Now invest in Commodities through Mutual Funds

In a significant step, Securities and Exchange Board of India (SEBI) has issued new norms that have opened doors for participation of Mutual Funds (MF) in commodity derivatives. Mutual funds, so far were not permitted to invest in commodities other than gold.

SEBI has permitted Mutual Funds to participate in exchange-traded commodities derivatives (ETCD) except the 'sensitive commodities'. Essential commodities in the agriculture segment are regarded as sensitive.

Hybrid funds and gold exchange-traded funds have been permitted to participate in ETCDs. Funds should appoint a custodian to take care of physical settlement of contracts. Foreign portfolio investors (FPIs) aren’t allowed to invest in ETCDs

Investment limit         

 
Mutual fund schemes shall participate in ETCDs of particular good, not exceeding 10 per cent of net asset value of the scheme. However, the limit of 10 per cent is not applicable for investments through gold ETFs in ETCDs having gold as underlying.       

In case of multi-asset allocation schemes, the exposure to ETCDs shall not be more than 30 per cent of the net asset value (NAV) of the scheme. 

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