Axis Mutual Fund has recently sacked two fund managers - Chief trader and fund manager Viresh Joshi and Asst. fund manager Deepak Agarwal. These actions have been taken in light of the recent allegations of front-running, illegal gains using shell companies and executing trades that were detrimental to the interests of the unitholders.
- You see, when the fund manager decides to buy stocks in a scheme, the manager tells the chief dealer, “Hey I need X amount of Y stocks by the end of this week”. The dealer then works with multiple stock brokers to get the buy trade executed.
- Relying on the Fund Manager’s expertise, the dealer has all the information of what stocks are to be bought & in what quantity (usually high stakes running into hundreds of Crores), he can estimate by how much the prices would eventually move up by and the profit he could pocket from it.
- So, if the dealer buys the same stock in his personal capacity before the MF does and sells it when prices go up because of the huge buy order by the mutual fund house, this essentially is called front running.
These are serious allegations. So what did Axis MF do?
- Axis MF on its own conducted an internal audit as soon as this information was released & identified the lapses back in the month of Feb. But no further actions were taken then since the probe is still ongoing.
- Currently, as the news has been out. Axis MF hired 2 external auditors to look into the irregularities & SEBI is also waiting for the auditor's report to take further actions
- Both the alleged fund managers have been suspended and will no longer be a part of any of the Axis Mutual Fund schemes, and could be even barred from the markets, depending on the result of the probe.
I have exposure to these funds in my portfolio. What should I be doing?
- The first thing you may want to consider checking is if your portfolio has exposure to any of the funds managed by these fund managers under probe. Here is a list of the funds that were being managed by the accused fund managers along with new managers assigned to the fund: In case you do have exposure to these funds, here’s what you can do:
- Consult your financial advisor and assess whether the quality of the funds is still worth being in
- Switch / Rebalance to better quality funds with a strong fund manager track record and high fund house integrity.
- While this is surely a fault on Axis’ front, there should have been more proactive measures in reporting the actions. In hindsight, there is nothing fundamentally wrong with Axis’ stock picking ability but performance may be affected in the near term due to the current volatility although Axis schemes have generally performed well in the past.
- Additionally, SEBI has always been proactive in safeguarding investors' interests. Moreover, Axis has not stopped any redemption on the schemes. Finally, for any other further queries, you can get in touch with us to gain an expert opinion on the matter.
Disclaimer: Views expressed are for informational purposes only and do not constitute any Financial Advice whatsoever. Please consult a financial advisor and read offer documents carefully before investing.
