HDFC Asset Management Company (AMC) has announced the launch of HDFC Silver ETF, an open-ended exchange-traded fund (ETF) that replicates/tracks the performance of physical silver.
The new fund offer (NFO), which opened on August 18, 2022, will close on August 26, 2022, HDFC AMC announced in a press release.
It said the investment objective of the fund is to generate returns that are in line with the performance of physical silver in domestic prices, subject to tracking error. This fund will allow investors to digitally invest and own silver that can be easily traded during market hours. It will help them diversify their portfolio at a low cost and also help them own silver without worrying about the need to physically and safely store the precious metal.
According to the press release, the fund will invest in silver bullion of 0.999 fineness, and the returns from the fund are commensurate with the performance of silver, subject to tracking errors, over long term.
The minimum investment will be one unit.
Navneet Munot, managing director and chief executive officer, HDFC AMC said: “HDFC AMC has always maintained an investor-first approach offering its clients with the most effective solutions while launching products. This fund will provide investors an opportunity to enhance portfolio diversification by investing in a metal with a differentiated risk-return profile.”
He said investing in silver will help investors create wealth in the long term because of silver’s multi-purpose utility in industrial activities, such as portable devices, industrial equipment, electric vehicles, mobility, energy production and telecom.
The demand outlook for silver is robust on account of higher adoption in new age and green technologies. In addition, it is also a precious metal which hedges against currency depreciation since it is globally priced, he added.
Of late, a number of mutual fund houses have come out with silver ETFs.
ICICI Prudential Mutual Fund launched the country’s first silver ETF on January 5, 2022, soon after the Securities and Exchange Board of India (Sebi) in September 2021 allowed mutual fund houses to launch silver ETF in India. Later, on November 25, 2021, the capital markets regulator also came up with operating guidelines on silver ETFs.
According to the 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’.
Also, 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 bring more transparency, the market regulator has asked fund houses for physical verification of silver underlying the silver ETF units. This verification will be carried out by the mutual fund’s statutory auditor, who will report to the trustees every six months.