Türkiye’s parliament has approved a special liquidation and asset-recovery regime for investment funds caught in the country’s September 2026 fund crisis, giving regulators wider powers to sell difficult assets, pursue portfolio managers and distribute recovered money to investors. The measure addresses an immediate problem involving 131 funds and 455,758 investors, but its wider significance lies in what it reveals about liquidity, valuation and regulatory risk in one of the world’s fastest-growing emerging-market fund industries.
A Targeted Response to a Large Fund Liquidation
The legislation approved by the Grand National Assembly on October 22 applies to funds ordered into liquidation by the Capital Markets Board, or CMB, on September 17 and whose liquidation remains incomplete when the law is published.
According to Anadolu Agency, the measure establishes procedures for identifying investors, converting fund assets into cash, making interim and final payments, and recovering assets unlawfully removed from fund portfolios. It also creates a mechanism through which seized or confiscated property connected to the affected funds can ultimately be returned to investors.
The legislation is deliberately narrow. Parliamentary materials state that it does not establish a permanent liquidation or liability regime for Türkiye’s entire investment-fund sector. It is a special framework for the funds covered by the September 17 decisions.
That distinction matters for international investors. The law should not be interpreted as a general state guarantee for Turkish investment funds. Payments will depend on available cash, asset-sale proceeds and amounts recovered from responsible parties. The parliamentary vote also needs to be followed through the Official Gazette and implementing decisions before the operational details are completely clear.
The CMB said on September 23 that the affected group comprises 131 funds belonging to seven portfolio management companies and 455,758 unique investors. Reuters estimated that the funds held more than $20 billion after expanding rapidly over approximately three years.
The CMB originally contemplated a three-month liquidation period but extended the relevant maximum period to six months on September 20. It said the extension was intended to allow assets to be sold under more appropriate market conditions, particularly where immediate disposal could depress prices.
How the Crisis Developed
The liquidation followed redemption difficulties at funds managed by Pusula Portföy and Tera Portföy in mid-September. The CMB subsequently suspended purchases and redemptions through the Turkish Electronic Fund Trading Platform, known as TEFAS, for funds associated with seven managers: Tera, Pusula, Hedef, Atlas, A1 Capital, Pardus and Bulls.
The problem was not simply that investors asked for their money back. Several funds had accumulated large positions in small or thinly traded shares. Such holdings can generate substantial reported gains while prices are rising, but they may be difficult to sell at anything close to their recorded value when redemptions accelerate.
Reuters reported that Türkiye’s portfolio-management industry had grown to $329 billion in assets by August 2026, from $246 billion one year earlier. Tera’s assets under management increased more than tenfold to $14.3 billion over that period, while Pusula’s rose approximately thirteenfold to $13.2 billion.
Some individual performances were extraordinary. Reuters calculated that Tera’s TLY hedge fund produced a 747 percent lira return between January and July 2025. Its cumulative return later exceeded 15,000 percent by September 2026. The fund attracted more than 102,000 investors and reached approximately $5 billion in assets. Tera’s TP2 money-market fund held around $4.6 billion for roughly 167,000 investors.
These numbers were difficult to reconcile with the liquidity and fundamental value of some underlying securities. When redemption requests increased, managers faced the familiar mismatch between fund units presented as liquid and portfolios containing assets that could not be sold quickly without substantial discounts.
The resulting pressure extended into the equity market. Reuters reported that the BIST 100 entered a bear market and recorded its worst September since 2008. Goldman Sachs economists Clemens Grafe and Basak Edizgil estimated that Turkish money-market funds experienced $4 billion of outflows during the first two weeks of September. Bank of America Securities economist Hande Küçük later calculated that September outflows through TEFAS reached about TRY743 billion.
Much of the money appears to have remained inside the Turkish financial system. Bloomberg reported that both Goldman Sachs and Bank of America observed large transfers into lira bank deposits. That reduced the immediate risk of a disorderly move into foreign currency, although it did not resolve losses or restore confidence in fund valuations.
What the New Law Changes
The legislation gives the CMB extensive authority over the liquidation process. Designated institutions will identify assets, determine valuation methods, reconcile unit-holder records and arrange interim and final distributions under CMB supervision.
Investor ownership will be established by reconciling records held by the Central Securities Depository, Takasbank, TEFAS, custodians and distributors. This is important because purchase and redemption instructions submitted around the September 17 suspension may have been recorded at different stages of settlement.
For funds that lack enough distributable cash to meet claims based on their pre-liquidation unit prices, the law introduces a net-investment calculation. Parliamentary materials describe this as cash paid into a fund minus withdrawals, with relevant amounts adjusted using the average movement of Türkiye’s consumer and domestic producer price indices. The Central Securities Depository will conduct the calculation using a first-in, first-out method.
Eligible investors may receive interim payments of up to TRY1 million per investor for each fund designated by the CMB. Investors whose net investment is below that threshold may receive up to their calculated amount, while those above it will initially be capped at TRY1 million. This is an advance against the final liquidation entitlement, not a guaranteed recovery of the fund’s stated value.
Where available cash is insufficient, the CMB may prioritize investors with the smallest net investments or establish a minimum payment level applied across investors. People or institutions determined by the CMB to have participated in market abuse, insider trading or manipulation connected with the funds can be excluded from liquidation and recovery-account payments.
The CMB can also authorize exchange or off-exchange sales, block sales, different price margins and temporary resale restrictions for purchasers of liquidated assets. These powers are intended to avoid forced sales into markets where quoted prices may not reflect realizable value.
The central challenge will be balancing speed against recovery value. Selling illiquid shares rapidly may provide cash but crystallize steep losses. Waiting could preserve more value, but it prolongs uncertainty and leaves investors without access to their funds.
Liability, Asset Recovery and Regulatory Credibility
The law makes the portfolio management company that founded or managed a fund primarily responsible for losses caused by unlawful transfers. If the amount cannot be collected from the company, the CMB may identify other individuals or legal entities, including parties found to have acted together, as personally liable.
The definition of recoverable value is broad. It includes money, securities, property, claims and rights transferred through loans, advances, guarantees, repos, sales or other transactions that lacked a genuine economic purpose benefiting the fund, even where a transaction appeared formally compliant.
The Savings Deposit Insurance Fund, or SDIF, will be empowered to collect from responsible parties using public-debt recovery and banking-law procedures. It may also be appointed as trustee over certain seized assets and, under specified conditions, sell them without waiting for the conclusion of the related criminal proceedings. Recovered money will be placed in fund-specific accounts separated from the SDIF’s own assets and protected against attachment.
Reuters reported on October 2 that Justice Minister Akın Gürlek said investigations had expanded to 217 suspects, with 56 held pending trial. Those proceedings concern allegations and have not produced final findings of guilt. The legislation nevertheless gives the state a route to preserve and monetize assets while criminal and administrative cases continue.
The episode also raises questions about the timing of supervision. The CMB said it had observed from the final quarter of 2025 that certain hedge and money-market funds were contributing to price movements in low-free-float shares that could not be explained by company fundamentals. The Financial Stability Committee discussed the issue on December 2, 2025, and the CMB began preparing macroprudential measures the following day.
On August 28, 2026, the CMB introduced tighter concentration, related-party exposure, disclosure and capital rules. Legal analysis by Kinstellar noted that the new framework included a 10 percent single-issuer exposure limit for hedge funds, a 20 percent ceiling for instruments issued by parties connected with the fund or its manager, and higher minimum capital requirements for portfolio management companies.
The subsequent redemption crisis suggests that preventive rules arrived after significant concentrations had already developed. Finance Minister Mehmet Şimşek has said the problem was confined to a limited part of the market and did not constitute systemic risk. Even if that assessment proves correct, foreign institutions will focus on whether the authorities improve early detection, enforcement consistency and disclosure quality.
Implications for Türkiye’s Investment Case
The fund crisis comes at a time when Türkiye has been seeking more stable, long-term foreign capital. According to Central Bank data cited by the Investment and Finance Office, the country attracted $13.1 billion in foreign direct investment in 2025, up 12.2 percent from 2024. FDI excluding real estate reached $10.7 billion, which Treasury and Finance Minister Şimşek described as the strongest result in a decade.
The liquidation does not directly threaten a foreign manufacturer’s factory, licence or operating subsidiary. However, capital-market governance influences the cost of financing, the credibility of local valuations and the willingness of international investors to use Turkish funds, brokers and securities as treasury or acquisition instruments.
Foreign buyers conducting mergers and acquisitions must also examine whether a target company’s shares, financing arrangements or related parties have exposure to the affected funds. A quoted market value may be a poor guide where trading was supported by concentrated fund ownership. Enhanced legal, financial and beneficial-ownership due diligence is therefore essential.
Companies establishing Turkish operations should similarly review how working capital is held. Corporate cash invested through a local money-market fund is not equivalent to an insured bank deposit. Treasury policies should specify permitted counterparties, concentration limits, liquidity standards, custody arrangements and escalation procedures.
What This Means for Foreign Investors
The new law provides an organized path for liquidation and asset recovery, but the final recovery rate remains uncertain. Investors should monitor the Official Gazette, CMB implementing decisions, fund-level asset-sale disclosures and the reconciliation of records held by MKK, Takasbank, custodians and distributors.
For new entrants, market-entry analysis should now include the ownership and liquidity of local securities, the governance record of portfolio managers, and possible exposure to related-party transactions. Company incorporation and corporate structuring should separate operating cash from speculative investments and establish clear approval controls for local treasury activity.
Legal and tax compliance work will be required to assess the treatment of interim payments, write-downs, recoveries and potential litigation. Government relations and regulatory liaison become relevant where investors need to coordinate with the CMB, SDIF, Investor Compensation Center or other Turkish institutions. Import-export businesses should also consider whether restricted access to treasury funds could disrupt customs payments, supplier settlements or foreign-exchange needs.
Finally, project management for investments already under way should include liquidity contingencies and alternative banking arrangements. The immediate legislation is a crisis-resolution measure. Its longer-term value will depend on whether Türkiye converts the episode into stronger supervision, more credible valuations and clearer protections for both domestic and international capital.