Graham Ryding

Graham Ryding inquired about the nature of new ETF product launches, which commodities Sprott sees as poised for a breakout, the timing of compensation payable, capital allocation priorities for the cash balance, and the strategy for private strategy fundraising.

Answer

John Ciampaglia, CEO of Sprott Asset Management, confirmed that new ETF launches are proprietary passive-based indexes, with a focus on scaling existing funds. He noted that multiple metals hitting all-time highs is abnormal, and Sprott remains constructive on all, seeing government intervention as a key driver. Ciampaglia stated that compensation payable would be paid the following month. Whitney George, CEO of Sprott Inc., emphasized maintaining a strong balance sheet, growing regular dividends, and opportunistic stock buybacks. For private strategies, George aims to cycle through lending products and scale other offerings, noting increased engagement with family offices and high-net-worth investors.

Graham Ryding inquired about the nature of upcoming ETF product launches (active vs. passive, proprietary indexes) and which commodities Sprott believes are positioned for a breakout. He also asked about the timing of compensation payable impacting the cash balance and the company's capital allocation strategy for its net cash build. Finally, he asked if the fundraising for private strategies would replace Lending Fund 2 or add incremental AUM, and if Lending Fund 2's harvesting phase implies carried interest in 2026.

Answer

John Ciampaglia, CEO of Sprott Asset Management, confirmed that the new ETF launches in the pipeline are proprietary passive-based indexes, with one being a clone for Europe and another a brand-new fund. He stated that Sprott is constructive on all its main metals, noting that multiple metals have hit all-time highs, and governments are increasingly involved in securing supply chains. He emphasized that most investors have little commodity exposure, and Sprott is bullish on metals over traditional energy/agriculture. Regarding cash and compensation, John Ciampaglia indicated that compensation payable would largely be paid in the following month. Whitney George, CEO of Sprott Inc., stated that Sprott maintains a strong balance sheet, aims to grow regular dividends, and will be opportunistic with stock buybacks. He confirmed that fundraising for private strategies aims to cycle through lending products and scale other interesting private strategies, including an evergreen lending product and a special metals and mining fund. He declined to comment on specific carried interest from Lending Fund 2.

Graham Ryding of TD Securities requested a breakdown of the quarter's carried interest and performance fees, the reason for the low associated compensation payout, and the multi-year outlook for these fees. He also sought to confirm an estimate for quarter-to-date net flows.

Answer

CFO Kevin Hibbert explained that 65-70% of the carried interest came from a legacy LP where the original team members are no longer with the firm, resulting in a higher retention for shareholders. CEO Whitney George clarified that most performance fees crystallize at year-end and carried interest is lumpy, making it difficult to model. Regarding flows, Kevin Hibbert, with input from Whitney George and John Ciampaglia, adjusted the estimate to be closer to $150 million for the quarter-to-date, accounting for redemptions in uranium ETFs.

Graham Ryding asked for a reminder on why redemptions in the exchange-listed trusts have historically been low and whether this was due to arbitrage activity. He also questioned why the combined gold and silver trust experienced outflows while the individual metal trusts saw inflows. Finally, he requested guidance on the outlook for the compensation ratio given the significant AUM growth.

Answer

CEO Whitney George attributed low redemptions to two factors: attracting long-term oriented investors and the closed-end structure, which allows an arbitrage community to step in when trusts trade at a significant discount. John Ciampaglia confirmed this dynamic was at play in late 2023. George also explained that institutional investors prefer single-commodity products, leading to stronger flows into the pure-play gold and silver trusts over the combined fund. CFO Kevin Hibbert addressed the compensation ratio, stating that the current level of approximately 47% is a reasonable assumption for modeling purposes and that he expects EBITDA margins to improve due to operating leverage.

Graham Ryding from TD Securities asked about several topics, including whether the company would consider paying off high-cost preferred equity, how recent RIA acquisitions were funded, the reason for the notable change in noncontrolling interest (NCI), and the company's comfort level with its 3.5x leverage ratio.

Answer

Executive Kurt MacAlpine stated that paying off preferred equity is not a short-term priority as Corient's growth rate is double the preferred's return. CFO Amit Muni clarified that RIA acquisitions are funded by borrowing at the CI level and loaning funds to the U.S. business. Kurt MacAlpine added that the NCI calculation is complex and directed analysts to the new guidance for modeling. He also confirmed they are comfortable with the current leverage, reiterating distinct capital priorities for Canada (buybacks/deleveraging) and the U.S. (M&A).

Inquired about the priority of maintaining CI Financial's investment-grade rating, requested quantification of organic wealth management growth, asked for an update on the retail alternatives product, and later followed up on the allocation of future free cash flow between buybacks and debt reduction.

Answer

The company prioritizes shareholder returns, with buybacks currently favored over deleveraging at the Canadian level. Organic growth was strong but not quantified. The alternatives product is progressing with a dedicated team and a two-pronged approach of growing on current platforms while seeking new ones. Future free cash flow allocation will continue to prioritize buybacks if the share price remains low, viewing it as a sequencing decision.

Graham Ryding inquired about the priority of maintaining an investment-grade credit rating at CI Financial versus raising debt at the Corient level. He also asked for quantification of organic growth in the Canadian and U.S. wealth segments and sought an update on the progress of the company's alternative product offering in the retail channel.

Answer

Executive Kurt MacAlpine stated that capital allocation is dynamic. For the Canadian business, the priority is settling obligations, followed by share buybacks and debt reduction, with buybacks currently favored. For Corient, the goal is self-sufficiency in funding acquisitions. He did not quantify wealth management growth but highlighted its resilience. Regarding the alternatives product, he described a two-pronged growth strategy: leveraging existing platform approvals while working to gain access to national platforms, supported by a dedicated 12-person team.

Inquired about the 2025 deleveraging strategy regarding which bonds to target, the mechanics of raising debt at the U.S. subsidiary, 2024 targets for the Canadian custody platform, and a specific figure for U.S. organic growth.

Answer

Deleveraging will target bonds offering the most value. Debt for the U.S. sub can be raised at the parent level or by addressing existing covenants. The Canadian custody platform is expected to see strong growth but no specific targets were provided. U.S. organic growth was 'several billion' in 2023, but no exact number was given.