Excerpts from the interview:
Q: Recently you have launched silver ETF fund, can you give us some details of it?
We have launched this because silver is a unique commodity and can be a good investment and a diversifier. Purchasing quality physical silver can be a challenge and there is a premium that individuals have to pay, Also let's not forget the storage costs and risks. Investing in Silver ETFs take away these challenges.
Silver ETF can be bought and sold on stock exchanges the same way we buy and sell shares. This Silver ETF is benchmarked against the Domestic price of silver.
Majority of the total corpus will be invested in 999 purity physical silver bars and a small portion may also be invested in Derivatives where silver is the underlying asset.
These Physical silver bars will be kept with a third party custodian and receive an auditors' report for physical verification of silver at periodical intervals. Thus Silver ETFs can be a way to take exposure to silver without having to worry about purity, quality, liquidity and storage.
Q: What are the advantages to investors who want to invest in this scheme? And why will it be a favourable diversifier for investors?
A: Silver is a commodity with dual drivers of demand. 51 per cent of the demand comes in the form of industrial demand whereas gold is a mere 10 per cent and the rest in the form of Investment and Jewellery. This is what makes it unique. During economic uncertainties, the safe haven and store of value and during economic growth cycles the Industrial and Jewellery demand drives the prices of silver.
Newer uses of technology like 5G and EVs and a shift to renewable sources of technology like Solar is further going to increase the demand for silver. Silver being a by-product of other metals, the supply will be limited and dependent on other metals. These properties make it an excellent commodity to diversify by benefiting from Industrial as well as Safe haven drivers.
Q: What are your views on mutual funds aggressively launching NFOs after a halt after three months?
A: There is a very prudent guideline from SEBI which allows only one Fund in each specified category. So only in categories where a fund house did not earlier have any fund, they can plan a new fund based on their views of the investor's needs and timing. Many fund houses have been launching new and innovative ETFs and Index Funds where there was a gap and so most of the NFOs you see are of such passive funds. Besides those, currently we have quite a few relatively new fund houses who have a product gap in many categories and so they are launching various NFOs to ensure they have funds in each relevant category.
Q: How do you see the growth of Silver ETF in the whole industry going ahead?
A: During the commodity bull cycles, Silver outperforms gold. Silver can act as a diversifier, a trading product for people who understand its cyclicality and as a long term investment who understand its importance as an industrial metal. AMCs have started to look at asset diversification beyond Gold and we will see more AMCs coming out with Silver ETFs. With the right information and data dissemination we would see increased participation in Silver ETFs.
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