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Sprott to launch first fixed income fund
July 20, 2010
Lawrence Delevingne
The Sprott Absolute Return Income Fund is set to launch August 31 and will managed by Scott Colbourne.
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Scott Colbourne
(Courtesy of Sprott, Inc.)
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Sprott Asset Management, the Toronto firm that has made a fortune on investments in gold and natural resources, is branching into fixed income, with plans to launch the Sprott Absolute Return Income Fund August 31.
Scott Colbourne, an award-winning bond investor hired this spring, will be the lead manager for the fund and two other fixed-income mutual funds for Sprott.
Sprott is expanding after its other hedge funds have posted big returns. As of June 30, the Sprott Hedge Fund LP I, managed by founder and chief executive Eric Sprott, is up 7.2% this year through June; the long/short equity fund has produced a net annualized return of 21.5% since its inception in 2000. Similarly, the Sprott Hedge Fund LP II, another long/short equity vehicle with $513 million under management, is up 6.5% this year through June with an annualized return of 21.0% since its launch in 2002.
According to marketing materials, the new absolute return fund is targeting a net return of 8% to 12%. The fund will invest in fixed income securities, currencies, derivatives and other instruments. Colbourne “will adjust investments in an effort to take advantage of differences in countries, currencies, interest rates, and credits based on global macroeconomic and political analysis,” according to the documents.
The absolute return fund will charge a management fee of 2% and a performance fee of 20% of profits earned above a hurdle rate of three percent plus the 3-month Canadian Bankers Acceptance Rate.
Colbourne has 22 years of experience in managing fixed income and foreign currency portfolios, most recently as senior portfolio manager at TD Asset Management, where he oversaw a $30 billion portfolio, and as head of fixed income at AGF Investments. The AGF Global Government Bond fund that Colbourne managed was awarded the best foreign bond fund for four years in a row (2002 through 2005) at the Canadian Investment Awards (now called the Morningstar Canadian Awards).