With prices of gold and silver continuing to rise, setting new records on a regular basis, the assets under management (AUM) of Exchange Traded Funds (ETFs) that invest in these precious metals could well rival the largest equity mutual funds (MFs) soon.
The combined AUM of the gold and silver ETFs of Nippon India MF has vaulted past the ₹1 lakh crore mark. It stood at ₹102,516.5 crore at the end of 28 January, National Stock Exchange (NSE) data showed. ICICI Prudential MF came second with the aggregate AUM of its gold and silver ETFs totalling ₹48,165.7 crore.
The assets of Nippon India Gold ETF, the largest in the category, stood at ₹ 55,125 crore, while its silver ETF’s AUM totalled ₹47,392 crore. ICICI Prudential MF’s gold and silver ETF’s assets were at ₹24,587 crore and ₹23,579 crore, respectively.
Flexi-cap equity funds have the largest AUM in the MF space. While Parag Parikh Flexi Cap has an AUM of about ₹1.33 lakh crore, HDFC Flexi Cap Fund has assets of nearly ₹96,285 crore. The AUM of Nippon Gold ETF came at ₹55,125 crore while its silver ETF’s assets were at ₹47,392 crore. The AUM of top-10 gold and silver ETFs alone stood at about ₹2.77 lakh crore.
Gold ETFs allow investors to gain exposure to gold through the stock market while being backed by physical metal. There are currently 22 such ETFs across fund houses.
True safe-haven appeal
The huge interest in gold and silver ETFs reflects how investors view precious metals as a true safe haven and an effective hedge against volatility. In December alone, gold ETFs recorded net inflows of ₹11,647 crore, Association of Mutual Funds in India (AMFI) data showed.
This underscores how the gold-ETF route is increasingly preferred as a transparent, regulated channel to gain exposure to gold, unlike many other formats that may lack oversight, market experts said.
The sharp rally in the prices of the precious metals has even prompted the launch of a combo fund that invests in both gold and silver. Precious metals like gold and silver have historically served as stores of value and have acted as hedges against inflation and currency depreciation.
With central banks globally increasing their gold reserves and silver demand rising across industrial and investment segments, ETFs that invest in these metals have gained traction. “The strong growth in gold and silver ETF assets reflects investors’ increasing preference for transparent, liquid, and regulated investment avenues to gain exposure to precious metals. Gold ETFs continue to be used as portfolio diversifiers and inflation hedges, while silver ETFs have seen rising traction amid their dual role as a precious and industrial metal,” Nippon India MF said.
“Looking ahead, as structural trends like currency pressure, inflation risks and global instability persist, gold ETFs are likely to become an important component of many portfolios as part of overall portfolio diversification,” experts said.