Turkey’s regulator readies rescue as regulatory crackdown drives investment funds’ meltdown

Turkey’s regulators are preparing a rescue package for its investment-fund industry after a wave of redemption defaults and a spate of regulatory actions tipped Borsa Istanbul into its worst two-day selloff since March 2025.

The crackdown appears to be wide: Turkey’s Capital Markets Board (SPK) ordered last week the liquidation of 130 funds across seven asset managers — five at Tera Portfoy Yonetimi, 12 at Pusula Portfoy Yonetimi, 31 at Hedef, 16 at Atlas, nine at A1, 15 at Bulls, and 42 at Pardus. The SPK also suspended trading in all funds run by those seven firms and issued a two-year trading ban on executives at Pusula and Tera. The decisions came as Turkey advances criminal complaints against Pusula and Tera for alleged price manipulation in the equity market, with prosecutors placing Tera chairman Emre Tezmen under a travel ban and arresting Info Yatirim’s chairman Namik Kemal Gokalp.

The domino run started Monday, after Asset management firm Pusula disclosed that some of its investment and money market funds could not meet withdrawal requests. On Wednesday, Tera defaulted on redemptions on its money market fund and equity intensive fund — TRY 366 bn combined, or roughly USD 7.5 bn. And Atlas Portfoy joined Thursday, announcing redemption delays on its own money market fund.

A separate Iran-linked liquidation ran in parallel, piling onto the market’s trouble. The SPK also approved the winding down of six funds managed by Golden Global Portfoy — short-term lease certificate, gold, and money-market participation funds, plus three venture capital vehicles — after Washington sanctioned parent Golden Global Bank on 4 September over allegations it moved USD tens of mns for Iran’s IRGC-Quds Force. Ankara placed the bank itself under state-appointed control this week.

A regulatory curveball

The trigger dates to late August, when the SPK tightened asset managers’ ownership limits in a single stock. The rules, which included new tiered caps, are forcing managers holding concentrated positions in illiquid names to unwind, at the same time investors were pulling money out. The industry has bled roughly TRY 128.7 bn (USD 2.7 bn) in net assets in the following two weeks, Turkish business news platform Bazaar Times reported last week.

BACKGROUND- Turkey’s regulators moved last month after the MSCI threatened to downgrade Turkey’s index status unless regulators intervene on what it said was a recurring pattern of possible coordinated trading among funds tied to smaller listed Turkish companies, we previously reported. The MSCI gave Turkey until its November review to show credible progress on the issue.

At the center of the regulatory crackdown are funds’ positions in three publicly listed companies: Katilimevim, a Sharia-compliant home and vehicle savings-finance firm; Gundogdu Gida, an Istanbul dairy producer in which Pusula funds held 38.67% of the capital as of 18 August; and Destek Finans Faktoring, a factoring subsidiary of Destek Holding.

How one of these stocks moved shows what the funds may have been doing: Katilimevim’s stock rose roughly 2,000% in just over the twelve months leading to July 2026, in our calculation of market tracing data, before hitting an all-time high of TRY 69.00 on 28 August — a few days before the SPK unveiled its rule rewrite. It closed Wednesday at TRY 24.72, down nearly two-thirds from its late-August peak.

The outcome? Highly exposed funds are seeing the value of their AUM evaporate. The new rules gave exposed funds a year to adhere to the new caps, driving a run from funds to offload big parts of their positions in some of these stocks, which are becoming harder to sell quickly enough, Bloomberg reports. For example, Pusula’s AUM had already collapsed to TRY 143 bn by Monday, from TRY 431 bn at the end of August.

Who will come to the rescue?

Officials are now trying to assure investors: The Financial Stability Committee, which was founded in 2011 to coordinate government response to financial stress after the 2008-09 financial crisis, said yesterday the turmoil posed no fundamental or structural risk to Turkish capital markets and pledged more measures to ease the liquidity crunch and prevent contagion, Bloomberg reports.

The Central Bank of Turkey (TCMB) already moved on liquidity. It will increase one-week repo funding as needed, revise commercial banks’ borrowing limits, and reduce collateral haircuts on funds provided in central-bank markets. The SPK also temporarily cut the minimum equity maintenance ratio for margin trading to 20% from 35%, effective through 2 October.

IN CONTEXT- The market duress adds to Turkey’s fiscal and macro stress. The TCMB held its one-week repo rate at 37% for a fifth straight meeting on 10 September, citing energy-price shocks from the US-Iran war that have kept annual inflation at 31.5% in August. Finance Minister Simsek said this week that the conflict has added 7 percentage points to Turkish inflation.