Sprott to Expand Focus: Peter Grosskopf
Founded in 2001, Sprott Inc. went public in 2008 and grew to more than $10 billion in Assets Under Management during the precious metals bull market that peaked in 2012. Today, with the gold and resource sector down over the last three years, Sprott’s AUM stands at approximately $7.7 billion.
I caught up with Sprott Inc. CEO Peter Grosskopf while in Toronto recently and asked him: “What does the future look like for Sprott?”
“We are committed to growing our business through a dual growth strategy that includes becoming a global leader in precious metals investing while continuing to grow our diversified Canadian asset management platform," he began.
“We have a long history in the business. We have industry-leading technical and in investment management expertise. We’ve invested in our business to acquire better talent and improve our investment management practices."
Can you tell us about some of your successes?
“On the resource side, the most recent initiatives have been to develop highly specialized products in private equity, private lending, and a hedge fund alongside a very substantial Chinese partner in resource investing.
“In the diversified business, our Enhanced Funds managed by John Wilson have grown from zero to more than $750 million in AUM in just over two years.”
What is your outlook for precious metals?
“Through continued QE and artificially low interest rates, the thesis for precious metals and hard assets only becomes more appealing. And we believe that sticking with this thesis will result in great performance for our clients over the long term.”
What does this mean for Sprott?
“Over time, we have invested to build a platform that can easily manage a significantly greater level of assets than we currently manage. As large, long-term investors allocate more capital to our strategies, we have the potential to become a truly global investment manager with more than $20 billion in AUM. Meanwhile our expenses will not change much, in my view. So shareholders of Sprott Inc. as well as clients should benefit.”
What are the biggest threats today for regular investors?
“Almost all asset classes have performed very well – real-estate, stock markets, bonds, and even emerging markets to a degree. We are in the midst of a huge recovery in asset prices, while the underlying economies remain very weak.
“How could assets like stocks do so well? It’s no secret that government involvement is probably the main reason. But now these governments are struggling to keep up their efforts. They are becoming tapped out with too much debt, and even looking to remove fiscal support programs. Going forward, they may no longer be a deciding factor.
“So there is the risk of another crisis today, and investors need a place to fall back for safety. That place is hard assets and precious metals.
“Over the last year, Sprott has also attracted many new clients who are interested in non-resource stocks. As I noted earlier, the fastest source of growth has been Sprott’s ‘defensive equity’ funds – general stocks protected to the downside by options.”
Will Sprott continue to diversify beyond precious metals and natural resources?
“Many people ask me: Why don’t you just put precious metals on the sidelines? Others ask why we bother diversifying.
“As committed we are to precious metals, other markets are orders of magnitude larger. So as Sprott expands, it will inevitably result in our taking on new specific areas of expertise. For example, we recently acquired three new funds in the agriculture, timber, and infrastructure sectors, which are available for Canadian investors. These are big areas where we can offer a lot of value.”
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This information is for information purposes only and is not intended to be an offer or solicitation for the sale of any financial product or service or a recommendation or determination by Sprott Global Resource Investments Ltd. that any investment strategy is suitable for a specific investor. Investors should seek financial advice regarding the suitability of any investment strategy based on the objectives of the investor, financial situation, investment horizon, and their particular needs. This information is not intended to provide financial, tax, legal, accounting or other professional advice since such advice always requires consideration of individual circumstances. The products discussed herein are not insured by the FDIC or any other governmental agency, are subject to risks, including a possible loss of the principal amount invested.
Generally, natural resources investments are more volatile on a daily basis and have higher headline risk than other sectors as they tend to be more sensitive to economic data, political and regulatory events as well as underlying commodity prices. Natural resource investments are influenced by the price of underlying commodities like oil, gas, metals, coal, etc.; several of which trade on various exchanges and have price fluctuations based on short-term dynamics partly driven by demand/supply and nowadays also by investment flows. Natural resource investments tend to react more sensitively to global events and economic data than other sectors, whether it is a natural disaster like an earthquake, political upheaval in the Middle East or release of employment data in the U.S. Low priced securities can be very risky and may result in the loss of part or all of your investment. Because of significant volatility, large dealer spreads and very limited market liquidity, typically you will not be able to sell a low priced security immediately back to the dealer at the same price it sold the stock to you. In some cases, the stock may fall quickly in value. Investing in foreign markets may entail greater risks than those normally associated with domestic markets, such as political, currency, economic and market risks. You should carefully consider whether trading in low priced and international securities is suitable for you in light of your circumstances and financial resources. Past performance is no guarantee of future returns. Sprott Global, entities that it controls, family, friends, employees, associates, and others may hold positions in the securities it recommends to clients, and may sell the same at any time.
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