IDBI Mutual Fund launches IDBI Gold ETF: Review

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IDBI Mutual Fund launches IDBI Gold ETF: Review
With gold being preferred over other investment assets during the times of uncertainty, mutual fund houses provides an option to invest in paper gold. IDBI Mutual Fund, a subsidiary unit of IDBI Bank has launched IDBI Gold Exchange Traded Fund (ETF), an open-ended scheme.

The IDBI Gold ETF has already launched in the market on October 18, 2011 and will be closed on November 2, 2011. The allotment of units will take place on November 10.

The minimum investment required to invest in IDBI Gold ETF is Rs 10,000 and in multiples of Re. 1 thereafter.

The fund will invest in physical Gold and Gold related instruments with the objective to replicate the performance of gold in domestic prices. The ETF will adopt a passive investment strategy and will seek to achieve the investment objective by minimizing the tracking error between the Fund and the underlying asset.

The scheme will invest 95% to 100% of assets in gold and gold related instruments and up to 5% of assets in debt and money market instruments.

Gautam Kaul will be the fund manager.

The scheme is proposed to be listed on NSE and BSE to provide liquidity.

While announcing the scheme, R M Malla, CMD, IDBI Bank and chairman, IDBI Asset Management. said “We, at IDBI Mutual Fund see investment in gold as a component of prudent diversification to hedge against uncertainties, inflation and for long-term benefits.”

"Our view is that gold is an essential part of asset allocation for an investor and it is an evergreen asset," IDBI Asset Management Ltd Managing Director and Chief Executive Debasish Mallick told reporters.

"IDBI gold ETF units are proposed to be listed on the NSE and BSE to impart liquidity. Reputed bullion dealers have been appointed as market-makers to provide buy-sell quotes in the markets on a regular basis. IDBI MF will also offer direct buy-sell options at NAV-related prices for investments of 1,000 units and above," Mallick said.

He further added, “A unique feature of IDBI Gold ETF is that it can be used as collateral security for taking loans from IDBI Bank while providing an instant liquidity. We are also in talks with five of the biggest jewellers in the country, who will sell gold jewellery in exchange of the ETFs.”

View: This provides you a better option to invest in gold if your purpose is investment and not consumption. Gold ETFs are in limelight these days due to their lower transaction costs and tax benefits. The net returns of investing in Gold ETF are comparatively better than buying a physical gold as when you buy gold coins from a bank or jeweller, you need to bear a premium of 5-7%, which is not in the case of gold ETFs.

GoodReturns.in DISCLAIMER: The views expressed in this article are the views of the author and do not reflect the views of our company. GoodReturns.in does not take any responsibility for any losses incurred by investors who take their cues from the above article.

Read more about: mutual funds, gold, etf, investment, nfo, tax
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