Gold ETFs have delivered returns of greater than 30% over the previous 12 months. Compared, liquid debt funds, fairness indices just like the Nifty and conventional financial institution fastened deposits have provided modest returns within the 5-8% vary.
“The sharp distinction in efficiency is pushing us to discover gold ETFs below unit-linked insurance policy (ULIPs) to enhance portfolio returns and add a hedge in opposition to market uncertainty,” an insurance coverage govt who had despatched this advice to the regulator stated on situation of anonymity.
ET BureauULIPs supply flexibility to policyholders to allocate funds throughout fairness, debt and balanced choices, relying on their threat urge for food. Insurers need the Irdai to permit them to take a position 3-5% of their ULIP belongings below administration in gold ETFs. The life insurance coverage {industry} at the moment has ₹70 lakh crore in belongings below administration. In response to latest requests, the insurance coverage regulator suggested firms to route their proposals by way of the Life Insurance coverage Council, the {industry} physique representing life insurers.
The regulator requested for an in depth proposal with dangers and proposed mitigation measures. It’s going to take a choice after reviewing the industry-wide proposal. Its approval would widen the funding universe for insurers, providing them entry to an asset class that’s more and more seen as a rewarding secure haven amid international uncertainty.
Following the financial shocks triggered by the Covid-19 pandemic and rising geopolitical tensions, gold has turn out to be a strategic reserve asset for a lot of nations. Central banks worldwide have elevated gold purchases.
In 2024-25 alone, the Reserve Financial institution of India (RBI) purchased 57.5 tonnes of gold, the second-highest addition in a yr since 2017. Over the previous 5 years, the RBI’s gold holdings elevated 35% to 880 tonnes on the finish of FY25 from 653 tonnes in FY20.
Gold now accounts for about 12% of India’s whole international trade reserves, up from 6.86% in 2021, in response to the World Gold Council. Individually, the insurance coverage {industry} is pushing for longterm funding choices, looking for approval to spend money on zero-coupon bonds and longer-tenure company debt, significantly from infrastructure corporations. Whereas insurers can already spend money on authorities securities, equities, fairness derivatives and infrastructure, they face a scarcity of long-dated devices to match long-term liabilities.
Most infrastructure corporations difficulty fiveyear debt, which insurers discover too quick. Insurers have urged the federal government to difficulty 20and 30-year sovereign zerocoupon bonds. Over the previous 25 years, gold has given a return of 20 occasions.
