MFs are flocking to the silver ETF space with new programs; collect assets of Rs 1,400-cr

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Mutual funds launched a series of new fund offerings in the Silver ETF (exchange-traded funds) category this year and raised Rs 1,400 crore in assets following the introduction of the new asset class. investment by market regulator Sebi in 2021.

In addition, fund companies, including Kotak Asset Management Company, have filed draft documents with the market regulator to float silver ETFs as well as silver ETF fund-of-funds for investors, information showed. of the Securities and Exchange Board of India (Sebi).

These NFOs (New Fund Offerings) offer investors the opportunity to invest digitally and own money that is easily tradable during market hours.

According to industry data, so far, Aditya Birla Sun Life Mutual Fund, ICICI Prudential Mutual Fund and Nippon India Mutual Fund have launched silver ETFs. In addition, each of these asset management companies has a silver fund of funds (FoF), which in turn invests in their respective ETFs.

Additionally, DSP Mutual Fund and HDFC Mutual Fund closed their Silver ETF NFO earlier this month, while Edelweiss Gold and Silver ETF FOF is currently open for subscription for investors.

The industry has already raised Rs 1,400 crore in assets from silver funds till the end of July, according to data provided by Morningstar India.

Asset management firms have been rushing to launch silver funds since Sebi authorized silver ETFs in November 2021.

“Sebi’s decision paved the way for mutual fund companies to be able to launch silver ETFs. Considering that many investors use silver as a hedge against inflation, it gave them an easier path, in which they could hold the precious metal in form or a fund, rather than holding it in its physical form,” said Kavitha Krishnan, Principal Analyst – Head of Research, Morningstar India.

Additionally, silver has underperformed recently, which may have prompted AMCs to launch silver ETFs and FOFs as now may be the right time to invest in the precious metal, Radhika said. Gupta, MD and CEO of Edelweiss AMC.

Apart from being used as an investment, silver also finds its place in the industrial and manufacturing sectors. Increased demand for silver from new-age industries, such as electric vehicles, solar and 5G, also appears to have made investors more aware of the impact of investing in silver, Krishnan said.

Prior to the introduction of silver ETFs, physical silver and silver futures were the investment opportunities available to those seeking exposure to this asset class.

Physical silver has drawbacks such as purity issues and pricing inefficiencies. Futures contracts, on the other hand, were not suitable for retail investors, said Ghazal Jain, fund manager – alternative investments at Quantum AMC.

“As such, the introduction of silver ETFs is a good development for retail investors seeking exposure to silver as an asset class. As in the case of gold ETFs , silver ETFs will also pass on the benefits of price efficiency, liquidity and convenience to retail investors,” she noted.

Basically, the silver ETF scheme refers to a mutual fund scheme that invests primarily in silver or silver-related instruments.

Gupta said silver has many similarities to gold when it comes to investing. It is a good hedge against inflation, has a low correlation to equities and therefore offers good diversification benefits.

“FOFs and ETFs are a convenient and inexpensive way for people to invest in silver versus physical silver,” she added.

Vikram Dhawan, Head of Commodities and Fund Manager, Nippon India Mutual Fund, said that at current prices, silver is nearly 90 times larger than gold and therefore requires storage, custody and storage infrastructure. greater handling.

According to him, silver ETFs offer a convenient, safe and efficient way to invest in silver and these instruments hold high-quality physical silver bullion that meets the best international standards and practices.

However, experts cautioned investors against rushing into silver ETFs and suggested assessing its suitability in their portfolio and its investment merit over gold.

“Due to its status as a once-precious metal, silver can to some extent help combat the effects of inflation on a portfolio, but not as effectively as gold tends to do. Since being unbundled as a form of money, silver has been widely used in industry, and prices tend to move more in line with overall economic growth and therefore risky assets,” said said Quantum AMC’s Jain.

Overall, India is the third largest physical silver investment market in the world after Germany and the United States. The size of the physical silver investment market in India is around USD 1 billion per year.

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

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