ICICI Prudential is the latest company to come out with a gold fund of funds, and the fund is similar to other gold funds like the SBI gold fund.
The fund is right now in the NFO period which will end on October 4th 2011, but that shouldn’t make any difference to you because mutual fund NAV doesn’t impact performance.
Everything I wrote about the SBI gold fund review stands true for this fund also, and I don’t really have anything to add except for one small little thing which I noticed in the last discussion.
At least a couple of people seemed to imply that gold ETFs charge you an expense of about 1% or so, and that makes buying these gold funds better.
I don’t know how widespread that view is but I do know it doesn’t make any sense. When you buy a gold fund of funds, that fund will in turn go and buy an ETF, and you will indirectly still incur the fee of the ETF.
The ETF doesn’t care whether you buy the fund directly or whether you own it through a mutual fund – they will charge you the fee anyway.
In addition to that – the fund of funds will now charge you a fee as well – so not only do you pay the ETF fee – you pay the fund of funds fee in addition to that.
The only people who can benefit from a gold fund of funds are people who want to buy very small quantities of gold periodically, and who feel that the brokerage charges hurt their purchases a lot because of these small quantities.
Outside of this, I don’t see any other reason for owning a gold fund of funds, but of course, this is just my view, and there is a counter view also – you can find that in the comment thread of the SBI gold fund post, and see if it appeals to you.
I’m going to stop here else it’s going to be a repeat of the SBI gold fund post and I don’t want to do that. So please read that post if you are interested in gold fund of funds, and if you’re disappointed that this post is so short then cheer yourself up — at least you’re not on a water slide.