Mutual funds gearing up for silver ETF

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With the capital market regulator SEBI paving the way for silver exchange traded fund launch, mutual funds are gearing up to venture into the new space as investors are looking for diversification to passive investment in metals.

The only option currently available is Gold ETF. The asset under management of Gold ETF has increased 21 per cent to ₹16,350 crore in August, against ₹13,504 crore logged in same period last year.

Vishal Jain, Head ETF, Nippon Life India Asset Management, said the fund house will plan to launch silver ETF as soon as the final regulations are out. Introduction of Silver ETFs will not only increase the options available in ETFs but also help investors diversify across another commodity.

Rapid growth

“Over the years, investor base in ETFs has grown rapidly which shows their increased acceptance and is a positive sign for the entire ETF category in India,” he said.

DP Singh, Chief Business Officer, SBI Mutual Fund, said silver ETF is definitely an interesting product and the fund house will consider it after studying the final regulations besides gauging custodian interest and various other factors.

‘Millennials keen’

Silver is the most popular precious metal after gold among investors. Being cheaper than gold, many millennials have taken keen interest in owning silver jewellery. Besides consumer demand, silver prices are largely influenced by industrial demand and economic activities.

Kaustubh Belapurkar, Director, Morningstar India, said that silver ETFs are popular globally along with gold and other precious metal ETFs. “Investors should be judicious with their investment and allocation as silver prices are volatile,” he said.

“Currently, the US domiciled Silver ETFs has the highest assets of about $12 billion, followed by Switzerland and Ireland,” he added. Swapnil Bhaskar, Business Head, Niyo Money – platform for millennials investors said introduction of silver ETF can be a game changer as it deepens the securities market for the investors. “The Silver ETF will give a seamless buying experience and eliminate the worry on purity and theft as the underlying asset will be managed by the professional vault managers,” said Bhaskar.

Priti Rathi Gupta, Founder, LXME, a financial platform for women, said the regulator is expected to make fund houses own physical silver bars for silver ETF which will eliminate the issues of contango and backwardation effect and give investors more realistic pricing of the metal they hold. “Even though silver and gold work in parallel, silver has its own market dynamics. Hence, silver can be a huge success in the financial markets even for retails investors,” said Gupta.