| Fund Company | Sprott Asset Management L.P. |
| Fund Type | Natural Resources Equity |
| Rating | F |
| Style | Small Cap Growth |
| Risk Level | Very High |
| Load Status | Optional |
| RRSP/RRIF Suitability | Poor |
| TFSA Suitability | Poor |
| Manager | Eric Sprott since September 1997 Allan Jacobs since August 2010 |
| MER | 2.98% |
| Code | SPR 001 – Front End Units SPR 111 – Low Load Units |
| Minimum Investment | $1,000 |
Analysis: Prior to 2008 it seemed that this fund could do no wrong. From its launch in 1997, the fund continued to post impressive gains. However, between June 2008 and November 2008 the fund lost more than 52% of its value. Since then, it has gained all of those losses back, and then lost most of it again.
Naturally, the biggest issue with this fund is volatility. It has a monthly standard deviation that is nearly twice that of the broader markets. In looking at the way the fund is managed, it is not hard to see why. Eric Sprott and Alan Jacobs manage this fund with a macro driven, high conviction style.
The current theme by which the fund is managed is they believe that physical bullion is the ultimate defense against inflation and currency devaluation. They believe that gold and silver equities offer substantially more long-term performance potential over the broad Canadian equity market. This belief is based on concerns that the massive amounts of liquidity that have been injected into the global economy will ultimately result in runaway inflation and currency devaluation.
As of September 30, more than 80% of the fund was exposed to precious metals and their related equities. Silver bullion is the largest sector, followed by gold companies. Not surprisingly, it is concentrated in Canada, with some exposure to Australia and the U.S.
Despite the bumps in performance since 2008, the long-term numbers are nothing short of spectacular. Since inception, the annualized compound return is 15.2%. Short-term numbers are less impressive, losing 15% in 2012 and 30% in 2011.
This is also not a cheap fund to own, with an MER of 2.98%.
The narrowness of the management’s focus will dramatically increase the risk profile of this fund and it is our opinion that it should be treated as a precious metals fund, with exposure limited to those with only the highest risk tolerance.
From a total risk adjusted return perspective, it is our opinion that investors may want to consider an actively managed precious metals fund instead of this one. Provides comparable investment exposure with lower cost and better risk
adjusted returns.