Axis AMC, which is India’s seventh largest asset manager, is under investigation for alleged front-handling by two officials.
For Y Bloomberg
Posted on May 10, 2022
The Indian partner of global money manager Schroders Plc is under investigation by the country’s capital markets regulator for alleged actions by two of its officials, according to people familiar with the matter.
The Securities and Exchange Board of India is examining the funds Viresh Joshi and Deepak Agarwal managed at Axis Asset Management Co., said the people, who declined to be named because they are not authorized to speak to the media. Axis AMC is the seventh largest asset manager in India with 2.5 trillion rupees ($32 billion) in assets.
Sebi did not respond to an email seeking comment. Schroders, which owns a 25% stake in Axis AMC through Schroders Singapore Holdings Pvt., declined to comment. Joshi did not return calls or messages, and Agarwal’s phone was turned off. Axis AMC said on Friday it had suspended two anonymous fund managers pending an internal investigation. He declined to comment when contacted Monday.
“There are no restrictions on bailouts,” Chandresh Nigam, managing director of Axis Mutual Fund, said in a letter to investors on Sunday, a copy of which was seen by Bloomberg News. “In any case, we believe that the liquidity available with our funds and the quality of our portfolio will allow us to meet investors’ redemption requests, if any.”
Indian equity mutual funds have attracted billions of dollars in inflows in recent years amid a retail investment boom. The benchmark S&P BSE Sensex stock index hit an all-time high in October.
The increased share of retail savings increases pressure on Sebi’s new chairman, Madhabi Puri Buch, to crack down on wrongdoing.
She has dealt with similar cutting edge incidents very harshly in the past. In a June 2021 order, Buch, then a full-time director of Sebi, barred 20 entities, including Reliance Securities Ltd.’s dealers, from trading blue chip trades in the Tata Absolute Return Fund.
Plans managed by Joshi and Agarwal included Axis Arbitrage Fund, Axis Banking ETF, Axis Conquisition ETF, Axis Nifty ETF, Axis Quant Fund, Axis Technology ETF, and Axis Value Fund.
Axis Arbitrage Fund is the largest managed by either manager, with assets worth nearly Rs 58 billion. Cash and liquid assets accounted for more than half. The actively managed funds, Axis Value Fund and Axis Quant Fund, have more than 3% of their portfolio in cash.
“At this point, we want to have a good balance. We are not going to be too aggressive with whitelisting or downgrade any,” said Nirav Karkera, head of research at Fisdom, an investment advisory firm, referring to the funds managed by Axis MF.
Shares of companies in which Axis MF owns more than 4% have been hit by concerns about 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%.