Artha Bharat Investment Managers has introduced a physical gold fund in GIFT City that tracks international prices and invests in LBMA-standard gold bars. Investors can choose between cash or physical gold delivery upon redemption, marking a shift in how gold is held as a financial asset within the IFSC.
What Happened
Artha Bharat Investment Managers IFSC has launched the Artha Bharat FinMet Physical Gold Fund, establishing it as the first physical commodity fund within India’s International Financial Services Centre (IFSC) in GIFT City. The fund operates as an open-ended passive investment vehicle designed to track international spot gold prices. By partnering with the Singapore-based precious metals specialist FinMet, the firm plans to allocate a minimum of 95% of its assets directly into London Bullion Market Association (LBMA)-standard gold bars. These assets will be sourced and traded through the India International Bullion Exchange (IIBX).
Investment Strategy and Storage
The fund’s primary goal is to provide investors with a structure that closely mirrors global gold price movements. Unlike traditional gold ETFs that may rely on paper derivatives, this fund is backed by physical assets. The gold bars are stored in insured, secure vaults managed by the India International Depository IFSC (IIDI). This setup is designed to ensure that the physical backing of the investment is both transparent and verified under the regulatory framework of the International Financial Services Centres Authority (IFSCA).
Flexibility for Investors
A notable feature of this fund is the redemption flexibility. When investors choose to exit their position, they have the option to receive the value in cash or take delivery of the actual certified physical gold bars. The fund has set a total expense ratio at 0.65% per annum, which covers management and operational costs. Subscription and redemption windows are scheduled on a weekly basis, providing liquidity that is distinct from standard bullion market trades.
The Role of GIFT City and IIBX
This launch highlights the growing importance of the India International Bullion Exchange (IIBX) as a hub for institutional gold trading. By utilizing IIDI vaults for long-term asset storage rather than just import-export transactions, Artha Bharat is attempting to create a new way for institutional and high-net-worth investors to hold gold. For investors, this structure reduces the typical hurdles associated with sourcing, transporting, and securing physical gold independently.
What Investors Should Track
Because this fund tracks international spot prices and operates within the IFSC, potential investors should consider currency fluctuations between the Indian Rupee and the US Dollar, which can influence returns. The key monitorables for this scheme will be the fund’s tracking error relative to global gold prices, the actual demand for physical redemption, and the liquidity available during the weekly windows. Investors should also note that regulatory norms in GIFT City for IFSC-based funds may differ from those of domestic mutual funds in India.