SPR is in the process of de­vel­op­ing a new cor­po­rate name and prod­uct lineup, and hir­ing new port­fo­lio man­agers

Investment Executive - - FRONT PAGE - BY JADE HEMEON

Sprott off­shoot SPR is de­vel­op­ing a new name and prod­uct lineup.

freshly hatched in­vest­ment fund man­age­ment firm SPR & Co. LP of Toronto has left its nest and is fly­ing on its own. SPR’s prin­ci­pals re­cently com­pleted the ac­qui­si­tion of a $3bil­lion chunk of di­ver­si­fied in­vest­ment as­sets from SPR’s for­mer par­ent, Toronto-based Sprott Inc.

SPR is the tem­po­rary name for the new money-man­age­ment firm in charge of the fam­ily of 38 mu­tual and hedge funds Sprott sold to an am­bi­tious group led by John Wil­son, for­mer CEO of key Sprott sub­sidiary Sprott As­set Man­age­ment LP (SAM), and James Fox, SAM’s for­mer pres­i­dent. Wil­son and Fox both hold the ti­tle of man­ag­ing part­ner at SPR.

SPR is in the process of cre­at­ing its own brand iden­tity. There are sev­eral ini­tia­tives in the works, Wil­son says, in­clud­ing a cor­po­rate name change, the launch of a “full pipeline of new prod­ucts” and the hir­ing of new port­fo­lio man­agers.

“We’re mov­ing ahead to sep­a­rate our­selves from the Sprott brand and es­tab­lish our own iden­tity,” says Wil­son, who was with SAM for more than five years. “From our per­spec­tive, the good thing about our for­mer con­nec­tion is that Sprott is well rec­og­nized in Canada and glob­ally; the bad thing is Sprott is associated mostly with re­sources and pre­cious met­als prod­ucts. Al­though that’s part of what we do, it’s not the only thing, and most of our business is out­side those as­set classes.”

Sprott will con­tinue to man­age about $850 mil­lion of the $3 bil­lion in as­sets un­der man­age­ment (AUM) that SPR ac­quired on a sub­ad­vi­sory ba­sis, in­clud­ing 10 funds spe­cial­iz­ing in gold, sil­ver and re­sources-re­lated in­vest­ments. How­ever, SPR will fo­cus largely on what Wil­son calls “dif­fer­en­ti­ated in­vest­ment strate­gies that are not avail­able else­where,” in­clud­ing prod­ucts de­signed to en­hance yield and/or man­age risk and sub­due volatil­ity.

The SPR lineup in­cludes spe­cial­ized eq­ui­ties and fixed­in­come prod­ucts, in­clud­ing al­ter­na­tive strate­gies and ab­so­lutere­turn man­dates. SPR’s AUM is di­vided more or less equally be­tween eq­ui­ties and fixed-in­come, Wil­son says, and new prod­uct launches will fo­cus on both ar­eas.

“We’re not look­ing to pro­vide an­other Cana­dian div­i­dend fund,” Wil­son says. “We want to pro­vide new and in­no­va­tive so­lu­tions and will be ex­plor­ing a range of op­tions. Our fund lineup will be more com­plex than lon­gonly, bench­mark-re­lated funds.”

Wil­son en­vi­sions a “three-piece lineup”: one-third of SPR’s business in real as­sets tied to pre­cious met­als, in­fra­struc­ture and en­ergy; one-third al­ter­na­tive in­come; and one-third di­ver­si­fied eq­ui­ties.

Al­ter­na­tive in­come will in­clude vari­a­tions on di­rect lend­ing, such as pri­vate credit and bridge-fi­nanc­ing prod­ucts. Eq­ui­ties prod­ucts will in­clude de­fen­sive or re­turn-en­hanc­ing strate­gies, such as the use of put and call op­tions to aug­ment in­come, or long/short hedg­ing strate­gies to cre­ate a layer of down­side pro­tec­tion in bear mar­kets.

“There’s a lot of demand for prod­ucts that of­fer both yield and safety, and we will ex­tend the types of al­ter­na­tive strate­gies avail­able,” Wil­son says. “In our view, one of the largest op­por­tu­ni­ties in in­vest­ment man­age­ment is help­ing peo­ple find bet­ter al­ter­na­tives to tra­di­tional fixed-in­come. Our prod­uct lineup will al­low [fi­nan­cial] ad­vi­sors to dif­fer­en­ti­ate their busi­nesses by in­tro­duc­ing strate­gies and so­lu­tions that are un­avail­able at large, ‘su­per­mar­ket’ firms or robo[-ad­vi­sor] plat­forms.”

With eq­ui­ties mar­kets more than eight years into a bull run, Wil­son says, now may be a good time for ad­vi­sors to add a dash of non-cor­re­lated prod­ucts, such as pre­cious met­als or eq­ui­ties funds that in­cor­po­rate some down­side pro­tec­tion into client port­fo­lios: “One of the ways ad­vi­sors can pro­vide value is in de­vel­op­ing the ap­pro­pri­ate as­set al­lo­ca­tions for clients.”

SPR also may in­tro­duce ETFs down the road, Wil­son says, but any launches are likely to be lim­ited to pro­vid­ing ex­ist­ing SPR fund strate­gies i n ETF for­mat rather than ex­pan­sion into en­tirely new in­vest­ment ar­eas.

One of the chal­lenges SPR faces is that it’s launch­ing in a highly com­pet­i­tive mar­ket in which re­cent reg­u­la­tory ini­tia­tives have led to more de­tailed dis­clo­sure to clients re­gard­ing the re­la­tion­ship of prod­uct fees to per­for­mance.

“[SPR] can cre­ate its own iden­tity when hived off from the Sprott cul­ture, but ex­hibit­ing suc­cess and build­ing its own track record will take time,” says Christo­pher Davis, di­rec­tor of man­ager re­search with Toronto-based Morn­ingstar Canada. “[SPR] faces a dis­tri­bu­tion land­scape that’s dom­i­nated by big banks and a hand­ful of suc­cess­ful in­de­pen­dent play­ers. That’s a tough row to hoe, and you need to be ex­cep­tional.”

The staff at SPR to­tals roughly 80 peo­ple, slightly fewer than half the staff who worked at Sprott be­fore SPR was spun off. No­tably ab­sent from the SPR let­ter­head are high­pro­file fund port­fo­lio man­agers Den­nis Mitchell, for­merly se­nior port­fo­lio man­ager at SAM spe­cial­iz­ing in real es­tate, in­fra­struc­ture and global eq­ui­ties, and Scott Col­bourne, pre­vi­ously co-chief in­vest­ment of­fi­cer (along with Wil­son) at SAM. Both left around the time the deal closed.

“[All] par­ties agreed that we [should go] our sep­a­rate ways,” Wil­son says, “and Den­nis and Scott had other in­ter­ests they wanted to pur­sue.”

Step­ping into Col­bourne’s shoes on the fixed-in­come side is the team of Mark Wis­niewski, who has more than 30 years of fixed-in­come ex­pe­ri­ence, and Chris Cock­eram, who has ex­pe­ri­ence in the high-yield space.

An­other port­fo­lio man­ager, Jeff Sayer, is re­spon­si­ble pri­mar­ily for a va­ri­ety of global funds, in­clud­ing in­fra­struc­ture, real es­tate, div­i­dend and bal­anced man­dates.

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