Surviving the front-running storm: An investor's handbook

livemint.com:

₹41 trillion of public money. The alleged offender, a bond dealer turned equity dealer at LIC, reportedly used accounts of close relatives, including his mother, mother-in-law, and even his deceased father, to conduct these illicit trades. These incidents underscore a sobering reality: where there's opportunity for financial gain, there will always be those willing to bend or break the rules.

However, what's particularly intriguing about the recent Quant Mutual Fund case is the market's response. Unlike previous incidents where fund houses faced significant redemption pressures, Quant MF has seen redemptions not exceeding 1.1% of its assets under management (AUM). This muted reaction raises questions about investor behaviour and market resilience in the face of controversy.

And I'm not here to defend or condemn any asset management company (AMC). My aim is to provide a balanced perspective and equip investors with the tools to make informed decisions. So, what should investors look for when faced with allegations of front-running or other ethical breaches at their chosen fund houses? Here are some key considerations: Liquidity and portfolio composition: Assess the fund's liquidity position and any shifts in portfolio composition.

For instance, Quant MF's increased holdings in large-cap stocks could be seen as a step to manage potential redemption pressures. Investor concentration: Examine the holdings of top investors. A well-diversified investor base, with top investors holding small percentages, 2-3% each, suggests a lower risk of large-scale disruptions.