Istanbul (AFP) – Turkey’s justice minister on Wednesday said the government’s top priority was to recover the money of nearly half a million investors caught up in a spiraling investment fund crisis. Prosecutors are currently investigating the activity of 131 investment funds held by seven companies, whose assets are reportedly worth more than 826 billion Turkish lira — around $17 billion. All of them were placed into liquidation on September 17 by Turkey’s Capital Markets Board (SPK), which said they handled the money of more than 455,000 individual investors.
“We’ve seen the savings of some citizens have been exploited and transferred elsewhere and smuggled abroad. Our goal is now to bring them back and ensure that our citizens get their money,” Justice Minister Akin Gurlek said in a YouTube interview in New York. “Hopefully the grievances will be resolved in a short time.”
The problems began to emerge after the SPK on August 28 issued new guidelines on investment funds, stating that they could no longer invest all their assets in one stock but were required to diversify. The move sought to address concerns that many funds were heavily investing in a small number of obscure or hard-to-sell stocks. In order to comply, funds began selling stocks, spooking investors who got the jitters and started trying to cash in their investments.
But scandal erupted last week when several companies admitted they were unable to liquidate their assets fast enough, raising liquidity concerns that sent the Borsa Istanbul stock exchange tumbling. “When investors started seeking withdrawals, a serious problem emerged: one or two funds effectively defaulted… and investors were unable to receive their money as expected. That triggered a degree of panic in the markets,” explained economist Murat Sagman. “Unfortunately, an investor who placed 100 percent of their assets in these investments is likely to suffer very significant losses.”
– ‘The right steps’ – Gurlek said prosecutors had “initiated proceedings against 63 individuals” over allegations of organized crime, fraud, defrauding the state, and violations of the capital markets law. In certain cases, the value of the stocks had been wildly exaggerated, he said, pointing to one without a listed company headquarters whose “value is currently higher than Turkish Airlines and Aselsan,” Turkey’s largest defense electronics firm.
On Friday, Finance Minister Mehmet Simsek played down the impact of the liquidation, telling NTV private television that the problem only affected a small percent of Turkey’s 2,038 investment funds. “We have quarantined the problematic area. Investors’ savings will be protected,” he said, adding most of the affected funds were the Turkish equivalent of hedge funds. Hedge funds are generally subjected to fewer investment restrictions than ordinary mutual funds.
“For now, the right steps are being taken to prevent this from turning into a broader crisis of confidence,” Sagman told AFP. “Trust can be rebuilt through effective action. However, that process will take time, quite a long time.”
© 2024 AFP
