Edelweiss Silver ETF, an offering from Edelweiss Mutual Fund, has opened for subscription on Thursday, November 16. This open-ended exchange-traded fund (ETF) aims to mirror the domestic prices of silver, presenting investors with an avenue to align their returns with the performance of physical silver in the domestic market.
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This initiative marks a move by Edelweiss to tap into the growing interest in precious metals, specifically silver, as a means of diversification and hedge against market volatility. Running until November 20, the new fund offer (NFO) presents an opportunity for investors to delve into this avenue.
The investment objective
The investment objective of Edelweiss Silver ETF is to generate returns in line with the performance of physical silver in domestic prices, albeit subject to tracking errors. However, it's crucial to note that while the scheme's objective is well-defined, it doesn't assure or guarantee any returns, necessitating a careful consideration of risk factors before diving in.
Plan/options available
During the NFO period, the minimum application amount stands at ₹5,000 and in multiples of ₹1 thereafter. Post the NFO phase, market makers and large investors can directly purchase or redeem in blocks from the fund in "Creation unit size" on any business day.
Entry and exit loads
There's no entry load applicable, and for creation unit size, no exit load is levied on redemptions made by market makers or large investors directly with the fund.
Liquidity and trading on the exchange
For other than creation unit size, no direct redemption is feasible with the fund, permitting redemption only through the stock exchange during trading hours, subject to the prevailing market conditions, according to the fund document.
To ensure liquidity, the units are set to be listed on stock exchanges, offering investors the flexibility to buy or sell on all trading days. The pricing of these units in the secondary market will hinge on demand and supply dynamics, further facilitated by appointed market makers who will provide ongoing liquidity, Edelweiss Mutual Fund said.
Asset allocation
Under normal circumstances, it is anticipated that the asset allocation of the scheme shall be as follows:
| Instruments | Indicative allocations (% of total assets) | Risk Profile | |
| Minimum | Maximum | ||
| Silver and silver-related instruments | 95% | 100% | Moderate risk to high-risk |
| Debts and money market instruments | 0% | 5% | Low risk to moderate risk |
(Source: Fund document)
Expense structure
The Edelweiss Silver ETF, while offering a promising avenue for investment, comes with a breakdown of expenses that investors should carefully scrutinise. The expenses associated with this ETF are bifurcated into two main categories:
NFO expenses: These encompass a spectrum of activities related to the NFO launch, including sales and distribution fees, marketing, registrar expenses, printing, and stationery. For the Edelweiss Silver ETF, these NFO expenses will be borne by the AMC.
Annual scheme recurring expenses: These recurring expenses account for the day-to-day operations of the scheme. They encompass various charges such as investment management and advisory fees, registrar and transfer agents' fees, marketing and selling costs, and other operational expenditures.
The AMC estimates the recurring expenses to be charged to the scheme's daily net assets. It's essential to note that the actual expenses may deviate from the estimates provided by the AMC.
A look at returns of similar schemes
| Scheme name | Returns (1-year) |
| Nippon India Silver ETF | 13.04% |
| ICICI Prudential Silver ETF12.13% | 12.13% |
| ICICI Prudential Silver ETF FoF | 14.24% |
| DSP Silver ETF | 12.31% |
| HDFC Silver ETF | 12.27% |
| Axis Silver ETF | 13.40% |
(Source: Value Research)
Should one invest?
Investment decisions often hinge on multiple factors, and the Edelweiss Silver ETF is no exception. It's crucial for prospective investors to weigh the pros and cons before venturing in.
Pros:
Diversification: An opportunity to diversify an investment portfolio by venturing into the precious metals market.
Hedge against volatility: Precious metals like silver are often considered a safe haven during market upheavals, potentially providing a hedge against volatility.
Liquidity and flexibility: The ETF's listing on stock exchanges assures liquidity and the flexibility to trade on any business day.
Cons:
Risk factors: Investments always come with inherent risks. Fluctuating market prices, settlement risks, and liquidity concerns are factors to consider.
No assured returns: The scheme's disclaimer on returns underscores the uncertainty associated with investment outcomes.
Conclusion
The Edelweiss Silver ETF presents a decent opportunity for investors seeking to diversify their portfolios and hedge against market volatility. However, it's imperative to conduct a comprehensive risk assessment, considering the inherent uncertainties and the disclaimer on returns associated with this investment avenue.
(Edited by : Amrita)
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