Page 14 - BANKING FINANCE OCTOBER 2021

MUTUAL FUND

Mut ual F und N ew s
Mutual Fund News
Mutual Fual Fund Nund Newewss
Mut
Mutual Fund News

Sebi rolls out swing pricing framework with a partial swing during per data released by the Association of
normal times and a mandatory full Mutual Funds in India. This is in addi-
to protect debt mutual swing during market dislocation times tion to the money invested in sovereign

fund investors for high risk open-ended debt gold bonds that track gold prices and
Sebi has introduced the concept of schemes," the circular said. are issued by the Reserve Bank of In-
'swing pricing' to protect investors in Sebi has directed industry body Asso- dia on behalf of the Government of
debt mutual funds (MFs) in the event ciation of Mutual Funds in India (Amfi) India. Precious metals, especially gold
of a market dislocation or large re- to determine thresholds for triggering and silver, are an important asset class
demptions. the mechanism. In addition, fund for many Indians.

In a circular issued recently, the regu- houses will be allowed to introduce The launch of ETFs tracking prices of
lator said initially the mechanism will other parameters. silver and crude oil has been a long-
be made applicable only during net The market regulator will define 'mar- standing demand of investors and the
outflows. This framework shall be ap- ket dislocation' based on Amfi's recom- mutual fund industry. Silver has been
plicable with effect from March 1, mendation or take a suomoto call. an integral part of investors' commod-
2022. Once market dislocation is declared, it ity portfolio globally. As per etfdb.com,
Swing pricing is a mechanism used to will be notified by Sebi that swing pric- five silver ETFs account for assets worth
USD 13.7 billion. iShares Silver Trust is
ensure that long-term investors in debt ing will be applicable for a specified the largest ETF tracking silver prices,
schemes are not adversely impacted period.
managing assets worth USD 12.4 bil-
during big-ticket redemptions, typically lion. The ETF has lost 1.69 percent over
by large investors. SEBI clears way for launch the last one year. The expense ratio of
At times, a fund house is forced to liq- of silver exchange-traded these ETFs tracking silver ranges be-
uidate their good quality papers to tween 30 and 95 basis points.
meet redemption requests. This sparks funds in India Meanwhile, gold ETFs too have benefit-
a fall in net asset value (NAV), impact- SEBI in its board meeting on Septem- ted from the gold price rise in recent
ing those who remain invested. Swing ber 28 approved the idea of launching years; barring recent volatility where
pricing allows a fund house to adjust silver exchange-traded funds (ETFs) in
it has lost 8.69 over the last one year.
the NAV of a scheme at times when India. Overall though, smart investors have
there are large outflows in such a way At present, Indian mutual funds are benefited by gold price movements,
that there is little or no erosion in value allowed to launch ETFs tracking only but in a paperless way that gold ETFs
and the redeeming investors don't get
one commodity - gold. Gold ETFs to- and sovereign gold bonds offer, with-
any unfair advantage.
gether manage assets worth Rs out the botheration of holding and
"The framework shall be a hybrid 16,349 crore as on August 31, 2021, as storing physical gold.

14 | 2021 | OCTOBER | BANKING FINANCE