Most fund houses announced the addition through an addendum last week, almost 6 months after the Securities and Exchange Board of India (Sebi) allowed all non-debt active schemes to take gold and silver exposure.
According to MF executives, adding gold and silver ETFs to the investment framework primarily aims to give fund managers greater flexibility to use the two commodities when they see an opportunity to diversify their portfolios.
The changes also align the schemes with the revised categorisation framework announced by Sebi on February 26, 2026, they said.
“It is just an enabling provision. In future, when we think it makes sense to invest, we have the flexibility to do so,” said Neil Parekh, chief executive officer (CEO), PPFAS MF. The extent to which fund houses have provided for gold and silver ETFs varies across schemes, reflecting their respective asset allocation mandates. Several flexicap funds, for instance, have provided for up to 35 per cent precious metal ETF exposure, while largecap funds have declared a 20 per cent upper limit. Similarly, multicap funds have set the maximum limit at 25 per cent.
The differences between fund categories arise from the varied fund structures. Largecap funds have to mandatorily invest 80 per cent of the assets in largecap stocks, while the defining criterion for flexicap funds is minimum equity exposure of 65 per cent.
Bandhan had said the provision would be used opportunistically with the aim of improving risk-adjusted returns and allowing fund managers to capture commodity opportunities where a suitable listed-equity play may not be available.
Sebi’s decision to allow gold and silver exposure came after a sharp rally in the two commodities, which had emerged as key alternative assets amid heightened global uncertainty.
According to industry executives, the move was intended to give fund managers greater flexibility to diversify portfolios when equity valuations become stretched and market conditions turn uncertain.
Gold and silver can provide an additional avenue for portfolio diversification when fund managers see limited opportunities in equities, they said.
A few schemes clarified in their communication to investors that investment in gold and silver ETFs will be made based on various factors. These include commodity fundamentals, macro-economic factors like inflation and interest rates, demand and supply, volatility as well as market sentiment, among others.
Leave a comment