What Some Crashing Turkish Funds Can Teach Global Investors

Emerging Market Turkey is currently embroiled in a stock-market scandal after some high-profile investment funds crashed—leading to a panic as investors rushed to cash out. While the likelihood of contagion is low, the episode holds a few timeless lessons for global investors.

Some background: A handful of Turkish funds had been boasting triple-digit returns—one even claimed to gain more than 66,000% in the three years to September 16—which enticed many everyday investors.^[i] But those eye-popping numbers stirred suspicion of price manipulation. Turkish regulators started reviewing in late 2025, and index providers like MSCI noted in June that international investors were complaining of “recurring instances of possible coordinated trading” by some Turkish funds.^[ii]

The funds appeared to concentrate their capital in tiny, illiquid stocks, making it easy to inflate the price. According to some observers, they then used that inflated stock as collateral to borrow short-term loans, which they reinvested into the same stocks. As returns garnered attention and spurred FOMO, more investors put their capital into these funds. It all seems great when returns are soaring, but this is a classic red flag of something amiss.

In August, Turkey’s market regulator SPK released new guidelines aimed at easing investor concerns, prompting some folks to pull their money. That had a cascading effect, causing one fund to crash and default—which spilled over to other similar funds, and eventually, panic spread to broader Turkish markets.^[iii] Regulators then stepped to stem the damage, as SPK ordered the liquidation of the troubled funds and arrested several top finance executives.

For global investors, the implications here are limited, with most trouble centered on the firms in question and smaller Turkish stocks. For perspective, the MSCI Turkey comprises just 0.4% ($48.8 billion) of the MSCI Emerging Markets Index.^[iv] If Turkey were part of the global developed MSCI World, its weighting would be similar to Portugal’s at 0.05% of the index.^[v] Even within Turkey, it doesn’t seem like this story is leading people to yank funds from the financial system. One research outfit reported affected Turkish investors parked most of their savings in lira deposits.^[vi] This, versus holding hard cash, US dollars or gold suggests the system isn’t seeing a run of sorts.

But we do think there are some timeless investing lessons here. Take the aforementioned fund boasting a 66,000% return. For comparison, Turkey’s benchmark stock index, the BIST 100, rose 75.7% in Turkish lira (and was down -2.6% in USD) over the same timeframe while the MSCI Turkey was up 121.3% in lira (and 22.7% in USD).^[vii] Looking more broadly, the MSCI Emerging Markets Index climbed 234.3% in lira (85.3% in USD) while the MSCI World delivered a 213.4% return in lira (and 73.7% in USD).^[viii]

If a fund’s performance is wildly out of line with the broader market, investors must scrutinize how the fund is generating that return. In our experience, the fund is most likely making outsized, super-concentrated, leveraged trades—which is risky and arguably reckless—or is outright fraudulent. Either way, not good. We understand the appeal of sky-high returns, but successful long-term investing isn’t about achieving a quick, enormous return. It is about discipline and not chasing whatever looks hot at the moment.