Kotak Mahindra Asset Management Company (AMC) on March 13, 2023 announced the launch of Kotak Silver ETF Fund of Fund.
The open-ended fund of fund will invest in units of the Kotak Silver exchange-traded funds (ETF). The new fund offer (NFO) opened on March 13, 2023 and will close on March 27, 2023.
Kotak Mahindra AMC announced in a press statement that the scheme offers several benefits to investors, such as diversification, easy liquidity, no making charges, and no storage costs. Investments can be done even without having a dematerialised account, just like a mutual fund.
“In the past, silver as a commodity had provided protection during crises. For instance, during the recent Russia-Ukraine conflict, while the Nifty 50 fell by 10 per cent, silver prices surged by 12 per cent,” Kotak AMC said in a press statement.
According to Kotak Mahindra AMC, the product is suitable for investors who are seeking long-term capital appreciation and want to invest in an open-ended fund of fund scheme with the primary objective of generating returns by investing in units of Kotak Silver ETF.
Nilesh Shah, managing director, Kotak Mahindra AMC said: “We are launching Kotak Silver ETF Fund of Fund to make it easier for investors to diversify their portfolios with convenient access to this precious metal, which has various industrial applications. The current silver prices present a potential opportunity for those interested in allocating funds to this asset in the medium to long term.”
Previously, Kotak Mahindra AMC had launched the Kotak Silver ETF through an NFO from November 21, 2022 to December 5, 2022. It had said the product was designed to provide investors with an opportunity to hedge against the ongoing economic uncertainties and geopolitical risks prevalent across several major global economies.
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 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.
Fundamental Drivers Of Silver Market
Silver is a versatile precious metal with widespread usage across the bio-pharma, medical technology, power generation, electric vehicles, clean energy, and mobility sectors. In addition, silver also has the potential to provide a hedge against inflation. A key factor that will impact silver prices is the expected rise in demand over supply in the near future.