Turkish regulators ordered the liquidation of 131 investment funds last month after some managers warned they could not meet redemption payments. The funds had grown to more than $20 billion in assets over three years, and the fallout has dragged Turkish stocks into a bear market, triggered a market-manipulation investigation with 217 suspects, and prompted JPMorgan to flag downside risk to the country's 2026 growth forecast.
Turkey's Capital Markets Board (SPK) ordered the liquidation of 131 funds run by seven asset managers last month, after some warned they could not meet redemption payments. The funds had swelled past $20 billion in assets within three years, drawing in nearly half a million investors, including politicians, former officials and celebrities chasing returns to outrun a depreciating lira and high inflation. The expansion continued even after authorities alleged some funds were being used for market manipulation.
How the boom took shape
Turkey kept monetary policy tight to tame inflation and encourage lira-denominated savings, which boosted appetite for funds promising returns above inflation and local deposit rates. Some funds concentrated their holdings in a single stock or asset, and some traded recently listed small-cap shares, where thin liquidity let prices swing sharply and lifted the funds' daily returns.
Two managers at the center
Tera Portfoy and Pusula Portfoy expanded fastest. Tera's assets under management grew more than tenfold to $14.3 billion, while Pusula's jumped thirteenfold to $13.2 billion, and by the end of August the two ranked sixth and eighth among Turkey's portfolio managers. Tera's TLY hedge fund returned 747% in lira terms between January and July 2025, when it had fewer than 200 investors; after opening to a broader investor base, its cumulative return climbed to more than 15,000% by September and it drew 102,616 investors and $5 billion in assets, making it the largest fund now being liquidated. Tera's TP2 money market fund followed with $4.6 billion in assets and around 167,000 investors, returning 123% while inflation ran at 60%.
Investigation widens
Justice Minister Akin Gurlek said the number of suspects in the market-manipulation probe has risen to 217, with 56 jailed pending trial. Those jailed include senior executives linked to Tera and Pusula, among them Erkan Kilimci, a former central bank deputy governor who later became a Tera executive. Fatma Betul Sayan Kaya, a deputy chair of President Tayyip Erdogan's ruling AKP, resigned from her party posts after an opposition politician alleged she and her husband profited from trading Ozata Denizcilik shares ahead of the turmoil. According to Reuters, Finance Minister Mehmet Simsek had flagged the practice months earlier: "We know that these manipulations are being carried out particularly through certain funds."
What comes next
Istanbul's main index closed 2.5% higher on Thursday as sweeping changes to its constituents removed stocks caught up in the crisis, after the index posted its worst month since 2008 in September. The SPK said liquidating the funds will take six months; investors with net investments below 1 million lira ($20,396) will get full repayment, while those above that threshold will receive an interim payment of 1 million lira. Turkey's Savings Deposit Insurance Fund has opened accounts for investors asked to return what authorities describe as "excessive gains." JPMorgan analysts said the turmoil brings meaningful downside risks to Turkey's 2026 GDP growth forecast of 3%.
Source: Investing.com
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