The incoming chairman of the European Private Equity and Venture Capital Association, 3i's Jonathan Russell, used his inaugural speech at the annual symposium in Madrid to highlight the European trade association's ceaseless battle against its critics.

He is right to acknowledge this as a battle far from won.

But it may not be enough for the industry to be more open and to say simply “this is what we do”. Witness the extraordinary coverage in UK newspaper The Times of Oyak Group, a Turkish pension fund.

According to the paper: “Oyak is no ordinary pension fund. It exists for the benefit of Turkey's army establishment. Created in 1961, it provides a supplementary pension for officers in the armed forces and some civilian military personnel, over and above the state pension.”

This does sound quite a lot like an ordinary pension fund, albeit a large one for retired soldiers. It has 230,000 members and funds under management total about $8 billion, which makes it a financial force to be reckoned with in Turkey.

However, as far as the paper and some EU parliamentarians are concerned, Oyak Group “is an unacceptable extension of the power of the Turkish military”. As the paper notes: “The army is probably the most powerful and permanent force in Turkish society, but, arguably, is a force for instability, having removed four governments from power.”

And nothing Coskun Ulusoy, Oyak's chief executive, says seems to deter the paper's insinuation of sinister ulterior motives. Ulusoy “insists that Oyak is a purely commercial organisation, interested only in returns for its members, who happen to be army officers.” But the paper still contends “the army connection is a sore point”.

According to The Times Oyak is big and needs to diversify beyond the domestic economy to reduce risk and widen opportunity. It will stick to basic industries and resources. The fund is also on the lookout for minerals, iron ore and coal.

The Times does concede that Oyak isn't an army front, and yet: “There is something of the military about Oyak's deliberate and disciplined strategy of taking big positions and holding its ground with grit and determination, rather than dabbling in shares like a typical fund manager. Indeed, Ulusoy used to teach military strategy before he was hired to help sort out Ziraat Bank, a state-owned lender.”

So there you have it. Any reader in the habit “of taking big positions and holding its ground with grit and determination” is by this definition a potential warmonger. Quite what they might make of Joe Rice, head of US buyout firm Clayton Dubilier & Rice and a former US marine, is not clear.

Naturally, the real problem here is not a marauding pensioner militia from Turkey. Instead, it is the irrational fear that leads to bigoted policy and investment decisions.

In March 2003 the US Montana Board of Investments decided to pull all its French investments after a pension fund member had moved “that the board sell all French company stock and not purchase any more French stocks until such time as a future board determines that France has proven it is a friend of the United States again”.

According to the website SWF Radar, the board managed to convince itself that it would not be in breach of its fiduciary duties if it divested in France since, “the backlash [against France] could be significant. The media has reported French goods not being purchased; French wines not being purchased; Evian water not being purchased. People are protesting against the French. There is a risk in holding French company stock.”

The decision to divest, which was reversed in October of that year, is reported to have cost the MBI's members $4 million, SWF Radar says.

Irrational fear of the bogeyman can be costly: for all concerned.