Sprott Small Cap Equity Fund
Investment Team
Allan Jacobs
Senior Portfolio Manager, Director of Small Cap InvestmentsAllan Jacobs
Senior Portfolio Manager, Director of Small Cap Investments
Allan Jacobs joined SAM in August 2007 as a Director of Small Cap Investments with focus on the Sprott Small Cap Funds. Prior to joining SAM , Allan was head of Canadian Small Cap equities at Sceptre Investment Counsel, a field he has specialized in for the past 20 years. He was also the Portfolio Manager of the Sceptre Equity Growth Fund, as well as Portfolio Manager of the Sceptre Canadian Equity Small Cap Pooled Fund and the Canadian small cap component of all other institutional portfolios. He managed the Sceptre Small Cap Opportunities Fund (a hedge fund), which was launched on January 31, 2007 (now called the Sprott Small Cap Hedge Fund). He was an integral part of the Canadian Equity team at Sceptre since 1993 and was appointed a Managing Director of Sceptre in 1996.
Allan was acknowledged for his achievements at Sceptre on several occasions. The Sceptre Equity Growth Fund was awarded the Best Canadian Small Cap Fund over one-, three-, five- and ten-year periods at the 2007 Canadian Lipper Fund Awards. The Sceptre Equity Growth Fund was also a finalist for the 2006 Small Capitalization Equity Fund of the Year and was chosen Canadian Equity Fund of the Year in 2005. Furthermore, Allan was chosen the 2006 Fund Manager of the Year at the Canadian Investment Awards. The Small Capitalization Canadian Equity Pooled Fund, also managed by Allan, was awarded Canadian Small Cap Pooled Fund of the Year.
The experience he brought to Sceptre in 1993 included his management of the largest equity fund in South Africa (a $5 billion fund for Old Mutual) and his four years at Canada Life Investment Management Limited as the portfolio manager of Small Cap Canadian equities.
Peter Imhof
Investment StrategistPeter Imhof
Investment Strategist
Peter Imhof joined SAM in August 2007 as an Investment Strategist and member of the small cap team. Together with Allan Jacobs, Peter's focus is the new Sprott Small Cap Funds. Prior to joining SAM , Peter worked at Sceptre Investment Counsel as a member of the Canadian Equity Small Cap Team and was appointed as Managing Director in December 2006.
Peter was a significant contributor to the award-winning management team of the Sceptre Equity Growth Fund and the Small Capitalization Canadian Equity Pooled Fund. He began his investment career at Sceptre in March 1998. From 1998 to 2000 he was involved in quantitative analysis and portfolio construction in Canadian Equities.
Fund Details
| Fund Status | Open |
| Distributions | Income and Capital Gains Distributed Annually (if any) Distributions are reinvested automatically |
| Fund Code |
SPR 010 - (A) |
| Inception Date | 8/23/2007 |
| Nature of Securities | Mutual Fund Trust Units |
| Type of Fund | Canadian Small-Cap Equity 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) |
| Performance Fee | 10% of excess over S&P/TSX Small Cap Total Return Index |
| Eligible for Registered Plans | Yes |
| Investor Risk Tolerance | Medium to High |
Q1 Market Commentary
The Sprott Small Cap Equity Fund Series A (the "Fund") gained 2.4% during the first quarter while its benchmark S&P/TSX SmallCap Total Return Index climbed 6.0%.
Canadian small cap stocks, which tend to be more focused on natural resources, fell 4.9% during March as commodity prices declined from their February highs. At the end of the quarter, the Fund maintained an approximate 26.4% allocation to energy stocks which, as a group, weighed on performance. One of our energy sector positions, fluid service management specialist Poseidon Concepts, delivered a solid quarter gaining in excess of 12%.
The Fund was approximately 26.9% invested in materials stocks which tend to have a slant towards precious metals. One standout within this sector during the quarter was Neo Material Technologies which manufactures engineered rare earth materials. The stock surged in excess of 50% during the quarter as a result of a $1.3 billion bid from rare earth giant Molycorp. Otherwise, March was a weak month for precious metals stocks as gold and silver fell 1.7% and 6.9%, respectively.
The performance within the Fund's 10.9% allocation to information technology stocks was mixed during the quarter. Direct marketing software manufacturer Softchoice had an exceptional quarter, gaining in excess of 12% during March while established positions such as Wi-Lan dropped 11%.
Our 12.5% allocation to consumer discretionary stocks also delivered mixed results. Glentel, which operates Wireless Wave cellular outlets, grew their EPS yet failed to meet street expectations during March and the stocks subsequently sold off more than 16% in one day. Conversely, Amaya Gaming Group, an established investment for the Fund, gained 40% during the quarter and now represents more than 4% of our portfolio.
The Fund held a 4% gross short positions which are typically ETFs that we short to hedge beta away from invested sectors such as energy and precious metals. The Fund held 15.0% in cash as both a volatility buffer and to provide a source of Funds for new opportunities.
Although it was a relatively weak quarter for the Fund, we remain confident in our proven stock selection process and anticipate delivering index-enhanced returns in the coming quarters.