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The capital and commodity market regulator SEBI will soon allow mutual funds to invest in gold futures by letting them amend the investment objective of existing gold schemes to have an exposure to commodity futures markets.
In December 2017, SEBI had floated a consultation paper to obtain stakeholders’ opinion on allowing mutual funds and portfolio managers to invest in the commodity derivative market. Most fund houses had responded to it.
“We have requested SEBI to allow amendments to the existing gold schemes so that we can immediately have exposure to the commodity futures market through gold futures. SEBI wants us to ensure that dissenting investors be given an option to exit without any load,” said a mutual fund executive.
Launching new schemes to attract funds for investing in gold or any other commodity futures is difficult. Moreover, any scheme should have a minimum asset under management of ₹8,000 crore to be viable, he added.
Currently, mutual fund exposure to gold is limited to exchange-traded funds that invest in gold and gold-related instruments such as the gold deposit scheme and the gold monetisation scheme. Gold ETFs are required to invest 95 per cent of their assets under management in gold and gold-related instruments.
As of February, the total AUM of Gold ETFs was ₹4,830 crore, accounting for less than 1 per cent of the total industry AUM of ₹2.22 lakh crore. As of December-end, there were 3.45 lakh folios under gold ETF schemes, according to AMFI data.
Sundeep Sikka, Executive Director and CEO, Reliance Mutual Fund, said it is remunerative to invest in gold through gold futures rather than physical gold.
MFs need the option of switching between physical gold and futures to serve investors’ interest, he added.
However, he said this should not prevent actively managed schemes in gold (and other commodities) where investors, similar to equity or debt funds, have opportunities to invest in commodity-related themes.
Sikka said the move will bring down transaction costs when gold prices are poised for a big move on the upside.
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