After the Securities Exchange Board of India revised its policy on capital outflow, allowing fund houses to invest upto USD 2 billion in overseas funds and securities, DSP Merrill Lynch has been the first to launch a feeder fund.

The Gold Fund will avail of its full quota of USD 2 billion to invest in equities of international gold mining companies through its parent company, Merrill Lynch World Gold Fund. The RBI had approved an overseas investment of up to USD 4 billion in May 2007, which is yet to be approved by SEBI.

DSP Merrill Lynch is optimistic that the rupee’s current status will encourage Indian investors to invest in the fund. The company’s research team in London has predicted a high growth trajectory for the gold market, with prospects of doubling in seven years, or perhaps even four years. This analysis is supported by American hedge-fund experts who forecast gold prices to scale up to USD 1,000 an ounce from the prevailing USD 664 an ounce.

The fund managers are also banking on the Indian’s love for gold, which transcends all classes of society. Holding 10% of the world’s gold, India is the largest international market, and an opportunity to invest in overseas gold mining companies would appeal to many.

UTI Asset Management and Benchmark Asset Management had earlier this year launched a gold fund which released exchange traded funds that track index performance on the price of gold worldwide.

DSP’s Gold Fund started subscription on July 25 and will close as the company achieves its USD 2 billion target. Subscribers need to make a minimum investment of Rs.5000 in the Fund.

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