Asset management company, Kotak Mahindra Mutual Fund has filed with the Securities and Exchange Board of India (SEBI) for two new schemes – Silver Exchange-Traded Fund (ETF) and Silver ETF Fund of Funds (FOF).
The objective of the schemes would be to generate returns that are consistent with the performance of physical silver in domestic prices, subject to tracking error.
Kotak Silver ETF Fund of Funds will generate returns by investing in the units of Kotak Silver ETF.
The minimum amount to apply for the New Fund Offer (NFO) of the scheme will be 5,000, and in multiples of Rs. 1 after that.
The benchmark of the schemes will be the price of silver based on the daily spot-fixing price of the London Bullion Market Association (now known as the LBMA).
According to experts, silver is a more strategic allocation than gold, which is a strategic allocation for portfolio diversification. In addition, 65-70% of silver is used in industrial applications.
Silver ETFs are one of the latest investment asset classes to be introduced by the market regulator.
SEBI had in September 2021 approved amendments to mutual fund regulations to enable the introduction of silver ETFs in the Indian financial markets with certain safeguards in line with the existing regulatory mechanism for gold ETFs.
The first fund on commodities was introduced in the domestic markets in January 2022.
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 fund houses has a Silver Fund of Funds (FOF), which in turn invests in their respective ETFs.
ICICI Prudential Silver ETF is the largest scheme in this category with assets of approx. 472 crore till 31 May 2022.
Silver Fund as a category has given an average return of -11.52% over a period of three months.