Thanks to assets under management that are down sharply from last year’s levels, Sprott Inc.’s first-quarter profit plunged to half its level in the same period last year, the company announced on Thursday.
In the quarter ended March 31, the company’s net income plummeted to $7.4 million, down from $16.7 million in the first quarter of 2008.
Sprott Inc.’s total revenue tumbled 38% to $26.7 million from $43.1 million in the first quarter of 2008. This included a 31% drop in management fees to $22.6 million, from $32.8 million last year. Monthly average assets under management decreased by approximately 29% over the same period.
Net redemptions during the first quarter totaled $208 million, down from net sales of $298 million in the first three months of 2008.
But the quarter showed promising signs as fund sales increased and redemptions slowed significantly, according to Eric Sprott, president and CEO.
“March was the first positive net sales month since August 2008, reflecting strong performance of our funds, reduced de-leveraging activity from our institutional hedge fund clients and the launch of the Sprott Gold Bullion Fund, which has generated strong early sales,” Sprott said.
Despite the net redemptions, market appreciation helped the company’s assets under management rise to $4.7 billion, up from $4.4 billion at Dec. 31, 2008.
At the company’s annual general meeting on Thursday, Sprott said a market rally since the end of the first quarter have helped most of the company’s mutual funds continue to advance in recent weeks, while its hedge funds have suffered.
“Our hedge funds had a superb first quarter, but they’ve all had a very difficult April,” he said.
But Sprott believes the recent advance in stock markets represents a bear market rally as opposed to a sustained recovery. “I think we’re in a secular bear market,” he said.
Sprott expects that current quantitative easing efforts by central banks will have harmful consequences for the American dollar and for bond markets.
“The world is printing money,” Sprott said. “There has to be consequences to printing money.”
Sprott said heavy weightings in precious metals rewarded the company in the first quarter of 2009, and he remains bullish on investments in gold and silver.
“If you print money, gold as a currency and silver as a currency has to take on more value,” he said.
Next month, Sprott Inc. is planning a structural reorganization that will divide the company into a private wealth division, an asset management division and a consulting division. It will include an expansion of the private wealth division, Sprott said,
“We’re looking forward to being able to have that division direct all its efforts to our individual accounts,” he said.
IE