Key facts
- Turkish regulators ordered the liquidation of 131 investment funds last month.
- The liquidated funds managed by seven asset managers held over $20 billion in assets.
- The funds attracted nearly half a million investors seeking high returns to offset a depreciating lira and high inflation.
- Some funds concentrated investments in single stocks or assets with low liquidity, allowing for sharp price movements.
- Turkish officials had warned about market manipulation through investment funds since November 2025.
- Two asset managers, Tera Portfoy and Pusula Portfoy, are at the center of the crisis.
- Tera's TLY hedge fund reported a cumulative return of over 15,000% in lira terms by September.
- Justice Minister Akin Gurlek reported 217 suspects in the market manipulation investigation, with 56 jailed.
- Fatma Betul Sayan Kaya resigned from her ruling AKP party posts amid allegations of profiting from share trading.
- Liquidating the funds is expected to take six months, with repayment plans for investors.
- JPMorgan analysts noted meaningful downside risks to Turkey's 2026 GDP growth forecast due to the turmoil.
Turkey's investment fund sector is facing a severe crisis after regulators ordered the liquidation of 131 funds managed by seven asset managers last month. These funds had rapidly grown to over $20 billion in assets in three years, attracting nearly half a million investors, including prominent figures, who sought high returns to counteract the depreciating lira and high inflation. The expansion continued despite allegations of market manipulation by some funds.
The crisis has contributed to a bear market in Turkish stocks, with the main index experiencing its worst month since 2008 in September. Turkish authorities had warned about manipulation through investment funds as early as November 2025, with Finance Minister Mehmet Simsek stating that regulatory gaps would be addressed and then-Capital Markets Board Chairman Omer Gonul warning of penalties for managers circumventing rules.
Two asset managers, Tera Portfoy and Pusula Portfoy, are at the heart of the turmoil. Data from the Capital Markets Board shows that Turkey's portfolio management industry assets rose to $329 billion in August 2026 from $246 billion a year prior. Tera's assets under management increased more than tenfold to $14.3 billion, while Pusula's jumped 13-fold to $13.2 billion, making them significant non-bank players.
Some funds reported extraordinary returns, such as Tera's TLY hedge fund, which saw a cumulative return of over 15,000% in lira terms by September after becoming available to a broader investor base in July. This fund, with $5 billion in assets and 102,616 investors, is the largest among those being liquidated. Tera's TP2 money market fund, with $4.6 billion in assets and around 167,000 investors, also provided a 123% return when inflation was 60% over the same period.
The investigation into suspected market manipulation has widened, with Justice Minister Akin Gurlek reporting 217 suspects, 56 of whom have been jailed pending trial. Fatma Betul Sayan Kaya, a deputy chair of President Tayyip Erdogan's ruling AKP, resigned from her party posts following allegations of substantial profits from trading shares linked to the manipulation probe. Senior executives from Tera and Pusula, including former central bank deputy governor Erkan Kilimci, have also been jailed.
In response to the crisis, Istanbul's main index rose 2.5% on Thursday as stocks caught up in the turmoil were removed. The SPK estimates that liquidating the funds will take six months. Investors with net investments below 1 million lira will receive full repayment, while those above that threshold will get an interim payment of 1 million lira. JPMorgan analysts warned that the fund sector turmoil poses significant downside risks to Turkey's 2026 GDP growth forecast.