Mutual fund investors continue to shun gold funds

Assets more than halved since 2013 amid continuous outflows

Mutual fund schemes investing in gold are struggling to attract investments with investors' preference shifting towards equity-oriented funds.

In 2013, assets of gold funds stood at nearly Rs 12,000 crore amid weakness in the equity markets. Since then, overall assets in the gold fund category have seen a decline of 55 per cent to Rs 5,098 crore in July 2017.

Four years ago, overall gold schemes' assets comprised 1.5 per cent of mutual funds' overall assets. This has now slipped to a mere 0.25 per cent given the surge in the sector's overall assets to Rs 20 lakh crore.

Investors have continuously been redeeming funds from gold funds. Rather, since the beginning of 2014, barring a few occasions, almost all months have witnessed incessant redemptions. In the last one year, when equity schemes have offered double-digit returns to investors, gold funds have made negative return of about 4.8 per cent. Even debt-oriented funds have made 7-10 per cent returns for investors during the past one year.

A Balasubramanian, CEO of Aditya Birla Sun Life Mutual Fund said, "Investors have shifted and are shifting to financial asset classes. We have seen a surge in demand for equity-oriented funds and balanced funds. I believe, gold funds will continue to see outflows going forward too."

So far in 2017, gold funds have seen total net outflows of Rs 417 crore. Currently, there are 12 gold-related funds offered by the MF industry.

According to Milind Barve, managing director, HDFC Mutual Fund, "There is a clear shift from physical assets to financial assets. Mutual funds have been a beneficiary of this trend. At a time when outlook of real estate and gold does not look good, inflows are seeing an uptrend in financial assets."

Sector officials asserted that with bank declining the deposit rates, more investors are likely to opt for MFs in the coming years. Over the last four years, equity assets of mutual funds have surged from less than Rs 2 lakh crore to nearly Rs 7 lakh crore.