Could a Special Payment Arrangement Be Considered for Those Who Invest in Funds Out of Livelihood Need?

In the recent turbulence in funds and the stock market in Türkiye, we talk about how much investors have lost. We talk less about what that loss corresponds to in whose life.

Two people may each hold 100,000 TL in the same fund. One has invested that sum as a small part of a long-term accumulation. The other hopes, with money set aside from a retirement gratuity, to meet rent, medicines or a child’s education costs. Their rights arising from the fund units are the same. The harm they suffer from being unable to reach their money does not, however, weigh the same in their daily lives.

That difference makes it necessary to ask the following question: can a special payment arrangement be established for those who invest out of livelihood need, without impairing the rights of other investors? I believe this option should be considered seriously.

Not every fund investor decides under the same conditions

In the finance literature the investor is often treated as a person who seeks to increase wealth by spreading savings across different instruments. I do not think, however, that everyone who buys a fund in Türkiye has the growth of wealth as a primary aim. Some people look for a higher return on their savings because their current income does not keep up with their expenses. Under today’s economic conditions, the economic reasons for this behaviour are plain enough to need no further explanation.

Pressure to make a living affects the investment decision. A person whose rent has risen, who is struggling on a pension, or who is trying to meet a child’s costs may see a fund that has delivered high returns in the past as a way out. If financial literacy is also limited, that person may find it difficult to assess which assets the fund invests in, how readily those assets can be sold, and what happens if a large number of people wish to exit at the same time.

This does not mean that the investor bears no responsibility. One should question the possibility that a high return may carry high risk, and one should not gather in a single fund money that will be needed soon. Defining the “investor” under livelihood pressure solely as “a person chasing high gain” also tells the truth incompletely.

In my article Do Retail Investors Create the Market Conditions for Large Investors?, I examined the difference between the number of individual investors and the capital and pricing power of professional institutions. We cannot expect a small investor to act as if possessed of the same information and the same capacity to measure risk as a large fund manager.

Three different sources of payment should first be separated

To build a fair plan, the source of the payments to be made must be stated clearly.

The first is the fund’s own property. When the fund’s assets are sold, unit holders are paid from the proceeds within the framework of their rights. The essential question here is to sell the assets without creating unnecessary price pressure, and to carry out the distribution of the money obtained in a transparent manner.

The second is amounts that may be recovered from those who are responsible. If an irregularity, fault and a loss connected with it are established, collection from the persons concerned by way of compensation or other means may come onto the agenda. Whether that happens, and its scope, will emerge through examination and legal process. In my view the steps taken here will be extremely important and decisive for the future of Turkish capital markets. Those who did it should not be left with the profit.

The third is support with a social purpose. If support from public resources, or from a mechanism to be established separately, is considered for investors in livelihood difficulty, its source, conditions and limits must be set out clearly. This support should not be confused with a right arising from the fund’s assets, or with a possible claim for compensation.

The distinction matters. The proposal “let us help those in livelihood difficulty” does not mean “let the public cover the whole loss of everyone who invested”.

What kind of payment plan could be established?

The first step is regular information. For each fund, the condition of the assets, the sales made, the cash obtained, the expenses, and the conditions on which the payment timetable depends should be explained in an intelligible way. Even if the investor cannot learn with certainty when the money will return, the investor should know at which stage the process stands.

The second step is to consider interim payments where they are possible. When part of the fund’s assets has been turned into cash, can a partial payment be made by a method that protects the rights of all unit holders and is legally workable? This question should be examined concretely. If the amount and the calculation of an interim payment are explained in advance, investors’ uncertainty is reduced.

The third step is a separate support channel for those in urgent need. People who cannot meet rent, health costs and basic living expenses should be able to apply on criteria that can be documented. Income, the share of the loss in the household’s savings, and urgent expenditure may be considered together with Central Securities Depository (MKK) statistics. How applications will be assessed, within what time they will be answered, and how a decision may be appealed should be determined at the outset.

There is a sensitive boundary here. In a distribution made from the fund’s property, the balance of unit holders’ rights must be preserved. If assistance differentiated by social need is to be given, it must have a separate and explicit legal and financial basis. Support can then be provided to the person in urgent need without reducing another investor’s right in the fund.

Responsibility in the marketplace is not separate from the payment debate

In a neighbourhood market we cannot leave the safety of food solely to the attention of buyers. The buyer takes care, the seller follows the rules, and the competent authorities carry out their supervisory duty.

In the capital market, too, the investor must question the risks. Alongside that, the fund manager, the custodian and the supervisory authorities have responsibilities. If concentration, limited liquidity or unusual transactions have arisen in funds, it should be investigated when these were seen and what measures were taken. The fault of any person or institution cannot be declared in advance; the questions, however, need to be answered openly.

The rights of all holders of fund units must be protected. We should also see that not everyone needs their money with the same urgency. For a person who invested out of livelihood need, uncertainty lasting for months can create, in addition to the investment loss, difficulty in sustaining daily life.

The solution should therefore move in two directions. Payments to be made from fund assets should be carried out transparently and in accordance with rights; and, separately, a support mechanism based on explicit criteria should be considered for those in urgent livelihood need. Any breach and any loss, if they exist, should be investigated in their own legal process.