Turkey's Warren Buffett looks West
Banker Coskun Ulusoy turned fund OYAK into a major financial player, enriching Turkey's military retirees along the way.
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| Ulusoy, photographed in Istanbul, sees big opportunities on the horizon for OYAK, which now has $3 billion in cash to invest. |
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| OYAK helps drive the local economy through investments like its joint venture with Renault. |
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| OYAK owns and operates Erdemir, Turkey's largest steel company. |
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| Chairman and retired military man Turker is practically giddy over OYAK's performance under Ulusoy. |
(Fortune Magazine) -- It doesn't take long to discover that Coskun Ulusoy, the Warren Buffett of Turkey, is an avid student of warfare. He has hung his jacket neatly on the valet stand behind the desk of his Istanbul office and explained how he ended up at the University of Pittsburgh on a Fulbright scholarship. Now, as he begins to describe how he has been transforming, in his words, "this small, nothing company into a world-class, huge conglomerate," he picks up a notepad to draw a map of Sicily. "Think of Gen. Patton," he says. We're back in 1943, at one of the turning points of World War II. With a few pencil strokes, Ulusoy sketches out how Patton and the U.S. Seventh Army beat Field Marshal Bernard Montgomery and his British forces to the stronghold of Messina, first by taking Palermo in the west, and then swinging back east. "Emergencies require emergency measures," Ulusoy says firmly. "You can't waste time with peacetime techniques."
Ulusoy, it turns out, once taught war games at a Turkish naval college, a stint that proved to be improbably good training for his current job as CEO of Ordu Yardimlasma Kurumu, or OYAK, the pension fund of Turkey's armed forces. He's a civilian with a banking background, but in his seven years at OYAK, Ulusoy, 57, has amassed a Patton-like string of victories. The fund has typically posted annual returns well above 25%, outperforming major world markets and usually outpacing Turkey's inflation rate. OYAK's total assets have soared to $8 billion, from $1 billion, and it has $3 billion in cash to invest. That's stellar performance for a fund manager anywhere in the world, let alone a market such as Turkey, where there are daily tensions between proponents of Islam and secularists, and the local economy is dominated by oligarchical families such as the Kocs and Sabancis (though OYAK is almost as big, and certainly more profitable, than those empires). Plus Ulusoy has some fairly demanding - and, by training, combative - bosses: retired generals, lieutenants, and other military types.
OYAK isn't likely to remain a hidden gem for long. Ulusoy tells Fortune he is looking to invest his cash outside Turkey, and the U.S. and Western Europe are in his sights. It's a delicate time to be making an overseas push, of course. The specter of so-called sovereign wealth funds from China, Singapore, and Kuwait piling into distressed U.S. banks, including Citigroup, has sparked a backlash in the U.S., which wants those funds to become more transparent. If the idea of a foreign government owning American stocks is politically sensitive, investment by a foreign military entity is doubly so. Military pension funds in other developing countries, such as Pakistan, Indonesia, and Ecuador, tend to be opaque and, at times, tainted by corruption, says Kristina Mani, an associate professor at Oberlin College in Ohio, who studies such funds worldwide.
OYAK, on the other hand, is remarkably open, and Ulusoy - perhaps anticipating the day when he'd have money to spend abroad - has avoided potentially controversial investments, such as Iranian companies or Turkish media deals. Under Ulusoy's leadership, OYAK started publishing annual accounts in 2001. Members can now check their accounts online, and the fund's books are audited by international accounting firms and rated by credit agencies such as Standard & Poor's and Moody's.
Yet OYAK is not a pension fund in the model of, say, Calpers, the activist fund for retired California state employees. OYAK plays a significant hands-on role in the Turkish economy: It owns and operates Erdemir, Turkey's largest steel company, as well as the dominant cement producer. One of its joint ventures, with France's Renault, is the market leader for passenger cars. Another is the second-biggest insurance company. OYAK also owned one of the country's largest banks, until Ulusoy sold it in December for a huge profit. To top it all, S&P last year raised its rating on OYAK one notch above that of the Turkish state itself, because it deemed that the risk of default was lower.
That's as though the U.S. Department of Veterans Affairs ran General Motors, Bank of America, and a clutch of other major corporations, while racking up huge returns for its members. (A Turkish three-star lieutenant general retiring today gets a lump sum of more than $250,000, and an army sergeant pulls in about $120,000, six times what he or she might have earned before Ulusoy arrived on the scene.)
The rise of OYAK as a national industrial powerhouse mirrors the rise and stabilization of its home economy. Turkey has come roaring back from a 2001 plunge in gross domestic product; its economy is almost as dynamic as China's and India's, thanks to smart policy moves by the government, prodded by the International Monetary Fund, and fast footwork by a new generation of savvy entrepreneurs. The result? Five consecutive years of annual GDP growth averaging more than 7%. "Turkey is much more resilient than it was before," says Turkish banker Husnu Ozyegin. In 2006, Ozyegin sold the bank he had started 20 years ago with $2.5 million to National Bank of Greece for a cool $5.5 billion.
And yet Turkey's economic landscape remains uneven, which makes Ulusoy's track record even more impressive. Automobiles have become its single biggest export, replacing textiles, but locally they are taxed so heavily that it's cheaper to buy a car in Germany. Mortgages are a novelty. Unemployment is stuck around 10%. Gleaming new shopping malls are mushrooming in the nation's big cities, but they can't hide the grinding poverty of the shantytowns on the outskirts. The biggest question marks, however, surround the uneasy relationship between the business community and Prime Minister Recep Tayyip Erdogan, a devout Muslim. "This is the most pro-market government that we have seen for a long, long time," says Soli Ozel, a professor at Birgli University. And yet corporate distrust of the government runs deep. The most common fear is that Erdogan may steer away from the resolutely secularist path laid down by modern Turkey's founder, Mustafa Kemal Ataturk.
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