The author of this article feels that investors should constantly track their invested stocks and sectors to have an edge over the market.
- AXIS MUTUAL FUND has terminated the services of Viresh Joshi who was with the AMC for over a decade and served as a Chief Dealer and a Fund Manager.
- Axis AMC initiated an investigation in February 2022 on a suo moto basis and has even appointed reputed external advisors to assist in the investigation process.
- As part of the investigation and considering the conduct, the chief dealer was terminated from services on May 18, 2022, thereby ceasing to be the AMC’s key personnel.
- The media reported a dealer at a reputed fund house driving in Lamborghini, pointing at his lavish life and hinting at potential disproportionate assets.
- During first week of May 2022, Axis MF emailed investors that it is proactively doing an investigation involving two fund managers – Viresh Joshi and Deepak Agarwal who were handling seven schemes whose AUM totals Rs. 8,500 crores.
- The two fund managers are relieved from the schemes, and new fund managers are appointed to manage the schemes and now, an investigation is taken up to ascertain if the two are involved in the front-running of schemes.
- Axis Mutual Fund is backed by a famous Indian private-sector bank Axis Bank and Schroders plc, a British AMC and is India’s seventh largest AMC in terms of Assets Under Management (AUM).
- Front-running is an illegal process where the details of potential investments that the fund house would take will become known to outsiders who would take positions, thereby taking undue advantage, before the fund house transactions get placed/routed. The fund house eventually takes positions, but at a higher price level.
- Brokers often make a profit because they would be the first to know what scripts the fund house would buy in bulk. Sometimes kickbacks would be given to the fund manager and the chief dealer for the ‘favor.’
- SEBI has tightened regulations and even included technology (such as Artificial Intelligence and Machine Learning) over the years.
- It has even put the onus on the CEO to ensure that nothing goes wrong. There were instances where CEO had to pay from his pocket for the front-running done by his fund house.
- It is with large-sized fund houses than the smaller ones where front-running was high.
Amidst all these, Axis MF investors should not react by stopping or redeeming their investments with the fund houses but keep a close watch on the developments. SEBI will surely take appropriate action and give directions to compensate the fund house if the investors have suffered. Investors also should understand that the Axis MF episode is different from the earlier Franklin Templeton MF issue.