NFO Review: ICICI Prudential Regular Gold Savings Fund
Sep 20, 2011

Author: PersonalFN Content & Research Team

ICICI Prudential Regular Gold Savings Fund

An Open ended Fund of Funds Scheme

Summary

Type	Open-ended gold fund of fund	Benchmark Index	Domestic price of gold
Min. Investment Add. Investment	Rs 5,000 (for lump sum) and in multiples of Rs 1 thereafter. Rs 1000 for SIPs / Rs 1,000	Face Value	Rs 10 per unit
Entry Load	Nil	Exit Load *	2% *
Issue Opens	September 20, 2011	Issue Closes	October 04, 2011

* An exit load of 2.0% will be levied if the units are redeemed or switched, on or before the completion of 1 year from the date of allotment of units.

Estimated Recurring Expenses: 0.75% of the weekly average net assets of the scheme. However the total Expenses of the scheme including the expenses of the underlying scheme shall be capped at 1.5% of weekly average net assets of the scheme.

Investment Objective*

The investment objective of the scheme is “to generate returns by investing in units of ICICI Prudential Gold Exchange Traded Fund. However, there can be no assurance that the investment objectives of the Scheme will be realised.

The investments into underlying funds under the Scheme would, inter alia, be governed by:

The investment management style of such scheme
The tolerance and the risk profile of such schemes
The asset allocation (such as equity or debt) of such schemes”.

*Source: Scheme Information Document

Is this fund for you?

ICICI Prudential Regular Gold Savings Fund (IPRGSF) is the first gold fund of funds scheme from the ICICI Prudential Mutual Fund. The fund will invest its corpus in ICICI Prudential Gold Exchange Traded Fund (IPGETF). The Fund is launched especially considering the requirements of those who want to buy gold in a paper form, but do not have a demat account. It is noteworthy that unlike ETFs, you don’t require to maintain a demat account while investing in a gold savings fund (like IPRGSF). IPRGSF allows you to invest through Systematic Investment Plan (SIP) route, thereby enabling you to invest regularly in gold and also provide flexibility, as the amount of each monthly SIP can be determined by you subject to minimum amount of Rs 1000 per month.

The fund is mandated to allocate its assets as under:

Type of Instrument	% of Net Asset	Risk Profile
Units of ICICI Prudential Gold Exchange Traded Fund	95 % - 100 %	Low
Debt and money market instruments (including cash & cash equivalents and liquid/debt funds)	0 % - 5 %	Low

(Source: Scheme Information Document)

Fund Manager Profile

IPRGSF will be managed by Mr. Chaitanya Pande who holds a Bachelor’s degree in Science and also has to his credit the PGDM from IMI, New Delhi. He has a total work experience of 15 years in Fund Management, and also manages the IPGETF along with other debt mutual fund schemes.

Fund Outlook

The launch of IPRGSF has come at the time when gold prices are near their all-time highs steered by following factors:

Debt overhang situation in the Euro zone (due to failure of Greece and Italy to put their public finances in place)
Edgy economic recovery in the U.S (Q-o-Q GDP growth rate at mere 1.00% in last quarter i.e. April 2011 to June 2011)
Accentuating inflationary pressures in Emerging Market Economies (EMEs), including India
Dwindling industrial growth in India (IIP at 3.3% in July 2011)
Dwindling economic growth rate in India (7.7% GDP growth rate in Q1FY2011-12)
Anti-graft campaign in India
Piling up of inventory by stockists

Hence, while gold appears expensive to buy at these levels, the aforementioned factors elevate the chances of it ascending further. Thus in order to hedge yourself against the risks we recommend that to periodically invest in gold by allotting 5%-10% of your assets and stay invested in it with a time horizon of 10 to 20 years.

However, one should be watchful about any long-term favourable news disseminating especially from the developed economies, as this may signal a corrective phase for the precious yellow metal. Since the IPRGSF would be investing in IPGETF (the underlying scheme) its fortune would be closely linked to underlying scheme’s performance.

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