New Delhi: Is Quant Mutual Fund safe or not? This question may have worried you since the recent allegations of front-running emerged about the MF house. You may be concerned about how this may affect your portfolio. Well, you’re not alone. Here, we will break down why SEBI is investigating Quant Mutual Fund, what is front-running, and how these issues could impact your investments.
All about Quant Mutual Fund
Before we begin, let’s take a closer look at Quant Mutual Fund. It’s one of India’s fastest-growing fund houses, with assets under management (AUM) skyrocketing from Rs 100 crore in 2019 to Rs 93,000 crore today. Its top holdings include heavyweights such as Reliance Industries, Adani Power, and Jio Financial Services.
Now, let’s address the elephant in the room.
Why is SEBI investigating Quant Mutual Fund?
To gain more clarity about whether Quant Mutual Fund is safe or not, first know that markets regulator SEBI is investigating Quant Mutual Fund for suspected irregularities in their investment management practices. SEBI noticed these discrepancies during their routine inspections, raising red flags.
Additionally, audit firms reported concerns about Quant MF’s practices in their audits to the regulator. These irregularities could involve illegal practices such as front-running. Front-running is when someone with insider knowledge of upcoming trades makes their own trades first to profit unfairly.
Imagine a fund manager who learns that their firm is about to buy a large amount of stock in Company X. Before the purchase, they buy shares for themselves. After the firm purchases the stock and the price rises, the manager sells their shares for a quick profit, unfairly benefiting from insider knowledge.
As part of its investigation, SEBI conducted search and seizure operations at Quant’s head office in Mumbai and at the residences of suspected beneficiaries in Hyderabad. Alerts from SEBI’s surveillance system revealed that transactions by certain entities closely mirrored those of Quant Mutual Fund, raising suspicions of information leakage. In response, Quant said it is cooperating with the regulator and remains committed to delivering superior risk-adjusted returns.
So how will this impact your portfolio?
If you’re holding investments in Quant Mutual Fund, it’s natural to be concerned. Allegations like these can shake investor confidence and potentially lead to market volatility. And while funds might face some redemption pressure, experts assure that Quant has a substantial large-cap exposure across all their schemes, ensuring immediate liquidity if needed.
Investors should remain calm, as the issues, if proven, would likely be due to individual wrongdoing rather than institutional failure. “They hold significant cash balances across schemes and also have a reasonable large-cap exposure in all their schemes – which gives them immediate liquidity if needed. Investors need not panic as nothing will go amiss in their money. If established, it’s an individual wrong-doing, not an institutional failure.” – Mohit Gang, Co-Founder & CEO, Moneyfront
However, there’s a significant concern: Key-Man Risk.
What is key-man risk?
Key-man risk refers to the potential negative impact on a company or fund if a crucial individual, such as a top executive or lead fund manager, leaves or is embroiled in an investigation, making them unable to perform their duties. This can lead to operational disruptions, loss of investor confidence, and financial instability. Effective succession planning is essential to mitigate this risk.
In the case of Quant MF, the Key-Man Risk is notably high as the fund heavily relies on its founder and star fund manager, Sandeep Tandon. This dependence magnifies the potential impact of any issues surrounding him. “Key-man risk is fairly high in Quant AMC as it is solely dependent on their Star Fund manager who’s also the founder.” – Mohit Gang, Co-Founder and CEO, Moneyfront.
While some redemption pressure is expected in the short term, there’s no need for panic. However, long-term credibility might suffer if allegations are substantiated, as seen with other major asset management companies in recent years. So for the investors out there, stay informed and remain calm. While short-term volatility is possible, Quant Mutual Fund’s large-cap exposure provides liquidity, and the allegations, if proven, are likely individual rather than institutional issues
Quant Mutual Fund safe or not: The SEBI cracked down on Quant Mutual Fund for alleged front running which may lead to key-man risk. Know what it means Biz News Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
