The Motilal Oswal Gold and Silver Passive Fund-of-Funds delivered a 9% return over the last three months, outpacing traditional gold-only funds. This performance is largely tied to its hybrid strategy of holding both gold and silver assets. Investors should note that while this mix can drive higher returns, it also introduces the volatility associated with silver markets.
What Happened
Motilal Oswal Gold and Silver Passive Fund-of-Funds (FoF) has emerged as the top performer in its category over the last three months, posting a return of 9.0%. This performance puts it ahead of other popular gold-focused funds, including ICICI Prudential Gold ETF FoF, which saw 8.4% returns, and Axis Gold Fund, which delivered 8.1%. These comparisons are relevant for funds with assets under management (AUM) exceeding ₹1,500 crore.
The Gold vs. Gold-Silver Difference
It is important for investors to understand why this fund is performing differently from its peers. Most funds in the gold category invest exclusively in gold assets. However, the Motilal Oswal fund is a hybrid, investing in both gold and silver ETFs.
Gold is often seen as a hedge against inflation and market uncertainty, while silver is a precious metal that also has industrial uses. Because of its dual-exposure strategy, this fund’s performance is not strictly tied to gold price movements alone. When silver performs well, the fund can generate higher returns than pure gold funds, but it can also be more volatile during periods when silver prices drop.
Performance Highlights
Beyond the recent three-month data, the fund has shown strong long-term numbers. Over the past year, it recorded a return of 59.2%, significantly higher than the 10.1% return posted by its benchmark. Even on a three-year horizon, the fund has outperformed the benchmark by a wide margin. While Motilal Oswal currently leads in these shorter-term and one-year periods, the broader market landscape remains dynamic. For instance, SBI Gold currently leads in six-month returns with a 5.2% gain, showing that different funds may perform better over different time cycles.
Understanding the Risks
Investors looking at these performance figures should consider the composition of the funds. A pure gold fund and a gold-silver fund have different risk profiles. The inclusion of silver adds a layer of market risk, as silver prices are typically more sensitive to industrial demand and macroeconomic changes than gold. Therefore, comparing a gold-silver fund directly with a pure gold fund should be done with the understanding that the underlying investment strategy is distinct.
What Investors Should Watch
While high returns are attractive, they often come with higher risk. Investors may want to track the price trends of both gold and silver separately, as these will drive the fund's future performance. Furthermore, comparing funds based on AUM is useful for understanding the scale, but it does not determine future returns. SBI Gold, for example, manages a significantly larger corpus of ₹16,532.9 crore, whereas Motilal Oswal manages ₹2,863.1 crore. Investors should consider their personal risk tolerance for silver volatility before choosing between a pure gold fund and a diversified precious metals fund.