Turkey’s capital markets regulator has introduced tighter restrictions on hedge funds, limiting their exposure to individual stocks and related-party securities as authorities seek to address concerns over market manipulation and unusually strong returns, according to a report by Bloomberg.
The Capital Markets Board (CMB) has amended its fund guidelines to impose issuer-level limits based on a company’s free-float ratio. Hedge funds will now be restricted to holding between 2% and 8% of an issuer’s free-floating shares, depending on the size of its freely traded stock.
The new framework also limits hedge funds’ exposure to securities issued by affiliated companies under the control of their management. Such investments cannot account for more than 20% of a fund’s portfolio.
A further concentration limit applies to positions that individually represent more than 5% of a fund’s assets. Collectively, these holdings cannot exceed 20% of the portfolio.
Funds with positions above the new thresholds have until the end of 2026 to comply. Excess holdings must be cut by at least one-third by 31 October and by two-thirds by 30 November, before full compliance is required by 31 December.
The changes come as scrutiny of Turkey’s equity market intensifies, with concerns that some investment funds have gained disproportionate influence over the trading of illiquid stocks. Unusually large gains in individual shares and investment funds have raised questions over whether related accounts or coordinated trading may be distorting prices and valuations.
The latest rules are particularly significant because previous restrictions on concentrated equity positions applied to equity-heavy funds but did not cover hedge funds in the same way.
Turkey is also under pressure from major index providers. MSCI, S&P Dow Jones Indices and FTSE Russell have raised concerns over issues including shareholder transparency, free-float levels and market accessibility, with Turkey facing the possibility of a review of its emerging-market status.
