Edelweiss Silver ETF is open for subscription. Should you invest?

The new fund offer or NFO of Edelweiss Silver ETF is currently open for subscription. The NFO will close for subscription on November 20. Should you invest in this scheme replicating/tracking domestic prices of Silver?

The scheme is benchmarked against Price of Silver (based on LBMA Silver daily spot fixing price). The scheme will be managed by Ashish Sood (for commodities investment). The scheme will re-open for continuous sale and repurchase not later than November 24.

The investment objective of this scheme is to generate returns that are in line with the performance of physical silver in domestic prices, subject to tracking error. The scheme will invest 95-100% in silver and silver related instruments, 0-5% in debt and money market instruments.

The minimum application amount for investment is Rs 5,000 and in multiples of Re 1 thereof per application which includes switch-ins from other schemes of the Edelweiss Mutual Fund. Currently, there are no plans/options available under the scheme.

The scheme is suitable for investors who are looking for long-term capital appreciation and returns that are in line with the performance of Silver over the long term, subject to tracking errors.

Should you invest?
Should you invest in the NFO? We typically ask investors to invest in NFOs only if they offer something unique. The uniqueness could be that the scheme is offering an investment option that is not available in the market or offering something extra to an existing option. Otherwise, we believe investors are better off with an existing scheme with a long performance record. This is because you have some historical data to base your investment decision. You don’t have any data when it comes to new offerings.

There are around six schemes in the silver ETF category that have completed one year of existence in the market. These six schemes have offered an average return of around 12.40%. Axis Silver ETF, the topper in the category, offered 13.14%. Nippon India Silver ETF gave 13.04%. DSP Silver ETF gave 12.31%. HDFC Silver ETF and ICICI Prudential Silver ETF gave 12.27% and 12.13% respectively. Aditya Birla SL Silver ETF gave 11.52% in one year horizon.

As you can see, we don’t have much of a performance record to make an informed decision as these schemes have completed only one year in the market. You should take a call on whether you need silver in your portfolio. You should think about diversifying into silver only if you have a very large portfolio.


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