Evaluation of the performance of participation funds in Turkey in the context of ethical investment

The study aimed to analyze the performance of Participation Funds in the context of ethical investment, in line with two purposes and two fund classes. The first aim is to question whether there is a positive relationship between the performance results of Participation Funds and Fon Bul ratings. It has been investigated whether Fon Bul ratings reflect the ethical investment effect. The second aim is to investigate whether the ethical constraint causes poor performance in the Participation Private Pension Funds in accordance with the modern portfolio optimization. Participation Funds performance was analyzed using non-parametric method data envelopment analysis. It has been discussed whether the international interest-free finance principles and the obligation of the advisory committee cause a decrease in performance in The Participation Private Pension Funds. Within the framework of the first aim of the study, it started with the performance analysis of The Participation Funds operating in Turkey between January 2017 and December 2021. The performance of 14, 19, 25, 26 and 30 Participation Funds in the sector from year 2017 to 2021 was carried out by data envelopment analysis. In one application, operating expense and net asset values are used as inputs. In another application, performance analysis was carried out by using risk-return criteria, beta and standard deviation values in the input. The findings obtained as a result of data envelopment were evaluated by comparing them with Fon Bul ratings of the research period. The ultimate goal is to investigate whether Fon Bul ratings reflect the performance of Participation Funds. Within the framework of the second purpose, it was questioned whether the ethical constraint had a negative effect on portfolio optimization by comparing the Participation Private Pension Funds with the Interest-bearing Private Pension Funds. These query performance metrics were performed using data envelopment analysis without using explicit input, using Alpha, Sharpe, Information and Sortino Ratios in the output. The analyzes were carried out with the 36-month data of 105 PPP Funds and 105 Interest-bearing PP Funds. As a result of the research, it has been determined that the efficiency average of the Participation Private Pension Funds in Turkey is slightly higher than the Interest-bearing Private Pension Funds. As a result, it has been concluded that the principles of interest-free finance and the obligation of ratification do not have a negative effect on the performance of the Participation Funds. Two general conclusions were drawn from the study. First of all, it was found that Fon Bul ratings did not fully reflect the Participation Funds performance. However, it was concluded that the Participation Private Pension Funds, which were examined in the context of ethical investment, did not have a performance decrease compared to the Interest-bearing Private Pension Funds. In the future, studies on ethical fund groups such as environmental management funds, impact funds, and sustainable funds will contribute more to the literature on the portfolio performance impact of ethical investment. At the same time, it is thought that negative screening and positive screening questions specific to Turkey will contribute to the sector in establishing an ethical score index. Thus, an objective performance measurement method that takes into account the ethical score for the performance evaluation of ethical funds will be obtained.