UTI Mutual plans to raise Rs 1,000 cr via gold fund

UTI Mutual Fund proposes to raise Rs 800-1,000 crore through its gold exchange traded fund (GETF). UTI's gold ETF will be open for subscription from March 1 and it will close on March 12. UTI is the second fund house in the country after Benchmark AMC to offer this asset class investment.

The new fund offer (NFO), with a minimum investment of Rs 20,000, carries an entry load of 2.50 per cent for investments less than Rs 50 lakh, while investors joining the scheme later would not have to pay the charge. It will be listed on the National Stock Exchange (NSE) in the first week of April.

"We are offering our investors an opportunity to diversify their portfolio by investing in a new asset class which is gold without the hassles of handling the physical asset. Investors can buy and sell as small as one unit of the scheme on NSE once the scheme is listed," said S Ganesh, senior vice-president, UTI AMC.

UTI Gold ETF is an open ended exchange traded fund designed to track the performance and yield of the underlying asset, which is gold.

The scheme will invest in gold bullion and will reflect the international price of gold in the market. Every unit of UTI GETF will approximately represent one gram of pure gold. Units allotted under the scheme will be credited to investors' demat accounts.

Each unit would be backed by physical gold held by the custodian. Bank of Nova Scotia would be the custodian and the metal held by it would be fully insured, said Ganesh.

Investment in the scheme will attract long term capital gain tax after a year and short-term capital gains, if redeemed, before the period.