Turkey may consolidate the assets of closed-end funds into a pool to make payments to investors

Turkish authorities are considering consolidating the assets of 131 funds— which were liquidated by the regulator on September 17—into a single pool. This should help reimburse affected investors following a series of defaults that caused panic in the market last week, Bloomberg reported, citing a source.

Authorities are still discussing which entity will manage the pool; moreover, the plans themselves are in the early stages and are subject to change, the agency’s source clarified. In addition to creating the pool, the government is also considering raising the asset threshold for qualifying as a qualified investor—currently set at 10 million liras ($205,000), the source added. The regulator last raised this threshold in December.

The Ministry of Finance and the Capital Market Commission declined to comment to the news agency.

The asset pool could be used to manage funds that investors are trying to recover following a crisis in the fund industry that led to redemptions, seizures, and a sharp sell-off of shares last week. Funds currently in the process of liquidation hold more than $18 billion in assets and have approximately 350,000 investors, according to Bloomberg.

Pooling investments “could ensure fairer treatment of investors and help them recoup some of their losses,” says Haydar Ajun, managing partner of Istanbul-based Marmara Capital. Earlier on social media platform X, he wrote that only a portion of the approximately $20 billion invested directly or indirectly in crisis-hit stocks could be recovered through market sales—due to the overvaluation of these securities. In the same post, he proposed creating a separate escrow account, unrelated to the fund liquidation procedures, so that all parties involved in the manipulation—including individuals, management companies, and brokerage firms—would be held accountable for the damage caused with their own assets.

Announcements last week by the fund management companies Tera and Pusula that they were unable to repay investors triggered a sharp sell-off of Turkish stocks. This forced the authorities to intervene, announcing the liquidation of the funds and measures to support liquidity.

Authorities also detained executives from several financial companies as part of an investigation into alleged market manipulation. Among those detained are Muhammad Yaryz, chairman of the management company Pusula Portföy, and Ibrahim Bekçi, deputy CEO of Tera Portföy, according to Bloomberg.

As a result of the sell-off, Turkey’s main stock index, the BIST 100, lost more than 8% last week. Against the backdrop of measures taken by the authorities, it gained 0.2% during trading on September 21.

This article was AI-translated and verified by a human editor