Reliance MF to offer gold exchange traded fund

Mumbai: Reliance Capital Asset Management Ltd has filed offer documents of a planned open-ended gold exchange traded fund (ETF) with the Securities Exchange Board of India (SEBI).

The fund, to be called Reliance Gold Exchange Traded Fund, proposes to invest at least 90 per cent of its assets in gold and related instruments and the rest in debt and money market instruments, the company said in its offer documents filed with SEBI.

Retail investors can invest a minimum of Rs5,000 in the gold-based fund, it added.

Benchmark Mutual Fund launched the country''s first exchange-traded gold fund, paving way for investors to invest and trade in the yellow metal just like in any other equity investment.

But the scheme, called Gold BeES, may not attract many investors as it is mandatory for the investor to have a demat account for investing in the ETF. Also, on redemption, the repayment is done in cash and there is no physical delivery of gold.

To overcome the problem of limited number of demat account holders in the country, fund houses are tying up with depository participants (DPs) and offering demat account services to investors, said officials.

India accounts for 23 per cent of the world''s jewellery demand and around 35 per cent of global investment in gold comes from the country. However, a large number of investors put their money in gold, not only to see value of their investment grow, but also to use the metal for making ornaments later.

Benchmark BeES has collected around Rs100 crore during its new fund offer period and received applications from 22 states in the country.

The minimum subscription for the scheme was Rs10,000, while it is Rs20,000 for the UTI''s GETF scheme.

Besides Benchmark and UTI, five other MFs have also lined up to launch their gold ETF schemes.