ICICI Prudential MF’s silver ETF mops up ₹115 cr via NFO
Premium- Silver is for people who understand the market as it is a cyclical product and even more volatile than gold
India’s second-largest mutual fund house, ICICI Prudential Asset Management Company Ltd, has raised around ₹115 crore through the new fund offer (NFO) of India’s first silver exchange-traded fund (ETF), the official spokesperson of the asset management company has said. The NFO for ICICI Prudential Silver ETF was open for subscription during 5-20 January, making it the first scheme in India to invest its proceeds in physical silver and silver-related instruments.
The subscription number details and area-wise demand information will be known when the ETF will be listed for trading on Monday.
Meanwhile, ICICI Prudential MF had also launched a silver ETF fund of fund (FoF) on 13 January that will invest in the units of ICICI Prudential Silver ETF. The NFO for silver FoF will remain open for subscription till 27 November.
As per the data available with the Association of Mutual Funds in India (Amfi), ICICI Prudential MF is the second-biggest fund house in India with average assets under management (AAUM) of ₹4.67 trillion for the October-December 2021 period. SBI Mutual Fund is the biggest fund house with an AAUM of ₹6.28 trillion.
While, silver ETFs can be a way to take exposure to silver as one need not worry about the bulky nature of silver, purity, quality or liquidity of the investment, experts believe that this new investment instrument is not meant for all investors.
Notably, India’s first and biggest gold fund, Nippon India ETF Gold BeES, had raised around ₹100 crore through its NFO in March 2007. As of 31 December, the scheme had assets under management (AUM) of ₹6,343 crore.
“Silver is specifically meant for people who actually understand the market as it is a cyclical product and even more volatile than gold. So, the price points, as well as the entry and exit, are very important. Also, silver is more like a hybrid hedge, meaning 50% of that commodity that is mined globally is used in industrial products. So, the prices react to economic conditions," said Rushabh Desai, founder of Rupee With Rushabh Investment Services. Desai’s advice to investors is that up to 15% of one’s portfolio should be given to precious metals such as gold. “However, only a maximum of up to 5% can be given to silver, and that too in the satellite portfolio and not in the core," he added.
Markets regulator Sebi in November 2021 had issued final operational guidelines to introduce silver ETFs, expanding the options available for investing in commodities through exchanges. Before this there were no silver ETFs available in the Indian market, unlike the gold ETFs that are backed by physical gold in India.
Just like gold ETFs, asset management companies have to hold 95% of their assets in silver and silver-related securities. Further, mutual funds have to buy silver worth the corresponding value of the total investments made in a scheme and store it in vaults or lockers. A total of seven mutual fund houses have so far applied for silver ETFs or FoFs with Sebi. Aditya Birla Sun Life Mutual Fund and Nippon Life India Asset Management LTD have also launched new fund offers of ETFs and FoFs based on silver.
Never miss a story! Stay connected and informed with Mint. Download our App Now!!