Benchmark MF hopes for gold ETF

BANGALORE: Benchmark Mutual Fund is betting on the huge appetite that India has for gold to launch its gold exchange traded fund(ETF) called Gold BeES. India is the world’s largest bullion consumer with an annual intake of over 800 tonnes.

“Gold BeES is positioned as a retail asset product. Studies have shown that typically of the 800 tonnes around 10% to 15% goes to the retail consumer in the form of gold coins and bars. It is this retail segment we would be aggressively looking at tapping,” said Mr Rajan Mehta, executive director of Benchmark Asset Management Company.

It would be pertinent to mention here that Benchmark pioneered the concept of ETFs in India when it launched these in 2002. As per AMFI data, Benchmark currently has over Rs 6,000 crore of assets under management(AUM).

An ETF as the name suggest can be is a mutual fund scheme which is listed on the exchange(NSE-National Stock Exchange in case of Benchmark).

The Gold BeES which is an open-ended scheme will open on February 15 with the NFO(new fund offering) closing on February 22 and will open for regular trading during the last week of March. Although several Indian mutual funds have filed their application for gold ETFs with the regulator(SEBI), Benchmark has been the first off the block.

Mr Mehta said that besides the retail investor Gold BeES would find favour with high networth individuals. While on one hand Gold BeES are more secure than holding physical gold(as the ETF can be held in dematerialised form) for HNIs it also provides tax benefits like no wealth tax is payable on holding gold ETF units.

Another tax benefit relates to capital gains which is fixed at 10%. Typically if one holds physical gold the investor has to pay a short-term capital gains(STCG) of 30% while there is a long-term capital gains of 20%(this only applies if the physical gold is held for a minimum period of three years).

It must be mentioned here that a gold ETF is only an investment with the investor getting a credit in the form of units against the monies invested. Once redeemed by the investor, the latter only gets back his money. There is no receipt of physical gold.

The physical gold which represents the underlying asset in case of the gold ETF will be only held by Benchmark Mutual Fund.