Mirae Asset Mutual Fund on May 29, 2023 launched the Mirae Asset Silver exchange-traded fund (ETF). It will track the price of physical silver in the domestic market. The new fund offer (NFO) opened today and will close on June 6, 2023.
As an open-ended fund, it will subsequently reopen for continuous sale and repurchase starting from June 12, 2023.
During the NFO period, investors can start with a minimum investment of Rs. 5,000 and subsequently in multiples of Re. 1. Mirae Asset Silver ETF will be benchmarked against the domestic silver price based on the London Bullion Market Association (LBMA) silver daily spot fixing price
Why invest in Silver ETF?
By investing in commodities such as silver, investors can effectively diversify their portfolios to counter adverse movements in specific assets or asset classes. Both gold and silver have the potential to act as a hedge during economic downturns or periods of rising inflation.
Silver also serves as a hedge against rising movements of the dollar. Unlike gold, silver also finds significant usage in industrial applications.
Holding gold or silver in a portfolio helps smoothen the investing journey as their prices typically move differently from other asset classes, thereby providing stability. The growing demand for silver is fuelled by trends, such as the growth of consumer electronics, investments in 5G infrastructure, and the increasing use of silver in the green economy, particularly in solar photovoltaic (PV) panels.
Siddharth Srivastava, Head of ETF Product, Mirae Asset Mutual Fund, said that the growing use of silver in industrial settings, which now accounts for approximately half of the annual silver demand, provides support for its price.
Silver ETF amd Returns
Silver ETFs are passive investment instruments that closely follow the price movements of physical silver in the domestic market. The product is suitable for investors who are seeking long-term capital appreciation aligned with the performance of silver, subject to tracking errors. The fund house has stated that investors investing in silver ETFs carry a high level of risk on their principal investment.
The asset under management (AUM) of commodity-based ETFs has experienced a significant rise in the past three years, growing at a compound annual growth rate (CAGR) of 35 per cent from Rs. 10,081 crore to Rs. 24,718 crore.
According to the Association of Mutual Funds in India (Amfi), last year, following the Securities and Exchange Board of India’s (Sebi’s) approval of silver-based ETFs, mutual fund houses launched eight such ETFs, which currently manage assets worth Rs. 1,785 crores.
In terms of returns, silver has outperformed the Nifty 50 Index and gold over the past five years, with a return of 13.1 per cent as of April 30, 2023. Investing in silver ETF offers a relatively low-cost and straightforward option to gain exposure to silver, as it allows for easy buying and selling on stock exchanges, similar to stocks.
Mirae Asset Mutual Fund further said that despite the demand for silver surpassing supply in recent years, macroeconomic factors have limited significant price movements. However, as these factors cool down, the supply deficit will come into the limelight, potentially driving silver prices higher.
