Quant mutual fund front-running case: Clients pulled ₹1,398cr days after SEBI probe, says founder-CEO Sandeep Tandon

Sandeep Tandon, Founder and CEO of Quant Mutual Fund told investors that clients pulled close to ₹1,398 crore or $168 billion from the troubled asset manager in three days till June 26 after news of the markets regulator probe made headlines, as per a Bloomberg report.

The client withdrawals are among the first indicators of the probe’s impact, it added.

The fastest-growing mutual fund in the country with over ₹90,000 crore of assets under management (AUM), Quant MF made headlines after the Securities and Exchange Board of India (SEBI) said it is being investigated on suspicion of front-running.

Front-running is an illegal practice where fund managers, dealers, or brokers, who are aware of upcoming large trades, place their own orders beforehand to profit from the anticipated price movement when the large trade is executed.

Clients Pulled Out $168 million

Clients pulled about ₹1,398 crore ($168 million) in three days through Wednesday (June 26) due to the news and the redemptions amount to 1.5 per cent of assets, Tandon told investors in a video call late yesterday.

“The work at Quant Mutual Fund is as normal as it has been, apart from the data points asked by the regulator,” he said.

Tandon acknowledged that the fund received inquiries from the capital markets regulator and is fully complying with the requests, but did not give details, the report added.

He noted that SEBI has not charged Quant or any of its employees and that such regulatory visits or inspections are a “part of life” for the fund industry and “in the past two years multiple mutual funds have got something similar.”

The SEBI Investigation

Founded by Tandon, Quant secured its mutual fund license from Sebi in 2017. It is being investigated by SEBI on suspicion of front-running.

Issuing a clarification, the company has said it is “fully committed to co-operate with the regulator" and "will provide all necessary support and continue to furnish data to SEBI on a regular and as-needed basis".

“We want to assure you that Quant Mutual Fund is a regulated entity, and we are always fully committed to cooperating with the regulator throughout any review. We will provide all necessary support and continue to furnish data to Sebi on a regular and as-needed basis, demonstrating our unwavering commitment to transparency and integrity,” the statement read.

In terms of what investors should do, mutual fund experts felt the investigation might have little impact on them, given the fund's exposure to quality stocks, adding that MF's performance hinges on the market.

They opined that since Quant MF's investments are in quality stocks including Reliance, Jio Financial Services, HDFC Bank, Adani Power, Tata Power, SAIL, LIC, and Aurobindo Pharma, chances of any fall in the net asset value (NAV) due to the SEBI action are negligible.

(With inputs from Bloomberg)