Mutual funds allowed to trade in commodity derivatives

New Delhi: Mutual funds can now invest in exchange traded commodity derivatives, except those on sensitive commodities, according to Sebi. To boost participation of mutual funds in the commodities market, the watchdog has allowed them to invest in Exchange Traded Commodity Derivatives (ETCDs) with certain restrictions.

In a circular, the regulator said that no mutual fund schemes can invest in physical goods except in ‘gold’ through Gold Exchange Traded Funds (ETFs). ETCDs having gold as the underlying, shall also be considered as ‘gold related instrument’ for Gold ETFs.

Mutual funds can make the investments in ETCDs through hybrid schemes and Gold ETFs.”… as mutual fund schemes participating in ETCDs may hold the underlying goods in case of physical settlement of contracts, in that case mutual funds shall dispose of such goods from the books of the scheme, at the earliest, not exceeding 30 days from the date of holding of the physical goods,” Sebi said.

Prior to commencement of participation in ETCDs, the unit-holders of existing scheme would be given at least 30 days to exercise the option to exit at prevailing Net Asset Value (NAV) without any exit load charges. MFs can participate in ETCDs of a particular goods (single), not exceeding 10 pc of NAV of the scheme.

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