1 hour ago
14
Turkey’s capital markets regulator just pulled the emergency brake on 131 investment funds, ordering their liquidation after a cascade of investor redemptions exposed what authorities suspect was a web of Ponzi-like practices hiding behind legitimate fund structures.
The Capital Markets Board, known as the SPK, announced the measures on September 17-18, affecting roughly 350,000 investors and more than $18.3 billion in assets, equivalent to about 890 billion Turkish liras.
How the crisis unfolded
The funds in question were managed by seven companies: Tera Portföy, Hedef, Atlas, A1 Capital, Pardus, Bulls, and Pusula. Their strategy, in hindsight, had all the hallmarks of a self-reinforcing bubble. They poured capital into thinly traded stocks, which pushed those share prices higher, which made the funds’ returns look spectacular, which attracted more investor money, which got funneled right back into the same illiquid names.
When investors started pulling their money, the underlying stocks couldn’t absorb the selling pressure. Outflows hit as much as $1 billion in a single day. The SPK suspended trading in the affected funds on the TEFAS platform starting September 17. It also filed criminal complaints against multiple individuals for alleged share-price manipulation, and executives from Tera and associated firms were detained as part of the investigation.
Market fallout and the government response
Turkey’s benchmark BIST 100 index dropped between 6% and 8% as the crisis unfolded.
The SPK appointed two of Turkey’s most prominent banks to manage the cleanup. Isbank, the country’s largest private lender, and state-run Ziraat Bank were designated on September 18 to oversee the liquidations. Their mandate is straightforward: convert the funds’ holdings into cash and distribute proceeds to investors within three months, with the possibility of extensions if needed.
Finance Minister Mehmet Şimşek moved quickly to contain the narrative, framing the situation as an isolated problem rather than a symptom of deeper dysfunction.
Şimşek stated that these issues are localized and cautioned against viewing them as a signal of systemic risk in the financial system.
The mechanics of a fund-driven bubble
The pattern that emerged across these seven fund managers is a textbook case of what happens when concentrated positions in illiquid assets meet performance-chasing retail capital. Fund managers bought small-cap or micro-cap stocks with limited trading volume. Those purchases alone were enough to push prices higher in thin markets. The resulting returns attracted new investors, whose capital funded additional purchases of the same stocks.
The SPK’s characterization of potential Ponzi-like dynamics suggests that some of these funds may have been using new investor capital to cover redemptions from existing investors, rather than generating genuine investment returns.
What this means for Turkish markets
The forced liquidation of $18.3 billion in fund assets means a significant volume of stock will need to find new buyers. The three-month window given to Isbank and Ziraat Bank suggests that selling pressure could persist during this unwinding period.
Turkey’s broader economic reform agenda, led by Şimşek and central bank governor Fatih Karahan, has been focused on restoring orthodox economic policy and attracting foreign capital.
The 350,000 affected investors now face an anxious wait as Isbank and Ziraat Bank begin the work of converting illiquid portfolios into cash within the three-month liquidation window.
Disclosure: This article was edited by Editorial Team. For more information on how we create and review content, see our Editorial Policy.
English (US) ·