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 $3- billion 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 fixed- income products, including alternative strategies and absolute-return 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 long-only, 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 in 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 high-profile 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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