“An erroneous trade around market closing at 3:28 pm, in the Edelweiss Gold ETF was executed at around Rs. 53 instead of Rs. 63,” said a spokesperson for Edelweiss Mutual Fund.
As the trade could not be reversed before close on Thursday, the average closing price for Edelweiss Gold ETF on Thursday was Rs 56.2. Since this fund invests 50% each in Edelweiss Gold ETF and Edelweiss Silver ETF, the net impact of the error on Edelweiss Gold and Silver ETF Fund of Fund’s NAV was 6.9%.
On Friday, the NAV of the scheme is likely to normalise as the Edelweiss Gold ETF price normalised and came back to Rs 64.90 per unit, which is the price of gold.
Launched in September 2022, the fund has assets of Rs 98 crore as of December 2023. Such a situation could lead to a sharp loss for any investor who redeemed his units on that particular day (in this case Thursday). Any investor who purchased on Thursday would have made unprecedented gains.
“Investors must check the underlying ETF size, liquidity and volume traded on the exchange while considering an investment. If the scheme size is large, chances are it will be highly liquid and there will be no mispricing of assets,” said Nirav Karkera, head of research, Fisdom.Financial planners said many such exchange traded funds (ETFs) are illiquid because of low asset size and poor incentives to market makers.Some financial planners believe investors should opt for schemes that have built a track record.
“In the case of niche schemes, conservative investors should be careful and are better off opting for those with a track record of at least three years,” said Nikhil Gupta, Founder, Sage Capital.
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