DSP-Merrill sets sights on gold ETF

DSP-Merrill Lynch Asset Management Company (AMC) has filed its offer document to launch a mutual scheme that would invest in gold-based ETF (exchange traded fund), becoming the second fund house to approach the Securities and Exchange Board of India (Sebi) for approval, after the regulator allowed fund houses to launch such schemes recently.

Benchmark Mutual Fund, which specialises in ETF-based products, was the first one to file its draft document with Sebi for launching gold-based ETFs sometime back.

DSP Merrill Lynch's `World Gold Fund' will be an open-ended fund with at least 80 per cent of investments to be parked with similar mutual funds overseas.

Officials at DSP-Merrill AMC refused to comment on the development but industry analysts said the proposed scheme might not be a direct gold-ETF scheme but a variant that would invest in other gold ETFs outside the country. Recently, Sebi had allowed domestic fund houses to invest in overseas ETFs.

Gold ETFs, which are available in Australia, the UK, the US and South Africa, are popular in the US and the total holding is in the region of $5 billion.

Analysts expect at least a small part of the 16 per cent of household savings in real-estate and gold, to flow into gold-ETFs and real-estate mutual fund schemes.

The fine guidelines on such schemes are awaited.

India, one of the top gold consuming country, sees investments in gold more in the form of jewellery. According to a recent data by Altos Advisory Services, 16 GETFs could be introduced in the country.

The easing of norms to allow mutual funds to launch gold-ETFs follows the 2006-07 budget announcement, which proposed the launch of such schemes.

"Sebi is expected to come out with final set of guidelines for the gold ETFs soon. These funds give small investors, an opportunity to invest in gold, which is non-conventional for country's mutual fund industry. Investors will realise its benefits as more funds will launch gold ETFs," Association of Mutual Funds of India (AMFI) Chairman A P Kurian said.