Turkish authorities have taken significant steps to address a liquidity crisis in its asset management industry, instructing Turkiye Is Bankasi AS and state-run Ziraat Bankasi AS to oversee the liquidation of 131 investment funds. These funds, managed by seven portfolio companies, hold more than $18.3 billion in assets and affect approximately 350,000 investors. This decision by Turkey's Capital Markets Board (SPK) comes after earlier moves to suspend trading in these funds.
The liquidation process involves the appointed banks converting the fund assets into cash and then distributing the proceeds to investors. The regulator anticipates completing this process within three months, though extensions are possible. Isbank has specifically been assigned to manage the liquidation of funds from Tera Portfoy, one of the implicated firms.
This intervention follows a period of financial instability where several funds struggled to meet redemption requests, leading to a market selloff. The Turkish Capital Markets Board had previously suspended trading of these funds and initiated an investigation into suspected market manipulation, referring 38 individuals to prosecutors. The broader response by Turkish authorities also included the central bank loosening access to lira liquidity to prevent forced selling, demonstrating a multi-pronged approach to stabilize the financial markets and isolate household savings.
The market turmoil has prompted concerns among investors about potential spillover effects, though analysts suggest the equities turmoil appears contained for now. The events occur at a sensitive time for Turkey, as it endeavors to rebuild its international economic credibility under a stabilization program spearheaded by Finance Minister Mehmet Şimşek. The last emergency meeting of the Financial Stability Committee occurred in May.
The total assets under management of the troubled groups were reported to be around $29 billion, encompassing firms such as Tera Portfoy and Pusula Portfoy, which had failed to meet redemption requests. The swift action by regulators aims to mitigate further damage and restore confidence in the Turkish financial system.
