- Axis Mutual Fund, removed two fund managers, Viresh Joshi and Deepak Agarwal, on account of alleged front running.
- It was observed that Axis Mutual Fund’s average AUM jumped 32% to ₹ 2.24 trillion for the March quarter. This was higher than the industry average growth of 20%.
- Most experts believe that it is best to wait for a clear picture. As of now, we do not have sufficient information to make a well-informed decision about holding or selling investments.
Axis Mutual Fund, India’s seventh-largest fund house with an AUM of over ₹ 2.5 lakh crores, removed two fund managers, Viresh Joshi and Deepak Agarwal, on account of alleged front running. Together, they managed seven mutual fund schemes of the fund house with assets under management (AUM) of more than ₹ 7700 crores.
Viresh Joshi has been associated with Axis AMC since 2009 and was the chief trader and fund manager. He used to oversee Axis Arbitrage Fund, Axis Technology ETF, and Axis Consumption ETF. His core responsibilities included managing arbitrage funds & derivatives trading strategies.
Deepak Agarwal joined Axis Mutual Fund in 2015 as a research analyst. Later he was promoted to assistant fund manager (Equity) in 2020. Since 2021 he has been managing the Axis Consumption ETF and the Axis Quant Fund.
What is front-running?
Front-running is illegal and one of the most serious offences as per SEBI. It involves the use of non-public information or confidential information for buying or selling securities ahead of a bulk order. The person engaged in such a practice benefits from the subsequent predictable price movement, post the execution of the bulk order.
What happened at Axis Mutual Fund?
Axis Bank is the sponsor of the fund house and said that it had launched a suo moto investigation in order to probe irregularities, since February 2022. The AMC has used reputed external advisors to aid the investigation and in the process, two fund managers, Viresh Joshi and Deepak Agarwal 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,” said Axis Bank.
The Securities and Exchange Board of India (SEBI) is examining the breach of the code of conduct and will question more employees of Axis Mutual fund in the coming weeks, said another person.
It was observed that Axis Mutual Fund’s average AUM jumped 32% to ₹ 2.24 trillion for the March quarter. This was higher than the industry average growth of 20%.
Which are the schemes that got affected?
Axis Mutual Fund stripped two fund managers of their roles. Their names are still on the website of the AMC, however, an addendum issued by the fund on May 4, announced management changes in the schemes that they managed:
| Scheme | Existing | Revised |
| Axis Arbitrage Fund | Sachin Jain, Viresh Joshi, Devang Shah | Ashish Naik, Sachin Jain, Devang Shah |
| Axis Banking ETF | Viresh Joshi and Ashish Naik | Ashish Naik |
| Axis Consumption ETF | Viresh Joshi and Deepak Agarwal | Ashish Naik |
| Axis Nifty ETF | Ashish Naik and Viresh Joshi | Ashish Naik |
| Axis Quant Fund | Deepak Agarwal | Ashish Naik |
| Axis Technology ETF | Jinesh Gopani and Viresh Joshi | Jinesh Gopani |
| Axis Value Fund | Jinesh Gopani and Deepak Agarwal | Jinesh Gopani |
What Should Investors Do?
Most experts believe that it is best to wait for a clear picture. As of now, we do not have sufficient information to make a well-informed decision. We do not know if investors have lost money and if they have, then how much did they lose.
They say that such front-running is unlikely to make a huge difference to the share prices of top companies. They have plenty of shares floating around the market. If an investor has invested in larger schemes, investments are relatively safe as compared to those schemes that invest in mid-cap and small-cap stocks.
Experts say that the fund house or SEBI may come up with more information. Plus there are costs and taxes associated with switching or redemption of funds. Therefore investors should not sell their investments in a rush.
“One is exit load depending on when you have invested and second is the taxation, be it long term or short term. First, assess your risk profile as well as schemes’ performance and take a call based on that rather than taking a blanket exit call,” said Amol Joshi, founder of Plan Rupee Investment Services.
“Whatever has happened is absolutely wrong. From an investor’s perspective, I think the quality of stocks that Axis MF holds in its portfolio continues to be good. So, considering the way they have performed over the years, I don’t think anyone needs to take a knee-jerk reaction and be in a rush to redeem just because of this particular issue,” said Harshad Chetanwala, a Sebi-registered investment adviser and co-founder of MyWealthGrowth.
