HDFC Asset Management Company introduced a NFO (new fund offer) namely HDFC Silver ETF. It is an open-ended ETF (exchange-traded fund) replicating the performance of silver.
The new fund offer for the silver ETF opened for subscription on 18 August and will remain open till 26 August. The fund manager of the scheme is Bhagyesh Kagalkar.
In November 2021, after the SEBI allowed the launch of silver ETFs, four mutual fund houses introduced silver ETFs so far this year - ICICI Prudential AMC, Nippon India AMC, Aditya Birla Sun Life AMC, DSP Mutual Fund and the newly launched HDFC silver ETF became the fifth player.
Before we proceed, let us first deconstruct the concept of silver exchange-traded funds.
Silver Exchange Traded Funds
Silver has various industrial applications in addition to being a valuable metal. It is in high demand in the industries of manufacturing, investment, and jewellery. More than half of silver is used in heavy industry and high technology, according to the world silver survey study.
A basket of assets that tracks an underlying index is known as an exchange-traded fund (ETF) and exchange-traded funds that monitor the price of silver are known as silver exchange-traded funds.
Fund Overview
According to the AMC, investing in physical silver and storing it in a safe manner could be difficult for an individual, but HDFC Silver ETF provides investors with an opportunity to digitally invest in and own silver which is easily tradable during market hours, replicates the performance of the metal, and diversifies a portfolio at a low cost.
Investing in silver can be beneficial due to its multi-purpose utility in industrial activities such as portable devices, industrial equipment, Electric Vehicles, mobility, energy production and telecom.
Silver demand outlook is robust on account of higher adoption in new age and green technologies. Along with the above, it is also a precious metal which hedges against currency depreciation since it is globally priced, as per the fund house.
Fund Objective
The investment objective of the scheme is to generate returns that are in line with the performance of physical silver in domestic prices, subject to tracking error. There is no assurance that the investment objective of the scheme will be realised, according to the fund house.
Navneet Munot, managing director and chief executive officer, HDFC Asset Management Co. Ltd, said, “HDFC AMC has always maintained an investor-first approach offering our clients with the most effective solutions while launching products. This fund will provide investors an opportunity to enhance portfolio diversification by investing in a metal with a differentiated risk-return profile."
During the NFO period the minimum investment amount would be ₹500, and in multiples of ₹1, thereafter. There will be nil exit load on redemption of units.
