SEBI preparing guidelines for gold ETFs
16 Sep 2006
The Securities and Exchange Board of India (SEBI), the capital markets regulator, will soon come out with detailed guidelines governing the soon-to-be-launched gold exchange traded funds (ETFs).
According to former executive trustee of UTI A P Kurian, who is now chairman, Association of Mutual Funds in India (AMFI), SEBI and the association are busy working out the finer details for the guidelines. Several mutual funds have plans to launch GETFs, and a few have already filed their offer documents for such funds with the SEBI.
The Indian government, in its budget for financial year 2005-06, decided to allow mutual funds to launch such schemes; SEBI recently issued guidelines relating to real estate mutual funds (REMFs), which are also expected to emerge as popular instruments.
Retail investors can buy and sell gold through units in these funds, and reap the benefits of the volatility in the price of yellow metal. Gold ETFs are currently traded in the US, the UK, Australia and South Africa. Turkey plans to launch a gold ETF later this month.
Benchmark Mutual Fund, DSP-Merrill Lynch and UTI Mutual Fund are among those that have already (or plan to) filed offer documents for Gold ETFs. Benchmark specialises in ETF-based products. The 'World Gold Fund' by DSP Merrill Lynch will be an open-ended fund with at least 80 per cent of investments to be kept with similar ETFs abroad.
UTI MF plans to raise nearly Rs1,000 crore through its ETF for gold and gold futures. Like other mutual funds, UTI too is awaiting further clarifications from SEBI, especially on issues relating to the storage of gold.
SEBI recently allowed domestic mutual funds to invest in overseas ETFs. Gold ETFs are available in the US, the UK, Australia and South Africa.
India is one of the largest consumers of gold, though most of the gold is available in physical form, specially jewellery. Mutual fund industry analysts expect Gold ETFs to emerge as popular vehicles for those wanting to benefit from the volatile prices of the metal.