NFO Pick – (Kotak Gold Silver Passive FOF)

13 Oct 2025 , 11:32 AM

WHY TO LOOK AT A GOLD AND SILVER FUND?

Gold and silver have been stupendous performers in last one year, largely on the back of global uncertainty and the trend towards de-dollarization. This has led to sustained buying demand from central banks, followed by robust demand from global ETFs. While silver also has substantial industrial applications in automobiles, defence, and electronics; gold is more of a safe haven asset class; especially amid rising geopolitical risks.

A gold and silver fund is a natural hedge as it splits the investment between a safe haven asset and an asset with industrial applications too. Both assets have shown relatively lower dispersion and hence greater predictability. Silver has been in structural deficit, but what matters is that the Gold-Silver ratio automatically rebalances prices. Being an FOF, investors do not require a demat and trading account to invest in this fund.

HOW WILL THE GOLD SILVER ALLOCATION HAPPEN IN THE FUND?

In the last 20 years; gold has given positive returns in 16 years and silver in 14 years. Also, in 13 of these 20 years, gold has outperformed silver, while silver did better in 7 years. The allocation between gold and silver will be done based on a proprietary allocation model.

• According to the disclosed data, the proprietary model (when back-tested) has shown the ability to consistently outperform gold and silver as individual asset classes.
• Also, if the proprietary model is compared to a plain-vanilla 50:50 allocation model, then the proprietary model has outperformed in 16 out of the last 20 calendar years.
• The value shifts between gold and silver are continuously captured and rebalanced through a dynamic rebalancing model of the underlying Kotak Gold and Silver ETFs.
• Apart from avoiding GST (physical purchase) and storage hassles, even the reallocation between gold and silver happens in a way that is tax-neutral to the FOF investor.

Let us turn to how precious metals funds have performed in last 1 year!

HOW GOLD AND SILVER FUNDS PERFORMED IN INDIA

In India, while gold funds have a much longer track record, silver funds are of much more recent origin. Hence sustainable long-term returns will not be available in the case of silver funds and gold funds will only cover half the story. However, we can use a proxy. We can use the returns on silver funds and gold funds over the last 1 year to understand how the combination returns would approximately look like.

If you look at the gold funds with more than 1 year legacy, the average returns in the last one year have been between 55% and 62%. That is extremely impressive. However, more impressive is the returns on silver ETFs, which have ranged between 72% and 76% in the last one year.  Obviously, any combination of gold and silver in the last one year would have also generated very attractive returns. More importantly, dispersion across funds is very low.

GLANCE AT KOTAK GOLD SILVER PASSIVE FOF

Here are key details of the Kotak Gold Silver Passive FOF.

• NFO opened on October 06, 2025 and closes on October 10, 2025. This open-ended fund (being an FOF) will invest in units of Kotak Gold ETF and Kotak Silver ETF.
• On the risk-o-meter, Kotak Gold Silver Passive FOF is classified as “High Risk,” due to its substantial exposure to two precious metals that have been volatile in the past.
• Kotak Gold Silver Passive FOF is best suited to investors looking at long term wealth, via an aggressive exposure two of the best performing precious metals globally.
• The benchmark for the fund will be the domestic price of gold and silver and will be calculated as prescribed and approved by the regulators.
• Minimum application amount in NFO is ₹100 and in multiples of ₹100 thereof. It will only offer the growth option, under the Regular Plan and the Direct Plan.
• Rohit Tandon will be the dedicated fund manager for the scheme. There will be no exit load charged on the fund.

Kotak Gold Silver Passive FOF will be given the special treatment meted out to gold ETFs since April 2025. Short-term capital gains (held for less than 12 months) will be taxed at the applicable incremental applicable tax rate. However, if held beyond 12 months, it will be classified as long term capital gains (LTCG), and taxed at 12.5%. However, unlike in the case of equity funds, the base exemption limit of ₹1.25 lakhs will not be applicable here.