Mutual Funds
After the Reliance and Kotak gold savings funds, Quantum has launched an identical product

Gold is making new highs, so fund houses are queuing up to launch gold saving schemes which will enable retail investors to park their money in gold ETFs. But such schemes carry hidden costs—and if you are risk-averse, you should not be betting on gold remaining at such exorbitant levels

Quantum Gold Fund has also launched its gold savings fund after the launch of the Reliance and Kotak gold savings funds, which were the first gold fund-of-funds (FoF) in the industry. (See: Reliance Gold Savings Fund has a strange target group).
Similar to the Reliance and Kotak funds, this is another FoF scheme and investors must understand this offer very clearly. It's a gold ETF (exchange traded fund) based FoF scheme which will invest only in Quantum gold ETFs. The New Fund Offer (NFO) opens on 28 April 2011 and closes on 12 May 2011.

What Reliance had essentially done is converted an ETF into a mutual fund product. This means Reliance can also offer it as a Systematic Investment Plan (SIP) and the same had been done by Kotak and now Quantum has followed suit. Reliance Gold Savings Fund had been pitched as a good option for small investors who want to invest in gold. It has opened the doors for non-demat account holders as it provides the facility to invest through the online medium and through the physical application mode.

Those who were not able to invest in gold ETFs since they did not have a demat account can now participate by investing in this fund. The same procedure was followed by Kotak and now Quantum has also joined the rally.

However, the issue is whether the product is truly beneficial for those whom it is meant for. The gold fund is aimed at those who do not even have a demat account.

We had mentioned this when the Reliance gold savings fund was launched: "Clearly, those who do not even have a demat account don't even know about the risks of equity or are risk-averse enough not to dabble in equity shares. Most investors like them have preferred a safe investment, such as fixed deposits."

At a time when gold is making new highs, asset managers and brokers are queuing up to launch gold saving schemes which will enable retail investors (even those without demat accounts and through SIPs) to park their money in gold ETFs. First, Reliance and then Kotak tried to reach a common class of people who did not have demat accounts and were interested in investing in gold. It targeted the middle class which represents a majority of the population. Obviously, other fund houses do not want to fall behind. So Quantum MF has joined the rally… and there will be many more to come.

As pointed out by Moneylife in February, "The price of gold has gone up six times in the last 10 years. Any asset that has gone up so much for so long a time carries a huge risk of a crash. How will a risk-averse investor react to an asset that can crash suddenly?"

A second issue with the fund is its cost structure. The entry load is nil and exit load is 2% if the investor exits within one year; nil after one year. However, since this is an FoF scheme, there might be ETF expense charges that one needs to pay. As per SEBI (the Securities and Exchange Board of India) guidelines, an FoF can either charge 0.75% of total expenses or it can charge a maximum of 2.5% of total expenses-including the weighted average total expenses of its underlying schemes-and not more than 0.75% as management fee from investors. Though the Quantum Gold Savings Fund will charge 0.75% annually, it will cap the overall cost (FoF+ETF charges) at 1.25%. Even then, a 1.25% cost is not insignificant.




5 years ago

Quantum's scheme is superior to both Reliance and Kotak since the total expenses is capped at 1.25% against 1.50% by the others.

Talks convened by labour commissioner fail to resolve Air India pilots' strike

Airline management refuse to discuss with representatives of pilots association, saying it has been derecognised; pilots insist on recognition of union and reinstatement of sacked colleagues

New Delhi: A fresh round of talks between agitating Air India pilots and the management convened by the chief labour commissioner failed today, the second day of the strike which led to the cancellation of about 60 flights across the country.

The airlines’ management also moved the Delhi High Court today, seeking contempt proceedings against the pilots for defying the order of the court to resume work. And the judge came down heavily on the agitating pilots for defying its order.

Air India also terminated the services of executive pilot Capt VK Bhalla, for expressing solidarity with the Indian Commercial Pilots Association (ICPA). Seven cockpit crew members have been sacked so far.

Chief labour commissioner NK Prasad initiated the second round of talks today, after the first exercise failed on Tuesday, and the number of pilots on strike increased to about 800 pilots.

At the meeting, the management remained firm that it would not talk to a derecognised association, while the pilots demanded restoration of recognition of their association and re-opening of their union offices and the reinstatement of those sacked or suspended. Yesterday, the management had derecognised the association for resorting to illegal protest action.

Air travellers bore the brunt of the disruption in flights due to the pilots’ protest, and many of them complained that they were not informed about the status of their flights in time and some of them came to know about the cancellations only after reaching the airport.

Labour minister Mallikarjun Kharge told journalists that conciliation proceedings were going on and “a solution could be reached only through conciliation”. Civil aviation minister Vayalar Ravi said that he had briefed prime minister Manmohan Singh on the issue and that a committee had been set up to go into the issue. The government would take a view after receiving the committee’s report.

In Mumbai, Rishabh Kapur, general secretary of ICPA, reiterated the pilots’ demand for a probe by the Central Bureau of Investigation into the mismanagement of the airline which, he said, had led to the huge losses suffered by the company after the merger with Indian Airlines. He also demanded a change of management as it was responsible for the airline turning into a loss-making company. Mr Kapur is among the pilot who have been sacked.

This is the second time that a pilots' union has been derecognised by Air India. In 2003, the management withdrew recognition to the Indian Pilots Guild (IPG), after pilots protested and refused to fly to southeast Asia during the SARS outbreak. IPG got back recognition in February 2009.


RBI to hold pre-policy consultations with finance ministry

Experts say the RBI would hike its key policy rates by at least 25 basis points on 3rd May to contain rising inflation. The central bank will also be required to take initiatives to promote growth

New Delhi: Amid concerns of rising inflation and slowdown of industrial growth, the Reserve Bank of India (RBI) will hold consultations tomorrow with the government in the run-up to its annual credit policy to be announced next week, reports PTI.

RBI governor D Subbarao is expected here in the capital tomorrow to hold pre-policy consultations with finance ministry officials.

"We will talk with the governor of the RBI before he announces the monetary policy. We will have a discussion. I think he is coming tomorrow," finance minister Pranab Mukherjee told reporters here.

The RBI meeting on 3rd May, which will fix the policy for 2011-12, comes at a time when the industrial growth has started showing signs of lagging and inflationary pressure continues to pose a threat to the economy.

Experts say the RBI would hike its key policy rates by at least 25 basis points on 3rd May to contain rising inflation.

While trying to check prices, the RBI will also be required to take initiatives to promote growth.

The central bank has already increased the short-term lending (repo) and borrowing (reverse repo) rates eight times since March 2010 to suck out excess liquidity from the system and tame demand as a means of fighting inflation.

Headline inflation has remained above 8% since January 2010. It clocked 8.98% in March this year. At the same time, food inflation has also been running high and close to double-digits, despite government's projection of a record harvest of wheat and pulses.

To add on to troubles, core inflation, which does not factor in rise in food prices, have also started shooting up and stood at over 7% in March.

While inflation has been at a sustained level, manufacturing growth has slowed down in the recent months.

Factory output, as measured by the Index of Industrial Production (IIP) slowed to 3.6% in February 2011, compared to a 15.1% expansion in the year-ago period.

Industrial output growth during the April-February period of 2010-11 stood at 7.8% vis-à-vis the corresponding previous period. In contrast, industrial output had expanded by 10% year-on-year in April 2009-February 2010.

In the pre-budget Economic Survey released in February, the government said it expects gross domestic product (GDP) growth to be 9% this fiscal.

However, in recent weeks many global banking and brokerage majors have exuded scepticism about the number due to rising commodity prices and falling investments.

Earlier this month, the Asian Development Bank revised its India growth forecast for 2011-12 to 8.2% from the earlier estimate of 8.7%.

According to Citigroup, India's economic growth is likely to be only around 8%, while according to Goldman Sachs it would be 7.8%.

The International Monetary Fund said that India's real GDP, which factors in value of output economy adjusted for price changes as in inflation, is expected to grow by 8.25% in 2011 calendar year.


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