On August 27th, according to reports, local pension regulators are considering relaxing certain investment restrictions, including gold-backed exchange-traded funds (ETFs). Multiple government and industry sources revealed that pension fund managers met several times with senior officials from the Pension Fund Regulatory and Development Authority (PFRDA) in late July, seeking approval for pension investments in gold ETFs. Reportedly, regulators are not only studying this proposal but have already issued draft guidelines on gold investments to fund companies, soliciting feedback. This development reflects the urgent need among pension fund managers for diversified asset allocation and enhanced returns.

Pension fund managers are pushing for regulatory relaxation primarily to seek higher returns from the growing pool of retirement savings. According to sources, these funds collectively manage approximately $177 billion in assets. They are also requesting relaxed rules for Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InVITs). Under the current regulatory framework, gold, real estate, and infrastructure are classified as alternative assets, with each pension fund limited to a maximum 5% allocation in these categories. This allocation limit appears overly rigid in the current environment, failing to fully leverage the hedging and appreciation functions of gold and other alternative assets.

Data shows that local pension fund total assets have grown more than threefold since the pandemic, benefiting from economic expansion and increased financial system participation. Industry insiders added that fund managers have been advocating through industry associations in recent months for relaxed investment restrictions regarding securities maturity and ratings, but regulators have yet to make a final decision. A senior official from the pension regulatory authority declined to comment on this matter.

Data indicates that gold ETFs have shown particular appeal this year, with several of the largest gold ETFs - including Nippon India ETF Gold, SBI ETF Gold, and HDFC Gold ETF - posting gains of nearly 30% in 2025 to date. Currently, the pension system is primarily divided into four investment categories: equities, corporate bonds, government bonds, and alternative investment funds, with the latter including REITs, infrastructure trusts, and gold ETFs. If pension funds lift the 5% allocation restriction on gold ETFs, the gold investment sector could experience a new period of explosive growth.

World Gold Council data shows that local gold ETFs experienced net inflows for the third consecutive month in July. Research head Kavita Chacko noted that global policy uncertainty and geopolitical tensions are the primary driving factors. However, July's net inflow dropped to 12.6 billion rupees (approximately $146 million), down 41% from June, though still 34% higher than the 2024 monthly average. She added that this positive trend continued through the first two weeks of August.

As of the end of July, local gold ETF total assets under management reached 676 billion rupees (approximately $7.85 billion), representing a substantial 96% year-over-year increase. Total gold holdings rose to 68 tons, with 1.2 tons added in July alone. Meanwhile, investor interest continues to intensify, with 215,000 new investment accounts added in July, bringing the total to 7.86 million, a 42% year-over-year increase. Additionally, one new gold ETF was launched in July, bringing the number of listed gold ETFs in the market to 21.

The allocation demand from pension funds for gold ETFs continues to strengthen, reflecting both investors' long-term confidence in gold and demonstrating that in a complex and volatile market environment, gold remains an indispensable stabilizer in asset portfolios. Should regulators further relax restrictions in the future, the growth potential for gold ETFs will far exceed current expectations.