The Capital Markets Board (SPK) has made a significant change to the valuation system to prevent unhealthy price formations in the participation shares of real estate investment funds (GYF) and venture capital investment funds (GSYF) traded on the stock exchange.
Under the new regulation, GYFs and GSYFs held in investment fund portfolios whose participation shares are traded on the stock exchange will now be valued based on the latest unit share value disclosed by the fund's founding portfolio management company, rather than the last price formed on the exchange.
Unit Share Value to Replace Last Exchange Price
The main purpose of the regulation is to prevent large discrepancies between the stock exchange price and the unit share value, which reflects the fund's true value, from affecting the valuations of other investment funds.
In the previous system, a GYF or GSYF share held in an investment fund's portfolio and traded on the stock exchange could be valued at the last transaction price in the market. This could cause the value of the fund's portfolio to be artificially inflated if the market price rose well above the unit share value.
With the SPK's change, the valuation of these participation shares will now consider the latest unit share value disclosed by the founding portfolio management company. This aims to limit the impact of abnormal exchange price movements on the portfolio values of investment funds.
The deadline for portfolio management companies to adapt to the new system is set as July 31.
'Funds Were Trading at Higher Values Than They Should'
Commenting on the regulation, Onur Duygu, Founder of Fon Turkey, said that GYF and GSYF shares were previously valued according to exchange pricing, noting, 'This was pulling the value of the funds higher than it should be.'
Duygu pointed out that some funds could see downward price movements after the new system, and said, 'Assets that were priced higher than necessary and inflated upward need to return to normal levels. The first step in this direction was taken by ensuring that the participation shares of real estate and venture capital investment funds traded on the stock exchange are valued on the basis of their unit share values.'
How Will It Affect Investors?
The regulation does not mean that the prices of all investment funds will fall directly. The magnitude of the impact will depend on whether the funds hold GYF and GSYF shares traded on the exchange and on the gap between these assets' market prices and their disclosed unit share values.
Particularly in funds that hold GYF and GSYF shares whose exchange prices are significantly higher than their unit share values, the switch to the new valuation system could have a downward valuation effect.
With this move, the SPK aims to prevent situations where the market price diverges significantly from the fund's fundamental value from artificially inflating the portfolio values of other funds, and to normalize pricing.
