Turkish authorities have placed 131 investment funds run by seven portfolio management companies into liquidation, in an effort to stop redemption problems at a handful of firms from spreading through the country's financial system.
Treasury and Finance Minister Mehmet Şimşek said on September 18 that there was no widespread systemic risk and that about 90% of the fund market was operating normally. He said the troubled segment had been quarantined and that the banking sector faced no liquidity or asset-quality problems.
How the crisis unfolded
The turmoil began in mid-September when Pusula Portföy could not meet some redemption requests, followed by defaults disclosed at Tera and payment delays at an Atlas money market fund. According to Türkiye Today, some funds held concentrated positions in thinly traded shares with limited free float, making it hard to raise cash quickly, so managers sold more liquid stocks and pressured the wider market.
The Capital Markets Board (SPK) ordered the liquidations on September 17 and closed the funds to purchases and redemptions. Media reports put the original 130 funds' assets at more than 800 billion liras, held by over 500,000 investors; a further Tera equity fund was later added. The regulator assigned İşbank to oversee six Tera Portföy funds and state-owned Ziraat Bank to handle those of A1 Capital, Atlas, Bulls, Hedef, Pardus and Pusula.
Under the payment rules, cash from asset sales will be distributed to investors in proportion to their holdings, while unfulfilled redemption orders on TEFAS, the national electronic fund trading platform, will be paid first. The liquidation period, initially set at three months, was later extended to six months, Türkiye Today reported.
Policy and legal response
The Financial Stability Committee, chaired by Şimşek, described the problems as temporary and manageable. The central bank pledged extra liquidity through one-week repo auctions and lower collateral haircuts, and the banking regulator temporarily eased capital rules for share buybacks by listed banks. Şimşek also called for closer oversight of the non-bank financial sector.
Justice Minister Akın Gürlek said four suspects, including fund executives, had been remanded in custody over alleged fund and share manipulation, and 51 people were barred from leaving the country. The turmoil weighed on markets: by late September Türkiye's five-year credit default swap spread rose above 250 basis points, its highest since May.
Sources
- Şimşek rules out systemic risk as 131 funds face liquidation
- Istanbul stocks slump as Türkiye CDS hits four-month high amid fund turmoil
Photo: NASA/WMAP Science Team / Public domain, via Wikimedia Commons
