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Effects of Turkey’s currency crisis felt as far away as Tennessee: report

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Turkey’s currency crisis has roiled emerging-markets investors far and wide, including the US state of Tennessee, where the state’s retirement system is the biggest institutional holder in a Turkey exchange-traded fund (ETF), Reuters reported.

The Tennessee Consolidated Retirement System (TCRS), which manages a retirement plan for public employees statewide, was the largest institutional shareholder in the US-based iShares MSCI Turkey ETF, according to Thomson Reuters data based on public filings as of June 30, with more than with 880,000 shares valued at around $19 million as of Friday’s value.

The Turkey ETF has lost around half its value for the year to date, hit by worries about Turkish President Tayyip Erdoğan’s influence over monetary policy and a worsening diplomatic rift with the United States.

The lira is down more than 37 percent this year, and the country’s BIST 100 stock index is down around 22 percent.

It was a reversal from the prior year, when the Turkey ETF generated a total return of nearly 38 percent in 2017, including dividends, according to Thomson Reuters data.

“It is a obviously a frustrating situation and it’s a real shame what’s happening in the country,” Michael Brakebill, TCRS’s chief investment officer, said in an interview on Friday.

TCRS invested in the iShares Turkey fund in 2012, it said.

“This particular incident doesn’t make us rethink the strategy,” said Brakebill. “It is part and parcel with what we walk through in the risks involved with emerging markets.”

In a separate email, Brakebill added that with a rapidly growing population of 80 million, Turkey embodies the “potentials and risks of emerging market investments,” although he said the retirement system had been “disappointed” with its investments in the country.

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