Turkey’s investment fund industry is facing a major crisis after regulators ordered the liquidation of 131 funds holding more than $20 billion in assets, exposing hundreds of thousands of investors to potential losses.
The funds expanded rapidly over the past three years as investors sought returns that could protect their savings from high inflation and the weakening Turkish lira. Some funds generated extraordinary gains by investing heavily in thinly traded small-cap stocks, where limited liquidity allowed prices to rise sharply.
One hedge fund at the centre of the crisis recorded a cumulative return of more than 15,000% in lira terms by September, attracting more than 100,000 investors and growing to about $5 billion in assets.
Regulators had raised concerns about possible market manipulation as early as 2025. The investigation has since widened, with authorities identifying 217 suspects and 56 people reportedly jailed pending trial.
The Capital Markets Board said liquidation of the affected funds could take six months. Investors with less than 1 million lira in certain affected funds are expected to receive full repayment, while larger investors will initially receive up to 1 million lira.
The crisis has also shaken Turkey’s stock market, which recorded its worst month since 2008 in September. Analysts have warned that the turmoil could weigh on economic growth in 2026, although the eventual scale of investor losses remains uncertain.
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