Home / Companies / News /  Nippon, Mirae, Aditya Birla Sun Life first fund houses to apply for silver ETFs
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Mutual fund houses have started to file for silver exchange-traded funds (ETFs) with the Securities and Exchange Board of India (Sebi) after the markets regulator last month came with the operational guidelines for the commodity-based investment instruments.

Mirae Asset Investment Managers (India) Pvt. Ltd, Nippon Life India Asset Management Limited and Aditya Birla Sun Life AMC Limited are the first three asset management companies (AMCs) to apply for silver ETFs, Sebi website showed.

All the schemes will be benchmarked to the domestic price of silver.

Nippon Life, which manages India’s biggest gold ETF in terms of asset under management (AUM) at 6,300 crore, has also applied for a silver fund of fund (FoF) that will invest into its Nippon India BeES Silver ETF.

These ETF schemes are passively managed funds that will be investing substantial portion of their assets in physical silver and tracking its performance as close as possible to the price of the commodity.

Experts say that precious metals such as silver, platinum and palladium can be a way to diversify one’s portfolio, away from a single precious metal—gold. The launch of gold and crude oil ETFs has been the long-standing demand of the industry in India.

Sebi on 24 November had issued final operating norms for the introduction of silver ETFs. These ETFs have to invest at least 95% of their net assets in silver and silver related instruments. This regulation is similar to gold ETFs, where asset management companies have to hold 95% of their assets in gold, gold bullion, and gold-related securities.

Moreover, transportation charges for bringing silver from London, customs duty, taxes and other levies will be added to the silver ETF price. In terms of costs, as per Sebi’s regulations there is an upper limit of 1% total expense ratio on ETFs.

Further, Sebi had mandated that the tracking error, which is the annualized standard deviation of the difference in daily returns between physical silver and the net asset value of Silver ETF based on past one year rolling over data, should not exceed 2%. The regulator had also proposed the appointment of a dedicated fund manager for commodity-based funds like gold ETFs and silver ETFs.

Value of commodity-based ETFs are directly linked to their corresponding commodity prices, which could adversely affect investment values. For example, on a one-year basis, gold ETF is the only asset category on average that has delivered a negative return.

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