ICICI Prudential MF set to launch India’s first silver ETF

India’s second-largest mutual fund house, ICICI Prudential Asset Management Company Ltd, will launch the country’s first silver exchange-traded fund (ETF), a new asset class that was recently introduced by the Securities and Exchange Board of India (Sebi).

ICICI Prudential Silver ETF would be the first scheme in India that will invest its proceeds in physical silver and silver-related instruments.

Markets regulator in November had issued final operational guidelines to introduce silver ETFs, expanding the options available for investing in commodities through exchanges.

As many as eight fund houses had applied for launching ETFs based on silver with the regulator during December. ICICI Prudential MF also applied for a silver ETF fund of fund.

The new fund offer (NFO) of ICICI Prudential Silver ETF will launch on 5 January and will remain open for subscription till 19 January 2022. The minimum application during the NFO period would be ₹100 and in the multiples of Re 1, thereafter. The scheme will be managed by Gaurav Chikane.

Commenting on the launch, Chintan Haria, head-product and strategy, ICICI Prudential Mutual Fund, said, “We believe silver ETF will be one of the preferred ways for investors to take exposure to silver as one need not worry about the bulky nature of silver, purity, quality or liquidity of the investment. Silver is among the preferred option globally when it comes to investing in precious metals. This is because silver is considered as a store of value, hedge against inflation and has a very limited correlation with other asset classes.”

The scheme will be benchmarked against the domestic price of silver as derived from the London Bullion Market Association (LBMA) prices and will have a nil exit load.

Investors should note that the value of commodity-based ETFs is 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.

ICICI Prudential AMC is the second-biggest fund house in India with average assets under management (AAUM) of ₹4.47 lakh crore for the July-September 2021 quarter. SBI Mutual Fund is the biggest fund house with an AAUM of ₹5.78 lakh crore.