When Pusula Holding closed its books for 2025, the Istanbul-based conglomerate looked like a poster child for Turkey’s modern financial boom. With soaring profits, modern non-bank financial products and an asset management arm, Pusula Portfoy (PSP), controlling roughly Turkish lira (TRY) 750bn ($15bn) in assets under management, the group appeared unstoppable.

Less than nine months later, that empire is unravelling in textbook dramatic fashion. A sharp regulatory crackdown, a TRY 133bn capital flight, executive arrest warrants, claims of a high-seas escape to Greece and a hastily negotiated rescue sale to Tera Group rained down over just a few weeks.

The spark

The unravelling began on August 28, when Turkey’s capital markets board (SPK) introduced stringent new regulations targeting free funds (serbest fonlar). The regulatory shift triggered immediate panic across Turkey’s electronic fund trading platform (TEFAS).

The problem was that some funds were buying in stocks to fictitiously drive up the price and fund returns. It was all legal but foreign index managers such as MSCI and FTSE consecutively issued warnings that they would drop Turkey to frontier market status. As a result, the government had to introduce some limits on funds buying in single stocks.

On September 14, the new regulations came into effect and the free-float rates of a total of 247 companies fell.

Over a matter of days, investors yanked roughly TRY 133bn out of open- and closed-ended funds managed by Pusula Portfoy. Money market funds bore the brunt of the runs, accounting for approximately TRY 90bn of the redemptions.

By September 15, the dam broke. Pusula Portfoy filed a statement with the public disclosure platform (KAP) acknowledging that it had defaulted on unit redemption payments for several funds. While the company was insisting that it was managing liquidity and working on broker reconciliations, the market read between the lines. Pusula, it figured, was out of cash’

Yacht in Marmaris

As financial pressure mounted, the drama escalated into the realm of crime fiction. Reports emerged that an arrest warrant had been issued for Muhammed Yariz (@MuhammedYarz233), the chairman of Pusula Portfoy, alongside allegations that he had fled the country aboard a private boat from the coastal town of Marmaris to Greece.

Yariz publicly denied the flight risk, maintaining he was simply taking a brief holiday, before returning to give a statement to local prosecutors. On September 14, he returned and was formally arrested.

Simultaneously, Turkish authorities slapped a travel ban on Serdar Turhan, a senior executive at Pusula Holding and its key publicly traded savings finance flagship Katilimevim (KTLEV).

Enter and exit Tera Group

Desperate to stem the panic, Pusula agreed to sell the entire holding and its core subsidiaries, including KTLEV, Birevim, Iktisat Katilim, Pusula Portfoy and Pusula Yatirim, to Tera Group. Tera chairman Emre Tezmen was swiftly announced as the incoming chairman of the board at Pusula.

However, the deal remains far from seamless. Tera issued a legal clarification emphasising that the takeover had not yet been legally or operationally finalised and remains subject to anti-trust, SPK and banking watchdog BDDK approvals.

Crucially, Tera explicitly distanced itself from Pusula’s existing fund liabilities, stating it bears no legal responsibility for the liquidity defaults at Pusula Portfoy.

Tera’s funds and listed companies were among the best performers in recent years. KTLEV was up 1,599% y/y. But the driver behind the unbelievable performances, which pushed the SPK to introduce the new regulations, was as explained above.

Don’t panic: No problem with lira supply

On September 16, Borsa Istanbul opened down slightly 0.17% at around 13,868, following a steeper 2.41% drop the previous day. While the benchmark BIST-100’s broader pullback was driven largely by global macro factors, namely Federal Reserve interest rate expectations and shifting global bond yields, the localised impact on Pusula’s assets was severe.

Meanwhile, KTLEV, the group’s most visible listed vehicle on the BIST, locked at lower limit-down levels, tumbling roughly 10% to around TRY 27.46 following several days of intense selling.

While broader banking and holding equities along with bond markets later on in the day experienced collateral noise and heavy sell-offs (mainly to create liquidity), the systemic threat to Borsa Istanbul and local bond markets remains contained.

The fallout highlights acute vulnerabilities within Turkey’s rapidly expanding shadow banking and savings finance sector (tasarruf finansmani) as well as the portfolio management industry where hyper-growth backed by aggressive fund structures can swiftly implode under regulatory re-tightening.

For now, Turkish investors are left watching nosediving price charts while awaiting government intervention via its sovereign wealth fund (TVF/TWF). Given that lira can be created by the country’s central bank on an infinite basis, the drama will end when the government decides to end it.