Kotak Mahindra MF launches silver ETFs to hedge against ongoing uncertainties

• Kotak Mahindra Asset Management Company launches a silver ETF, which will invest in physical silver and silver related instruments.
• The fund house believes this is an opportunity to hedge against the ongoing economic uncertainties and geopolitical risks prevalent across several major global economies.
• Silver ETF is more suited to experienced investors who understand commodity cycles.

Kotak Mahindra Asset Management Company on Thursday launched Kotak Silver ETF (exchange traded fund), which will invest in physical silver and silver related instruments.

The mutual fund product will provide investors with an opportunity to invest in this precious metal without physically holding it. The ETF’s price will be in line with the price movement of silver.

The fund house says this investment product will provide investors an opportunity to hedge against the ongoing economic uncertainties and geopolitical risks prevalent across several major global economies.

A silver ETF provides easy access to silver without actually physically holding it and also help in diversifying the investor portfolio. “Our Silver ETF launch is in line with our continued effort to provide easy and efficient access to various asset classes. It will provide convenient access to Silver as an asset which is not only a precious metal but also has many industrial uses. The consolidation in Silver prices since the start of the year provides a good opportunity for those looking to allocate some money to this asset for diversification,” said Nilesh Shah, group president and MD at Kotak Mahindra Asset Management Co.

As per the World Silver Survey 2022, post the pandemic, demand for silver has outstripped supply due to uptick in industrial activity and a surge in retail investor appetite for the metal. The metal has clocked 43% absolute returns in the 5-year period. However, the past performance may or may not be sustained in the future.

Silver prices are driven by its industrial consumption and supply side dynamics. The precious metal is a hedge against the traditional equity-debt portfolio, as silver has low-correlation with both asset classes. However, silver is a high-risk asset class and, therefore, it is more suited to investors who understand precious metals and commodity cycles.

The new fund offer (NFO) of the Silver ETF opens for subscription on November 21 and closes on December 5.

The units of the fund will be in the form of creation unit size or in multiples thereof. Each creation unit consists of 30,000 units of Kotak Silver ETF. Each unit is approximately equal to 1 gram of silver, said the mutual fund company.

ETFs are a type of funds that are bought and sold the same as a stock on the exchange and the underlying asset in this case would be silver. The price of the ETF is tracked to an underlying index, here it will follow the price of silver in the real world.


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