Participation Funds
With the decision of the Capital Markets Board (“Board“) dated November 21, 2024, and numbered 60/1696, certain amendments have been made to the Guide on Investment Funds (the “Fund Guide“).
According to paragraph (b) of Article 1.2 of the Fund Guide, the investment strategies of the funds are determined based on the risk value calculation method specified in the Fund Guide. “Participation umbrella funds” are also included within the scope of this legislation, which limits the number of funds that can be issued by ensuring that no more than one fund is issued from each risk value group, and that investment funds are organized according to their risk values.
A new section has been added to Article 1.6 regulating the principles for funds with the “participation” word in their title, on obtaining services from an advisor/advisory board for these funds. Accordingly, the amount required for the purification of the impaired income may be covered from the fund assets or fund management fee, provided that the information regarding the purification is included in the fund prospectus and the approval of the advisor/advisory board is obtained for the transaction.
In case the amount is covered from the fund’s assets, the measures to be taken in order not to affect the fund’s unit share value must be disclosed in the prospectus. In addition, the portfolio management company will disclose the amount calculated as a result of the purification transaction within 5 business days following the periods in which the purification process is carried out and the institution to which this amount is transferred, on the Public Disclosure Platform.
Regulations Regarding the Fund’s Title
Subparagraph (a) of Article 2 sets forth the minimum wording that must be included in the fund title, and subparagraph (b) lists the wording that cannot be included in the title. Among these restrictions, it has been added that the title of funds whose participation shares are traded on TEFAS cannot include references to a specific distributor institution. The possibility of adding a term reflecting the technical/methodological/risk value to the title, as regulated in paragraph (i) of Article 2, has also been extended to participation funds that, in accordance with their investment strategy, do not invest at least 80% of the total fund value in a specific asset, in addition to variable funds and fund basket funds.
Foreign Currency Investments and Government Domestic Debt Instruments
With the addition of paragraph 3 to Article 3, it has been regulated that, without prejudice to the exceptions arising from the legislation, the investment in foreign currency denominated money and capital market instruments of funds whose title does not include the wording of “foreign currency” cannot be equal to or exceed 80% of the total value of the fund.
A new paragraph has been added to Article 4.9, which regulates the principles regarding funds with the terms “Money Market” and “Short-Term” in their title. Accordingly, with the exception of those that include the term “participation” in their title, at least 10% of the portfolio of money market funds will be directed to investments in government domestic debt instruments. The compliance deadline for money market funds to adhere to this limitation has been set as February 28, 2025.
Application and Disclosure
Before the amendment, Article 6.5 provided detailed regulations on the promotion of participation shares by the institutions that distribute the funds in order to provide additional benefits to investors. With the new regulation, the article has been shortened, and it now solely states that the institution organizing the campaign is required to submit a written application to the Capital Markets Association of Turkey, and that the applications will be concluded by the Association.
Finally, with the amendment made in Article 8.4, the principles regarding the daily disclosure of reference prices by investment funds that calculate unit share values at specific periods have been regulated. In the previous version of the article, for hedge funds and guaranteed funds, the fund data resulting from the most recent valuation of these funds were entered into the “Takasbank Fund Transactions Menu” on the last business day of each month. With the change, it has become mandatory for funds that calculate unit share values at specific periods to calculate and disclose a daily reference/indicative share value, and to notify the institutions providing portfolio custody services and Takasbank, regarding the calculated unit share value. This regulation is set to come into effect on January 2, 2025.
