Sprott Energy Fund
Investment Team
Eric Nuttall
Portfolio ManagerEric Nuttall
Portfolio Manager
Eric Nuttall is a Portfolio Manager with Sprott Asset Management LP. He joined the firm in February 2003, and over the years, has become a nationally recognized expert on the Canadian oil and gas sector. A popular industry commentator, Eric is a frequent guest on the Business News Network (BNN), a regular contributor to Alberta Oil Magazine, often interviewed by The Globe and Mail, the National Post, the Calgary Herald, and has appeared in both the Wall Street Journal Asia and Barron’s.
Eric is Lead Portfolio Manager of the Sprott Energy Fund, and co-manages the Sprott 2011 and 2012 Flow-Through Limited Partnerships with Allan Jacobs. Eric is a key contributor to Sprott’s internal macro energy forecasts, and supports Sprott’s portfolio management team by identifying top performing oil and gas investment opportunities.
Eric graduated with High Honours from Carleton University with an Honors Bachelor of International Business.
Eric Sprott
Chief Executive Officer; Senior Portfolio ManagerEric Sprott
Chief Executive Officer; Senior Portfolio Manager
Eric Sprott has more than 40 years of experience in the investment industry. After earning his designation as a chartered accountant, Eric entered the investment industry as a research analyst at Merrill Lynch. In 1981, he founded Sprott Securities (now called Cormark Securities Inc.), which today is one of Canada’s largest independently owned securities firms. In 2001, Eric established Sprott Asset Management Inc.
Eric’s investment expertise is well represented in his track record in managing the Sprott Hedge Fund L.P., Sprott Hedge Fund L.P. II, Sprott Bull/Bear RSP Fund, Sprott Offshore Funds, Sprott Canadian Equity Fund, Sprott Silver Equities Class and Sprott Managed Accounts. His extensive list of accolades include: Canadian Investment Awards’ Opportunistic Strategy Hedge Fund Award (Sprott Hedge Fund L.P., 2004); MarHedge’s Best Canada Based Annual Performance Award (Sprott Offshore Fund Ltd., 2006); HFM Week’s Best Long/Short Hedge Fund Globally (Sprott Offshore Fund Ltd., 2008); Winner of Absolute Return’s Hedge Fund of the Year (Sprott Capital LP, 2010). Over the years, Eric has personally been the recipient of numerous awards and honours, including one of Investor Digest’s Canada’s Best Investors (2004); Ernst & Young’s Entrepreneur of the Year (2006); Investment Executive’s Fund Manager of the Year (2007); Advisor.ca’s Top Financial Visionary (2011); Terrapinn's Most Influential Hedge Fund Manager (2012); and the 2012 Murray Pezim Award for Perseverance and Success in Financing Mineral Exploration (2013).
More recently, Eric has been elected Fellow of the Institute of Chartered Accountants of Ontario (FCA), a designation reserved for those who demonstrate outstanding career achievements and service to the community and profession.
Over the years, Eric has also been recognized for his considerable philanthropic endeavours and community contributions. Eric and his family established the Sprott Foundation in 1988 to address urgent human need, hunger and homelessness. He has provided generous endowments to Carleton University, the Ottawa Hospital Foundation, Daily Bread Food Bank and United Way, among others. More recently, Eric donated $1.4 million to CanFund in support of Canadian athletes for every gold medal won at the 2010 Vancouver Olympics. In April 2011, along with Sprott Inc., Eric sponsored a 24-year old Canadian driver James Hinchcliffe, getting him a seat with the prestigious Newman/Haas Racing. In June 2012, the Sprott Foundation donated $25 million in support of the Department of Surgery at the University Health Network.
Fund Details
| Fund Status | Open |
| Distributions | Income and Capital Gains Distributed Annually (if any) Distributions are reinvested automatically |
| Fund Code |
SPR 006 (A) |
| Inception Date | 4/15/2004 |
| Nature of Securities | Mutual Fund Trust Units |
| Type of Fund | Energy Sector Fund |
| Valuations | Daily |
| Redemptions | Daily |
| Minimum Initial Investment | $1,000 CDN |
| Minimum Subsequent Investment | $100 CDN |
| Minimum Investment Term | 90 days (2% penalty) |
| Management Fee | 2.5% annual - (A) 1.5% annual - (F) |
| Performance Fee | 10% of excess over S&P/TSX Capped Energy Total Return Index |
| Eligible for Registered Plans | Yes |
| Investor Risk Tolerance | High |
Fund Objective
The Sprott Energy Fund seeks to achieve long-term capital growth. The Fund invests primarily in equity and equity-related securities of companies that are involved directly or indirectly in the exploration, development, production and distribution of oil, gas, coal, or uranium and other related activities in the energy and resource sector.The indicated rates of return for series A/class A securities of the Funds are based on the historical annual compounded total returns including changes in unit/share value and reinvestment of all distributions or dividends and does not take into account sales, redemption, distribution or optional charges or income taxes payable by any security holder that would have reduced returns. Investment funds are not guaranteed, their values change frequently and past performance may not be repeated. This communication does not constitute an offer to sell or solicitation to purchase securities of the Funds.
Q1 Commentary
The Sprott Energy Fund Series A (the “Fund”) declined 4.9% during the quarter, compared to a 2.7% gain by its benchmark, the S&P/TSX Capped Energy Total Return Index.
Weakening oil prices, renewed concerns about slowing economic growth in Europe and China, and continued capital outflows from natural resource focused funds depressed energy stocks during the first quarter of 2013. Valuations became even more depressed as investors globally continued to shun Canadian oil stocks due to concerns over a lack of pipeline takeaway capacity and the longer-term declines in demand as US oil production continues to grow.
We are excited about current valuations in the energy space and will endeavor to profit from the shrinking investment horizon and patience level of other investors. The opportunity to buy profitable, well-funded companies steered by proven management teams at proved producing reserve value is extremely rare. Valuations for many stocks now approach those last seen in the financial collapse of 2008. What is different now is that the financial system has stabilized, the price of oil has remained at approximately $100/bbl, natural gas has recovered by nearly 100% off of the recent bottom, and drilling efficiencies have improved dramatically (getting more production for less capital). Yet equities struggle. Outside of a handful of names, apathy amongst investors globally is near an all-time high. For this trend to change, a sentiment-improving catalyst is needed. Fortunately, we can easily identify one: Keystone XL pipeline approval. A Presidential approval would be the most important catalyst for Canadian oil stocks in over two years. It is our belief that US and global investors will return to our space once the concern about pipeline takeaway capacity is lessened, and given dramatically depressed valuations relative to US energy stocks, most notably in mid-cap oil stocks, that significant upside remains.
Oil continues its range bound trading between $95-$100/bbl Brent. We see this band continuing for several years until US oil growth slows and/or the global economy increases its economic growth rate. Within this band, even accounting for pricing differentials, Canadian and US oil producers can do quite well. Natural gas has rallied from its lows due to a colder than average winter and the benefit of coal-to-gas switching. With natural gas exceeding $4/mcf, this demand benefit of switching has been negated. We continue to believe that, barring a hot summer, natural gas will experience a ceiling price of approximately $4.75/mcf. With this scenario in mind natural gas stocks in general appear richly valued.