Isntanbul: An unforeseen early 2017 rally in Turkish equities wrong-footed local fund managers, producing their worst start for at least five years.

In the first six weeks of this year, just three of the 63 domestic equity funds managed to outpace Istanbul’s benchmark index, data from Turkey’s Electronic Fund Distribution Platform show. That’s the worst performance since at least 2012, when records began. In the first six weeks of 2016, 20 funds out of 59 beat the index.

While almost all the funds listed on the platform had positive returns, the figures underscore the increasing unpredictability of Turkish markets. After most Turkish fund managers failed to foresee the turbulence that enveloped local markets in 2016, even more of them missed this year’s rally. It’s harsh to evaluate performance over such a short period, money managers say.

“It’s usually not quite right to have a judgement by just looking at the short-term performance of the funds; it doesn’t paint the whole picture,” said Murat Salar, general manager and board member at Azimut Portfoy, whose fund’s 13 per cent return this year is among the few that beat the benchmark. “That said, fund managers shouldn’t be missing big turns before they happen and just focus on the short-term noise.”

After a year marked by an attempted coup, terrorist attacks, a slowing economy and cabinet changes, a cautious approach among money managers to the start of 2017 may have been understandable. They were caught off-guard: The Borsa Istanbul 100 Index rose 13 per cent by mid February, buoyed by a combination of improved sentiment toward emerging markets, creative steps by the Turkish central bank to support the lira and stock valuations that drew investors to local stocks.

Turkey losing its last-remaining investment-grade credit rating in late January proved a surprising catalyst for stock gains. The decision by Fitch Ratings Ltd. removed a lingering concern for investors, who started buying Turkey’s battered banks, according to Mehmet Gerz, chief investment officer at Istanbul-based Ata Portfoy. The local banking index is up 16 per cent this year.

“More opportunistic investors rushed in, triggering a rally, and this bank-led rally became a rising tide, lifting all boats,” Gerz said.