India’s $11 billion Quant Mutual Fund is facing a probe by the country’s securities regulator for alleged front-running, shedding light on the challenges emerging from the nation’s booming stock markets. The investigation into Quant Mutual Fund, India’s fastest-growing mutual fund, involves examining trades by its employees based on alerts generated by the regulator’s surveillance system. The probe could potentially extend beyond top traders within the company. With assets soaring to 930 billion rupees ($11.1 billion) from about $20 million in December 2019, Quant Mutual Fund has been a key beneficiary of the surging inflows.
Front-running, the illegal practice of trading stocks based on insider information, particularly pending transactions that could impact prices, is at the center of the investigation. Similar probes in recent years have targeted employees of investment firms who leveraged advance knowledge to profit through personal accounts. Market sentiment could potentially be impacted if the allegations against Quant Mutual Fund are proven true, especially with stocks being richly valued.
In response, Quant Mutual Fund has assured the Securities and Exchange Board of India of full compliance by providing necessary data regularly. Following news of the investigation, stocks held by the manager experienced declines, with RBL Bank Ltd. falling by as much as 4.4% and National Aluminium Co. by 4.7%. The regulator also conducted a search and seizure operation at the fund’s headquarters in Mumbai on suspicion of front-running activities.
Quant Mutual Fund, founded in 1996 and experiencing rapid growth after acquiring Escorts Mutual Fund in 2018, has been utilizing artificial intelligence and big data techniques for over a decade. Founder Sandeep Tandon, with a background in money management since the early 1990s, has emphasized the importance of transparency and adherence to regulatory standards amidst the inquiry. The fund’s unconventional approach, relying on data-driven strategies and macroeconomic insights, has positioned it as a standout player in India’s mutual fund landscape.
