Mutual funds takes shine out of Gold bonds - Views on News from Equitymaster

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Mutual funds takes shine out of Gold bonds

Jul 11, 2000

Earlier it was banks shelling out bars of yellow metal to woo public at large. Now it's mutual funds, trying the age-old trick to perk up individual fund corpus by adding a glittering edge to the schemes. If media reports are to be believed, the Unit Trust of India (UTI), India's largest mutual fund will be offering gold at the time of redemption or repurchase of units of Grihalakshmi Unit Plan (GUP), a scheme specially designed for the girl child.

It's a welcome move, as investors will have an option to choose between gold and the Indian currency at the time of redemption. Investors are expected to jump at the offer as gold serves as a hedge against inflation. UTI's gold edged unit scheme (whenever it is launched) might take away a large share of the gold deposit scheme pie offered by banks.

When contacted by personalfn.com, UTI official stated that they had not received any formal notification on the issue. According to a report published in one of the financial daily, gold-against-units scheme would be introduced after the revamp of the existing scheme.

The institution will tie-up with banks offering gold linked deposit scheme and service scheme holders by giving gold instead of money. By offering gold, UTI will be able to market the scheme to unit holders and also offer branded gold through banks without taking any hassle or risk on its portfolio.

This gold-for-units option is one of the many features, which will be added to GUP, which is currently undergoing a complete makeover.

According to UTI officials, at the time of redemption of the unit scheme, the value of gold will be pegged on the basis of the value of gold at that point of time.

GUP is aimed at providing regular income with reasonable capital appreciation for women. While women can save for themselves through this plan, the plan can also be gifted to a daughter/ granddaughter/ niece/ any other female relative, who has completed 18 years of age. Under the scheme, the minimum amount, which can be invested, is to the tune of Rs 5,000. Currently the duration of the Plan is 30 years from the date of investment. The corpus of the fund is invested in debt as well as equity. Under the existing scheme, repurchase is allowed after three years from the date of investment at NAV based repurchase price announced by UTI from time to time.

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