Looking at the three-month performance, 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% returns for the six-month period ending 12 October 2007, have sailed ahead in recent months their three-month score turning out to 8.5%.
Diversified equity funds have provided 14.55% and 35.08% over three- and six-month periods respectively.
Diminutive 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.
UTIs Gold ETF and Gold Benchmark ETF have provided 8.58% and 8.54% respectively during the three-months ended 12 October 2007. The Kotak fund, which was launched in July, has given about 2.85% 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.
Recently Reliance Mutual Fund has launched Reliance Gold ETF. The scheme is designed to provide returns that closely correspond to returns provided by domestic prices of gold. The NFO opened for subscription on October 15 October 2007 and closes on 1 November 2007.
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