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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.

India’s first gold fund, Nippon India ETF Gold BeES, was launched in March 2007, while silver-based mutual funds were first introduced in January this year.

Securities and Exchange Board of India (Sebi) had in September allowed MF houses to introduce silver exchange-traded funds (ETFs) in the Indian market. ICICI Prudential Silver ETF was the first silver-based fund in India.

Notably, Motilal Oswal MF and ICICI Prudential MF had applied for gold and silver funds in February and December, respectively, but are yet to launch the schemes.

 

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Edelweiss’ new scheme will target equal exposure to the two metals and will rebalance periodically. Since the AMC doesn’t have a standalone gold or silver fund, the scheme will invest in units of gold and silver ETFs managed by other fund houses or Edelweiss.

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 hand, there is rising demand for silver in new-age technologies such as smartphones, electric vehicles and solar panels. However, silver hasn’t performed well over the past 10 years.

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.

Experts suggest that gold can be 5-10% of a portfolio.

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