The Hindu Business Line : Diversified equity funds outperform gold ETFs

Kolkata, Oct. 15 If their three-months’ performance is any indication gold ETFs (exchange traded funds) are coming up the value chain, a trend that has caught the attention of investment circles. However, diversified equity funds, in comparison, outperformed Gold ETFs.

Gold ETFs, which had trailed almost all other categories of funds with sub-1 per cent returns for the six-month period ending October 12, have sailed ahead in recent months – their three-month score turning out to 9.53 per cent.

Diversified equity funds have provided 15.49 per cent and 38.45 per cent over three- and six-month periods respectively, figures released by Value Research indicate.

Small group

Gold ETFs, a new-generation category spawned with the help of recent regulatory sanction, have remained a small group, with only three products making it to the list. These are managed by UTI, Benchmark and Kotak.

UTI’s Gold ETF and Gold Benchmark ETF have provided 9.55 per cent and 9.5 per cent respectively during the three-months ended October 12. The Kotak fund, which was launched in July, has given about 2 per cent in the past one month or so.

The market has not taken aggressively to gold ETFs, investment circles suggest, while referring to their relatively small asset sizes. This, they feel, indicates that there have not been too many takers compared to that of certain other categories. The UTI scheme, for the record, had about Rs 143 crore under management in September, the benchmark fund Rs 128 crore and Kotak Rs 52 crore.

That gold ETFs are increasing in number is clear from recent filings by fund houses. The latest to do is Quantum MF – the proposed Quantum Gold Fund will be listed on the stock exchange in the form of an ETF tracking domestic prices of gold through investments in physical gold.

Returns

The offer document filed by the fund house with SEBI maintains that the ETF will aim at providing returns that are in line with the performance of gold and gold related instruments, subject to tracking errors. The fund will try to provide returns that, before expenses, closely correspond to the returns provided by gold.

Each unit of the ETF will be offered at a face value of Rs 100 each – and will be issued at a premium equivalent to difference between the allotment price and the face value of Rs 100. Each unit of Quantum Gold Fund issued will be approximately equal to price of half gram of gold, the offer document has noted.

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