India’s seventh-largest asset management company — Axis Mutual Fund — with assets under management of over Rs. 2.59 trillion has come under the scanner of the market regulator SEBI for suspected violations of front-running by some of its fund managers.
The fund house has removed Viresh Joshi, head trader and fund manager, and Deepak Agarwal, equity research analyst from seven of its equity schemes.
What is front-running?
Front-running is the practice by which a dealer/broker executes a trade on their personal account in advance of the fund making the same trade. Because mutual funds usually deal in large quantities, any transaction by them has a significant bearing on the stock price. An individual can therefore benefit by trading ahead of the fund.
Which schemes have been impacted?
The following seven schemes have seen management changes:
- Axis Arbitrage Fund
- Axis Banking ETF
- Axis Consumption ETF
- Axis Nifty ETF
- Axis Technology ETF
- Axis Quant Fund
- Axis Value Fund
It is too early to say and we do not want to make any premature calls/judgements. However, it is fair to predict that all equity schemes of Axis will face tremendous redemption pressure in the coming few days. We will not recommend you to make any panic decisions and wait for the final review to come out.
Has Axis commented anything on the matter?
Axis Mutual Fund in a statement said “Axis AMC has been conducting a suo moto investigation over the last two months (since February 2022). The AMC has used reputed external advisors to aid the investigation. As part of the process, two fund managers have been suspended pending investigation of potential irregularities. We take compliance with applicable legal/regulatory requirements seriously, and have zero tolerance towards any instance of non-compliance.”
The AMC has recently also terminated the employment of both the employees and further widened the scope of the investigation to make sure they do not miss out on anything else.
Does any of Daulat’s model portfolios — DMAS — have exposure to the above schemes?
No. None of our DMAS model portfolios has exposure to the affected funds.
We will continue to monitor the developments on an ongoing basis and keep you apprised of any major updates.
