Axis Silver ETF has emerged as the top-performing silver fund over the last three months, despite recording a decline of 6.6%. While this makes it the leader among its peers, the negative figure reflects broader volatility in the commodity market. Investors should analyze these short-term dips against long-term tracking efficiency and commodity price trends rather than just current rankings.
What Happened
Axis Silver ETF has recorded a return of -6.6% over the last three months, placing it at the top of the silver ETF category as of June 25, 2026. Despite the negative return, the fund outperformed several peers in the same period. Aditya Birla SL Silver ETF and Kotak Silver ETF also posted an identical -6.6% return, highlighting a challenging period for the silver commodity segment. The data focuses on funds with Assets Under Management (AUM) exceeding Rs 1,500 crore.
Understanding Commodity ETF Returns
In the world of exchange-traded funds (ETFs) linked to commodities like silver, returns are directly tied to the underlying spot price of the metal. When the price of silver falls in the global or domestic market, the ETFs that track this metal will inevitably show negative returns. Being the "top performer" in a negative market simply means the fund managed to lose less value or stay closer to its benchmark than its peers.
Investors often see negative returns and mistake them for poor fund management. However, for silver ETFs, the primary goal is not to generate alpha—which means beating the market—but to track the price of silver as closely as possible. If silver prices are down, a perfectly managed ETF will also show a decline.
Size Versus Performance
While performance metrics shift over time, it is useful to look at the scale of these funds. ICICI Pru Silver ETF currently holds the largest corpus among the top five qualifying funds, with an AUM of Rs 15,985.7 crore. Large size can be an advantage for liquidity, as it generally makes it easier for investors to buy or sell large quantities of units without causing drastic price swings on the exchange. However, a larger AUM does not guarantee better performance or lower tracking error compared to smaller funds.
Risks Investors Should Know
Investors in silver ETFs face three primary risks:
Commodity Price Risk: Silver is a highly volatile industrial and precious metal. Its price is influenced by global demand, industrial usage, and macroeconomic factors like interest rates and currency fluctuations.
Tracking Error: This is the difference between the ETF's return and the actual return of the physical silver price. Factors such as management fees, cash holdings, and the time taken to buy physical silver can cause the ETF price to deviate from the actual metal price. A high tracking error is generally a negative sign for an investor.
Liquidity Risk: While ETFs are traded on stock exchanges, the trading volume can be thin for some funds. This might make it difficult to enter or exit a position at the desired price, especially during periods of market stress.
What To Track Next
Investors should avoid judging silver ETFs solely on short-term snapshots. Instead, they may look at the one-year and three-year performance data to understand how the fund behaves over full market cycles. The most critical metric for any ETF investor is the tracking error, which is usually mentioned in the fund's monthly factsheet. A consistently low tracking error over a long period is a stronger indicator of a quality ETF than short-term rankings in a volatile commodity market.