Which Gold MLD is Right for You – Alpha vs All Weather

Recently, several mutual fund houses stopped accepting fresh investments in their Gold ETF Fund of Funds (FoFs). This sudden halt affects lumpsum purchases, switch-ins, and new SIP registrations across many popular funds. Experts suggest this restriction is partly due to a combination of strong gold demand, a weak Indian rupee, and pressure on India’s import bills.

If you are looking to increase your allocation in gold but feel stuck due to these limited options, there is another highly structured route available: Market Linked Debentures (MLDs).

Market Linked Debentures, also called MLDs, are unique investment products that give you exposure to an underlying asset (in this case – gold) but with a predefined payout structure. They offer a way to participate in gold’s price increase while offering built-in protection if the price falls. Unlike traditional fixed deposits, MLDs usually do not pay regular interest (no interim coupons). Instead, your principal and profits are paid out together as a lump sum at maturity.

Here is a closer look at two popular Gold MLD options currently available:

This option is designed for investors who want an aggressive upside but are willing to take on a little bit of risk if gold prices drop significantly.

• Issuer: Alpha Alternative Ventures Pvt. Ltd. (a private, multi-asset alternative investment firm).
• Nature: Secured, unlisted Market Linked Debenture (MLD).
• Benchmark: Gold MCX (near month futures).
• Tenure: 3.5 years (42 months).
• Upside Participation (The Reward): It multiplies the gold return by 5x, capped at a maximum 50% absolute product return. For example, if gold rises by 10%, your investment grows by 50%.
• Principal Protection (The Risk): Partial protection. Your capital is 100% safe as long as gold does not drop by more than 20%. However, if gold crashes by more than 20%, you will begin to lose a portion of your original investment.
• Max IRR: 12.28%
• Minimum Investment: ₹ 5,00,000

This product is built for the “cautious optimist”—someone who believes gold will grow but wants a total safety net for their original capital, no matter what happens to the market.

• Issuer: Edelcap Securities Ltd., a 100% subsidiary of the Edelweiss Financial Services Group.
• Nature: Senior Secured Market Linked Debenture (MLD).
• Benchmark: MCX Gold.
• Credit Rating: CRISIL A+/Stable, meaning it has a strong ability to meet its financial commitments.
• Tenure & Observation: The total tenure is 3.5 years (42 months). Typically, the actual performance of gold is observed and “locked in” at the 36-month mark, with the final 6 months used as an administrative period to process your payout.
• Upside Participation: You can earn up to a 50% absolute return on your money, provided the gold benchmark delivers a 25% return.
• Principal Protection: Full 100% principal protection. Even if gold prices crash by 50%, you will get your entire original investment back at maturity. (Note: This protection is a contractual guarantee by the issuer, meaning your safety depends on the financial health of Edelweiss, not the government).
• Max IRR: 12.28%
• Security: Secured by 1x cover on principal & coupon against the company’s balance sheet assets.
• Minimum Investment: ₹ 5,00,00

Before investing, it is important to know how your profits will be taxed. Under current Indian Income Tax rules (Section 50AA), all gains from MLDs are treated as Short-Term Capital Gains (STCG), regardless of how long you hold the investment. This means your profits will be added to your income and taxed at your standard income tax slab rate. However, direct gains from Gold ETFs are also fully taxed at normal income tax slab rates, making the tax impact comparable.

With limited investment options currently available in the mutual fund market, MLDs are a great way to get exposure to gold with a defined, predictable payoff. Whether you prefer the aggressive multiplier of the Alpha MLD or the total capital safety of the Edelcap AWG MLD, these instruments offer a strategic way to grow your wealth while managing downside risk.