HNI's can transact with physical gold in Birla Sun Life Gold ETF

With gold and silver prices going through the roof, mutual fund houses are using the trend to sell gold ETF's (exchange traded funds) in India. Currently, there are no silver ETF's in India. Riding the growing popularity of gold as an investment instrument, Birla Sun Life Mutual Fund has launched the Birla Sun Life Gold ETF. The new fund offer which opens on 25-April-11 and closes on 9-May-11 appears to be a routine gold ETF. However, the product feature which allows transacting in physical gold as a product feature is interesting.


As per the Scheme Information Document, there is a provision for purchasing units in the ETF by depositing physical gold. Additionally unit holders can choose to receive the physical gold when they sell their units. It would be reassuring for the large investors that the ETF is backed by physical gold.

Authorised Participants and Large Investors may subscribe to/redeem the units of the scheme on any business day directly with the Mutual Fund at applicable NAV and transaction charges, if any, by depositing/receiving physical gold of defined purity (fineness) and quantity and/or cash, value of which is equivalent to Creation Unit size

The Creation Unit size in case of Birla Sun Life Gold ETF shall be 1,000 units and in multiples thereof. 

Each Unit is approximately equal to 1 (one) gram of gold.

Large Investors for the purpose of subscription to and redemption of units of the scheme would mean investors who deal in Creation Unit size, other than Authorised Participants.
Member of the NSE or any other recognised stock exchange or any other person who is appointed by the AMC to act as Authorised Participant as decided by the AMC.

While this is feature is irrelevant for small retail investors it could be useful for high net-worth individuals (HNI)  who may be interested in transacting in values equivalent to at least a kilo of gold. This based on a minimum amount of one creation unit which is equal 1,000 units and a unit is equal to 1 gram i.e. 1 kilogram of gold. This would imply  values of around 22 lakhs.

Transacting in physical gold could be an attractive feature for high net-worth individuals. The details about the Birla Sun Life Gold ETF is available in the Scheme Information Document.

Please note: This post is a discussion around one of the product features of the Birla Sun Life Gold ETF and not an endorsement of the product