Sayantan Chakraborty
ETFs or Exchange Traded Funds are a kind of Mutual Fund whose Units are traded in the Stock Market, just like regular shares of a company. Just like regular ETFs, Gold ETFs are passive investment instruments that primarily invest in Gold. But to generate the highest return, you need to pick the right Gold ETF. So in this article, we will talk about the Top 5 Gold ETFs in India.
There are a few things you have to keep in mind when choosing a Mutual Fund or an ETF, or in our case, a Gold ETF.
How to Choose the Best Gold ETF?
Gold is generally used as a hedging instrument by investors, but a lot of people think that just analyzing the return is enough to judge a Mutual Fund or an ETF. But that is not the ‘only’ parameter you should look at.
Parameters to Check Before Investing in Gold ETFs
- The Fund House -An Established, renowned fund house is always recommended over any new ones. Establishing trust among the customers in the financial industry is hard to come by, and experience plays a very big role in this industry.
- Age of the Gold ETF – Check the Inception Date of the ETF.
An ETF with a long history means you have more data and numbers to judge the performance.
ETFs with at least 3 to 5 Years of historical data is recommended. - AUM of the ETF – AUM or Assets Under Management is one of the most important factors when choosing a Mutual Fund or an ETF. Or, in our case, a Gold ETF.
A high AUM value indicates more people have trusted the fund or the ETF, and have poured in their hard-earned money. - Expense Ratio – The Expense Ratio is basically the fee you pay to the Fund House and the Fund Manager to manage the ETF.
Lower the Expense Ratio, the better for you.
Generally, passively managed ETFs always have a lower-Expense Ratio compared to actively managed Mutual Funds or ETFs. - Tracking Difference – When you are selecting an ETF that passively tracks a particular index or a particular asset class, in our case, Gold – You should always check how closely the ETF is tracking the index or the asset class.
Tracking Difference is common among passively managed funds but, your chosen fund or ETF should have the least Tracking Difference among its peers.
Let’s understand Tracking Difference using an example –
Let us say that the Gold Index has moved up by 1.35% on a particular month. And the Gold ETF you are thinking of investing in has moved up by 1.26% in that same particular month. Then -0.09% (1.26 – 1.35) is the Tracking Difference of the ETF.
Just keep in mind that the ETF you choose should have the least Tracking Difference among others.
Another thing to note is, that Tracking Difference and Tracking Error are not the same things. Tracking Error is a far more complicated jargon that 99.99% of retail investors don’t need to bang their head on.
But if you want to understand the concept of Tracking Error, ET Money has a detailed video about the issue on Youtube.
These are just a few parameters among many that you should analyze before investing in a Gold ETF. But here is one of our articles that will help you judge a Mutual Fund or an ETF on a fundamental basis.
We had a detailed discussion about Gold ETF in our Gold Investment guide, do give it a read – you will find it helpful. You find almost all of your questions regarding Gold Investment answered in that article. From taxation to indexation benefits to collateral capabilities for loans, all are answered in that article.
Or you can directly jump to the Gold ETF section by clicking here.
Now let’s move to the main topic of the article.
5 Best Gold ETFs in India in 2021
5 Best Gold ETFs in India
We will be listing the Top 5 Gold ETFs in India based on their AUM size.
- Nippon India ETF Gold BeES
AUM – Rs. 6,327.3 Crores
NAV – Rs. 41.2405/-
(As of 24th November 2021)
Starting on the 8th of March 2007, the Gold ETF of Nippon India has the highest AUM among its peers as of 24th November 2021.
Each unit of the ETF resembles approximately 0.01 Gram of Gold.
The ETF is managed by 38 Years old Mr Mehul Dama. His educational qualification included C.A., B.Com. He has 14 Years of experience in this industry with positions like Vice President – Controllers of the Indian arm of Goldman Sachs Asset Management Company, Vice President of Operations/Controllers of Benchmark Asset Management Company, etc.
At the moment, Mr Dama handles 24 open-ended schemes of Nippon India Mutual Fund.
Nippon India ETF Gold BeES has an Expense Ratio of 0.79%.
Let us use an example to understand it –
If you have invested 100 Rupees in the Nippon India ETF Gold BeES and at the end of the year, your investment value has risen to Rs. 110/-. Then 86 Paise (110 x 0.79%) will be deducted from Rs. 110, at the end of the year.
Now let us talk about few ratios.
Nippon India ETF Gold BeES has a Standard Deviation of 4.49. Meaning, the ETF will either rise or fall 4.49% from its Mean Value. (Mean Value is basically the Simple Average of a Mutual Fund or an ETF)
The Beta Value of the ETF is 0.97, meaning the ETF will rise or fall less compared to the Benchmark Index. In this case, the Benchmark Index is the domestic value of Gold.
The Sharpe Ratio of the ETF is 0.19. Sharpe Ratio is risk measurement ratio, which tells us whether a fund is taking extra risk to generate extra returns.
Sharpe Ratio is used to compare funds of the same category. Lower the Sharpe Ratio, the better for you.
All of these Ratios and many more have been discussed in detail in this article. If you want to know more about these ratios and how they work, do give it a read.
Nippon India ETF Gold BeES has invested 98.53% of its AUM in Gold. And the rest of the 1.47% of the AUM is kept in super liquid assets to avoid any liquidity issues.
Nippon India ETF Gold BeES has generated annualised returns of –
14.35% over 3 years
9.21% over 5 Years
and
4.22% over 10 Years - HDFC Gold Exchange Traded Fund
AUM – Rs. 2,792.03 Crores
NAV – Rs. 42.371/-
(As of 24th November, 2021)
Starting on the 13th of August 2010, HDFC Gold ETF has the second-highest AUM among all the Gold ETFs that are traded on the NSE or the BSE..
Each Unit of the ETF resembles approximately 0.01 Gram of Gold.
The ETF is managed by 49 Years old Mr Krishan Kumar Daga. With a B.Com degree and 23 Years of experience under his belt, at the moment, Mr Daga manages 12 HDFC Funds / ETFs.
He has held the position of Vice President on multiple companies including Deutsche Equities, Reliance Capital, etc. He also held the position of Head of ETF and Fund Manager at Reliance Capital Asset Management Company.
As of 24th November 2021, HDFC Gold Exchange Traded Fund has an Expense Ratio of 0.60%.
The ETF invests 97.77% of the AUM in 1 Kg Gold Bars which are 99.5% pure. And the rest is kept in super liquid money market instruments to prevent any liquidity issues.
Now let us take a look at a few ratios –
We were unable to find the Standard Deviation of HDFC Gold ETF on any of the official documents from HDFC Mutual Fund. But websites like Moneycontrol and Value Research have estimated the Standard Deviation to be between 14 to 15.
Such a high Standard Deviation indicates that the ETF is very volatile.
No mention of different Risk Ratios on the SID or on the Factsheet of the ETF doesn’t paint a very good picture of the ETF. But still, let’s carry on!
The ETF has a Beta Value of 0.97, which is lower than 1. It means that the ETF will swing up or down, less, compared to the Benchmark Index, which is the Domestic Price of Gold.
HDFC Gold Exchange Traded Fund has a Sharpe Ratio of 0.64.
As of now, we can only compare the Sharpe Ratio of the HDFC ETF to Nippon India ETF Gold BeES. And we can see that the Sharpe Ratio of the HDFC ETF is far higher than that of the Nippon India ETF ( 0.64 vs 0.19). This tells us that HDFC Gold Exchange Traded Fund is taking way more risk compared to Nippon India ETF Gold BeES.
Now lets us see how the HDFC Gold ETF has performed over the years.
HDFC Gold Exchanged Traded Fund has generated annualized returns of –
14.31% over 3 Years
7.05% over 5 Years
and
4.37% over 10 Years
After looking at the returns, we can see that the Nippon India Gold ETF has beaten HDFC Gold ETF on a 3 Years and 5 Years basis, but the HDFC Gold ETF has outperformed on the 10 Years basis.
Let’s move on to the next ETF. - SBI – ETF Gold
AUM – Rs. 2,461.62 Crores
NAV – Rs. 4,243.60/-
(As of 24th November, 2021)
Starting on the 18th of May 2009, the Gold ETF of the State Bank of India Mutual Fund has the 3rd highest AUM among all the Gold ETFs in India.
Each unit of the ETF resembles approximately 1 Gram of Gold. And that is why the NAV of SBI Gold ETF is much higher compared to the rest of the ETFs discussed above.
SBI – ETF Gold is managed by 42 Years old Mr Raviprakash Sharma. The educational qualification of Mr Sharma includes B.Com, C.A., and C.F.A. (USA). With 22 Years of experience in the Indian capital market, Mr Raviprakash Sharma at the moment manages 12 Open-Ended funds in SBI Mutual Funds.
His past experience included positions like Manager, Senior Manager, Financial Advisor, Assistant Vice President, at companies like Birla Sunlife Securities, HDFC Asset Management Company, Citigroup, Kotak Securities, etc.
As of 24th November 2021, the Expense Ratio of the SBI – ETF Gold is 0.51%.
The ETF invests 98.17% of the AUM in Gold, Gold Bullion and other Gold related securities. And the rest of 1.83% is kept in cash and money-market instruments.
Time to take a look at a few ratios.
We were unable to find any mention of important ratios on the Factsheet or the SID of the ETF. So the information, data and numbers provided below are sourced from Moneycontrol, Morning Star and Value Research.
According to Moneycontrol and Value Research, the Standard Deviation of the SBI – ETF Gold is between 14 and 15.40. Indicating that the ETF is volatile in nature.
The Beta value of the ETF stands at 0.97, meaning the ETF will be less volatile compared to its Benchmark Index which is the Domestic Price of Gold.
Let us explain it with an example –
If the price of gold goes up by 100 Rupees, the ETF will gain 97 Rupees. If the price of gold goes down by Rs. 100/-, then the ETF will lose Rs. 97/-.
The Sharpe Ratio of SBI – ETF Gold is 0.66.
It means the Gold ETF of State Bank of India Mutual Fund is taking more risk compared to both HDFC Gold ETF and Nippon India ETF Gold BeES (0.66 vs 064 and 0.19).
Let’s take a look at the performance of the ETF over the years.
SBI – ETF Gold has generated annualized returns of –
15.40% over 3 Years
9.55% over 5 Years
and
4.40% over 10 Years
After looking at the returns, we can see that the Gold ETF of SBI has comprehensively outperformed both the Gold ETF of Nippon India and HDFC, on a 3 Years, 5 Years, and 10 Years basis. - ICICI Prudential Gold ETF
AUM – Rs. 2,047.38 Crores
NAV – Rs. 42.84/-
(As of 24th November, 2021)
Began trading on the 24th of August 2010, ICICI Prudential Gold ETF has the 4th highest AUM among all the Gold ETFs traded in the country.
Each unit of the ETF resembles approximately 0.01 Gram of Gold.
ICICI Prudential Gold ETF is managed by 3 people.
Mr Manish Banthia
Mr Nishit Patel
and
Mr Gaurav Chikane
41 Years old Mr Manish Banthia has a B.Com degree and an MBA. He is also a Chartered Accountant. With a work experience of more than 16 years, Mr Banthia has been associated with ICICI Prudential since October of 2005.
As of October 2021, Mr Banthia manages 18 other Funds and ETFs at ICICI Prudential AMC.
26 Years old Mr Nishit Patel is a Chartered Accountant, he also has a degree in B.Com. Mr Patel has joined ICICI Prudential in November of 2018.
At the moment, Mr Patel manages 21 other Funds and ETFs at ICIC Prudential AMC.
38 Years old Mr Gaurav Chikane has a Bachelor of Engineering degree in Information Technology and an MBA in Finance. He has been on the fund manager roster of ICICI Prudential AMC since the 1st of July, 2021.
Mr Patel is currently a dedicated fund manager for managing investment in Exchange Traded Commodity Derivatives.
In the past, he has worked with companies such as Accenture, Edelweiss, Inditrade, etc.
At the moment, Mr Patel manages ICICI Prudential Multi-Asset Fund.
As of September 30, 2021, Mr Manish Banthia has been managing the ETF for a tenure of 9 years 1 month. Mr Nishit Patel has been managing the ETF for a tenure of 10 months. And, Mr Gaurav Chikane (for Exchange Traded Commodity Derivatives) has been managing the ETF for a tenure of 2 months.
As of 24th November 2021, the Expense Ratio of the ICICI Prudential Gold ETF is 0.50%.
Time for some ratios.
Earlier, we were unable to find any mention of important ratios on the factsheet of a few ETFs discussed above. But this time, ICICI Prudential won’t let us take a look at the factsheet of their Gold ETF until they have our contact information.
Anyway, we still searched and found a few ratios which we will discuss now.
Both, Morning Star and Value Research is estimating that the Standard Deviation of the ICICI Prudential Gold ETF is above 15.
The Beta value of the ETF is 0.98. Meaning, it will be less volatile compared to the Domestic Price of Gold.
According to Moneycontol, the Sharpe Ratio of ICICI Prudential Gold ETF is 0.73.
The Gold ETF of ICICI Prudential has the highest Sharpe ratio among all the ETFs discussed above, which is not a good sign for the ETF.
The lower the Sharpe Ratio, the better for you.
ICICI Prudential Gold ETF has generated annualized returns of –
15.14% over 3 Years
9.31% over 5 Years
and
4.29% of 10 Years
So we can see, that on 3 Years and 5 Years annualized return basis, ICICI Prudential Gold ETF has outperformed the Gold ETFs of Nippon India and HDFC. But couldn’t beat the Gold ETF of SBI Mutual Funds.
But on the basis of 10 Years annualized return, the Gold ETF of ICICI Prudential has slightly outperformed Nippon India ETF Gold BeES. But underperformed compared to the Gold ETFs of SBI Mutual Funds, HDFC.
Now let us move on to the final Gold ETF of our list. - Kotak Gold Exchange Traded Fund
AUM – Rs. 1,941.5 Crores
NAV – Rs. 41.35/-
(As of 24th November, 2021)
Launched on the 27th of July 2007, Kotak Gold ETF has the 5th largest AUM size among its peers.
Each unit of the Kotak Gold ETF resembles approximately 0.01 Gram of Gold.
The ETF is managed by 2 people.
Mr Abhishek Bisen
and
Mr Satish Dondapati
43 Years old Mr Abhishek Bisen has a B.A. degree in Management and an MBA in Finance. Mr Bisen is associated with Kotak AMC since October of 2006.
He manages a total of 9 Funds and ETFs at Kotak AMC.
The Gold ETF of Kotak AMC is also managed by 42 Years old Satish Dondapati, who has an MBA degree in Finance. He joined Kotak AMC in March of 2008. Before joining the AMC, he was in the MF Product Team of Centurion Bank Of Punjab.
With 13 Years of work experience under his belt, Mr Dondapati manages 9 Funds and ETFs at Kotak AMC.
As of 24th November 2021, the Expense Ratio of Kotak Gold Exchange Traded Fund is 0.55%.
Time to look at a few ratios of the ETF.
The Standard Deviation of the Gold ETF of Kotak is 15.41, which is similar to the Gold ETFs of HDFC and SBI Mutual Funds.
The Beta value of Kotak Gold ETF is 0.97, which is lower than 1. Meaning the funds will swing around less compared to the Domestic Price of Gold.
The ETF has a Sharpe ratio of 0.66, which is again similar to the Gold ETFs of HDFC and SBI MFs.
Let us take a look at the past performance of Kotak Gold ETF.
Kotak Gold ETF generated annualized returns of –
15.67% over 3 Years
9.48% over 5 Years
and
4.10% over 10 Years
As we can see, the Gold ETF of Kotak has outperformed all the above-mentioned ETFs based on a 3 Years annualized return.
On the basis of 5 Years annualized return, Kotak Gold ETF has outperformed the Gold ETFs of Nippon India, HDFC, and ICICI Prudential Mutual Funds. But underperformed compared to SBI – ETF Gold.
And on the basis of 10 Years annualized return, Kotak Gold ETF has underperformed all of the above mentioned Gold ETFs.
All the data and numbers mentioned above are sourced from Moneycontrol, Value Research and Morning Star.
Which is the Best Gold ETF in India?
The 2 Best Gold ETFs in India are Nippon India ETF Gold BeES and SBI – ETF Gold.
Let us justify the above statement with a few numbers.
Both the ETFs manage a huge sum of money, proving investors’ confidence in them. They also have a history of 10 years and more, which means both the ETFs have seen multiple market cycles and are experienced in managing the fund during uncertain times.
Both ETFs have a different amount of Gold associated with their units. The Gold ETF of Nippon India can be favourable for small retail investors as each unit of the ETF resembles approximately 0.01 Gram of Gold, while SBI – ETF Gold can used by serious investors for long term Gold investing.
Investing in Gold with just Rs. 40/- was once a pipe dream, but Gold ETFs made it a reality.
Both the ETFs are managed by experienced fund managers who have a long history of operating in this industry under their belt.
When it comes to Expense Ratio, Nippon India ETF Gold BeES seems to be expensive, but considering how consistent the performance of the ETF has been over the years, the Expense Ratio of 0.79% isn’t too high.
While the Gold ETF of SBI has an Expense Ratio of 0.51%, which is common among all the top tier Gold ETFs.
Now let’s compare the returns each ETF has generated over time.
| Name of The ETF | 3 Years Annualized Return | 5 Years Annualized Return | 10 Years Annualized Return |
| Nippon India ETF Gold BeES | 14.35% | 9.21% | 4.22% |
| HDFC Gold Exchange Traded Fund | 14.31% | 7.05% | 4.37% |
| SBI – ETF Gold | 15.40% | 9.55% | 4.40% |
| ICICI Prudential Gold ETF | 15.14% | 9.31% | 4.29% |
| Kotak Gold Exchange Traded Fund | 15.67% | 9.48% | 4.10% |
From the above chart, we can see that on a 3 Years Annualized Return basis, the Gold ETF of Kotak has performed the best. SBI – ETF Gold came second.
On a 5 Years and 10 Years Annualized Return basis, the Gold ETF of SBI tops the chart.
Now you might be thinking that Nippon India ETF Gold BeES is nowhere near the top performers, then why is Money Premier recommending it.
Well, in assets like Gold “Consistent” performance is what you want, and the Gold ETF of Nippon India has definitely performed very consistently without many hiccups. And the ETF is also the least volatile ETF among all its peers.
Secondly, how open the fund house is about the ETF.
While researching this topic, the only fund house we found that openly provided all the data about their ETF was Nippon India. And transparency is a very big issue when it comes to money and investments.
Conclusion
To conclude the whole article, each ETF has its own Pros and Cons. Some have more Pros while some have more Cons.
If you are a long term investor (which you should be), then investing in any one of the ETFs discussed above wouldn’t generate a drastically different return from the other in the long run.
That was it.
If you found this article helpful, do Upvote us using the Upvote Button below. It motivates us to make more such articles.
Do share this article with your friends and family if they are thinking of investing in Gold too.
And also – Sharing is Caring! 🥰
And as usual, in the end, we will say –
Good Luck and Happy Investing! 😊
Disclaimer: The views, investment tips, presumptions, and calculations expressed on Moneypremier.net are not of the website or its management. This article is for Educational Purposes only. Moneypremier.net advises users to check with certified experts before making any financial decisions.
Stock Disclaimer – As of 8th December 2021, people associated with Money Premier (https://moneypremier.net/) do not own any units of any of the ETFs mentioned in the article. But, they might take positions in the ETFs mentioned in the article, in the future.
Comments
Loading…