STOCKS | Turkey Moves to Contain Fund Crisis With Liquidations, Trading Bans, and Arrests

Turkish authorities are trying to stop the crisis at several well-known asset managers from spreading across the wider financial sector. According to Sina Finance, police detained or imposed travel restrictions on several finance executives as an investigation into large fund outflows expanded this week. Police arrested Pusula Portfoy Chairman Muhammed Yariz and detained Hedef Holding Chairman Namik Kemal Gokalp, Destek Holding major shareholder Altunc Kumova, and Tera Portfoy Deputy CEO Ibrahim Bekci. Tera Holding Chairman Emre Tezmen was barred from leaving the country. Earlier on Thursday, regulators announced measures to curb market turmoil, including plans to liquidate about $20 billion in funds managed by firms such as Tera Portfoy. They also filed criminal cases and imposed trading bans on dozens of people over alleged stock manipulation. After a meeting chaired by Finance Minister Mehmet Simsek, regulators said the problem was “temporary and manageable.” Turkey’s central bank also announced measures to boost market liquidity and said it would take further action if needed. The benchmark index initially stabilized after three straight days of selling that had erased nearly 10%, while the banking index briefly jumped 9.4%. The BIST 100 closed up 3% on the day, but hundreds of smaller stocks outside the main index continued to plunge, with more than 100 falling close to the 10% daily limit. The turmoil has drawn attention to risks in Turkey’s fast-growing fund industry, where some managers had held relatively illiquid stocks. At the center of the episode is Tera Portfoy, an asset manager founded by Emre Tezmen that oversees about 730 billion lira in assets. Its flagship fund had a three-year cumulative return of more than 66,000%. Tezmen defended the firm on social media, saying only that some funds were experiencing temporary liquidity problems. He later said the company had been hit by a highly planned, deliberate, and organized speculative attack. The selloff began in August after regulators tightened rules on stock funds that concentrated bets in less liquid shares. That forced funds to sell holdings and triggered a rush by investors to withdraw money. Tera Portfoy and Pusula Portfoy Yonetimi AS funds recently said they could no longer meet client redemption requests. Turkey’s Capital Markets Board said on Thursday morning that it would liquidate more than 100 funds at Tera Portfoy, Pusula Portfoy, and five other asset managers. Funds at Tera Portfoy and Pusula Portfoy accounted for 74% of the total funds mentioned by the regulator. The regulator also announced trading bans for some fund managers at the two firms, citing alleged manipulation of Katilimevim, Gundogdu Gida, and Destek Finans Faktoring AS shares. Turkey’s central bank said it would add liquidity through one-week repo operations if necessary and adjust banks’ borrowing limits.