The Axis Mutual Fund had a combined corpus of Rs 2.59 lakh crore as of end of March 2022 and was the seventh largest mutual fund in terms of AUM (assets under management) in the company.
As recently as November 21, 2021 the fund had reassigned various schemes to different fund managers. Some of the schemes were managed jointly by Viresh Joshi and Deepak Agarwal.
They were jointly responsible in some of the schemes, individually responsible and also paired with others in different schemes. Viresh Joshi also doubled up as the chief dealer and thus had access to much more information than the other fund managers.
Sometime in February 22, there were murmurs within the mutual fund industry of some of the fund managers in Axis, having income substantially higher than their disclosed sources of income.
Mutual fund industry is a highly organised and regulated industry where bank accounts, equity holdings and also trading accounts have to be disclosed upfront. Further, any dealings with equity have to be done in a designated manner and are allowed not only with prior permission but also with a designated broker only.
While the matter as publicly disclosed was investigated from February 22, it is surprising that it took over three months to come to the conclusion and the two managers mentioned above to be dismissed.
What is really surprising and shocking is that there are less than 1,000 Lamborghinis in the country as of now. To find out in whose names they are registered for any agency would take a matter of hours or in case it is stretched to maybe a couple of days. This is the total number of cars sold since inception. For the police to find out from the registration plate the beneficiary of the car is a piece of cake.
I would not like to discuss the salaries that are paid to fund managers, but suffice to say that it doesn't allow the luxury of buying a car where the street price is Rs 350 lakh to Rs 500 lakh or thereabouts. I am sure this kind of emoluments may not be available to even CIOs of mutual funds.
One could be sure that the car would not have been purchased in the name of the fund manager who has been sacked or any of his family member's name. It has to be in the name of a person who has been accommodative and facilitated the deal for the fund manager.
What could be the benefit for the facilitator? It has to be linked to the activities of the fund manager who was also a dealer. Details of trades to be executed were leaked so that illegal gains could be made by the fund manager/dealer and also the person/entity who facilitated the car usage.
Large amounts have been involved and they would have moved through bank accounts not disclosed. A close scrutiny would yield results and details for all these activities quite easily.
While the MD and CEO of Axis Bank, Amitabh Chaudhry has stated on record that no one will be spared, until investigation is over, all senior people in Axis Mutual Fund above the two fund managers must be put under surveillance. This kind of serious lapses cannot happen without the active participation and connivance of the top.
What has happened is serious and cannot be condoned. All ill-gotten wealth, which is discovered, must be confiscated and returned to the rightful beneficiaries who in this case would be the unit holders of various mutual fund schemes run by these two fund managers. It is of paramount importance that investigation is done at the highest level and on top priority as time is of essence in such cases.
The use of external agencies, who know their job best like the Income Tax Department and others, must be requested to expedite the same. Mutual funds, which survive on trust of investors, need to restore confidence all over again.