HDFC AMC Launches Silver ETF FoF; NFO Opens Oct 7, Minimum Subscription Rs 100—Know Details

HDFC AMC has launched a mutual fund called HDFC Silver ETF Fund of Fund, bringing investors more opportunities to invest in silver with a minimum subscription of Rs 100.

Outlook Money Team

Updated on: 6 October 2022 6:08 pm

HDFC Mutual Fund Launches NIFTY NEXT 50 And NIFTY 100 ETFs; Subscription Ends August 1

HDFC Mutual Fund on Thursday launched the HDFC Silver ETF Fund of Fund, about a month after it launched the Silver Exchange-Traded Fund (HSETF).

The new fund would invest over 95 per cent of the assets in units of HDFC Silver ETF and the rest in debt and money market instruments.

The minimum subscription amount is Rs 100. The new fund offer runs from October 7 to October 21. It is purely a growth fund with no dividend option plan, meaning it would reinvest all the accumulated gains into the fund unless you exit.

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It has no exit load if redeemed after one year from the date of allotment. However, 2 per cent will be charged for redemption within six months and 1 per cent within one year.

Why Is HDFC Launching A Silver Product?

In a webinar, HDFC AMC fund manager Krishan Kumar Daga highlighted silver’s potential demand due to its immense industrial applications, from solar panels, smartphones, electric vehicles, and pharmaceuticals to water purification projects and ventures.

According to the World Silver Survey 2022, silver demand is roughly split between industrial applications and jewellery and investment demand.

“Increasing share of EVs in the automobile market is expected to increase demand of silver as EVs use almost twice the silver used in the traditional Internal Combustion Engine (ICE) car,” Daga said. In addition, silver can also provide a hedge against currency depreciation and diversification benefits.

According to data provided by the fund house, the Indian rupee depreciated from below Rs 40 in December 1996 against the US dollar to Rs 80 a US dollar now.

Returns Silver Generated

Silver gave a compound annual growth rate (CAGR) of 10 per cent per gram in the last 20 years. However, the fund house said that CAGR had been 7 per cent in the dollar and per kg terms for the same period.

Table Showing CAGR of Silver Over Various Time Periods Source: HDFC AMC

When the returns of Silver are compared with National Stock Exchange (NSE) NIFTY 50, for one year, Silver returned an average rolling return of 11 per cent while Nifty 50 returned 15 per cent. On the other hand, if it is compared with Indian government securities debt, which gave 7 per cent returns in one year, silver showed higher returns than debt but lower than equity.

This logic holds for a three years time frame too. Silver gave an average rolling return of 11 per cent, while NIFTY 50 gave 15 per cent, and government securities (G Sec) debt gave 8 per cent.