Mumbai: Expected goldrush to the Gold Exchange Traded Funds (ETFs) launched so far haven’t lived up to the expectations of the fund managers.
The response seems to have been muted by regulatory requirements, higher initial investment amount and lack of awareness among the investing community.
A total collection of just Rs235 crore by the first two GETFs by UTI Mutual Fund and Benchmark have left the respective fund managers to do some soul searching.
“Gold ETFs launched in Australia, USA and South Africa took time to get popular among the investors,” UTI Asset Management Company (AMC) Chairman U. K. Sinha had said last week. The total asset (gold) under management in these countries went up from 10 metric tonne in 2002 to 600 metric tonne in December 2006, reflecting slow but steady progress.
UTI AMC managed to collect only Rs135 crore during the new fund offer (NFO) period that closed last month where as the Benchmark AMC’s NFO in February mopped up around Rs100 crore.
Besides, lack of awareness and compulsory demat account required for investing in these funds seem to be major factors for unimpressive response. Mutual fund investors have so far not being asked to open demat account.
“Out of 26,000 applications received by UTI AMC, 400 to 500 were rejected for want of demat account,” UTI AMC’s Chief Investment Officer A K Sridhar said.
Though UTI AMC made arrangements for simultaneous demat account opening for applicants with some brokers, the result was not impressive.
“In our case out of 15,000 applications received more than hundred were rejected for not having demat accounts,“ Rajen Mehta of Benchmark AMC said.
Higher initial subscription amount of Rs20,000 fixed by UTI and Rs10,000 by Benchmark also seem to have made these funds unattractive for retail investors.
Also, the fact is that equities were currently providing better returns than gold in the short term.
The daily trading volumes also looks lacklustre so far on the National Stock Exchange, the trading platform for both the funds.
On Friday (April 20) UTI’s Goldshare, which was launched on Tuesday (April 17) traded at Rs945.30 per unit of one gram but the turnover was low with trade worth just Rs2.27 crore with a volume of 23,942 units.
Benchmark’s Gold BeES, launched last month, traded at Rs946.90 per unit with much better turnover of Rs3.83 crore and volumes at 40,335 units.