SBI Mutual Fund has recently launched the SBI Silver ETF Fund of Fund, and it’s creating quite a buzz. If you’re curious about what this means and whether it’s something worth considering, you’re in the right place.
Let’s break it down in a way that’s easy to understand.
What is an NFO?
An NFO, or New Fund Offer, is the first time a mutual fund company offers a new fund to the public. It’s similar to an IPO in the stock market. For investors, it’s an opportunity to get in on the ground floor of a new fund at its initial offering price.
About the SBI silver ETF fund of fund
The SBI Silver ETF Fund of Fund is an open-ended scheme, which means you can invest in it and redeem your investment at any time. This particular fund invests in the SBI Silver ETF, which in turn invests in physical silver.
Key dates
- Opening date for subscription: June 27, 2024
- Closing date for subscription: July 5, 2024
- Reopening for continuous sale and repurchase: Within five business days from the date of allotment
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Investment objective
The main goal of the SBI Silver ETF Fund of Fund is to generate returns by investing in the SBI Silver ETF. While there’s no guarantee that the objective will be met, the fund aims to provide returns that closely correspond to the performance of the domestic price of silver.
Why invest in this fund?
This fund is ideal for those seeking long-term capital growth through investments in silver. Silver is not only a precious metal but also an industrial metal with applications in electronics and renewable energy. This dual demand can potentially drive its value higher over time.
How to invest?
Minimum investment
You can start investing in this scheme with as little as ₹1000 per plan/option, and any additional investment must be in multiples of Re 1. There’s no upper limit, so you can invest as much as you’d like.
Asset allocation
Under normal circumstances, the fund will allocate its assets as follows:
- 95-100%: Units of SBI Silver ETF
- 0-5%: Government securities, triparty repo, and units of debt mutual funds
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Comparing with other silver ETF funds
The SBI Silver ETF Fund of Fund isn’t the only player in the market. Here’s how it stacks up against similar funds:
- HDFC Silver ETF Fund of Fund – 1year return is 22.21%
- Kotak Silver ETF Fund of Fund – 1year return is 22.21%
- ICICI Pru Silver ETF Fund of Fund – 1year return is 22.21%
- Nippon India Silver ETF Fund of Fund – 1year return is 28.25%
- Aditya Birla Sun Life Silver ETF FoF – 1year return is 26.03%
These funds all aim to provide returns similar to the performance of silver, but their track records are relatively new, so investors need to evaluate their recent performance.
Benchmarking performance
The SBI Silver ETF Fund of Fund benchmarks its performance against the domestic price of silver, based on the London Bullion Market Association (LBMA) Silver daily spot fixing price. This ensures that the fund’s performance aligns closely with the actual market price of silver.
Fees and loads
Entry load
Good news: There’s no entry load for this fund. You can invest without having to pay any additional charges upfront.
Exit load
- For exit on or before 15 days from the date of allotment: 1%
- For exit after 15 days from the date of allotment: Nil
The AMC reserves the right to modify the load structure on a prospective basis.
Management and risk
Fund manager
Harsh Sethi, with 17 years of experience, is the designated fund manager for the SBI Silver ETF Fund of Fund. With his expertise, the fund aims to achieve its investment objectives effectively.
Risk factor
This scheme involves very high risk, as indicated in the Scheme Information Document. It’s suitable for investors who are aware that their principal will be subject to significant risk. Consulting a financial advisor is recommended if you’re unsure whether this product is suitable for you.
Advantages of investing in silver
Inflation hedge
Metals like silver act as a buffer against inflation. In today’s economic climate, where inflation is a concern, investing in silver can be a strategic move.
Industrial demand
Unlike gold, silver is extensively used in industrial applications. Sectors like electronics and renewable energy rely heavily on silver, which can drive its demand and value in the long term.
Liquidity
Investing through an ETF and Fund of Fund provides the advantage of liquidity. You can easily buy or sell your investments without much hassle.
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Conclusion
The SBI Silver ETF Fund of Fund offers a unique opportunity for investors looking to diversify their portfolio into commodities, particularly silver. With its dual demand as a precious and industrial metal, silver has the potential for significant long-term growth. The fund’s structure, low entry cost, and liquidity make it an attractive option for both novice and experienced investors.
Always remember to consult with a financial advisor to ensure if it aligns with your investment goals and risk tolerance.
