Nippon India Mutual Fund has submitted draft documents to the market regulator for the launch of a new commodity-based passive investment scheme named Nippon India Gold Silver Passive Fund of Fund (FoF). The proposed scheme will invest in gold and silver exchange traded funds (ETFs), offering investors exposure to both precious metals through a single investment structure.
The open-ended Fund of Fund scheme is designed to generate long-term capital appreciation by investing primarily in units of Nippon India ETF Gold BeES and Nippon India Silver ETF. The move comes at a time when commodity-linked investment products are witnessing increasing interest amid volatility in global markets, inflation concerns, and shifting investor preferences toward diversified asset classes.
Dual Exposure to Gold and Silver
According to the draft filing, the proposed scheme will allocate between 95% and 100% of its total assets to the underlying gold and silver ETFs managed by Nippon India Mutual Fund. The remaining portion of the portfolio, capped at 5%, may be invested in money market instruments for liquidity management and operational purposes.
The benchmark for the scheme has been structured equally around domestic gold and silver prices, with 50% weightage assigned to each commodity. The benchmark composition reflects the fund’s strategy of maintaining balanced exposure to both precious metals.
Gold and silver have historically been considered important alternative asset classes, especially during periods of economic uncertainty, currency fluctuations, and inflationary pressure. By combining both metals into a single passive structure, the fund aims to offer diversified commodity participation through a simplified investment route.
Passive Investment Structure
The scheme will follow a passive investment strategy and will not actively trade commodity positions. Instead, it will invest in the two underlying ETFs, whose performance is linked to domestic spot prices of gold and silver.
The allocation between gold and silver may be adjusted periodically using an internal allocation model based on price movements and market trends. However, the overall investment approach will remain passive in nature.
The draft papers also highlighted several investment restrictions. The scheme will not invest in overseas securities, derivatives, credit default swaps, securitised debt instruments, REITs, InvITs, or engage in short selling activities. Additionally, the fund will not participate in securities lending and borrowing arrangements.
Investment Details and Cost Structure
The minimum investment amount during the New Fund Offer (NFO) period as well as during continuous purchase has been fixed at ₹500. Additional investments can be made starting from ₹100. During the NFO period, units of the scheme will be available at a face value of ₹10 each.
The scheme will not impose any exit load on redemptions, according to the draft filing. The annual recurring expense ratio has been capped at 0.90% of daily net assets, excluding statutory levies and charges associated with the underlying ETFs.
Investors in the scheme will indirectly bear the expenses of the underlying gold and silver ETFs in addition to the FoF-level expenses.
Growing Interest in Commodity-Based Investment Products
Commodity-oriented mutual fund products have gradually gained traction among investors seeking diversification beyond traditional equity and debt investments. Gold ETFs have already established a significant presence in India’s investment landscape, while silver ETFs have also witnessed growing participation over the past few years.
The proposed Gold Silver Passive FoF will provide investors with exposure to both metals without requiring separate investments in individual ETFs.
Summary
Nippon India Mutual Fund has filed draft papers for the launch of the Nippon India Gold Silver Passive FoF, an open-ended scheme investing in gold and silver ETFs. The proposed fund will primarily allocate assets to Nippon India ETF Gold BeES and Nippon India Silver ETF while following a passive investment approach. The scheme aims to provide combined exposure to gold and silver through a single commodity-based investment structure.
Disclaimer:
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