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Tuesday, Mar 01, 2005

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AMCs gearing up for gold funds

Veena Venugopal

Mumbai , Feb. 28

NOW you can buy or sell gold in the form of units for as little as Rs 100.

The mutual fund industry has made a concerted effort in the last year to try and introduce mutual fund products that would invest in commodities instead of equity or debt. This effort just got a shot in the arm with the Finance Minister, Mr P. Chidambaram, announcing the introduction of gold exchange traded funds (ETF). This indicates that mutual funds can now sell units with gold as the underlying asset.

The Mumbai-based Benchmark Asset Management Company Pvt Ltd had filed its offer document for introducing gold ETFs as early as May 2002 and the document has been awaiting clearances from Securities and Exchange Board of India and Reserve Bank of India, since then.

"We were the first ones to conceptualise this product," said Mr Sanjiv Shah, Executive Director, Benchmark AMC.

Association of Mutual Funds in India (AMFI) would be submitting with SEBI its report on commodity funds later this week. While this report covers investments by mutual funds in all commodities, asset management companies believe that once gold ETFs get started, other commodities, especially metals, can be added easily.

Mr A.P. Kurien, Chairman, AMFI, said the Budget announcement carries an important message to investors to diversify from investments only in debt and equity products. While AMCs are excited about the opportunity of exploring a different class of products entirely, they are aware of the operational difficulties in launching these, including hiring skilled professionals in the area of gold trading.

"Several funds have been interested in launching this product, they would be waiting for final clearances and subsequently filing their offer documents," Mr Kurien added.

As gold is a preferred form of investment for Indians, AMCs see the potential of the product to ignite the excitement of investors. "This would give investors all the advantages of owning gold without the hassles of trading it," said the Chief Executive Officer of an AMC.

"We would, however, follow a wait and watch policy before we introduce any gold products. Investors would have to be educated about it first," he added.

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