Edelweiss Asset Management Limited on Wednesday launched a new open-ended fund of funds scheme, Edelweiss Gold and Silver ETF Fund of Fund, focused on precious metals.
The fund is open for subscription from August 24, 2022, to September 7, 2022.
Investments in gold and silver are considered a safe bet in times of high inflation. Also, the precious metals and equities have low correlation and, as such, they offer better diversification, it noted.
Edelweiss Gold and Silver ETF Fund of Fund is an open-ended scheme investing in gold and silver ETFs. Compared to the physical metals, it offers greater convenience, affordability, and liquidity, the fund said, stressing that it is the first scheme in India to give exposure to both gold and silver.
The fund managers underlined that the scheme would allocate the resources equally between gold and silver ETFs and rebalance periodically to tackle any possible divergence.
Commenting on the fund, Radhika Gupta, MD & CEO of Edelweiss Asset Management Limited, said at the launch that it offers “good diversification benefits,” with the exposure to both metals; hence, it makes a strong investment case. Additionally, it provides ease and tax efficiency.
Suitability Of The Fund
Investors looking to protect their portfolios during the downturn are best suited for the product. It can help them offset the volatility in their equity portfolios.
Gupta said, “Both metals have underperformed in recent times, and the dollar index, which has an inverse correlation with gold and silver, may weaken in the near term; hence, it could be a good time to invest in gold and silver.”
Highlighting the scheme’s worthiness, the fund observed that while gold usually performs well during a recession, silver generally outperforms during a precious metal rally.
Also, the demand for these metals is rising fast, yet the supply is limited. For instance, silver can benefit from the rising demands for electric vehicles, smartphones, and solar panels, among others. The fund stressed that it will be especially beneficial to those seeking to diversify and mitigate volatility.
Of late, several mutual fund houses have launched silver ETFs.
ICICI Prudential Mutual Fund launched the country’s first silver ETF on January 5, 2022, after the Securities and Exchange Board of India (Sebi) gave the go-ahead in September 2021. On November 25, 2021, the market regulator issued operating guidelines on silver ETFs.
According to Sebi guidelines, a silver ETF scheme must invest at least 95 per cent of the net assets in silver and silver-related instruments. Exchange-Traded Commodity Derivatives (ETCDs), having silver as the underlying asset, would also be considered a ‘silver-related instrument’.
Furthermore, the physical silver must be of standard 30 kg-bars with 99.9 per cent purity (999 parts per thousand) conforming to the London Bullion Market Association (LBMA).
In addition, to ensure transparency, Sebi has asked the fund houses for physical verification of silver underlying the silver ETF units. It will be carried out by the mutual fund’s statutory auditor, who will report to the trustees every six months.