Tata is coming out with a new fund offer for its own gold ETF – Tata Gold Fund. The new units will be priced Rs.100, and trade in stock exchanges like other ETFs.
The Tata Gold ETF will hold physical gold or gold related instruments as the majority of its holdings. They plan to hold at least 90% of their assets in gold, and the remaining in money market instruments, bonds, securitized debt, and other debt instruments permitted by SEBI.
This is a passive fund, which means that the fund manager will not try to beat the returns of gold, but try and replicate it for the most part.
The recurring expense ratio of the fund is expected to be 2.50% of average weekly assets for the first Rs.100 crore. This is similar to what most other gold ETFs in India have to offer, with the exception of Benchmark mutual fund’s gold ETF, which charges an expense ratio of 1%, and Quantum gold fund’s gold ETF, which charges an expense ratio of 1.25%.
The minimum application amount during the Tata Gold NFO will be Rs.10,000 for retail investors. It is worthwhile to keep in mind that since this is a mutual fund NFO, and not a stock IPO, investors shouldn’t think about any sort of listing gain from this.
If you were looking for a gold ETF, then there is one more option for you to invest in. This fund is not really all that different from other gold ETFs that hold physical gold, so I wouldn’t really be all that excited about its launch.
I can only hope that all these new gold ETFs that are getting launched in the market bring down the fees that mutual funds charge investors. At 2.50%, this is quite high compared to the western gold ETFs, and one can only hope that time and competition brings this charge down.
Disclosure: This is just a summary of the new fund that will be launched, and not a buy or sell recommendation.