Sprott profit edges up to $3.7-million

Date: Friday, October 31, 2008
Author: Canadian Press

Sprott Inc. has booked third-quarter earnings of $3.7-million, up from $3.5-million a year earlier, despite financial-market turmoil that cut its assets under management by 27 per cent during the quarter.

Assets under management were $5.6-billion on Sept. 30, down from $7.7-billion on June 30 but up from $5.5-billion at the end of last year's third quarter.

Management fees increased 19 per cent from a year earlier to $32.9-million. Total revenue — management fees, performance fees, gains or losses on proprietary investments and interest income — increased by 18 per cent to $25.4-million from $21.6-million.

Net fund sales for the quarter were $122-million, but the market slide cut the value of assets under management by $2.2-billion.

“The financial markets have suffered unprecedented declines since the beginning of July across all sectors, causing our assets under management, like most investment managers, to decrease considerably during the third quarter,” observed Eric Sprott, CEO of the resource-oriented Bay Street money manager.

“While we anticipated a market downturn in 2008 and positioned our portfolios defensively, we did not expect investors to punish real, hard assets, in particular gold and gold stocks,” Mr. Sprott added in a statement.

“Despite the difficult market conditions, net sales were positive during the period, which we believe is a true testament to our performance track record. However, given the impact of the financial crisis on hedge funds globally, we have increased the liquidity in our hedge funds to deal with possible redemptions.”

Mr. Sprott, who took the company public in May at $10 per share and has seen the stock price go as low as $2.49 earlier this month, noted that most previous market downturns “have been followed by periods of significant outperformance in our funds.”

He added: “We remain confident that our investment strategies will deliver strong growth over the long term and support our efforts to increase our market share of the Canadian and global asset management industries.”