Sebi Probes Into Quant Mutual Fund For Front Running: Know More About What Is Going On

The Securities and Exchange Board of India (SEBI) is allegedly investigating Quant Mutual Fund for front-running. Sebi's continuous efforts to preserve investor safety and market integrity include the investigation.

Sandeep Tandon founded Quant Mutual Fund, which received a mutual fund license from Sebi in 2017. With assets rising from about Rs 100 crore in 2019 to over Rs 91,000 crore at present, it has since emerged as the mutual fund with the fastest rate of growth in the nation.

Allegations on Quant MF?

One of the main issues being looked into is front-running, a practice in which managers purchase securities for themselves before placing significant orders for their clients, thereby pushing up prices, according to reports

Retail inflows have been the main driver of Quant Mutual Fund's recent notable growth. Between March 2020 and the present, its assets under management have increased from Rs 233 crore to Rs 80,470 crore. The fund, which is well-known for its distinct analytics-based investing approach, has quickly grown its market share.

Top holdings of the fund

The portfolio of Quant Mutual Fund is broad, comprising large, mid, and small-cap stocks from a range of industries. Reliance Industries Ltd. (8.75 per cent of AUM), Adani Power Ltd. (4.66 per cent), and Jio Financial Services Ltd. (4.52 per cent) are their top holdings.

Significant stakes in Tata Power Company Ltd. (2.36 per cent), Aurobindo Pharma Ltd. (2.39 per cent), and HDFC Bank Ltd. (3.11 per cent) are also held by the fund.

Companies including IRB Infrastructure Developers Ltd. and Aegis Logistics Ltd. are among Quant MF's small-cap holdings; similarly, HFCL Ltd. and Poonawalla Fincorp Ltd. are among the mid-cap holdings.

Samvardhana Motherson International Ltd. (2.06 per cent), Life Insurance Corporation of India (2.20 per cent), and Steel Authority of India Ltd. (2.21 per cent) are some other noteworthy holdings. With holdings in businesses like Container Corporation of India Ltd., Jindal Steel & Power Ltd., and Britannia Industries Ltd., the portfolio is well-balanced.

What is front-running?

A large client places an order with a broker to purchase 10,00,000 shares of PQR Co. The stock price will undoubtedly rise as a result of this massive acquisition, at least initially.

The broker purchases some PQR.co stock for their own portfolio before putting the client order on hold. After that, the client's order is processed. The broker immediately cashes out money by selling the stocks previously bought.

Front-running is similar to insider trading, with the minor difference being that the broker works for the client's brokerage instead of the client's business.