic finance, financial services and regulatory advice, equity and debt offerings, derivatives, investment funds, compliance and corporate governance and public company mergers and acquisitions.

Sait Baha Erol is an associate in Esin Attorney Partnership’s Banking & Finance practice group. Baha focuses his practice in project finance, aircraft finance, acquisition finance, syndications, structured finance, securitization, trade finance, loans and credit facilities.

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