According to people familiar with the matter, the Indian partner of global money manager Schroeders Plc is being investigated by the country’s capital markets regulator for alleged front-running by two of its executives.
The Securities and Exchange Board of India is probing funds managed by Viresh Joshi and Deepak Agarwal at Axis Asset Management Company, the people who declined to be named, said they were not authorized to speak to the media. Axis AMC is India’s seventh largest asset manager with assets of 2.5 trillion rupees ($32 billion).
SEBI did not respond to an email seeking comment. Schroders, which holds a 25% stake in Axis AMC through Schroeders Singapore Holdings Pvt Ltd, declined to comment. Joshi did not respond to calls and messages and Agarwal’s phone was switched off. Axis AMC on Friday said it has suspended two unidentified fund managers pending an internal investigation. It declined to comment when reached Monday.
“There is no restriction on redemption,” said Chandresh Nigam, managing director of Axis Mutual Fund, in a letter to investors on Sunday, a copy of which was seen by Bloomberg News. The available liquidity and the quality of our portfolio will enable us to meet redemption requests, if any, from investors.”
Indian equity mutual funds have pumped in billions of dollars over the years amid a boom in retail investments. The benchmark S&P BSE Sensex index of stocks hit an all-time high in October.
The increasing share of retail savings has put pressure on new SEBI chairperson Madhabi Puri Buch to crack down on irregularities.
He has dealt very strictly with similar front-running incidents in the past. In a June 2021 order, Butch, the then whole-time director of SEBI, prohibited 20 entities, including dealers of Reliance Securities Ltd, from trading for front-running trades in the Tata Absolute Return Fund.
The schemes run by Joshi and Agarwal included Axis Arbitrage Fund, Axis Banking ETF, Axis Consumption ETF, Axis Nifty ETF, Axis Quant Fund, Axis Technology ETF and Axis Value Fund.
Axis Arbitrage Fund is the largest that was managed by either of the two managers, with assets of around Rs 58 billion. Cash and liquid assets made up more than half of it. Actively managed funds, Axis Value Fund and Axis Quant Fund hold more than 3% of their portfolio in cash.
“At this point, we want to strike a good balance. We are not being too aggressive on whitelisting nor downgrading anyone,” said Fisdom, an investment advisory firm, referring to funds managed by Axis MF. Nirav Karkera, Head of Research said.
Shares of companies in which Axis MF holds more than 4% have been hit by concerns over regulatory action. These include Coforge Ltd, which has lost 8.6% since Friday, Torrent Power Ltd, which has lost 8%, and Info Edge India Ltd, which is down 9%.