Domestic fund house Tata Mutual Fund on Monday said that subscription to its Tata Silver ETF Fund of Funds (FoF) scheme will be suspended until further notice. In a communication to potential investors, the mutual fund provider said that the change will take effect from the next day, October 14.
The information was included in the scheme’s information document (SID), it noted.
Tata Silver ETF Fund of Funds
The fund — an open-ended scheme — invests in the Tata Silver Exchange Traded Fund and aims to generate returns in line with domestic silver prices.
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The Tata Silver Exchange Traded Fund is commonly known as Tata Silver ETF.
Tata Mutual Fund manages both direct and regular plans of the FoF.
Why this move?
The fund house said that the decision is “due to prevailing market conditions and (a) shortage of physical silver in the domestic market; silver is trading at a premium relative to international prices”.
It also noted that the domestic silver price premium “directly impacts the valuation of the Scheme”.
Therefore, in light of the current market scenario, Tata Mutual Fund has decided to “temporarily suspend all lump sum investment, switch-in into the scheme and fresh registration of Systematic Investment Plan (SIP) and Systematic Transfer Plan (STP) into the scheme from the effective date”, it wrote in a note to investors.
Tata MF suspends subscription to Silver ETF FoF | What happens to the existing SIP and STP plans?
The fund house clarified that all its existing SIPs and STPs registered under the scheme will continue to be operational.
It also said that purchases, switch-in transactions as well as fresh SIP and STP registrations received before 3 pm on Ocober 13 will “be accepted and processed at applicable NAV”.
“Please note that during this suspension period, Redemptions, Switch-out, Systematic Withdrawal Plan (SWP) will continue to be permitted in accordance with the terms outlined in the Scheme Information Document,” it added.
The fund house also said that the “suspension is temporary in nature and shall continue only till further notice in this regard”.
Here are answers to a few frequently asked questions (FAQs) on the subject:
What are funds of funds?
A fund of funds is a mutual fund that invests in other mutual funds.
This is contrary to direct buying in stocks or bonds.
Simply put, in an FoF, instead of the investor choosing funds, the FoF picks and manages a basket of funds for the investor.
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How are FoFs different from normal mutual funds?
Your investment in an FoF goes into other funds.
Those funds then invest in individual companies or assets.
What does a silver ETF FoF do?
A silver ETF fund of funds invests your money in a silver exchange-traded fund (ETF).
A silver ETF tracks silver rates, giving investors a simpler avenue to invest in non-physical silver.
These silver ETFs invest in physical silver or silver-related instruments.
A silver ETF FoF gives you exposure to silver prices — just like owning silver — but without having to buy or store the metal yourself.
