Sprott Inc. which reported a 96-per-cent drop in fourth-quarter profit, is on the acquisition trail to build a global investment firm.
“We expect to be an active acquirer,” its chief executive officer Peter Grosskopf said Thursday after Sprott also reported assets under management falling to $9.1-billion. “We are confident that we have built a platform with the capacity to manage $20-billion or more.”
The Toronto-based wealth management company struck a $14-million cash-and-stock deal last month to acquire Calgary-based Toscana Capital Corp. and Toscana Energy Corp. They have about $161-million in assets in energy investments.
“We believe that Toscana will bring to us a leading team of energy specialists and lenders, as well as a Calgary presence that will help us accelerate other products across the energy sector.”
Major initiatives this year include developing a team-based hedge fund that will appeal to international institutional investors, and launching new equity balanced and hedge fund products focused on Canada and North America, he told analysts during a conference call.
He blamed weaker prices for bullion and precious metals stocks as well as lacklustre performance fees for profit falling to $4.6-million, or 3 cents a share, for the three months ended Dec. 31. That was down sharply from a profit of $108.6-million, or 72 cents a share, a year ago. Total revenue dropped to $38.1-million from $242.1-million.
“We have been vocal on our views on economic weakness, and dangers inherent in the financial system, and as a result, our portfolios were positioned defensively throughout 2011,” he said. “For the first eight or nine months, this positioning served as well, and we were able to deliver relatively strong results through the volatility related to the European debt crisis…
“However, beginning in August with the broad market sell-off, our performance suffered due to declines in gold, silver and energy equities, which accelerated into year end…More of our funds finished the year in negative territory, and our performance fee revenue declined substantially.”
The firm remains “skeptical of the economic recovery absent money-printing,” Mr. Grosskopf said. “We believe that the opportunities have never been greater for precious metals shares to outperform.”
Sprott, meanwhile, has been on a hiring spree. Last month, it brought on new manager John Wilson, a former chief investment officer with Cumberland Private Wealth Management. He took over management of Sprott Opportunities Hedge LP and Sprott Opportunities RSP Fund last month.
Those funds had been run by two other Sprott managers after star hedge fund manger Jean-François Tardif left the firm in mid-2009 to “retire.” After being out of the business for three years, Mr. Tardif is returning in May to run JFT Strategies Fund, a closed-end hedge fund, for First Asset Management Inc. It begins trading in May.
It is not clear whether Mr. Tardif, who has founded his own firm, Timelo Investment Management Inc., will attract assets away from his old Sprott funds. He ran about $420-million in assets at Sprott. His former funds, which generated strong returns over five years, suffered net redemptions for a while after his departure.