Large fund gains targeted for recovery, Şimşek says

ISTANBUL

Authorities will seek voluntary repayments from those who made at least 10 million Turkish Liras in inflation-adjusted gains from troubled investment funds, Treasury and Finance Minister Mehmet Şimşek said on Oct. 20.

Speaking in a joint Bloomberg HT-Habertürk broadcast, Şimşek said the recovery effort would initially focus on those meeting that threshold.

“If the money is not returned voluntarily, the Justice Ministry will take the necessary legal steps,” he said.

Şimşek said authorities had identified those who benefited from market-disrupting transactions.

They would pursue assets unlawfully transferred from the funds to individuals and companies, including the personal assets of those involved in coordinated wrongdoing.

He also said interim payments of up to 1 million liras would begin quickly once Parliament passes a liquidation bill, subject to the resources available in each fund.

Small investors and money market funds would receive priority.

The bill has cleared Parliament’s Plan and Budget Committee.

Şimşek gave no firm date for its passage, saying the timing was for lawmakers to decide.

Final distributions would be made in proportion to investors’ holdings.

“Public funds will not be used,” he said.

Of the 131 funds managed by seven portfolio management companies ordered into liquidation, 66 had been fully wound up by last week, Şimşek said.

These were managed by A1 Capital, Pardus and Bulls, with 40.8 billion liras returned to 45,747 accounts.

In those liquidations, money market fund investors received the value of their holdings as of Sept. 17, plus a 1.43 percent return.

Investors in equity-heavy funds received about 58 percent of their holdings’ Sept. 17 value.

Şimşek attributed the lower recovery to declines in share prices that he said had been artificially inflated beyond the companies’ underlying fundamentals.

Authorities aim to complete the liquidation of Hedef Portföy’s 31 funds by the weekend, though Şimşek cautioned that the timing was not certain.

He said the company’s owners and managers had returned money and assets, allowing its funds to undergo ordinary liquidation.

Ziraat Bank and İşbank are overseeing the liquidation process, while the Capital Markets Board and other institutions have completed preparations for interim payments.

Şimşek described the risk of the fund crisis spreading to the banking sector as negligible, while acknowledging that indirect effects could persist.

He said withdrawals from funds had largely halted and money leaving them had moved into bank deposits.

The minister also outlined plans for tougher penalties for market manipulation, coordinated abusive trading and insider dealing, alongside stronger supervision and additional regulatory staff.

A broader reform package was being prepared for submission to Parliament this year, with consultations expected next month.

Measures under consideration include independent verification of companies’ free-float ratios, which measure the proportion of shares available for public trading.

Şimşek said implementation of the existing fund guidelines would not be postponed.