Quant Mutual Fund Says CFO Change Was Decided Before Sebi Investigation: What Investors Should Know?

Quant Mutual Fund has clarified that its Chief Financial Officer (CFO), Harshal Patel, resigned in February before the Securities and Exchange Board of India's (Sebi) raid last month for suspected front-running.

Today the AMC issued a clarification on the X platform rebuffing "rumours" that Patel didn't resign because of an investigation and had tendered his resignation on February 19, 2024 and completed his last day of his service with the company on May 19, 2024.

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Earlier this month Quant Mutual Fund noticed, "Shashi Kataria has been appointed as Chief Financial Officer, Operations Head and Executive Director of Quant Money Managers Limited with effect from July 1, 2024, in place of Harshal Patel who has resigned due to his personal reasons.”

Quant Mutual Fund on June 24, 2024, confirmed that the Securities and Exchange Board of India (Sebi) is investigating the fund house and it is fully committed to cooperating with the same.

Should Investors Worry?

Quant Mutual Fund saw its first weekly net outflows of 2024 totalling Rs 2800 crore, in June's last week, after the Sebi investigation became public, according to a Value Research report. The Quant Small Cap Fund faced the highest outflows, accounting for 28 per cent of the total outflow. But notably the AMC's largest funds, Quant Small Cap Fund, Quant Flexi cap fund and the Quant Mid Cap Fund increased their stakes in Reliance Industries and HDFC Bank considerably during the month.

The schemes have increased their stake in Adani Power, HDFC Bank, HUDCO, and HFCL while exiting from many midcap and small-cap investments. So now Quant Mutual funds have enough large-cap investments in small and mid-cap funds, so liquidity shouldn't be a problem for redemptions. Expect some underperformance in the near term due to potential selling in mid and small stocks that Quant holds.

But long-term investors don't have to worry and can continue ongoing SIPs and can consider waiting for lump sum investments until the situation is clearer. Also, as per Quant Mutual fund AUM data, the fund house continues to attract inflows. For instance, in its midcap fund, it added Rs 794 crore in AUM MoM. Sebi is investigating, which may result in some outflows, but the investigation outcome will determine its future trajectory. In June, the cash holding in the midcap fund continued to increase, reaching 5.72 per cent compared to 3.77 per cent in May and 2.59 per cent in April. This increased cash holding means the fund is better prepared to handle redemption pressures.

Also, the Securities and Exchange Board of India (SEBI) will not take any measures that risk retail investors' investments.