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SBI Enters The Golden Era

In the past few months, the funds that have turned in the best performances have been the gold funds. Gold ETFs haven’t disappointed their investors, and in a bearish market, have proved to be the best mode of investment. Predictably, the Gold ETF funds have had a good time too, witnessing major increases in their AUM. And to get a piece of this pie, SBI Mutual Fund has filed an offer document to launch its Gold Exchange Traded Scheme (GETS).

This will be an open-ended exchange traded scheme which will invest at least 90 per cent of its assets in physical gold and gold related securities and the rest in debt and money market instruments. The fund will have two plans, Plan A and Plan B. Plan A, the retail plan of the fund will have an annual recurring expense of 2.5 per cent and has a low minimum investment of Rs 5000 with a reducing entry load based on the amount of investment during the initial offer period. For investments of up to Rs 1 lakh, it will be 1.5 per cent, for amounts above Rs 1 lakh up to Rs 5 Lakh the same will be 1 per cent, for Rs 5 lakh up to Rs 50 lakh it will be 0.75 per cent and above Rs 50 lakh to Rs. 1 crore will be 0.5 per cent.

Plan B, the institutional plan of the fund will have a lower annual recurring expense of 1.5 per cent and a minimum investment of Rs 1 crore. The investment in the plan will be without any load during the initial offer period.

The fund’s performance will be benchmarked to the gold price on the London Bullion Market Association (LBMA).

The SBI Gold ETF will be the sixth such fund in India given the rigid structure stipulated by regulators for running such a fund. The first Gold ETF was launched by Benchmark in Februay 2007. Gold ETFs are up 50 per cent over the past 1-year and up 20 per cent over the past six-months. Together, the five existing Gold ETFs have Rs 582 crore under management as on June 30, 2008. Interestingly, two other funds, DSPML World Gold Fund and AIG World Gold, which both invest in stocks of gold mining and related companies together had nearly Rs 2400 crore under management as on June 30.

Investors can buy an ETF like a usual fund during the initial public offer and subsequently like a share through a broker on the market. Hence, all investors must have a demat account to buy this fund.