Sprott Asset Management plans to offer a new pure play on gold that will be exchange-listed in Canada during the key registered retirement savings plan (RRSP) season.
Sprott Physical Gold Trust, a closed-end bullion fund, will also be listed in the United States, and is expected to compete directly with the highly popular exchange traded fund, SPDR Gold Trust .
The Sprott fund's gold will be stored at the Royal Canadian Mint, and unitholders would be able to redeem their units for physical gold bullion on a monthly basis if they want. In Canada, the plan is to market the new product in January, and list in early February. See prospectus
It's not surprising that Sprott is launching gold bullion products, given that company founder and hedge fund manager Eric Sprott is bullish on the yellow metal. See his commentary
Sprott Asset Management has filings with regulatory bodies in both countries for an initial public offering (IPO) at $10 (U.S.) a unit. The fund will trade under the symbols PHY on the Toronto Stock Exchange and PHYS on the NYSE Arca.
The management expense ratio (MER) for Sprott Physical Gold Trust is expected to be 0.65 per cent.
Rival offering Claymore Gold Bullion Trust will convert to an ETF next month and have an MER of 0.50 per cent. See blog
While the price of the yellow metal has been on a tear recently with gold futures hit record highs over $1200 (U.S.) an ounce, it has pulled back lately.
RBC Dominion Securities Inc. and Morgan Stanley Canada Ltd. will act as underwriters for the offering in Canada, while Morgan Stanley and Co. Inc. and RBC Capital Markets will do the same in the United States.
M Partners analyst Scott Chan suggested Tuesday in a report to clients that Sprott Asset Management "hopes to duplicate [last May's]successful launch of Claymore's Gold Bullion Trust."
"It is too early to predict the success over the next few months," wrote Mr. Chan, who has a "sell" rating on parent company Sprott Inc. with a one-year target of $3.80 a share. "We believe that a launch in early February may maximize sales potential in the middle of the seasonally strong RRSP season."
On the Seeking Alpha Web site, a blogger under the name Market Folly suggested that Sprott's offering appears to be a direct competitor to the SPDR GLD. "Do the launches of John Paulson' s gold fund and now Sprott's Physical Gold Trust mark a top in the gold market?," the blogger asks. "We'll have to wait and see."