Mumbai, 6 November: Investors are increasingly chasing the rally in gold prices through exchange-traded funds (ETFs), leading to a sharp surge in assets a new report said.
The data compiled by OmniScience Capital said growth in gold ETF assets under management (AUM) has significantly outpaced that of equity funds, even after adjusting for returns in the underlying asset classes, suggesting that investors are pouring money into gold primarily due to its recent price appreciation.
“We believe this FOMO behaviour would have been similar for any security whose price is rising. This aggressive migration signals a notable departure from structured asset allocation,” said Ashwini Shami, President and Chief Portfolio Manager at OmniScience Capital.
The analysis showed that gold ETF folios have expanded much faster than those of equity mutual funds over the past three years.
Since September 2023, the number of gold ETF folios has risen 2.6 times, compared with a 1.3-fold increase in large-cap fund folios.
OmniScience Capital noted that the trend has resulted in gold holdings reaching levels that appear inconsistent with commonly recommended asset allocation frameworks.
Gold is generally classified as an alternative asset and is typically allocated 5-10 per cent of an investment portfolio, with the broader alternatives bucket accounting for around 10-20 per cent.
Other alternative assets include private equity, structured debt, Specialised Investment Funds (SIFs), REITs and InvITs.
According to the analysis, the total AUM of gold ETFs has climbed to nearly Rs 1.9 lakh crore, equivalent to almost half of the roughly Rs 4 lakh crore managed by large-cap equity funds.
