Asset management company (AMC) Edelweiss Mutual Fund is scheduled to launch India’s first scheme that offers exposure to gold and silver via a single fund on 24 August. The new fund offer for Edelweiss Gold and Silver ETF Fund of Fund (FoF) will close on 7 September. The fund’s managers for the scheme are Bhavesh Jain and Bharat Lahoti.
Silver-based mutual funds were initially introduced in January of this year, while India's first gold fund, Nippon India ETF Gold BeES, was released in March 2007.
Exchange-traded funds (ETFs) for silver were introduced to the Indian market by MF companies with permission from the Securities and Exchange Board of India (SEBI) in September. The initial silver-based fund in India was the ICICI Prudential Silver ETF.
It should be noted that Motilal Oswal MF and ICICI Prudential MF submitted applications for gold and silver funds in February and December, respectively, but have not yet begun to implement the plans.
The new strategy from Edelweiss aims for equal exposure to the two metals and will periodically adjust. The scheme would invest in shares of gold and silver ETFs managed by other fund houses or Edelweiss since the AMC lacks a single gold or silver fund.
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Radhika Gupta, managing director and CEO, Edelweiss MF, told Mint, “There are a lot of gold and silver products in the market. But if you look at the combined proposition of gold and silver, they complement each other, and both metals have a low correlation to equities.”
According to the scheme note, gold performs well during recessions and silver outperforms during precious metal bull rallies. Both provide a good hedge against inflation in the long run.
Data showed that the yellow metal was up 26.1%, 31.7% and 11.3% during recession and market down-cycles in 2008, 2011 and 2016, respectively.
On the other side, newer technology like solar panels, electric cars, and smartphones are increasing the need for silver. However, over the previous ten years, silver hasn't done well.
Gupta argues, “Historically, precious metals have had an inverse correlation with the dollar, and with the US economy weakening, the dollar may weaken. This might be an opportune time to look at a precious metals fund.
Although, experts suggest going slow on having exposure to silver funds. “We do not need to have an allocation in silver. The gold allocation has a history of being a pure hedge against inflation and market downturns. Silver has a huge industrial usage, because of which, it tends to be volatile,” said Harshad Chetanwala, a Sebi-registered investment adviser and co-founder of MyWealthGrowth.
