MUMBAI: Mutual fund houses continue to rely on gold to increase their asset under management. Three asset management companies have sought approvals to launch gold-based funds over the past two months.
Several others are also waiting for the right time to come out with their batch of gold exchange traded funds and gold feeder funds, sources in distribution circles said.
IDBI Mutual, Canara Robeco Mutual Fund and BNP Paribas Mutual Fund have filed draft prospectuses with market regulator Sebi to launch gold-base funds.
While Canara Robeco has sought approvals to launch an ETF and fund-of-fund scheme, BNP Paribas and IDBI Mutual have filed prospectuses to launch fund-of-fund schemes.
""Gold fund is the only category that is attracting investments from retail investors. Fund houses are launching gold funds to attract money from smaller investors,"" said a Mumbai-based distributor.
Asset bases of gold ETFs, as per Amfi data, have surged 167% between January and November to Rs 9658 crore; this number looks even more staggering over a two-year when gold mutual fund assets have grown nearly 570%. Goldman Sachs (earlier Benchmark Asset Management), Reliance Mutual Fund and Kotak Mutual Fund have been the biggest beneficiaries of this rise in asset under management.
Gold funds is the only fund category that has generated significant returns for investors in 2011. Gold funds ended the year generating over 30% returns for investors. Most gold funds have gained 27 - 31% over the past one year.
Contrast this to large-cap equity funds, short-term bond funds and income funds which on an average have returned minus (-) 23%, 9.04% and 8.2% respectively during the same period, as per data from Value Research.
Gold ETFs and gold fund-of-funds (which feed into gold ETFs) yield higher returns when gold prices move up. Fund managers attribute the soaring popularity of gold funds to rising gold prices.
Gold has moved up from Rs 20,585 per ten grams in January to a high of Rs 29,140 in November and Rs 26,570 per ten grams at December-end.
Most experts expect gold prices to hold firm over the next one year. Economic instability in Europe, inflationary pressure raging across emerging markets and a weak rupee would hold gold prices firm, fund managers said.
""Gold might not fall much and only consolidate sideways,"" Ritesh Jain, head of investments at Canara Robeco Mutual Fund, told in an interview to ET last week.
Mr Jain believes that bullish trends in gold will continue for three - four years. ""I expect gold prices to breach Rs 35,000 per ten grams by middle of next year,"" he said.
Negative correlation with other asset classes, demand for jewellery and absence of default risk (when considered as an investment) are other reasons that prompt investors to buy gold.
As per a report by rating agency CARE, world gold demand grew on a year-on-year basis by nearly 11% to around 4000 tonnes in 2010 alone.
India, the world's largest gold consumer, and China being the drivers of this demand, accounting for over 55% of global gold jewellery demand and 52% gold investment demand.
India registered a 38% increase in consumer demand in 2010, despite prices surging by over 25% during the year.
Several others are also waiting for the right time to come out with their batch of gold exchange traded funds and gold feeder funds, sources in distribution circles said.
IDBI Mutual, Canara Robeco Mutual Fund and BNP Paribas Mutual Fund have filed draft prospectuses with market regulator Sebi to launch gold-base funds.
While Canara Robeco has sought approvals to launch an ETF and fund-of-fund scheme, BNP Paribas and IDBI Mutual have filed prospectuses to launch fund-of-fund schemes.
""Gold fund is the only category that is attracting investments from retail investors. Fund houses are launching gold funds to attract money from smaller investors,"" said a Mumbai-based distributor.
Asset bases of gold ETFs, as per Amfi data, have surged 167% between January and November to Rs 9658 crore; this number looks even more staggering over a two-year when gold mutual fund assets have grown nearly 570%. Goldman Sachs (earlier Benchmark Asset Management), Reliance Mutual Fund and Kotak Mutual Fund have been the biggest beneficiaries of this rise in asset under management.
Gold funds is the only fund category that has generated significant returns for investors in 2011. Gold funds ended the year generating over 30% returns for investors. Most gold funds have gained 27 - 31% over the past one year.
Contrast this to large-cap equity funds, short-term bond funds and income funds which on an average have returned minus (-) 23%, 9.04% and 8.2% respectively during the same period, as per data from Value Research.
Gold ETFs and gold fund-of-funds (which feed into gold ETFs) yield higher returns when gold prices move up. Fund managers attribute the soaring popularity of gold funds to rising gold prices.
Gold has moved up from Rs 20,585 per ten grams in January to a high of Rs 29,140 in November and Rs 26,570 per ten grams at December-end.
Most experts expect gold prices to hold firm over the next one year. Economic instability in Europe, inflationary pressure raging across emerging markets and a weak rupee would hold gold prices firm, fund managers said.
""Gold might not fall much and only consolidate sideways,"" Ritesh Jain, head of investments at Canara Robeco Mutual Fund, told in an interview to ET last week.
Mr Jain believes that bullish trends in gold will continue for three - four years. ""I expect gold prices to breach Rs 35,000 per ten grams by middle of next year,"" he said.
Negative correlation with other asset classes, demand for jewellery and absence of default risk (when considered as an investment) are other reasons that prompt investors to buy gold.
As per a report by rating agency CARE, world gold demand grew on a year-on-year basis by nearly 11% to around 4000 tonnes in 2010 alone.
India, the world's largest gold consumer, and China being the drivers of this demand, accounting for over 55% of global gold jewellery demand and 52% gold investment demand.
India registered a 38% increase in consumer demand in 2010, despite prices surging by over 25% during the year.
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