Sprott says redemptions loom

According to Globe and mail today, Eric Sprott expects more redemptions in his firm's hedge funds from international investors soon, which he says could "ultimately be significant."

Mr. Sprott made the comments after the Toronto-based money manager's third-quarter results missed analysts' expectations. The firm reported a profit of $3.7-million or 2 cents a share, compared with $3.5-million a year ago when it was a private company. Analysts polled by Thomson Reuters First Call expected 7 cents a share.

During the quarter ended Sept. 30, assets under management tumbled 27 per cent or $2.1-billion to $5.6-billion as the market carnage shaved off much of the market value. Net sales came in at $122-million.

"Our long-only funds have been significantly affected by the market," but the hedge funds have done better because of their short positions, he said.

Mr. Sprott's said his bearish view on financial stocks has borne fruit with the collapse of venerable U.S. financial institutions, but his bullish outlook on gold has yet to take hold.

"If certain things unfold as we expect, it's not out of the realm for us to imagine that gold could go to $1,500 (U.S.) or $2,000 an ounce," he said.
Much of Sprott's assets are concentrated in the small- to mid-capitalization resource sector that has taken a beating in the market meltdown.

But as of Wednesday, the Sprott Opportunities Hedge Fund LP, run by Jean-François Tardif, was up 0.9 per cent year to date, while the Sprott Hedge Fund LP II, run by Mr. Sprott, was only down 3.7 per cent. The S&P/TSX composite fell 31 per cent in the same period.

"The break-even line is not a bad resolution to a market that has fallen as much as it has around the world," Mr. Sprott said.

Most of the mutual funds, however, are sharply in the red. They include the flagship Sprott Canadian Equity Fund, down 47 per cent; Sprott Gold and Precious Metals, 66 per cent; Sprott Energy, 59 per cent; Sprott Growth, 70 per cent and Sprott Small Cap Equity, 50 per cent.