Sprott moves farther away from precious metals roots

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The Canadian money manager best known for its precious metals expertise is looking less and less like its old self.

Sprott Asset Management, the firm founded by Eric Sprott, is adding another "real asset" fund to its roster of investments portfolios, moving the firm farther away from gold and silver and closer to infrastructure and agriculture.

The new offering, dubbed the Sprott Real Asset Class, will launch this week, and its arrival comes after Sprott acquired three real asset funds earlier in 2014. Counting these purchases as well the new portfolio to launch this week, Sprott's five newest mutual funds offerings all focus on non-metals sectors.

The fifth of these offerings, the Sprott Enhanced Balance Fund, launched in 2012. Its largest holdings include CGI Group Inc. and Alimentation Couche-Tard Inc., investments that make Sprott look a lot more like a traditional portfolio manager that sells an array of funds.

The shift isn't solely in mutual funds either. Sprott's latest hedge fund, the Sprott Convertible Strategies Trust, invests in a plethora of sectors, and its largest exposure is to information technology, followed by industrials.

Sprott created or acquired each of these funds in what is currently an incredibly tough era for precious metals investors. Since peaking at north of $1,900 (U.S.) per ounce in 2011, gold is now hovering around $1,300, and silver plummeted to $21 per pound from $50.

Initially there were hopes that these drops would be short-lived, but the sustained pressure has forced Sprott to re-think both its strategy and the way in which its funds are managed. By the end of this year Mr. Sprott will no longer serve as the lead manager, and John Wilson was named the asset manager's chief executive officer in March.

Shortly after these shifts, Mr. Sprott sold $60-million of his stake in the company that bears his name by way of a bought deal, leaving him with a 25 per cent stake.

Although the changes may seem like a total 180-degree-turn, Sprott isn't abandoning its past. The firm recently closed a "flow-through limited partnership" that will invest in resource-related companies, and Sprott recently signed a joint venture agreement with Zijin, China's largest gold miner, to launch an offshore "global mining fund." Later this year Sprott also hopes to launch a gold equities exchanged-traded fund in the U.S.

But management acknowledges the firm has undertaken a deliberate re-balancing. Last November, Peter Grosskopf, the CEO of parent company Sprott Inc., admitted the company's "results have fallen short of our standards in the last two-plus years" and told analysts that the company would move toward a team-based approach to fund management while reducing risk at the same time.

In May, Mr. Grosskopf offered an update on the firm's re-balancing. "We don't want to get too diversified and we are definitely not looking to become a supermarket for strategy," he said.

But he did add that there are certainly open to launching funds where they "have an edge," such as "real assets," and that some speciality fixed-income offerings are also on the table.