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Feature Note / Newsletter

Gold ETFs now eligible for CCR approval for Chilean pension fund investment

Chilean pension funds , etf
12 August, 2020

The implementing regulations enabling approval of Gold ETFs for the general investment category of Chilean pension funds was published on Monday, August 10, 2020 by the Comisión Clasificadora de Riesgo (CCR), a quasi governmental body created by the Chilean pension fund statute.

Felipe Cousiño
Partner – Alessandri

In many respects the new regulations are similar to those applicable to ETFs  in other asset classes, but there are some differences.

There is added focus on the custodian (experience, integrity, membership and adherence to relevant industry bodies and standards, ratings, etc) and there are specific requirements relating to the experience of the manager in Gold ETFs (at least five years, apart from the general experience of 10 years in managing third party assets).

Furthermore, the prospectus and organizational documents must clearly and specifically provide that the objective of the ETF is exposure to gold, the investment in, or backed by, physical gold assets kept by the custodian.

The prospectus and other documents must also provide for segregation and for the safekeeping of the physical asset under an internationally highly  recognized and trustworthy standard. Moreover, the collateral may not be subject to any kind of encumbrance nor may be used in loans, leases, transactions or commitments.

In addition, adequate independent periodic auditing procedures are required. Likewise, both the issuer and the investor must have access to periodic statements of the physical assets that back the ETF.

The minimum required size of a Gold ETF is of US$ 1 billion, excluding contributions made by the manager or its affiliates, as opposed to US$ 100 million in the case of other ETFs.

A listing on a liquid segment of one of the CCR approved exchanges is also mandatory.

As with other types of instruments, the CCR will be making a holistic analysis of the relevant gold ETF, taking into account quantitative and qualitative criteria affecting the fund, its manager, its custodian and the exchange  on which its shares are traded.

If you need more information, please do not hesitate to contact a member of the Alessandri capital markets team.

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