1st Gold ETF Makes Debut in Iran

EghtesadOnline: Iran’s capital market witnessed the underwriting of its first investment fund with Bahar Azadi Gold Coin as its underlying asset on Saturday. Offered by Lotus Investment Fund, Lotus Gold Fund’s underwriting is set to continue on to Wednesday under the ‘TALA’ symbol on Iran Mercantile Exchange.

News ID: ۷۷۶۸۸۷

11 June 2017

As the Iranian capital market’s very first exchange-traded commodity, the fund will have an asset composition of both derivatives and securities based on gold, Bourse Press reported

The minimum investment threshold is 10 units and the maximum is 10 million. Each unit is priced at 10,000 rials ($0.26), bringing the ETF's total capital to 1 trillion rials ($26.31 million).

The ETF is also going to utilize active management, which is a portfolio management strategy where the manager makes specific investment with the goal of outperforming an investment benchmark index. It operates in contrast to passive management, in which investors expect a return that closely replicates a benchmark index’s movement and returns, according to Financial Tribune.

The gold fund will offer no dividend per share and the investor will profit based on the increasing value of purchased units over time. Considering ETF's active management, earnings are expected to exceed profits made from physical gold trading.

Investors can participate in the underwriting process both through brokerages and online using their personal trading codes.

An exchange-traded fund gives traders and investors exposure to commodities in the form of shares. Traded like a stock, ETCs track the price movement of various commodities such as oil, gold and silver, and then fluctuate in value based on those commodities. ETCs may track individual commodities or a basket of commodities.

ETCs provide a net asset value, which is considered as their fair value. Since the ETC is traded on an exchange, its value on the market may fluctuate above or below the net asset value.

According to Lotus Investment Fund Managing Director Ali Teymouri, the new ETF will provide investors with an array of advantages, the main one being the possibility of a safe investment in gold.

And what makes gold investment attractive? According to a report published by Lotus, systemic risks are closing in on both global and domestic fronts.

US stocks’ rising P/E ratios, the Federal Reserve’s hesitance in raising interest rates due to US President Donald Trump’s inconsistent fiscal and foreign policy and China’s escalating debt are some of the bad global omens.

On the domestic front, the large bulk of banks’ toxic assets, coupled with the significant difference between inflation and banking interest rates, dissuades investors from cashing in on equities.

"Investing in gold, on the other hand, shields investors from fluctuations in foreign exchange rate and inflation. The commodity can also be easily liquidated and helps investors have a healthy diversified portfolio. It also provides those engaged in its physical trade with a safer and tax-free option," Teymouri said.