Gold ETF’s on hold, but World Fund gets going

AHMEDABAD: while UTI Mutual Fund and Benchmark MF are awaiting Sebi’s nod for their gold exchange-traded funds (ETFs), DSP Merrill Lynch MF is proposing to launch a World Gold Fund. With Sebi clearing the regulation on custodians for storage of gold, the race is on between UTI Mutual Fund and Benchmark MF to come up with the country’s first gold ETF.

DSP ML’s World Gold Fund will be an open-ended fund, which will invest the money collected from Indian investors in the Merrill Lynch International Investment Fund’s World Gold Fund. This global fund is supposed to be the largest in its category and its corpus is estimated to be $5.5 bn.

The fund seeks to maximise total return by investing mostly in equity securities of companies worldwide, which have gold mining as main business activity. It may also invest in the equity securities of companies that deal in other precious metal or mineral and base metals. Unlike gold ETFs, this fund does not hold physical gold or metal.

S Nagnath, joint president of DSP ML MF, told ET that they have filed proposal with Sebi and are awaiting its clearance. “As per Sebi’s foreign investment norms for MFs, this fund can mobilise a maximum of $100m,” he said.UTI MF’s fund manager Chandraprakash Padiyar said that they are working out an arrangement whereby the problem of storing gold will be resolved.