After achieving the milestone in the year 2021, ETFs are all set to set their records in the new year 2022. The popularity of exchange-traded funds is no less, which resulted in a surge in its demand and which probably is the reason the options available for investing in the commodities through the stock exchange are increasing.
Metals like gold and silver hold a financial value as much as it holds an emotional value among people but buying and selling these commodities has always been a cumbersome task. With the introduction of Gold Exchange Traded Funds in March 2007, trading and transacting in gold became easy.
Now the investors also have the option to invest in Silver ETFs which will diversify the investors’ portfolio as another metal is added to the commodity list.
What is Silver ETF?
Silver ETF allows investing funds or proceeds in Physical Silver and Silver related instruments through the stock exchange. Here is the advantage that unlike the physical holding of silver, Silver ETFs are more liquid and have fewer storage costs. Mutual Funds have to value silver as per the London Bullion Market Association standards.
Along with Silver being a precious metal, it also has several industrial uses like they are used in LED chips, batteries, electric circuits, etc. With this rising demand for silver, SEBI (Securities and Exchange Board of India) in September 2021 permitted Mutual Fund houses to introduce Silver ETFs in India. In September 2021 SEBI after the board meeting released a notification approving Silver ETFs.
The notification stated, “The board approved an amendment to Sebi (Mutual Funds) Regulations, 1996 to enable the introduction of silver exchange-traded funds with certain safeguards in line with the existing regulatory mechanism for gold ETFs,”.
Later in November 2021, the Securities and Exchange Board of India came up with regulatory guidelines. As per the notification, a Silver ETF scheme has to invest at least 95% of the net assets of the scheme in Silver and Silver-related instruments. It said, “Exchange Traded Commodity Derivatives (ETCDs) having silver as the underlying shall be considered as ‘silver related instrument’ for Silver ETFs.”.
“The physical silver shall be of standard 30 kg bags with fineness of 999 parts per thousand (or 99.9% purity) confirming to London Bullion Market Association (LBMA) Good Delivery Standards.” added further in the notification. The watchdog has asked the Mutual fund houses for physical verification silver underlying the Silver ETF units by mutual fund’s auditor to bring more transparency in the process.
ICICI Prudential Mutual Fund Silver ETF
ICICI Prudential Mutual fund has launched the country’s first Silver ETF which is an investment in Silver and Silver-related instruments. The new fund offer for subscription has opened from January 5, 2022, and will be concluded on January 19, 2022.
The key objective of the scheme is to generate returns in line with the performance of physical silver in domestic prices derived from the LBMA fixing prices.
Other Mutual fund Houses to launch Silver ETFs
Nippon India Mutual Fund, HDFC Mutual Fund, Mirae Asset Investment Managers, Aditya Birla Sun Life Asset Management Company, and DSP Mutual Fund have also applied for silver ETFs. So, we can expect their launches in near future.
Disclaimer: The information provided is only for educational purposes and a general point of view. We are not SEBI Registered, before taking any positions seek professional advice.