In mid-September, the Turkish capital markets faced an acute liquidity crisis as retail investors rushed to withdraw approximately 213 млрд. турски лири от domestic investment funds between August 31 and September 16. Triggered by regulatory clampdowns on artificially inflated equity valuations, the sell-off exposed над 350 хил. investors to heavy losses and forced the liquidation of 131 funds.
The Bottom Line
- Mass Capital Flight: Investors pulled 213 млрд. турски лири from local funds in a span of roughly two weeks, according to data from Fintables.
- Regulatory Intervention: Turkey’s Capital Markets Board (SPK) ordered the immediate liquidation of 131 funds across seven asset management firms to contain systemic contagion.
- Cross-Market Impact: The unwinding of over-leveraged, illiquid positions dragged down broader equity benchmarks, triggering the largest single-day sell-off for Turkish stocks in over a year on September 15.
Anatomy of a Three-Digit Return Bubble
For years, a segment of Turkish retail investors channeled capital into high-flying domestic investment funds offering triple-digit percentage returns. Some outlier funds posted astronomical figures; for instance, the flagship fund managed by Tera Portfoy Yonetimi AS recorded a nominal three-year yield exceeding 66 000% leading up to September 16, according to market data cited by Bloomberg. Here is the math: such returns vastly outpaced economic fundamentals, generating immediate scrutiny from institutional analysts.
The operational mechanics behind these yields relied on concentrated holdings of illiquid equities featuring exceptionally low free-float percentages. By bidding up thin supplies of small-cap shares, fund managers artificially inflated asset values. These inflated equities were then leveraged as collateral to secure short-term loans, which were subsequently reinvested back into the same shares. But the balance sheet tells a different story once forced selling begins.
Market Contagion and Institutional Collateral Damage
Regulatory pressure intensified in late 2025 following warnings from Finance Minister Mehmet Simsek regarding market manipulation. Global index providers including MSCI and FTSE separately cautioned that distorted pricing mechanics threatened Turkey’s emerging market status. When the SPK published stricter operational guidelines in August, investor anxiety erupted into outright panic.
| Metric / Event | Recorded Figure / Status |
|---|---|
| Capital Withdrawn (Aug 31 – Sep 16) | ~213 млрд. турски лири |
| Affected Investors | Over 350,000 retail accounts |
| Funds Ordered for Liquidation | 131 funds across 7 asset management firms |
| Designated Oversight Banks | Is Bankasi AS and Ziraat Bankasi AS |
The contagion quickly spread beyond small-cap equities. Pusula Portfoy Yonetimi AS suffered a terminal asset depreciation and announced it could no longer fulfill investor redemption requests. Although Tera Portfoy Yonetimi AS initially attempted to acquire Pusula, Tera itself succumbed to redemption pressures on September 16, admitting an inability to process client payouts.
Emre Tezmen, chairman of the board at Tera, stated in a post on X that the firm faced an “extraordinary and unprecedented” speculative attack carrying systemic risks across broader asset classes. Conventional money market funds also sustained damage. Several problematic firms had engaged in repurchase agreements (repos), utilizing artificially inflated equities as collateral. As those collateral values evaporated, cash reserves fell short of obligations.
State Containment and the Three-Month Liquidation Timeline
To prevent a total banking sector freeze, the Central Bank of the Republic of Turkey stepped in by expanding weekly repo auction volumes, elevating borrowing limits on the interbank market, and executing direct purchases of lira-denominated bonds to anchor yields.
The Financial Stability Committee categorized the disruption as temporary. Meanwhile, the SPK mandated that private lender Is Bankasi AS and state-owned Ziraat Bankasi AS oversee an orderly, three-month liquidation process. These institutions will systematically divest remaining assets and disburse proceeds proportionally to trapped investors.
While the immediate systemic shock appears contained primarily to small-cap equities and the seven sanctioned management companies, restoring institutional confidence in Turkey’s retail investment vehicle architecture remains a multi-quarter challenge.
