It’s Raining Silver: Axis MF Launches Silver ETF, Silver FoF; NFO Closes September 15

Axis Mutual Fund on September 2, 2022 launched two silver investment schemes – an exchange-traded fund (ETF), and a fund of funds (FoF). The new fund offer (NFO) for both these schemes will close on September 15, 2022.

The Axis Silver ETF is an open-ended scheme that will track and replicate the domestic price of silver, while the Axis Silver FoF is an open-ended FoF scheme that will invest in units of Axis Silver ETF.

The minimum amount per application would be Rs. 500 for Silver ETF and Rs. 5,000 for Silver FoF, and in multiples of Re 1, thereafter, Axis Mutual Fund said in a press release.

According to Axis Mutual Fund, the benchmark for both these schemes will be the domestic price of silver based on the London Bullion Market Association (LBMA) silver daily spot AM fixing price.

Features of Axis Silver ETF and Axis Silver FoF

• Both funds will invest in industry standard 30 kg physical silver bullion of 999 parts per 1,000 fineness
• The purchase/sale of silver will be done with reputed institutions and bullion traders to ensure minimal trading costs and quality
• Investors will be provided will hassle-free ownership either in demat format or mutual fund units
• The storage, transport and insurance hassles of silver will be taken care of by Axis AMC
• There is an exchange liquidity, too. Investors can buy/sell ETF units on the National Stock Exchange (NSE) at their convenience

The unit creation size of the silver ETF will be 30,000 units, i.e., each unit of the ETF will be approximately equal to 1g of silver and cash component, if any.

Axis Silver ETF will be available only in the demat format, while Axis Silver FoF will invest a majority of assets in Axis Silver ETF, and investors will be allotted mutual fund units that can be freely transacted directly through Axis AMC. Thus, investors who do not have a demat account can gain exposure by investing in Axis Silver FoF.

In addition, the units of Axis Silver FoF will not be listed on exchange platforms, the release said.

There is no exit load for Axis Silver ETF. For Axis Silver FoF, the exit load will be 0.25 per cent if redeemed/switched out within seven days from the date of allotment. There is no exit load if redeemed/switched after that period.

Chandresh Nigam, managing director and CEO, Axis AMC said: “Silver’s interesting proposition, wherein it has the ability to act as an industrial commodity, as well as a precious metal, is one of the key factors that we believe will drive its significance. Now that investors have access to investing in silver via ETFs, it will further increase the metal’s value as a promising asset class in the future.”

Of late, a number of mutual fund houses have come out with silver ETFs.

ICICI Prudential Mutual Fund launched the country’s first silver ETF on January 5, 2022, soon after the Securities and Exchange Board of India (Sebi) in September 2021 allowed mutual fund houses to launch silver ETF in India. Later, on November 25, 2021, the capital markets regulator also came up with operating guidelines on silver ETFs.

According to the Sebi guidelines, a silver ETF scheme must invest at least 95 per cent of the net assets in silver and silver-related instruments. Exchange-Traded Commodity Derivatives (ETCDs), having silver as the underlying asset, would also be considered a ‘silver-related instrument’. 

Also, the physical silver must be of standard 30 kg-bars with 99.9 per cent purity (999 parts per thousand) conforming to LBMA. 

In addition, to bring more transparency, the market regulator has asked fund houses for physical verification of silver underlying the silver ETF units. This verification will be carried out by the mutual fund’s statutory auditor, who will report to the trustees every six months. 

Fundamental Drivers Of Silver Market

Silver is a versatile precious metal with widespread usage across the bio-pharma, medical technology, power generation, electric vehicles, clean energy, and mobility sectors. In addition, silver also has the potential to provide a hedge against inflation. A key factor that will impact silver prices is the expected rise in demand over supply in the near future.