Turkish stocks experienced a sharp decline this week, with the benchmark BIST 100 index dropping over 5% on Wednesday, extending a two-day decline to 6.9%. The sell-off was initiated when Istanbul fund manager Pusula Portföy, which managed $13 billion, failed to meet investor redemption requests. Fintables data, cited by Bloomberg, indicated that retail investors withdrew up to $1 billion from funds. This situation has been described as a "fund run," reminiscent of 1990s-style emerging-equity market crises by Emre Akcakmak of East Capital.
The market volatility prompted swift action from Turkish authorities. The Financial Stability Committee, chaired by Finance Minister Mehmet Şimşek, convened and stated there are no structural risks to Borsa Istanbul, attributing the issues to liquidity problems at specific funds and calling the situation "temporary and manageable." They vowed to implement measures to alleviate liquidity constraints and prevent wider financial system impact. Separately, the Capital Markets Board (SPK) filed criminal complaints against 38 individuals and barred them from trading on Borsa Istanbul for two years over alleged market manipulation of shares in Katılımevim, Gündoğdu Gıda, and Destek Finans Faktoring. Pusula Portföy and its executives were also banned.
Further regulatory actions include the market regulator's decision to liquidate some funds managed by seven asset management companies, including Tera Portföy and Pusula Portföy, following the failure of three asset managers to meet redemption requests. Pusula and Tera Group, which had a pending acquisition deal for Pusula Finans, had collectively managed around $27 billion at the end of August, affecting hundreds of thousands of retail investors. The Turkish central bank also announced it would increase funding via one-week repo auctions and revise banks' borrowing costs to support liquidity.
Analysts have attributed the funds' issues to concentrated buying of affiliated companies, which inflated fund values. Two Pusula funds had seen extraordinary returns of 164% and 144% in the first seven months of 2026. MSCI had previously warned in June about "co-ordinated trading" and the possibility of downgrading Turkey's market status to frontier from emerging market. Non-residents held about $41 billion of Turkish equities as of September 4, and the shakeup complicates Turkey's broader economic stabilization efforts under Mehmet Şimşek.
