Sprott Diversified Yield Fund
Investment Team
Scott Colbourne
Senior Portfolio ManagerScott Colbourne
Senior Portfolio Manager
Scott joined Sprott Asset Management LP in March 2010 and brings over 22 years of global fixed income and currency market experience to the firm. Previously, Scott was senior Vice President and portfolio manager at AGF Funds Inc. where he managed all of the fixed income mandates and co-managed balanced funds. Scott was also a managing director and partner at a Canadian hedge fund focusing on global fixed income and currency management. Prior to joining Sprott, Scott was a senior fixed income portfolio manager at TD Asset Management, where he was part of a team that managed all the firm's active fixed income institutional, retail and private client assets.
Scott began his career at the Bank of Canada where he worked in both research and trading which assisted in the execution of monetary policy. He is a four-time winner of the Best Foreign Bond Fund at the Morningstar Canadian Investment Awards. Scott is a CFA Charter holder and has an MBA from University of Toronto and an Honours BA from Queens University.
Michael Craig
Portfolio ManagerMichael Craig
Portfolio Manager
Michael Craig joined Sprott Asset Management LP in May 2010 and brings 10 years of experience developing fixed income analytics, tactical asset allocation and fixed income management. Michael previously worked at Phillips, Hager and North where he developed the analytics and research systems used by the fixed income team.
Prior to joining Sprott Michael was a Vice President at TD Asset Management where he was a portfolio manager for the Managed Asset Programs as well led the portfolio analytics group. Michael obtained his Masters in Financial Risk Management from Simon Fraser University (2006) and his Bachelor of Commerce from the University of British Columbia (1999). Michael is a CFA charterholder.
Ben Chim
Associate Portfolio ManagerBen Chim
Associate Portfolio Manager
Ben joined Sprott Asset Management LP in May 2011 as an Associate Portfolio Manager. He has over ten years of experience in bond and credit analysis. Ben began his career at DBRS as a credit analyst where he researched and analyzed bonds for various industries across the credit spectrum. Most recently, he was a Vice-President at TD Asset Management where he was part of a team that managed the firm's active high yield fixed income assets, including the TD High Yield Bond Fund. From 2006-2008, Ben was an Investment Analyst at CI Investments Inc. where he was part of a team that managed all of the active high yield fixed income assets in the Signature Funds group. Ben is a CFA charterholder and obtained his Bachelor's degree from the University of Western Ontario.
Fund Details
| Fund Status | Open |
| Distributions | Monthly |
| Fund Code |
SPR - 018 (A) |
| Inception Date | 8/5/2010 |
| Nature of Securities | Mutual Fund Trust Units |
| Type of Fund | Diversified High-Yield Fixed Income Fund |
| Valuations | Daily |
| Redemptions | Daily Low Load Option: 1st Year (3.0%); 2nd Year (2.75%); 3rd Year (2.5%); thereafter (0) |
| Minimum Initial Investment | $1,000 CDN |
| Minimum Subsequent Investment | $100 CDN |
| Minimum Investment Term | 60 days (1.5 % penalty) |
| Management Fee | 1.65% (Series A) |
| Performance Fee | 10% of excess over blended benchmark index (75% of daily return of Bank of America Merrill Lynch US High Yield Index; 25% of daily return of DEX Universe Bond Index) |
| Eligible for Registered Plans | Yes |
| Investor Risk Tolerance | Medium |
Q4 Market Commentary
The Sprott Diversified Yield Fund Series A (the "Fund") declined 92 basis points during the fourth quarter versus its blended benchmark* which gained 4.6% during the same period.
Recapping what we observed in October summarizes the wild swings that occurred in the bond market during 2011. The volatility in the markets during October was staggering. Intra-day up and down movements of $3 to $7 in the US long bond once the exception became more common. In the foreign exchange market, the Australian dollar, a "risk on" currency made a recent high in September, sold off more than 11% and then retested that high in the following month. Historically speaking this price movement in a currency would tend to occur over a period of years.
Liquidity has become crucial in this environment for both clients and managers. When the markets have sold off violently there have been no buyers and conversely, there have been no sellers whatsoever when the market has rallied. This lack of liquidity is a function of the banks and dealers withdrawing their balance sheet from the markets as they continue to shrink their businesses. With limited global growth there is less need for capital and the major banks are themselves reacting to this phenomenon.
Longer-dated government bonds were stellar performers during the back half of the year we seek significant risks in overweighting 10-year or 30-year government bonds. The likelihood of a repeat performance would represent a catastrophic economic scenario. Essentially, 10-year Canada would have to break below 1% yield to match their 2011 performance which would be a depression scenario. And with yields so low, a simple 25bps move in rates could put 10-years under water for the remainder of the year.
Our approach has been to build structural liquidity into the Fund. This means that we will carry more short term liquidity to take advantage of price dislocations as they arise, as well as focusing on shorter term debt in the 3-7 year range. We believe that our ability to employ a suite of strategies will deliver superior and more stable long-term results to those of more passive investments.