Asset Management Company (AMC) Edelweiss Mutual Fund India’s first scheme is scheduled to launch on August 24 that offers exposure to gold and silver through a single fund. The new fund offer for Edelweiss Gold & Silver ETF Fund of Funds (FOF) closes on September 7. The fund managers for the scheme are Bhavesh Jain and Bharat Lahoti.
India’s first gold fundNippon India ETF Gold BeES was launched in March 2007, while silver based mutual funds were first introduced in January this year.
The Securities and Exchange Board of India (SEBI) in September allowed MF houses to introduce silver exchange-traded funds (ETFs) in the Indian market. ICICI Prudential Silver ETF was the first silver-based fund in India.
Notably, Motilal Oswal MF and ICICI Prudential MF had applied for gold and silver funds in February and December respectively, but are yet to launch the schemes.
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Edelweiss’s new plan will target similar exposure to the two metals and rebalance from time to time. Since the AMC does not have a standalone gold or silver fund, the scheme will invest in units of gold and silver ETFs managed by other fund houses or Edelweiss.
Radhika Gupta, Managing Director and CEO, Edelweiss MF told Mint, “There are a lot of gold and silver products in the market. But if you look at the combined offer of gold and silver, they complement each other, and both the metals have less correlation to equities.”
As per the scheme note, gold performs well during bearish and the precious metal outperforms silver during bull rally. Both provide a good hedge against inflation in the long run.
The data showed that the yellow metal gained 26.1%, 31.7% and 11.3%, respectively, during recessions and market downturns in 2008, 2011 and 2016.
On the other hand, the demand for silver is increasing in new age technologies such as smartphones, electric vehicles and solar panels. However, silver has not performed well in the last 10 years.
Gupta argues, “Historically, precious metals have had an inverse relationship with the dollar, and a weakening US economy could weaken the dollar. This may be an opportune time to look at precious metals funds.
However, experts suggest to go slow in investing in silver funds. “We don’t need allotment in silver. Gold allocation has a history of being a net hedge against inflation and market downturns. Harshad Chetanwala, SEBI-registered investment advisor and co-founder of My Wealth Growth, said the industrial use of silver is huge, due to which it becomes volatile.
Experts suggest that gold can constitute 5-10% of the portfolio.
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