Axis Silver ETF and Fund of Fund: Should You Invest in Silver?
Mitali Dhoke
Sep 10, 2022
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In India, investing in precious metals like gold and silver has been a tradition for many years. Silver has been the cornerstone of technological evolution since time immemorial. Silver's atomic characteristics make it a useful raw material for a variety of businesses. Modern technology that addresses global concerns are powered by silver. Silver has a variety of industrial supply & demand dynamics, unlike other precious metals.
Historically, both these metals have demonstrated their prowess as an empirical choice against uncertain economic cycles. Silver has a very low correlation with equity & debt making it an ideal precious metal asset for diversification. Investing in silver in physical form can be challenging with respect to corrosion over time, safety, purity, etc. Thus, investing in silver through mutual funds has recently gained major traction amongst investors.
While investors have been exposed to Gold ETFs in the past, Silver ETFs have slowly but steadily begun to take the lead. However, most investors are yet to understand the importance of this metal and the purpose it serves in an investment portfolio. Since the movement of silver tends to have minimal co-relation to the movement of Equity or Debt, the ability of the portfolio to compound over the long term is not impacted significantly even in the face of economic headwinds.
In order to help investors add the gleam of silver to their portfolio, Axis Mutual Fund India's seventh largest fund house has launched two schemes - Axis Silver ETF and Axis Silver Fund of Fund.
Mr Chandresh Nigam, MD & CEO, Axis AMC, said, "Silver's interesting proposition wherein it has the ability to act as an industrial commodity, as well as a precious metal, is one of the key factors that we believe will drive its significance. Now that investors have access to investing in Silver via ETFs, it will further increase the metal's value as a promising asset class in the future. With the launch of Axis Silver ETF and Axis Silver FoF, we aim to seamlessly integrate available market opportunities with an investment strategy that allows investors to gain distinctive exposure to the metal. The new scheme's approach aligns with our philosophy and we believe, will be a notable addition to our portfolio of products."
Table 1: Details of Axis Silver ETF
| Type |
An open-ended scheme replicating/tracking the domestic price of Silver. |
Category |
Exchange-traded fund |
| Investment Objective |
To generate returns that are in line with the performance of physical silver in domestic prices, subject to tracking error. However, there is no assurance or guarantee that the investment objective of the scheme will be achieved. |
| Min. Investment |
Rs 500/- and in multiples of Re 1/- thereafter. |
Face Value |
Rs 10/- per unit |
| Entry Load |
Not Applicable |
Exit Load |
Nil |
| Fund Manager |
Mr Pratik Tibrewal |
Benchmark Index |
Domestic Price of Silver (based on LBMA Silver daily spot AM fixing price). |
| Issue Opens |
September 02, 2022 |
Issue Closes |
September 15, 2022 |
(Source: Scheme Information Document) )
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Table 2: Details of Axis Silver Fund of Fund
| Type |
An open-ended Fund of Fund scheme investing in Axis Silver ETF |
Category |
Fund of Fund |
| Investment Objective |
To track returns generated by Axis Silver ETF. However, there is no assurance or guarantee that the investment objective of the scheme will be achieved. |
| Min. Investment |
Rs 5,000/- and in multiples of Re 1/- thereafter. Additional Purchase Rs 1,000/- and in multiples of Re 1/- thereafter. |
Face Value |
Rs 10/- per unit |
| Plans |
|
Options |
- Growth
- Income Distribution cum Capital Withdrawal (IDCW)
|
| Entry Load |
Not Applicable |
Exit Load |
- If redeemed/switched out within 7 Days from the date of allotment - 0.25%;
- If redeemed/switched out after 7 days of allotment - Nil
|
| Fund Manager |
Mr Aditya Pagaria |
Benchmark Index |
Domestic Price of Physical Silver (based on LBMA Silver daily spot AM fixing price). |
| Issue Opens |
September 02, 2022 |
Issue Closes |
September 15, 2022 |
(Source: Scheme Information Document)
The investment strategy for Axis Silver ETF and Fund of Fund scheme will be as under:
Axis Silver ETF endeavours to generate returns that are in line with the performance of Silver, subject to Tracking Errors (as explained below). The scheme aims to invest in physical silver of prescribed quantity and quality (fineness) and endeavour to track the spot price of silver as derived from the LBMA (London Bullion Market Association) AM fixing prices. As per the SEBI rules, all Silver ETFs must hold silver having 99.9% purity.
The Scheme is not actively managed and no attempt will be made to buy or sell Silver to protect against or to take advantage of fluctuations in the price of Silver. Silver will include physical silver and other silver-related instruments, which may be permitted by Regulator from time to time.
The Scheme may also participate in ETCDs, with Silver as underlying to the extent permitted by the Regulations. The permitted limit shall not apply to Silver ETFs where the use of ETCDs, having silver as underlying, will be with the intention to take delivery of the physical silver and not to roll over its position to the next contract cycle.
Axis Silver Fund of Fund scheme, on the other hand, follows a passive investment strategy and will invest in Axis Silver ETF. The AMC does not make any judgments about the investment merit of silver or particular security nor will it attempt to apply any economic, financial or market analysis. The Scheme shall invest all of its funds in units of Axis Silver ETF, except to meet its liquidity requirements.
The AMC does not make any judgments about the investment merit of Silver or particular security nor will it attempt to apply any economic, financial or market analysis. The Scheme shall invest all of its funds in physical Silver and Silver related instruments, except to meet its liquidity requirements.
Under normal circumstances, the asset allocation for both the schemes will be as under:
Table 3: Asset Allocation for Axis Silver ETF
| Instruments |
Indicative Allocations (% of Net Assets) |
Risk Profile |
| Minimum |
Maximum |
High/Medium/Low |
| Silver & Silver related instruments* |
95 |
100 |
Medium to High |
| Debt & Money Market Instruments |
0 |
5 |
Low to Medium |
*includes physical silver and other silver-related instruments, which may be permitted by Regulator from time to time.
(Source: Scheme Information Document)
Table 4: Asset Allocation for Axis Silver Fund of Fund
| Instruments |
Indicative Allocations (% of Net Assets) |
Risk Profile |
| Minimum |
Maximum |
High/Medium/Low |
| Units of Axis Silver ETF |
95 |
100 |
Medium to High |
| Debt & Money market instruments |
0 |
5 |
Low to Medium |
(Source: Scheme Information Document)
About LBMA (London Bullion Market Association)
The London Bullion Market Association is the international trade association representing the global OTC (Over the Counter) bullion market for precious metals such as gold and silver. LBMA is associated with miners, investors, fabricators, ETFs, refiners, manufacturers, consumers, and central banks from around the world. It serves as a point of contact for regulators, investors, and clients, and, most importantly, it is the voice of the global precious metals market.
Who will manage Axis Silver ETF and Axis Silver Fund of Fund?
The designated fund managers for these schemes are Mr Pratik Tibrewal and Mr Aditya Pagaria.
Mr Pratik Tibrewal will be managing Axis Silver ETF, he holds Bcom, LLB (Gen) and MBA (Finance) degrees. He has an overall experience of 10 years in the financial services industry. Prior to joining Axis AMC, he was working with Inditrade Capital Limited, Edelweiss Asset Management Limited and Edelweiss commodities trading Ltd. At Axis Mutual Fund, Mr Tibrewal currently manages, Axis Gold ETF.
Mr Aditya Pagaria will be managing Axis Silver Fund of Fund, he has completed Bachelor in Management Studies (BMS) and Post Graduate Diploma in Business Management (PGDBM). He has an overall experience of 14 years in the financial services industry. Prior to joining Axis AMC, he was associated with ICICI Prudential Asset Management Company Ltd. (Fund Manager - Fixed Income).
At Axis Mutual Fund, Mr Pagaria currently manages, Axis Treasury Advantage Fund (along with Mr Devang Shah), Axis Liquid Fund (along with Mr Devang Shah), Axis Banking & PSU Debt Fund, Axis Ultra Short Term Fund (along with Mr Sachin Jain), Axis Overnight Fund, Axis Floater Fund (along with Mr Hardik Shah) and Axis Money Market Fund (along with Mr Devang Shah and Mr Sachin Jain). Axis Gold Fund, Axis AAA Bond Plus SDL ETF - 2026 Maturity (along with Mr Kaustubh Sule)- Axis AAA Bond Plus SDL ETF - 2026 Maturity Fund of Fund.
Fund Outlook - Axis Silver ETF and Fund of Fund
Axis Silver ETF aims to invest in physical silver and silver-related instruments and it is a smart way to own silver with 99.9% purity in an easy digital form. The scheme seeks to generate returns that are in line with the performance of physical silver in domestic prices as derived from the LBMA (London Bullion Market Association), subject to tracking error.
Similarly, the Axis Silver Fund of Fund scheme aims to simply invest in units of Axis Silver ETF and replicate the underlying scheme's performance. Both schemes offer investors a better alternative to benefit from the appreciation in prices of silver compared to physical silver because it provides higher liquidity and less storage costs. Silver is a versatile commodity used across many industries, including specialist electronics such as the new 5G technology ecosystem to make various technical parts, solar panels, satellites, electric vehicles, etc.
Given that silver is a necessary basic commodity, demand may rise as the world moves toward more sustainable & renewable energy sources. The history of silver prices illustrates that the commodity appreciates in value as inflation rises. These schemes provide a hedge to investors against inflation and have a low correlation with other asset classes. Being a globally priced metal, it acts as a hedge against currency depreciation.
The stability of Silver is the key attribute in times of uncertainty since commodity price movements have a low correlation with equities. In comparison to purchasing physical silver, the schemes offers investors a better alternative because it has higher liquidity and lower storage costs.
However, do note that silver is more volatile in nature than gold since it is an industrial metal. Gold has traditionally been driven by safe-haven demand, whereas silver has been driven by industrial demand. Additionally, the persistent repercussions of the Russia-Ukraine conflict, spiralling inflation and the RBI's recent announcement to hike policy rates again by 50 basis points to curb demand and control inflation may cause a significant risk to the economic growth and keep the commodity market volatile in the near term. The mix of macro-economic and supply-demand dynamics affects the price of silver. But, rising industrial demand may work in favour of silver prices.
Thus, these schemes are suitable for investors with a moderately high-risk appetite and longer investment horizon to benefit from the future potential of silver. Before investing, ensure your investment objectives align with the respective mutual fund scheme. You may choose between Axis Silver ETF and the Fund of Fund scheme as per your suitability.
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Warm Regards,
Mitali Dhoke
Jr. Research Analyst