Turkey fund liquidation could hit 2026 growth outlook

The fund unwind is already hitting equities. Borsa Istanbul’s main index suffered its worst monthly performance since 2008 in September, though it rebounded 2.5% on Thursday after regulators moved to remove some affected stocks from benchmarks to limit the damage. The scale of the liquidation, which the Capital Markets Board says could take up to six months, underscores how long the uncertainty may linger.

Authorities are trying to keep the crisis contained. Investors with less than 1 million lira in net exposure in the affected funds are due to be repaid in full, while those with larger holdings are set to receive an initial 1 million lira payment. The Savings Deposit Insurance Fund has also opened accounts for those willing to voluntarily return gains deemed excessive before liquidation.

Even so, the real loss for investors remains unclear. The headline asset total does not equal the final damage, because the recovery will depend on what the funds’ holdings can be sold for — and many of those positions are in thinly traded shares that may be hard to unload without forcing prices lower.

For investors, the story is now about whether a financial-sector scandal becomes a broader confidence shock. Turkish equities, the lira and local asset managers remain exposed until liquidation proceeds are clearer and policymakers convince markets the damage is limited.