Higher net asset values and better returns could be in store for gold ETF holders, if the latest directive by the Union Government is implemented by the fund houses.
According to new guidelines by the Centre, mutual fund houses can park the gold holdings under their exchange-traded funds (ETFs) in gold-linked schemes of banks.
Fund analysts said that this would serve a two-fold purpose.
“On an investor and fund-performance level, this would mean higher returns for the investors of ETFs. Fund houses would earn interest through the bank schemes in which they would invest the gold. This interest would be passed on to the ETF scheme resulting in higher NAV and better returns,” said Debasish Mallick, Managing Director and Chief Executive Director, IDBI Asset Management.
From a macroeconomic perspective, analysts said that the import duty on gold could come down if there is higher circulation of physical gold. Jewellers typically go to banks to buy gold for commercial purposes. On the ETF expense ratio front, fund analysts said a change looks unlikely as fund houses would still be required to hold the underlying gold with the custodian until they decide to invest it in the bank schemes. To that extent, fund house would have to continue paying security charges to the custodian of the gold udnerlyings.