Sprott Inc. is looking to spread its wings beyond Canada and the United States in its bid to become a global leader in hedge funds and other alternative investing strategies.
The Toronto-based investment firm, which on Thursday reported a sevenfold jump in fourth-quarter profit, is on the prowl for small acquisitions in places such as London, Hong Kong and Australia. "We have come to know, through regular business, various teams that manage similar investment funds to us in those locations," Sprott chief executive officer Peter Grosskopf said Thursday.
Sprott is expanding in the United States through the acquisition earlier this year of Carlsbad-Calif.-based Rule Investments Inc., which owns a broker and money management firms.
But Sprott is unlikely to launch mutual funds south of the border because these investments are not allowed to charge performance fees as the firm does in Canada. The company's focus in the U.S. will be running accounts for wealthy individuals, Mr. Grosskopf said.
In Canada, Sprott is looking to expand in the institutional and high-net-worth space as its mutual and hedge fund business appears to be turning around after two years in net redemptions. Net sales were in the $100-million range in both January and February. "Two months do not make a trend, but we are very encouraged," Mr. Grosskopf said.
The firm believes investors face major risks ahead whether the U.S. government ends its quantitative-easing program or continues it, leading to "hurtful inflation," he added. "Our focus in 2011 will be continuing to invest in hard assets … We expect to maintain our precious metals exposure, increase our silver investments and build appropriate positions in energy, agriculture and infrastructure."
Sprott's fourth-quarter profit, which includes annual performance fees, surged to $108-million or 72 cents a share, from $13.3-million or 9 cents a year earlier. Total assets under management rose to $8.5-billion at Dec. 31 from $4.8-billion at the end of 2009.
In October, Sprott launched Sprott Physical Silver Trust, a closed-end fund that raised $575-million. The firm now plans to launch a silver bullion mutual fund in Canada.
Stephen Boland, analyst at GMP Securities Inc., upgraded Sprott stock to a "buy" on Thursday, and boosted his one-year target to $11.50 a share. "We believe that the stars have aligned for Sprott in that performance in the core funds should drive net sales through 2011," he wrote in a report.