Reliance Cap seeks permission for silver, platinum ETFs

Sneha Padiyath Mumbai | Updated on February 16, 2011

Retail investors may soon have silver and platinum ETFs too if the SEBI permits Reliance Mutual Fund to launch funds based on the metals.

Several mutual funds have already launched gold ETFs, which are gaining popularity among investors.

The CEO of Reliance Capital Asset Management Ltd, Mr Sandeep Sikka, said at the sidelines of the Reliance Gold Savings Fund launch that the AMC was looking at launching silver and platinum exchange traded funds (ETFs), provided they get permission from SEBI.

He said that though SEBI does not allow for the launch of these funds, it is an opportunity that Reliance Capital would like to explore.

In 2010, silver gave returns of about 87 per cent. Platinum, though not too popular among retail investors, is also being viewed as a potential ETF contender by AMCs.

However, Reliance will not be the first AMC looking at introducing a product based on silver.

In 2008, Benchmark AMC had filed an offer document with SEBI for the launch of a silver exchange traded fund. According to a senior Benchmark AMC official, approval is still pending and there is no saying when SEBI might give it a go-ahead.

The investment objective of the scheme, as mentioned in the offer document filed by Benchmark, is to ‘provide returns that, before expenses, closely correspond to the returns provided by silver by investing in units of overseas mutual fund schemes including exchange traded funds investing in silver or securities and instruments linked to silver and exchange traded notes whose returns are linked to silver.'

The minimum investment into the scheme would be Rs 10,000. Each unit of Silver BeES (as the product is named) would approximately be equal to the price of 100 grams of silver and will have a face value of Rs 100.

Why SEBI is still mulling over the approval of these products is a matter of debate.

Analysts say that the ETF segment in India does not have significant volumes. In the Rs 6.75-lakh-crore mutual fund industry, the gold ETF segment has a corpus of Rs 3,500 crore. All ETFs put together have around Rs 5,411 crore as assets under management.

“One of the issues that could be a matter of concern is the fact that gold ETFs in India are not a 100 per cent physically backed by assets,” said Mr Vibhu Ratandhara, Assistant Vice President, Bonanza Commodity Brokers.

“Since these ETF funds invest in fund-of-funds or overseas ETFs, how does one ensure that these funds are backed by physical assets sitting here?” said an analyst on conditions of anonymity.

Also, analysts believe that SEBI may not want to clutter the market with too many new products in a segment which still does not have enough depth to begin with.

Published on February 16, 2011

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