MUTUAL FUNDS

Recalcitrant inflation & moderate performance in equity and debt asset classes may prompt many retail investors towards gold as an asset class<
23-Apr-12   17:11 Hrs IST
With mutual fund industry offering Gold ETF and Gold FoF, which one would you advice for retail investors who would like to take exposure in gold, for Akshay Tritya?

Funds investing in gold ETF's are predominantly of two varieties, the Gold fund of Fund (FoF) and such hybrid schemes which allow for partial allocation to gold.

As such, the predominant fund investment in Gold ETF's is through the Gold FoF medium. Gold FoF is an enabling scheme for such investors who do not have demat access; or do not have the time to invest in Gold ETF's regularly. For such investors, Gold FoF provides folio management facility as well as provides the convenience of an SIP.

Gold FoF product segment has been expanding at a scorching pace given the traditional acceptance for gold in India. This, coupled with the investing convenience of Gold FoF, gives this product a high acceptability potential with retail investors. In FY12, the number of Gold FoF schemes increased from 2 to 9, while the AUM within the category also expanded rapidly. The average AUM with Gold FoF in March-11 was at Rs 146 crs while the average AUM in March-12 stood at Rs 3,570 crs.

It is our opinion, that the recalcitrant inflation and moderate performance in equity and debt asset classes may prompt many retail investors towards gold as an asset class. At that, the latent volatility in the forex market, and the possible monetary expansion in the primary currencies worldwide, may also boost the gold performance prospects. These factors may continue to drive investment in Gold FoF in the year ahead.

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