Mutual funds flock to silver ETF space with new schemes
New Delhi: Mutual funds have launched a clutch of new fund offers in the silver ETF (exchange traded fund) category this year and collected Rs 1,400 crore in assets after the introduction of the newly-created investment asset class by market regulator Sebi in 2021.
Further, fund houses including Kotak Asset Management Company have filed draft documents with the markets regulator to float silver ETF as well as silver ETF fund of funds for investors, information with the Securities and Exchange Board of India (Sebi) showed.
These NFOs (new fund offers) are providing an opportunity to the investors to digitally invest and own silver which is easily tradable during market hours.
As per industry data, so far, Aditya Birla Sun Life Mutual Fund, ICICI Prudential Mutual Fund and Nippon India Mutual Fund have launched silver ETFs. Further, each of these asset management companies has a silver fund of funds (FoF), which in turn invests in their respective ETFs.
In addition, DSP Mutual Fund and HDFC Mutual Fund closed the NFO of their silver ETF earlier this month, while Edelweiss Gold and Silver ETF FOF is currently open for subscription for investors.
The industry has already collected Rs 1,400 crore in assets base from silver funds till July-end, according to data provided by Morningstar India.
The asset management companies are rushing to launch silver funds since Sebi allowed silver ETFs in November 2021.
"The Sebi's move opened up avenues for mutual fund houses to be able to launch silver ETFs. Considering that a lot of investors use silver as a hedge against inflation, this offered an easier avenue for them, wherein they could hold the precious metal in the form or a fund, rather than holding it in the physical form," said Kavitha Krishnan, Senior Analyst Manager Research, Morningstar India.
Also, silver has underperformed recently, and this may have triggered AMCs to launch silver ETFs and FOFs as it may be a good time to invest in the precious metal, Radhika Gupta, MD and CEO, Edelweiss AMC, said.
In addition to being used as an investment, silver also finds its way into industrial, and manufacturing sectors. Higher demand for silver from new age industries, like electric vehicles, solar and 5G, also seems to have created more consciousness among investors about the impact of investing in silver, Krishnan said.
Prior to the introduction of silver ETFs, physical silver and silver futures were the available investment avenues for those looking to take exposure to this asset class.
Physical silver comes with its drawbacks such as purity concerns and price inefficiencies. Futures, on the other hand, were not suitable for retail investors, said Ghazal Jain, Fund Manager- Alternative Investments at Quantum AMC.
