Corporates cut investment in gold ETF by 38% in a year

Thanks to systematic investment plans, retail investors now have the largest share of assets managed by gold-backed ETFs. Corporates, on the other hand, have been reducing their exposure to these gold funds.

Retail investors accounted for 44.63 per cent of the total assets of Rs 6,215 crore managed by gold ETFs last quarter. In the same quarter of the previous year, retail investors were the second largest investor group with a 33.2 per cent share, behind corporates.

While retail investors have marginally increased their investment in the gold ETFs to Rs 2,297 crore in the September quarter from Rs 2,089 in the year-ago quarter, corporates have been significantly reducing their investments.

Corporates accounted for 46.72 per cent, or Rs 2,941 crore, in the year ago period. They have been bringing it down in the past two quarters and the investments now stand at 35.3 per cent, or Rs 1,817 crore. Their investments have come down by 38 per cent in one year.

Most of the other groups of participants, including banks and financial institutions, FIIs and high net-worth individuals, too have been going slow with investments. FIIs have completely exited gold ETFs and banks and financial institutions have just Rs 1.14 crore invested in the funds.

In case of retail investors, those who have been investing systematically in gold ETFs through the feeder funds have remained consistent. Some of the asset management companies, which operate these feeder funds, have been contributing to the stability of the gold ETF AUMs. In the past two years, gold ETF AUMs have remained stable around Rs 6200 crore levels. It was steadily declining for three years till 2015. In 2012, when the gold prices were on a bull run, gold ETF AUMs had touched Rs 12,000 crore.

“Short-term investors who have been looking for quick returns have exited gold ETFs. So we have been seeing outflows stabilising. Still there are a few serious customers who look at gold from a long-term perspective” said Lakshmi Iyer, CIO-fixed income & head-products, Kotak Mahindra Asset Management. Retail investments have been steady due to the systematic investments of these serious long-term investors, she said.