NFO Alert: Tata Mutual Fund launches the Tata Gold ETF Fund of Fund; all you need to know

Tata Mutual Fund announced the launch of the Tata Gold ETF Fund of Fund. The scheme opened for public subscription on January 02, 2023, and will close on January 16, 2023. The scheme re-opens for continuous sale and repurchase on or before January 24, 2023.

What kind of mutual fund scheme is this?

This is an open-ended fund of fund scheme investing in the Tata Gold Exchange Traded Fund.

This product is suitable for investors seeking

• Long-term capital growth
• Returns that are in line with returns provided by Tata Gold Exchange Traded Fund

What is the main objective of investing in this fund?

The primary investment objective of the scheme is to provide returns that are in line with returns provided by Tata Gold Exchange Traded Fund. However, there is no assurance or guarantee that the investment objective of the scheme will be achieved.

Speaking at the launch, Anand Vardarajan, Business Head – Institutional Clients, Banking, Alternate Investments and Product Strategy, Tata Asset Management said, “When you don’t know the risk, diversify. When you know the risk, hedge it. Precious metals like gold and silver help investors in hedging their risk and also diversify their portfolios. It offers the ability to hedge against inflation and currency fluctuation and at the same time, being differently co-related, it helps in providing hiding space when equity and debt markets turn volatile. If most of the gold is above the ground and only less is to be unearthed, then this becomes a great asset class to be owned. Limited supply coupled with rising demand for gold makes a great case to have it in one’s portfolio.”

How may one invest in this scheme?

Investors can invest under the scheme with a minimum investment of ₹5000 per plan/option and in multiples of Re 1. There is no upper limit for investment.

Under normal circumstances, the asset allocation of the scheme will be as follows:

Are there similar mutual funds in the market?

To date, many asset management companies (AMCs) have launched such gold ETF fund of funds, thus, allowing inclined investors to avail of returns corresponding to the total returns of the securities in this particular index. Most of these funds are not too old, which means that investors can assess them only by their recent performance. These include:

How will the scheme benchmark its performance?

The scheme will be investing substantially in the Tata Gold Exchange Traded Fund (TGETF). The underlying benchmark for TGETF is the domestic price of gold. Hence, the domestic price of gold is the appropriate benchmark for performance comparison.

The performance comparisons for the scheme will be made vis-à-vis the benchmark. However, the scheme’s performance may not be strictly comparable with the performance of the benchmark, primarily due to the inherent differences in the construction of the portfolio and expense ratio.

Are there any entry or exit loads to this scheme?

This scheme involves no “Entry Load”, which means that investors do not have to pay anything to park their earnings in this scheme. The “Exit Load” would be calculated as under

• Redemption/Switch-out/SWP/STP on or before the expiry of 365 days from the date of allotment: If the withdrawal amount or switched-out amount is not more than 12% of the original cost of investment- NIL.
• Redemption/Switch-out/SWP/STP on or before the expiry of 365 days from the date of allotment: If the withdrawal amount or switched-out amount is more than 12% of the original cost of investment-1%/
• Redemption/Switch-out/SWP/STP after expiry of 365 days from the date of allotment- NIL.

Who will manage this scheme?

Tapan Patel is the designated fund manager of this scheme.

Does the fund contain any inherent risk?

The scheme involves “High Risk” as per the details mentioned in the Scheme Information Document and is best suited to investors willing to understand that their principal will be subject to high risk only. However, investors should consult their financial advisors if they doubt whether the product is suitable for them.