Turkey moves to liquidate 131 investment funds amid Ponzi-like scheme concerns

Turkey’s capital markets regulator just pulled the emergency brake on 131 investment funds, ordering their liquidation after a cascade of investor redemptions exposed what authorities suspect was a web of Ponzi-like practices hiding behind legitimate fund structures. The Capital Markets Board, known as the SPK, announced the measures on September 17-18, affecting roughly 350,000 investors and more than $18.3 billion in assets, equivalent to about 890 billion Turkish liras. How the crisis unfolded The funds in question were managed by seven companies: Tera Portföy, Hedef, Atlas, A1 Capital, Pardus, Bulls, and Pusula. Their strategy, in hindsight, had all the hallmarks of a self-reinforcing bubble. They poured capital into thinly traded stocks, which pushed those share prices higher, which made the funds’ returns look spectacular, which attracted more investor money, which got funneled right back into the same illiquid names. When investors started pulling their money, the underlying stocks couldn’t absorb the selling pressure. Outflows hit as much as $1 billion in a single day. The SPK suspended trading in the affected funds on the TEFAS platform starting September 17. It also filed...