Mutual Funds
Gold ETFs have meagre assets despite rising gold prices; savers have better options to buy gold

Meagre assets in gold ETFs (Exchange Traded Funds) show the weakness in the outreach strategy of mutual funds. Besides, savers have safer options to invest in gold. Will Reliance Gold Savings Fund be able to overcome this?

Mention gold and it immediately attracts the imagination of the Indian saver. The common assumption is that gold always goes up and indeed, gold prices have been rising sharply for the past 10 years. Those who are scared of the risks in equities think that gold is risk-free-that it always goes up. One way to invest in gold is through gold ETFs. When there is an inherent interest in an asset class and the asset is also performing well, it always attracts a flood of money.

So, gold ETFs must be overflowing with cash, right? Wrong. There are 10 gold ETFs in the market that have been launched between 2007 and now. All these 10 fund companies have been able to attract with their collective might is just about Rs3,300 crore.




Avg AUM (RsCr) Oct-Dec 2010

Axis Gold ETF

10-Nov 2010



Gold Benchmark ETF (Gold BeES)

08-Mar 2007




13-Aug 2010



ICICI Prudential Gold ETF

24-Aug 2010




27-Jul 2007



Quantum Gold Fund

22-Feb 2008



Reliance Gold ETF-Dividend Payout

21-Nov 2007



Religare Gold ETF

12-Mar 2010




18-May 2009




10-Apr 2007






 (AUM: Assets under management)

This is too small a number given that gold has gone up over five times in the last 10 years. There are about 1.5 crore demat accounts in India where gold ETFs can potentially go into, but the sales of gold ETFs are still not rising. Why has the gold ETF not become popular as a means of attracting money into gold, even when gold prices have been shooting up?

The answer is that savers don't like or don't understand ETFs, especially since this involves having a brokerage and demat account. Besides, they have better means to buy gold. But more about that later.

It is against this scenario of poor popularity of gold ETFs that Reliance has launched its Gold Savings Fund, the first gold fund of funds, which opens a new avenue for investing in gold as an asset class.

The fund seeks to provide returns of gold through investments in the Reliance Gold Exchange Traded Fund, which in turn invests in physical gold. It enables you to reap the returns of gold in a paper form without the need of a demat account. It has tried to bring gold investments under the umbrella of a normal mutual fund. Making such an opportunity available, Reliance has targeted those investors who do not even have a demat account needed to invest in equity markets.

However, the issue is not about access through a demat account or the lack of it. The fact is that gold ETFs are not popular even among those who have demat accounts. By eliminating the demat requirement, can Reliance reach a large new market? This remains to be seen, but it is unlikely.

One of the advantages of Reliance Gold Savings scheme is that you can start small and run a systematic investment plan. These are important features, but they are unlikely to sway those savers who have nothing to do with brokerage and demat accounts today. A large section of Indian savers regrettably don't trust either the regulator or market intermediaries, and so have nothing to do with the entire equity complex.

This is borne out by the grassroots research work Moneylife and Moneylife Foundation have done. Indeed, the fact is that savers have little to do with not only the broker-demat complex but even with mutual funds. This is evident from the poor growth in assets under management (AUM) of mutual funds.

Considering the above scenario, will the Reliance Gold Savings Fund be successful in achieving its target? Will this scheme be able to attract those small investors for whom such a kind of investment is like entering the complicated world of finance?

Well, gold ETFs and Reliance have a formidable competitor. Savers simply think that they have better options of investing in gold. As against a poor record to ETFs, the Tanishq gold savings scheme of Titan Industries has developed an investor base of lakhs. The scheme is simple and promises high fixed returns.

According to the Golden Harvest monthly savings scheme of Tanishq gold, you commit to pay a certain fixed amount for 11 months and the 12th installment is paid by the company. Say for instance you pay Rs3,000 per month for 11 months.

So the total amount paid by you is Rs33,000. On this you get a bonus of Rs3,000, after 12 months so that your total amount becomes Rs36,000. With this amount you can buy gold anywhere in India from any Tanishq showroom at the end of the year.

Recently it has also opened online investing where foreign investors can also invest in this scheme. Work out the math. It promises a 14% return on your scaled investment.

There is no tax deducted at source because you are not getting interest. There are no regulatory hassles like Know Your Customer (KYC) norms. There are no skirmishes with the regulator either, because there are no regulators for this scheme.

A lot of smaller jewellers with a long pedigree also offer the same scheme. There are huge limitations of such gold savings schemes, but they still work because there is a fixed return and no price risk.

To wean away a saver from this alternative of running a fixed income scheme with her trusted jeweller, a minor innovation that does away with demat accounts may not be enough. Savers have their own preferences which fund companies are today unable to meet, for a variety of external and internal reasons.




6 years ago

while agreeing with R Bala, I started investing in Gold ETF after SBI ETF entered market. I found it very convienent, safe and steady investment. The growth is steady but sure as far as the treand shows. With small investment of just 2k PM good asset can be built up over a period of time. The instrument is a very good option for middle income group who needs Physical Gold at a later part of life for the marriage of children.

R Balakrishnan

6 years ago

Tanishq scheme is a rip off. One, you cannot buy gold coin/bar. You can only buy their jewellery, which normally carry a 12 to 20 percent making charges and wastages. Second, you are buying it at a rate that is prevailing at the point of buying. So, if you believe gold prices are going to rise, you are best off with an ETF.
Tanishq scheme is only good for housewives who are compulsive buyers of jewellery, because it forces them to save and no go except to accept jeweller in return.



In Reply to R Balakrishnan 6 years ago

A perfect observation.How can a Tanishq Scheme be compared with an ETF?It is just another marketing/sales gimmick by Tanishq.

Karvy Private Wealth CEO: iTrust online presence, offline business was attractive

Hrishikesh Parandekar says iTrust was a nice fit with Karvy’s wealth management business.  “We met the iTrust entrepreneurs, liked the business and acquired it.”

Earlier this month, Karvy Private Wealth took over In December, NetAmbit bought The exits have been described as not so profitable. So, has the click-and-buy model failed? The new owners have a strong offline business and were looking for a foothold in the online segment. Hrishikesh Parandekar, chief executive officer of Karvy Private Wealth, talked to Moneylife on these and related issues. Excerpts from an interview.

What was the reason to acquire iTrust? Did you also consider other websites like rupeetalk (before it was acquired) before finalizing?

iTrust has a great online space positioning, website traffic and brand recall for clients in a niche market. They have a good tax-filing tool for customers that  gives leads for financial planning business for retail investors and high networth individuals (HNIs). They developed corporate relations by signing up with human resources departments for employee tax and financial planning in several cities. The team of over 100 iTrust employees worked in an advisory role and solicited business. It has been a nice fit with our business in wealth management. No, we did not look at rupeetalk or other websites. We did not go out for competitive shopping. We met the iTrust entrepreneurs, liked the business and acquired it.

 Personal finance websites have been struggling. iTrust had also closed down its office in Mumbai. We hear that it has been not so great an exit for iTrust entrepreneurs. When will you break-even with your iTrust investment?  

I cannot speculate on why they closed the Mumbai office. We are not bothered about it. We have a good presence in Mumbai. iTrust had a good presence in Hyderabad, NCR and Bangalore. I can't comment on exit of iTrust entrepreneurs and their profitability. We have not disclosed the acquisition cost, but are happy about it. There are multiple pieces to the acquisition and hence we can't comment on break-even.

You decided to acquire iTrust instead of developing a website yourself? Is it similar to your other acquisition like the wealth management boutique, PARK Financial Advisors?

It is a question of buying a brand in a niche position versus the time that it would take to build it. We decided against doing it ourselves. We have grown inorganically through acquisitions which brought in some quality senior management. Each situation is unique and so is iTrust. We got different things from each acquisition.

The customers coming to the iTrust website would be different from the HNI clients you are servicing. Are you going to change your customer segmentation?

We will continue to serve HNI customers in three segments of family office, core wealth management, and affluent business. We took the lead for the acquisition, but there will be leads and flows for other businesses in the Karvy group. The leads that do not meet our wealth criteria will be given to other Karvy businesses like distribution for mutual funds, insurance and so on. There are over 500 points of presence for Karvy distributors that can consume the leads to close business.

Are you also interested in the lead generation business for insurance, credit card, loan and so on through the website? Will you be selling leads to a third party?

We will not monetize by selling leads to a third party. We will use it to close the sale ourselves or give it to other businesses in the Karvy group. If there is need for insurance-based financial planning we can sell it as we are insurance brokers.

How do you derive business leads from Karvy group companies?

As a matter of business practise we don't tap into the mutual fund registry data at all, even though there is no regulation. To some extent, we do take leads from the corporate registry where share owners of a corporation are recorded. The share transfer agent business of Karvy has information about corporations and its shareholders. We also get leads from Karvy broking arm that has information about demat accounts.

Who are your main competitors?  

Foreign institutions like Merrill Lynch, Citi Private Wealth, Morgan Stanley; home-grown ICICI Bank, HDFC Bank and Kotak Wealth are our competitors. At the Karvy group level, there are competitor brokers like Motilal Oswal, Religare, Indiainfoline, Anand Rathi and so on. There are multi competitors in multiple segments.

Can you give information about the number of clients, assets under management (AUM), profitability?

We have about 2,500 clients with Rs2,500 crore AUM. This is the second year of our operation and we have been profitable, but I cannot share details.



prakash chandra praharaj

6 years ago

I am a Certified Finacial Planner and would like to join the panel for answering the questions.Pl advise how to go about it?

Godrej may hike soap rates to offset rising costs

Godrej group firm Godrej Consumer Products, which sells soap brands such as Cinthol and Godrej No 1, raised prices of its soaps by 3%-5% in early January

The Godrej group, a major player in the FMCG segment, said it could hike soap prices to offset rising input costs, particularly those of vegetable oils.

"Soap is one category which is affected because vegetable oil prices are rising. We are meeting it by efficiency in manufacturing and distribution and by some price increase. There could be further price increases," Godrej group chairman Adi Godrej said.

When asked by how much the prices could go up, he said: "It is difficult to predict how much, but it depends on how raw material prices will pan out. If the raw material prices go up significantly, we need to take a price hike."

Godrej group firm Godrej Consumer Products (GCPL), which sells soap brands such as Cinthol and Godrej No 1, raised prices of its soaps by 3%-5% in early January. It had also raised the prices of its hair-colour products by 10% around three months ago.

Godrej, however denied on cutting down on retailers' margins.

On the acquisition front, he said the company is no longer aggressively looking out for prospective purchases after a spate of acquisitions last year, although it continues to keep its option open.

"We are looking for acquisitions, when suitable acquisition comes our way, we will. I won't use the word aggressively, but we are looking for it," Godrej said.
Last year, GCPL had seven acquisitions to its credit, including the takeover of leading African personal care brand Tura from Nigeria's Tura Group, Latin American hair colour firm Issue Group and Argentina's Argencos.

On Monday, GCPL ended 0.28% down at Rs356.95 on the Bombay Stock Exchange, while the benchmark Sensex gained 1.25% to 18,438.31.


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