Fund Liquidations: Developments to Date and What Can Investors Expect?

Vardar Şanlı

Oct 2

19 min read

In light of the recent developments commonly referred to as the “fund crisis,” the Capital Markets Board of Türkiye (the “Board”) adopted various measures and liquidation decisions in September 2026 concerning certain portfolio management companies and the investment funds established by them. This information note provides a comprehensive analysis of the liquidation regime established pursuant to these decisions and the legal implications of such regime for investors.

TABLE OF CONTENTS:

I. INTRODUCTION

Pursuant to the Board's Bulletin No. 2026/60 dated September 17, 2026, exercising its powers to impose measures under Article 96 of Capital Markets Law (Law No. 6362) (the “CML”), resolved to suspend trading in the investment funds established by seven portfolio management companies, namely Tera Portföy Yönetimi A.Ş., Pusula Portföy Yönetimi A.Ş., Hedef Portföy Yönetimi A.Ş., Atlas Portföy Yönetimi A.Ş., A1 Capital Portföy Yönetimi A.Ş., Pardus Portföy Yönetimi A.Ş. and Bulls Portföy Yönetimi A.Ş. Accordingly, the Board resolved to suspend trading in the investment funds traded on the Electronic Fund Trading Platform (the “EFTP”) and to liquidate 131 of such funds.

Within the framework of the authority granted to the Board under Article 54 of the CML to determine the procedures and principles applicable to the termination and liquidation of investment funds, the Board set forth the procedures and principles governing the liquidation process in its Bulletin No. 2026/61 dated September 17, 2026 and its press release dated September 28, 2026. Subsequently, through its resolutions dated September 30, 2026, the Board established additional principles governing the liquidation process including with respect to funds whose liquidation proceedings had been suspended for a specified period, as well as funds that had been closed to trading; it also determined the principles applicable to interim payments of receivables, of receivables to which investors of certain funds would become entitled upon liquidation. Accordingly, the liquidation regime established by the Board has significant legal and economic implications for investors beyond the mere suspension of transactions in fund participation units.

In the liquidation process, certain matters in particular give rise to questions, including how payments to investors will be determined and the order in which such payments will be made; how receivables that became subject to disputes, enforcement proceedings or litigation prior to liquidation will be collected; and how the performance of the portfolio during the liquidation period will be reflected in the amount ultimately payable to investors. Taking into account the principles established by the Board regarding the liquidation regime, the following sections examine investors’ current legal position, the status of their receivables, and the key matters that should be considered in connection with the liquidation process.

II. LIQUIDATION REGIME AND THE LEGAL POSITION OF INVESTORS

1. Legal Consequences of the Suspension of Trading and the Liquidation Decision

In assessing the legal consequences of the Board’s decisions, it is important to distinguish between the suspension of purchase and redemption transactions in respect of the funds and the decision to liquidate the funds. Although both measures affect investors’ ability to exercise rights in respect of their fund participation units, they differ in terms of their legal nature and consequences.

The suspension of trading in the participation units of an investment fund does not, in itself, result in the termination of the fund or the commencement of its liquidation process. The suspension of trading is, in essence, a measure that prevents the execution of purchase and redemption transactions relating to participation units. No liquidation procedures are carried out during this period. In this respect, rather than constituting a transaction that terminates the fund’s legal existence, the suspension of trading is a temporary restriction affecting the transferability of participation units and investors’ ability to exit the fund by redeeming their participation units. Liquidation, by contrast, is a process aimed at terminating the fund. Within the scope of liquidation, the fund’s portfolio assets are converted into cash, its debts and liabilities are discharged, and the remaining amount is distributed to the fund participants, thereby liquidating the fund’s assets.

Pursuant to the decisions adopted by the Board, purchase and redemption transactions through the EFTP in respect of the funds established by the relevant portfolio management companies and traded on the EFTP have been suspended; however, not all funds subject to trading restrictions have been placed into liquidation. Under the Board’s Bulletins No. 2026/60 and 2026/61, the applicable trading restrictions vary depending on the relevant fund and distribution channel, as follows:

All investment funds established by the seven portfolio management companies concerned and whose participation units are traded on the EFTP have been suspended from both purchase and sale transactions on the EFTP.

The funds established by those seven portfolio management companies and suspended from trading on the EFTP have also been suspended from redemption (sale) transactions conducted outside the EFTP.
The 131 funds in respect of which a liquidation decision has been adopted have been suspended from both purchase and redemption transactions, whether conducted through the EFTP or outside the EFTP.

The position of investors in funds that have been suspended from trading but have not been placed into liquidation also warrants separate consideration. In such funds, investors continue to hold their participation units; however, due to the suspension decision, redemption of those units cannot be effected and investors are therefore unable to convert their investment in the fund into cash. At the same time, since no liquidation decision has been adopted in respect of the fund, no process is initiated for the conversion of the fund’s portfolio assets into cash for distribution to investors. Accordingly, for these investors, the suspension decision neither provides an opportunity to exit the fund nor triggers a process under which payments will be made to them. By its decision dated September 30, 2026, as published in the Board’s Bulletin No. 2026/67, the Board resolved that, with respect to the funds established by A1 Capital Portföy Yönetimi A.Ş., Bulls Portföy Yönetimi A.Ş. and Pardus Portföy Yönetimi A.Ş., the liquidation process would proceed first with investment funds whose titles contain the expression “money market” and would thereafter continue from the funds with the highest number of investors to those with the lowest number of investors.

Under the same decision, funds that do not fall within the scope of liquidation but whose transactions were restricted pursuant to the Board’s decisions dated September 17, 2026 may be reopened for trading following completion of the liquidation process. The terms governing purchases and redemptions of participation units, will be determined by the relevant founder portfolio management company, taking into account the portfolio composition of the funds, liquidity and market conditions, and investor interests. However, where necessary for the completion of liquidation procedures, such funds may also be reopened for trading through all distribution channels before the liquidation process has been completed.

2. Management Authority of Banks in the Liquidation Procedure

With respect to the funds placed into liquidation, the Board has introduced a special mechanism that departs from the ordinary liquidation procedure. The Board’s authority in this respect should be assessed primarily within the framework of Article 54 of the CML, which authorizes the Board to determine the procedures and principles governing the termination and liquidation of investment funds, together with the Board’s powers to impose measures in response to unlawful activities and transactions of capital market institutions. In this context, responsibility for conducting the liquidation process has not been left to the fund founders; instead, portfolio custodian banks appointed by the Board have been placed at the center of the process.

Pursuant to Section A/1 of Bulletin No. 2026/61, Türkiye İş Bankası A.Ş. has been authorized to conduct the liquidation process in respect of the funds established by Tera Portföy Yönetimi A.Ş., while T.C. Ziraat Bankası A.Ş. has been authorized to conduct the liquidation process respect of the funds established by the other six portfolio management companies. The banks have been granted authority to exercise the powers of the fund founder to the extent necessary for carrying out the liquidation. This arrangement demonstrates that the liquidation process is distinct from the ordinary management of the funds. However, the banks’ existing duties and responsibilities arising from their capacity as portfolio custody institutions remain in effect.

3. Principles Governing the Conversion of Fund Assets into Cash

The Board has not required the financial assets of funds subject to liquidation to be converted entirely into cash at a single point in time or on a specified date. Pursuant to Section A/5 of Bulletin No. 2026/61, the financial assets held in the portfolio will be converted into cash at such intervals and in such amounts as the relevant bank deems appropriate, taking into account investor interests, market depth and liquidity conditions. The banks are authorized to invest cash already held within the fund assets, as well as cash generated from the sale of financial assets, in money market instruments and transactions, and to transfer such amounts to fund investors at intervals determined by the banks.

This arrangement has two important consequences for investors in funds subject to liquidation. First, the total fund value or unit value calculated as of the date of the liquidation decision does not necessarily mean that the same amount will ultimately be paid to the investor upon completion of the liquidation. Second, payments to investors need not be deferred until completion of the entire liquidation process or made in a single lump sum. The banks responsible for the liquidation may make distributions at intervals determined by them as portfolio assets are converted into cash. Accordingly, it is possible for payments corresponding to investors’ participation units to be made in several payments over the course of the liquidation process rather than in a single payment.

The Board’s decision dated September 20, 2026 to extend the maximum liquidation period from three months to six months should also be assessed in this context. The Board stated that this extension was intended to allow the assets subject to liquidation to be sold on the most favorable terms possible, taking into account the portfolio composition of the relevant funds and prevailing market conditions. The six-month period does not mean that the liquidation must necessarily continue for six months, and the process may be completed earlier where conditions permit. In this context, by its decision dated September 30, 2026, the Board also introduced an interim payment mechanism in respect of payments to be made to investors during the liquidation process. This mechanism applies to the funds established by Tera Portföy Yönetimi A.Ş., Pusula Portföy Yönetimi A.Ş., Atlas Portföy Yönetimi A.Ş. and Hedef Portföy Yönetimi A.Ş. that have been placed into liquidation, and provides for interim payments to holders of participation units whose reconciliation process has been completed, to be set off against the amounts to which they will ultimately become entitled as a result of the liquidation. The Board stated that the interim payment mechanism would initially be implemented in respect of money market funds.

The amount forming the basis of the interim payment will be determined by reference to the net investment amount calculated for each entitled investor by Central Securities Depository of Türkiye (“CSDT”). Investors whose net investment amount as of the payment date is below TRY 1,000,000 (one million Turkish liras) will receive an interim payment equal to the full amount of their net investment, while investors whose net investment amount is TRY 1,000,000 (one million Turkish liras) or more will receive an interim payment of up to TRY 1,000,000 (one million Turkish liras). The expression “net investment amount” in the decision is understood to refer to an amount calculated on an investor-by-investor basis, taking into account the aggregate amount of the investor’s investments in the funds covered by the interim payment mechanism, rather than solely the amount invested in the relevant individual fund. However, the decision does not provide a separate explanation of the methodology for calculating the “net investment amount”. Accordingly, under the current framework, it is unclear whether the net investment amount will be calculated solely by reference to the principal amount invested in the funds or whether gains and losses arising from the investor’s purchase and redemption transactions will also be taken into account. The scope of the net investment amount and the applicable calculation methodology are expected to become clearer through the calculations to be carried out by the CSDT and any further explanations that may be issued on the matter.

The interim payments will constitute inerim payments to be set off against the final amount to which the investor becomes entitled upon completion of the liquidation, and no redemption of participation units will be effected in consideration of such payments. Accordingly, receipt of an interim payment will not result in the termination of the investor’s participation units or the investor’s exit from the liquidation process; the investor’s position with respect to the final liquidation balance will be determined separately upon completion of the liquidation.

4. Treatment of Instructions Submitted Prior to the Liquidation Decision

The existence of a significant number of redemption instructions submitted through the EFTP on or before September 17, 2026 (the date on which the liquidation and trading restriction decisions concerning the relevant funds were adopted), but for which pricing, settlement or payment had not yet been completed, necessitated specific regulation and clarification as to how such instructions would be treated during the liquidation process. In particular, the date and time at which an instruction was submitted, the applicable pricing date and settlement period of the relevant fund, whether the instruction had entered the ordinary the EFTP processing cycle, and whether completion of the transaction was prevented by a default of the fund or by the fund’s failure to publish a price are important in determining investors’ legal position in the liquidation process.

Against this background, Section A/6 of Bulletin No. 2026/61 sets out specific principles governing the treatment of instructions submitted prior to liquidation. However, the reference in that provision to a cut-off time of 13:30 on September 17, 2026 for notice-based funds[1] gave rise to uncertainty in practice, given that the funds had been suspended from trading on the EFTP on the same date and that instructions submitted after 13:30 on September 16 and those submitted before 13:30 on September 17 were subject to the same pricing date. The Board therefore further clarified the application of this provision in its press release dated September 28, 2026.

In this context, pursuant to the decisions adopted and explanations issued by the Board:

All instructions submitted on September 17, 2026 (irrespective of the time at which the instruction was submitted) were cancelled due to the suspension of trading in the funds on the EFTP on the same date, and such instructions became subject to the liquidation regime (i.e., investors will receive payment from the balance resulting from the liquidation in proportion to their participation units).

All instructions submitted to the EFTP on September 16, 2026 (irrespective of the time at which the instruction was submitted) and on earlier dates were included in the ordinary the EFTP processing cycle in accordance with the applicable pricing and settlement rules of the relevant funds.

Accordingly, amounts arising, or that will arise upon determination of the applicable fund price, in respect of redemption instructions submitted to the EFTP on September 16, 2026 (irrespective of the time at which the instruction was submitted) or earlier but not completed (including those that could not be completed due to the relevant fund’s default or failure to publish a price) will be recorded as liabilities of the fund and will be paid with priority from the cash generated during the liquidation process. Therefore, the position of investors who submitted instructions before September 17 differs from that of investors whose orders submitted on September 17 were cancelled and who participate in the liquidation balance solely through their participation units.

With respect to the determination of the fund price, the price at which instructions submitted on or before September 16, 2026 will be executed depends on the time at which the instruction was submitted and the pricing rules applicable to the relevant fund. For instructions submitted before 13:30 on September 16, the applicable fund price may have been determined on the same day or during the relevant first pricing period, whereas instructions submitted after the cut-off time will fall within the subsequent pricing period. Accordingly, while the redemption amount may already have been determined for certain instructions submitted on or before September 16, the relevant fund price may not yet have been published, and the redemption amount may therefore remain undetermined, particularly for instructions submitted after 13:30. This distinction is relevant not so much to the investor’s legal position in the liquidation process as to the amount at which the investor’s receivable will be determined. Consequently, different economic outcomes may arise between instructions for which the applicable price was determined earlier and those carried forward to a later pricing period and still awaiting pricing.

5. What Does the Principle of Segregation of Fund Assets Mean for Investors?

Another important issue arising from the recent developments is the legal separation between the assets of an investment fund and the assets of the portfolio management company that established the fund. Pursuant to Articles 52 and 53 of the CML and the relevant secondary legislation, the assets of an investment fund are afforded specific legal protection. A key element of this protection is that fund assets may not be attached on account of the debts of the founder or the portfolio custody institutions and may not be included in their respective bankruptcy estate.

Accordingly, the economic loss that an investor may suffer should be distinguished from risks arising from the financial condition of the portfolio management company itself. It is possible that the amount ultimately received by an investor in respect of its fund units upon liquidation may be lower than their previous market value. However, the mere existence of such a loss in value does not, by itself, establish the legal liability of the founder, manager or any other entity. In assessing legal liability, it is necessary to determine separately the source of the loss and whether, with respect to the relevant person or entity, there has been any act or omission contrary to applicable legislation, the fund rules or the prospectus. In this context, losses arising from market conditions should be distinguished from losses resulting from an unlawful act or omission in the management, valuation, custody or distribution of the fund.

This assessment also applies to hedge funds. Pursuant to Article 25 of Communiqué on Principles Regarding Investment Funds (Communiqué No. III-52.1), the fact that hedge funds are not subject to the portfolio and transaction restrictions set out in Articles 17 to 24 of the same Communiqué does not eliminate the requirement that the fund be managed in accordance with applicable legislation and with the investment strategy and limits disclosed on its Public Disclosure Platform (the “PDP”) page. Accordingly, the fact that a fund qualifies as a hedge fund does not mean that every loss suffered by an investor must automatically be regarded as investment risk.

6. Liability of the Founder, Portfolio Manager and Portfolio Custody Institutions

The liquidation process is aimed at determining the amount that investors may recover from the fund assets. However, completion of the liquidation does not, in itself, eliminate any potential liability of persons or entities that were responsible for the management or oversight of the fund prior to liquidation.

The fund founder and the portfolio manager are required to manage the fund in the interests of investors and in compliance with the fund rules, the prospectus and applicable capital markets legislation. The duties of the portfolio custodian are not limited to the physical or book-entry custody of financial assets. Under Article 56 of the CML and Communiqué on Principles Regarding Portfolio Custody Services and Institutions Providing Such Services (Communiqué No. III-56.1), the portfolio custody institution is subject to various obligations, including monitoring the compliance of fund transactions with applicable legislation, performing controls relating to valuation and the determination of unit value, and overseeing transactions involving fund assets.

Accordingly, if liability for investor losses is assessed in the future, it will not be sufficient to consider only the ultimate economic loss resulting from the liquidation. The fund’s portfolio composition prior to liquidation, its level of liquidity, valuation practices, transactions with related parties, compliance with public disclosure obligations, and whether the custody institution discharged its control obligations will need to be examined in light of the specific circumstances of each case. The Board’s statement dated September 18, 2026 is also relevant in this context. In that statement, the Board drew attention to risks in the investment fund sector arising in particular from price movements in shares with low free-float ratios involving certain hedge funds and money market funds, as well as from unsecured borrowings between related parties.

7. What Should Investors Pay Attention to at This Stage?

As the liquidation process is still ongoing, the most important issue for investors at this stage is to preserve the records that may determine their legal position. In particular, investors who submitted redemption instructions before the liquidation decision should retain documents showing the date and time of the order, the relevant the EFTP transaction or reference details, whether the order was executed and, where applicable, any cancellation record. It would also be advisable to retain the prospectus and investor information form in force at the time the fund units were acquired, together with account statements, unit prices and relevant disclosures published on the PDP.
Payments made during the liquidation process should be monitored in light of the Board’s decisions and the procedures to be determined by the relevant banks. In particular, investors with unfulfilled redemption instructions should verify whether such instructions have been included in the reconciliation process between the CSDT and the relevant bank and whether the corresponding amount has been recognized as a liability in the fund accounts.
Investors should follow liquidation announcements published on the PDP page of the fund and statements issued by the banks conducting the liquidation. For investors in funds that have not been placed into liquidation but remain subject to trading restrictions, any further decisions that may be adopted by the Board will be particularly important.

Status of Instructions	Position in the Liquidation Process	Payment / Exit Status	Points Requiring Attention
Redemptioninstructions submitted to the EFTP on or before September 16, 2026	Although submitted to the EFTP, instructions that could not be executed (including those that could not be completed due to the relevant fund’s default or failure to publish a price) are tracked as liabilities of the fund in respect of the corresponding amount.	Pursuant to Section A/6 of Bulletin No. 2026/61, payment will be made with priority. In the case of the Tera, Pusula, Atlas and Hedef funds, eligible investors may receive an interim payment of up to TRY 1,000,000, based primarily on their net investment amount.	It is important to establish, on the basis of the EFTP records and other relevant records, the date and time at which the instruction was submitted to the EFTP and the reason why it could not be executed. For instructions that could not be completed due to the fund’s default or failure to publish a price, the amount payable may differ from the unit value of the fund prior to liquidation.
Redemptioninstructions submitted to the EFTP on September 17, 2026	All instructions submitted on this date were cancelled by the EFTP. The investor continues to be tracked as a holder of participation units.	Payment will be made in proportion to the investor’s participation units from the amount generated through the conversion of fund assets into cash. In the case of the Tera, Pusula, Atlas and Hedef funds, eligible investors may receive an interim payment of up to TRY 1,000,000, based primarily on their net investment amount.	Since any interim payment made will be set off against the amount ultimately payable upon completion of the liquidation, the total amount ultimately payable to the investor may differ from the pre-liquidation unit value of the fund.
Units held in funds that have been placed into liquidation but for which no redemption instruction was submitted	The holder of the participation units is included in the liquidation process.	Payment will be made in proportion to the investor’s participation units from the amount generated through the conversion of fund assets into cash. In the case of the Tera, Pusula, Atlas and Hedef funds, eligible investors may receive an interim payment of up to TRY 1,000,000, based primarily on their net investment amount.	Since any interim payment made will be set off against the amount ultimately payable upon completion of the liquidation, the total amount ultimately payable to the investor may differ from the pre-liquidation unit value of the fund.
Units held in funds that have been suspended from trading but have not been placed into liquidation	The investor continues to hold the fund units; however, no liquidation process has commenced in respect of the fund.	At present, the participation units cannot be redeemed.	Any further Board decisions concerning the fund and any announcements published on the PDP should be closely monitored.

III. ASSESSMENT

The decisions adopted by the Board in September 2026 have resulted in different legal statuses and consequences for the relevant investment funds. Although all funds traded on the EFTP and established by the seven portfolio management companies were suspended from both purchase and redemption transactions, not all of those funds were placed into liquidation. With respect to the 131 funds for which liquidation was ordered, a special liquidation regime departing from the funds’ ordinary operation was established. Responsibility for conducting the liquidation process was assigned to the designated banks, and the fund portfolios are to be converted into cash over time, at the banks’ discretion, taking into account investor interests, market depth and liquidity conditions. By its decision dated September 30, 2026, the Board also determined the order of liquidation for funds established by A1 Capital Portföy Yönetimi A.Ş., Bulls Portföy Yönetimi A.Ş. and Pardus Portföy Yönetimi A.Ş., and allowed funds that were not placed into liquidation but remained subject to trading restrictions to be reopened for trading following completion of the liquidation process or, where necessary for the completion of the liquidation, at an earlier stage.

One of the most significant consequences of this special regime is that not all investors in funds subject to liquidation are in the same legal position. Instructions submitted to the EFTP on September 17, 2026 were cancelled because the relevant funds were suspended from trading on that date, and the rights of those investors are therefore governed by their status as holders of participation units and their entitlement to participate in the liquidation balance. By contrast, redemption instructions submitted to the EFTP on or before September 16, 2026 but not completed (including instructions that could not be completed due to the fund’s default or failure to publish a price) are subject to a different regime. Amounts arising from such instructions, or that will arise upon determination of the relevant fund price, are to berecorded as liabilities of the fund and paid with priority from the cash generated during the liquidation process. Such amounts are therefore recorded in the fund accounts as liabilities rather than as participation units.

By another decision dated September 30, 2026, the Board introduced an interim payment mechanism for holders of participation units whose reconciliation process has been completed in funds established by Tera Portföy Yönetimi A.Ş., Pusula Portföy Yönetimi A.Ş., Atlas Portföy Yönetimi A.Ş. and Hedef Portföy Yönetimi A.Ş. and placed into liquidation. Under this mechanism, investors whose net investment amount, as calculated by the CSDT, is below TRY 1,000,000 (one million Turkish liras) may receive the full amount of their net investment, while investors whose net investment amount is TRY 1,000,000 (one million Turkish liras) or more may receive an interim payment of up to TRY 1,000,000 to be set off against the amount ultimately payable upon completion of the liquidation. Since no redemption of participation units is effected in consideration of the interim payment, receipt of such payment does not terminate the investor’s status as a holder of participation units in the liquidation process.

Accordingly, the economic outcome for an investor at the end of the liquidation process may depend not only on the number of participation units held, but also on whether a redemption instruction was submitted, the date and time at which it was submitted, the pricing and settlement rules applicable to the relevant fund, whether the fund price had been determined, and the stage at which the transaction remained incomplete. In particular, in the case of redemption instructions for which the relevant price has not yet been published, the investor’s entitlement to benefit from the priority payment regime should be distinguished from the determination of the amount ultimately payable. The applicable price and the resulting amount of the receivable will need to be assessed separately on a fund-by-fund basis.

Finally, the conduct of the liquidation process does not, in itself, eliminate any potential legal liability arising in connection with the fund’s management prior to liquidation, its valuation practices, liquidity structure, related-party transactions, public disclosure obligations, or the supervisory duties of the portfolio custody institutions. Accordingly, in assessing any potential investor claims, it will be necessary to consider not only the amount of loss ultimately arising from the liquidation, but also the source of that loss, whether there was any act or omission in breach of the relevant entity’s obligations, and whether there is a causal link between such conduct and the loss suffered. Although the Board’s statement dated September 18 identified certain risks within the investment fund sector, that statement does not, by itself, constitute a finding of liability in respect of any particular fund or entity.

[1] Funds in which orders for the purchase and redemption of participation units are executed at the unit price determined in the first calculation following the submission of the order.

This information note has been prepared for general informational purposes, within the framework of the general principles of Turkish law and in light of the developments up to October 2, 2026. It does not constitute advertising or promotional material, nor does it contain an assessment tailored to any specific case. Accordingly, the information contained herein may vary depending on the particular circumstances of each case, and Vardar Şanlı Attorneys at Law shall not be held liable in respect of such circumstances.