Nearly 50 percent of the team managing fixed-income schemes at Invesco India Mutual Fund has resigned over the year, after an Indian fund manager-turned-whistleblower leveled allegations of misappropriation of debt schemes, sources told businessline.
Financial market regulators across multiple jurisdictions are investigating allegations that Invesco India moved subprime bonds to retail oriented schemes, and also transferred them to off-shore fund schemes.
Hiding bad investments?
The ongoing probe by market regulator SEBI into the alleged violations by Invesco India has revealed that the fund house undertook several inter-scheme transfers (ISTs) between 2016 and 2021, specifically aimed at moving papers with ‘poor fundamentals’ into retail-oriented schemes at the time of heightened credit risk. The probe also pertains to Invesco illegally moving ‘bad papers’ in a few fixed income schemes to various jurisdictions to avert potential damages.
It is alleged that an attempt was made to hide bad investments made in some Indian schemes by tranferring them into other global funds. Meanwhile, the Indian schemes continued to buy bad papers. Invesco’s funds registered in tax haven Luxembourg, too, are under the scanner.
Resignations galore
Invesco insiders say that resignations have mostly been tendered by officials who were linked to the debt schemes — both onshore and offshore — which are under investigation. The resignations include that of Head of Fixed Income, Senior Fund Manager, key personnel managing investments for Invesco India Bond Fund (IIBF), Head of Credit, along with a Credit Analyst.
Also recently, since market regulator SEBI started its probe, Invesco’s Head of offshore global investment leads– strategy was moved to greener pastures with a new designation. Also, the Senior Vice President of offshore portfolio management strategy and Director for internal audit are serving their notice period. Many of those who have resigned recently did so suddenly after spending more than a decade at Invesco India.
The whistleblower has dragged Invesco, its top management and parent company to the court on alleged unlawful termination of his employment following his allegations of malpractices. The court has summoned the senior officials of Invesco, the sources said.
SEBI rules say inter-scheme transfers should be the last resort of AMCs to manage liquidity after they have exhausted all other options for raising cash. But, Invesco AMC moved low-rated subprime securities of issuers like Sintex Industries, Business Broadcast Networks (BBNL), a subsidiary of Reliance Capital, and IL&FS Transport (ITNL), among others from Invesco India Short Term Fund (IISTF) and other funds to Invesco India Credit Risk Fund (IICRF). The probe shows a pattern that whenever securities held by IISTF faced ratings downgrade or risk of adverse credit view, they were simply moved to IICRF through IST.
Invesco did not reply to a media query from businessline.