An Indian partner at global money manager Schroders is under investigation by the country’s capital markets regulator, accusing two of its officials of front-running deals, according to people familiar with the matter.
The Securities and Exchange Board of India is reviewing funds managed by Viresh Joshi and Deepak Agarwal at Axis Asset Management Co., the people said, speaking on condition of anonymity because they were not authorized to speak to the media. Axis AMC is India’s seventh-largest asset manager with 2.5 trillion rupees ($32 billion) in assets.
Sebi did not respond to emails seeking comment. Schroders, which holds a 25% stake in Axis AMC through Schroders Singapore Holdings Pvt., declined to comment. Josh did not return calls and messages, and Agarwal’s phone was switched off. Axis AMC said on Friday it had suspended two unnamed fund managers pending an internal investigation. It declined to comment when it arrived on Monday.
“There are no restrictions on redemption,” 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 event, we believe that the available liquidity of our funds and the quality of our investment portfolio will allow us to meet investor redemption requests, if any.”
Amid the retail investment boom, Indian equity mutual funds have attracted billions of dollars in inflows over the past few years. The benchmark S&P BSE Sensex stock index hit a record high in October.
The increase in retail savings participation has increased pressure on Sebi’s new chairman, Madhabi Puri Buch, to crack down on irregularities.
She has dealt with similar preemptive incidents very harshly in the past. In a June 2021 order, Buch, who was then a full-time director at Sebi, barred 20 entities, including dealers of Reliance Securities Ltd., from front-running the Tata Absolute Return Fund.
Schemes handled by Joshi and Agarwal include 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 fund managed by either of the two managers, with assets worth nearly Rs 580 crore. Cash and current assets account for more than half of that. Actively managed funds, Axis Value Fund and Axis Quant Fund, have more than 3% of their portfolio cash.
“At this point, we want to have a good balance. We are not going to be very aggressive on the whitelist, nor are we going to be very aggressive,” Nirav Karkera, head of research at investment advisory firm Fisdom, said of the funds managed by Axis MF. will lower any rating.
Shares in companies in which Axis MF holds more than 4% have been hit on concerns over regulatory action. These included Coforge Ltd., which fell 8.6 percent since Friday, Torrent Power Ltd., which fell 8 percent and Info Edge India Ltd., which fell 9 percent.