UTI Mutual Fund to launch gold exchange traded fund

22 February 2007

Investors will be required to make a minimum investment of Rs20,000 and subsequently in multiples of Rs 1 thereafter. "Each unit of the gold fund would represent  one gram of gold. The units allotted will be credited to the investors demat account," said Mohit Sachdev, country head and president, UTI Asset Management Company.

The entry load as a percentage of net asset value (NAV) is 2.5 per cent for investment upto Rs50 lakh; 1.5 per cent for investment between Rs50 lakh and Rs2 crore; 0.75 per cent for Rs2 crore and Rs 5 crore. For investments over Rs5 crore there is no entry load.

According to Sachdev, investing in UTI gold fund has several advantages over buying gold from the banks and jewellers. In the case of banks, the unit can be traded in multiples pf 1, 5, or 10 grams where as in the case of gold fund one unit represents 1 gram. Similarly, when gold is purchased from banks and jewelers, the buying premium is usually high while it is sold at a discount. "In the case of the UTI gold fund, the buying premium and selling discount are low."

Moreover, unlike physical gold, the exchange traded gold units are not subject to wealth tax but are subjected to capital gains tax after the first year.

The fund opens for subscription on 1 March, 2007, and closes on 12 March, 2007. The UTI Asset Management Company will invest in gold on March 26, 2007 and based on the net asset value at the end of that day, units will be credited to the investors.