Kotak Mutual Fund Continues Gold Silver Passive FoF Despite Silver Premium Pressure

Kotak Mutual Fund is moving ahead with its Gold Silver Passive Fund of Fund despite the ongoing spike in silver premiums driven by festive demand and supply limitations, as per the news reports. The fund is expected to allocate primarily to Kotak Gold and Silver ETFs guided by an internal model.

Silver Crunch Doesn’t Derail Gold Silver Passive FoF Launch

On October 6, 2025, Kotak Mutual Fund launched its Gold Silver Passive FoF amid a sharp rally in silver prices. Despite the 8% to 10% premium on domestic silver due to high seasonal demand and supply issues, the fund house has confirmed no change in plans. The offering continues to allocate funds into Kotak Silver and Gold ETFs with a targeted 95% deployment in these metals and 5% in money market instruments to maintain liquidity.

Temporary Halt on Silver Fund of Fund Inflows

Prior to this launch, Kotak had suspended lump-sum and switch-in flows into its Silver FoF due to high valuation risk. Silver ETFs were trading at a premium, leading to concerns about new investors potentially buying at inflated prices. This decision reflected Kotak’s risk management stance while preserving long-term capital growth for existing investors.

Market Dynamics Behind Silver Premiums

Silver prices in 2025 have rallied largely due to dual-value drivers, investment demand as a safe-haven asset and industrial utility. This demand spike triggered a physical supply crunch, pushing silver ETF premiums up. Lack of fresh physical silver supply has limited new ETF unit creation, distorting NAV and iNAV alignment.

Read More:When Will Lump-Sum Investments in Silver ETF FoFs Resume?

Conclusion

Kotak Mutual Fund’s decision to proceed with its Gold Silver Passive FoF reflects confidence in the transient nature of silver's inflated premium. The fund aims to ensure planned deployment within regulatory timelines, relying on upcoming price corrections after the festive period for optimal entry levels into the asset.

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