Turkey’s markets watchdog tightens hedge-fund ownership limits with MSCI deadline in view

Turkey’s capital market watchdog just tightened the leash on hedge funds — right as MSCI keeps a close eye on how they trade in Istanbul. Turkey’s Capital Markets Board (CMB) updated its investment-fund guidelines on Friday, setting new limits on how much of a company’s freefloat a hedge fund, or several funds under a single wealth manager, can hold.

The new caps scale with freefloat: Funds can hold up to 8% when a company’s freefloat ratio sits below 25%, dropping progressively to just 2% for a freefloat ratio of 75% or more. Funds sharing a portfolio manager or founder are counted as one for these limits, and where hedge fund investors control the company outright, the ceiling drops further to 1% per fund and 2% if more funds under a single management are involved.

The CMB also capped large portfolio positions at 20% of a fund’s book, and single-issuer debt holdings at 10%.

The move comes in response to MSCI’s warning last June about a recurring pattern of possible coordinated trading among funds tied to smaller listed Turkish companies — a dynamic MSCI said could inflate apparent freefloat. MSCI gave Turkey until its November review to show credible progress, or face a formal consultation on how Turkish equities are treated in its indexes.

DATA POINT- The decision impacts about TRY 3.2 tn (USD 66.1 bn) of wealth sitting across Turkey’s 369 hedge funds, per TEFAS data cited by Türkiye Today.