HDFC Gold ETF changes structure, to invest in gold derivatives and other gold related instruments

Tue Mar 24 2026

HDFC Mutual Fund has announced changes in the structure of its gold ETF i.e. HDFC Gold ETF with effect from April 22. The fund house informed about these changes through a notice cum addendum and the changes are structured as fundamental attribute changes.

According to the notice cum addendum, the fund will retain its 95-100% allocation to gold but will now invest in gold related instruments such as Gold Deposit Scheme (GDS), Gold Monetisation Scheme (GMS) and Exchange Traded Commodity Derivatives (ETCDs).

The cumulative exposure to gold related instruments i.e. GDS of banks, GMS and ETCD having gold as the underlying shall not exceed 50% of net asset value of the scheme. However, within the 50% limit, the investment limit for GDS of banks and GMS as part of gold related instruments shall not exceed 20% of net asset value of the scheme.

The unutilized portion of the limit for GDS of banks and GMS can be utilized for ETCD having gold as the underlying.

The notice cum addendum also highlights risk factors associated with investments in Exchange Traded Commodity Derivatives (ETCDs) which includes commodity risk, liquidity risk, price risk and settlement related risk.

Under the liquidity risk, while ETCDs that are to be listed on an exchange carry lower liquidity risk, the ability to sell these contracts is limited by the overall trading volume on the exchanges. ETCDs are leveraged instruments hence, a small price movement in the underlying security could have a large impact on their value, specified under the price risk.

It further highlighted the settlement risk which means that ETCDs can be settled either through the exchange or physically. The inability to sell ETCDs held in the Schemes’ portfolio in the exchanges due to the extraneous factors may impact liquidity and would result in losses, at times, in case of adverse price movement. Wherein the underlying commodity is physically delivered in order to settle the derivative contract, such settlement could get impacted due to various issues, such as logistics, or government policy for trading in such commodities.

In line with regulatory requirements, on account of the change in fundamental attributes being proposed, the fund house is offering an exit window or exit option of 30 days to existing unit holders from March 23, 2026 to April 21, 2026 (both days inclusive). These changes will be effective from April 22, 2026.

During the exit option period, unit holders not consenting to the change may either redeem their units by selling them on stock exchanges viz. NSE / BSE, where the units are listed; or redeem their units amounting to Rs 25 crore and above and in creation unit size directly with the AMC/Fund at Intra-day NAV.

Redemption of units from the scheme may entail capital gain/loss in the hands of the unitholder. For unit holders who redeem their investments during the exit option period, the tax consequences as set forth in the SID of the scheme and SAI of the fund would be applicable.

In case of NRI investors, TDS shall be deducted from the redemption proceeds in accordance with the prevailing income tax laws. In view of the individual nature of tax consequences, Unitholders are advised to consult their professional tax advisors for tax advice.

Source: https://economictimes.indiatimes.com/