Sprott Inc

TSX:SII

Earnings Call Transcript 2020-Q1

[Operator]

Good morning, ladies and gentlemen. And thank you for standing by. Welcome to Sprott Inc.'s 2020 First Quarter Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded, May 8, 2020. On behalf of the speaker that follow, listeners are cautioned that today's presentation and responses to questions may contain forward-looking statements within the meaning of the safe harbor provision of the Canadian provincial securities law. Forward-looking statements involve risks and uncertainties, and undue reliance should not be placed on such statements. Certain material factors or assumptions are implied in making forward-looking statements, and actual results may differ materially from those expressed or implied in such statements. For additional information about factors that may cause actual results to differ materially from expectations about material factors or assumptions applied in making forward-looking statements, please consult the MD&A for the quarter and Sprott's other filings with the Canadian securities regulations. I will now turn the call over to Peter Grosskopf. Please go ahead, Mr. Grosskopf.

[Peter F. Grosskopf, CEO & Director]

Thank you, operator. Good morning, everyone, and thanks for joining us today. On the call with me today is Whitney George, the President of Sprott; our Chief Financial Officer, Kevin Hibbert; and John Ciampaglia, the Chief Executive of Sprott Asset Management. Our Q1 results were released this morning and are available on our website, just one second, sorry, on our website, where you can also find our financial statements and MD&A. Before we begin, I'd like to acknowledge that we certainly are in unprecedented times and that the landscape has changed. The impacts are far-reaching and our thoughts are with those who have been the hardest hit. At Sprott, we are amongst the fortunate few that can say that the new landscape has unequivocally helped our business. Coming into the year, we were positioned with a view that markets were priced for perfection, which was associated mostly with a dependency on monetary stimulus. Our focus on gold provided an insurance for those conditions. At Sprott, we implemented our business continuity plan in March, and we've been operating at full capacity and at full speed in a mostly remote environment. I'm pleased to report the entire team has responded well to this new reality, and the transition for us has been virtually seamless. I'll begin on Slide 4 with some recent highlights. As the market sold off in the early stages of the COVID crisis, gold performed its traditional role as a portfolio insurance asset and a source of liquidity. At first, it sold off steeply with other assets as investors sold everything they needed to, to meet margin calls. However, once global governments responded to the ensuing liquidity crisis with unprecedented stimulus and money printing, gold quickly recovered and is currently trading around $1,700 an ounce, up more than 10% on the year. As we have seen in previous crisis, bullion demand recovers first and then as later followed by our resurgence into gold equities. So far, 2020 is unfolding the same way with mining equities starting to break out as this rotation occurs with gains of more than 40% during the month of April. And that's very pertinent to our quarter end report because our positions had the same effect. The increased demand for precious metal investments was reflected in our net sales for the quarter, which were more than $620 million. Our AUM increased by 16% during the quarter, and is up by more than 30% on a year-to-date basis as of May 6. With precious metals poised for what we believe will be a multiyear upswing, we believe the time is right for Sprott to pursue a U.S. listing. We're in a process of applying for that listing on the NYSE and hope to have it complete during Q2. The majority of our 150,000-plus clients are based in the U.S. or internationally, and we believe this listing will increase our profile and attract a diverse new group of institutional and retail shareholders. At the same time, we intend to complete a share consolidation to support the listing. This proposal will be voted on later today at our AGM and could be implemented as soon as next week. With that, I'll pass it over to Kevin for a review of our financial results before discussing each of our core segments in more detail. Kevin?

[Kevin Lloyd Hibbert, Senior MD, CFO & Co]

Thanks, Peter, and good morning, everyone. Just as a reminder, beginning this quarter, we've transitioned our presentation currency to U.S. dollars. And as such, all figures discussed today are in that currency. So I'll begin on Slide 5, which provides a summary of our AUM as at March 31, 2020, as well as a snapshot of our current pro forma AUM estimate as at May 6, 2020. AUM as at March 31 was $10.7 billion, up $1.5 billion or 16% from December 31, 2019. Our AUM benefited largely from the successful close of the Tocqueville Gold strategies acquisition earlier this quarter, strong inflows into our physical trusts and good inflows into our lending funds and private equity strategies in Asia. These increases were partially offset by market value depreciation from lower silver prices and weak equity market valuations that occurred during the last 2 weeks of March. However, subsequent to quarter end, the company quickly recovered all of these unrealized market value losses. And as a result, our pro forma AUM estimate as at May 6, 2020, is $12.1 billion, moving our total AUM up an additional 13% from the quarter end. Lastly, moving now to Slide 6 for a look at our Q1 2020 earnings. Adjusted base EBITDA in the quarter was $8.2 million, up $1.3 million or 18% from the prior period. The increase was primarily due to, again, the Tocqueville Gold strategies acquisition earlier this quarter, increased fees from strong net inflows in our exchange-listed products, and we also benefited from increased commission revenues in our brokerage segment due to higher transaction volumes. These increases were partially offset by lower finance income in our lending segment, given the repayment of legacy balance sheet loans and the higher capital distribution levels in our lending LPs last year, all of which more than offset increased management fees in our lending business from ongoing capital calls. For more information on our revenues, our expenses and EBITDA, you can refer to the supplemental information section of this presentation as well as our Q1 2020 MD&A filed earlier this morning. That said, I'll turn things over to John.

[John Ciampaglia, Senior Managing Director]

Great. Thanks, Kevin, and good morning to everybody. I'm very happy to share our results in the passives business, which has been an incredible driver of our AUM growth over the last -- about 2 months. What we've seen has really been unprecedented in terms of the demand response we're seeing from all types of investors around the globe for physical metal. And this was really a perfect storm because it coincided with the disruption to the complete global supply chain with mines closing, logistics closing down and refineries closing down. So at a time when people were looking for physical metal, it was incredibly difficult to find. What we're seeing right now is a slow restart of the supply chain, but I would say that we are still benefiting from this disruption because many of these refiners are not operating at full capacity. There are social distancing measures being put in place inside the facilities, and there still is a physical tightness in the market while demand remains very high. Year-to-date, as of May 6, the trusts have grown by 20%, which is really incredible in the context of silver being down 17% year-to-date. And I would think most asset managers are seeing 15% to 20% losses in AUM across traditional asset classes. The year-to-date sales have been incredibly strong in the last 2 months. We're at USD 1.1 billion. And you can see in April, we really had a spike of almost $600 million. And the pace remains quite strong up until yesterday. We were through $120 million of additional sales. So the momentum we're seeing has been very strong. What's interesting is the sales are coming from, I would call, more sophisticated investors, larger funds, family offices, institutions, RAEs. And so yes, there is unprecedented demand for -- at the retail level for coins and bars, which they can't find right now. But what we're seeing is demand from institutions that are trying to hedge, primarily equity risk moving away from low-yielding fixed income and whatnot. If we move to the next slide. I thought this slide provides some good historical background in terms of gold-backed ETF holdings. And these are -- this is a worldwide measure of all ounces of gold held through ETFs. And you can see that this uptick started well before the outbreak of COVID-19. It really started back in June of 2019 when gold broke through a psychological level of around $1,360. Obviously, COVID-19 has accelerated the gains. And you can see that even though we're at $1,700 gold, gold ETFs are at record level compared to 2012 when gold was at -- had breached its $1,900 level in U.S. dollar terms. We think that goal of $1,700 is going to be in high demand. It's been very resilient around that price level. Any kind of dip in pricing, we're seeing buyers come in and add to their positions. We think the next stop for gold is around $1,800, and it will eventually breach its all-time high in U.S. dollars, just over $1,900 an ounce. So we think we're still very early in the cycle. One thing we've noticed from a lot of our conversations is that many of these investors and these institutions are still very underallocated to gold and gold stocks. Many of them not invested in the category for many years, and I think that there's a lot of dry powder there to fuel the next leg of this bull market. And I will pass it over to Whitney now.

[W. Whitney George, President]

Thank you, John. I'll start on Slide 9, and talk a little bit about our Managed Equities business, which is a real scalable business now that we have successfully integrated John Hathaway and the rest of the Tocqueville Gold team, starting back in January, welcoming them to our new New York office, which we then promptly had to close down because of COVID-19, and eager to get back. We onboarded all of their products very efficiently. There was some attrition expected, as there always is with this kind of transfer, but again, all well within what our expectations were when we were pricing this transaction. We recently hired Dr. Nikki Adshead-Bell as a portfolio manager. Nikki is a very, very interesting addition because not only does she have experience investing in analyzing gold equities, she served on several boards of mining companies, and, in fact, was CEO of a mining company, which she turned around and then sold. She will chair our ESG Committee because she has real-life experience on the ground and just brings a set of capabilities that I don't believe any other investment firm in our space can match. As it was mentioned earlier, there's been a sharp recovery in AUM principally based on market. As Peter mentioned, the gold equities generally were up over 40% in April. They continue their rise this month. And I'm pleased to report that virtually all of our products have positive performance year-to-date, and most of them double digits. And I think that's something that we're very fortunate to have at this point in time with all the uncertainties out there. Gold stocks, we think, are poised to be the new growth stocks. Obviously, the higher metal prices will drive revenue. But at the same time, costs are well contained. Energy and labor being two of the largest components. So we think that there is an enormous opportunity for a V-shaped recovery in this industry as things open up with margin expansion and earnings growth and many of the features that are going to be very difficult to find in most other sectors. So I think we're very well positioned. We're very fortunate to have John and his team join the Toronto team and all of the other technical experts that we have here at Sprott. And we look forward to finding lots of new customers. Thank you. Back to Peter.

[Peter F. Grosskopf, CEO & Director]

Thank you, Whitney. I'll now turn to Slide 10 to look at some of our private strategies. We recently closed our second private resource lending fund, which raised over $820 million in committed capital. We are now in an ideal position to respond to a robust pipeline of opportunities. Activities are really ramping up, and we've signed multiple commitments in recent weeks and have a total pipeline of over $500 million when fully accounted for. During the first quarter, we had drawn down $60 million of this fund. In Q4 2019, we launched a new project participation vehicle with $210 million in lead orders. We are -- we believe this is becoming an important new market for institutional funding into mining projects. And we're currently looking at a number of deals. For this vehicle, we've completed one to date and have an active pipeline. So that will join us as a sister fund to the lending fund going forward. Fundraising for this fund has been put off until the fall because we're just going to work on deploying the money we have committed to date. Turning to Slide 11 for some closing comments. The outlook for precious metals has rarely been more positive. The monetary and fiscal stimulus as well as the heavy hand of government intervention that has been unleashed in response to COVID-19 is like nothing we've ever seen, and we will be -- we believe we'll be paying for it for many years to come. Global debt levels are completely unsustainable, and financial repression through negative real rates will now become standard policy tool for governments globally. This environment is extremely positive for gold. At Sprott, we're focused on driving growth in our core strategies, first and foremost, and to drive this growth organically. Our physical trusts are the perfect product for these times, and we're the main beneficiaries of investor flows during Q1 and for the year-to-date. But as Whitney noted, we believe it's now gold stocks' time to shine, and we expect great things from our Managed Equities business in the months ahead. We're determined to capitalize on this current opportunity and position Sprott for the future. We are exploring complementary product line expansions. We've certainly increased our virtual marketing activity, and this has proven to be a remarkably effective way for us to grow our funds. And we will also pursue some new international distribution agreements in select markets. We do -- we are convinced that the timing is right for us to step on to the larger stage with the NYSE listing. And we think there are synergies between our large client base in the U.S. and a share position in that market. We look forward to introducing our company to a broader group of investors during the latter half of this year. That concludes our remarks for today's call, and I'll now pass it back to the operator for questions.

[Operator]

[Operator Instructions] Our first question comes from the line of Gary Ho from Desjardins.

[Gary Ho, Analyst]

Sorry. I jumped on the call late. Can you provide some additional color on the flows that you're seeing so far in Q2? I think you highlighted some of your fiscals and ETFs business, maybe just a little bit more granular color into your different segments?

[Peter F. Grosskopf, CEO & Director]

Yes. I'll pass that to Kevin, and perhaps John can comment as well.

[Kevin Lloyd Hibbert, Senior MD, CFO & Co]

Yes. And forgive me, but I'll pass it on to John. He's got a lot more insight into that.

[John Ciampaglia, Senior Managing Director]

Sure. What we're seeing, obviously, are the liquid type strategies in the physical metal space are really attracting the lion's share of the flows. So post-Q1, in the trust, we've seen about USD 700 million of additional flows. And that's in just about 5 weeks. So the pace that we're seeing has been very strong, and with about 120 of that coming in May. So the pace is not falling off. I said last time on the call that gold at $1,600 is very constructive for us to raise capital. And now obviously, at about $1,715, that kind of validated my point. We're seeing lots of interest. And I think we often think about the world from a U.S.-centric lens. But if you take a step back and think about price of gold and every other currency, but U.S. dollars, it's at all-time highs. So we're seeing investors from around the world looking for physical gold products. We are raising capital in the silver. Silver is a very different story. As you know, it's a monetary metal and an industrial metal. The industrial metal side of the equation obviously has fallen off. But when silver hit below $12 an ounce, we saw an incredible demand response from silver investors, which tend to be much more price sensitive. And in no time, you couldn't find a single silver coin anywhere because they were all bought. So we're seeing primarily flows into the gold trust, but we're also seeing flows in our gold and silver trust and our dedicated silver fund. So different kind of buyers. The gold funds are more institutional driven, the silver funds are more retail driven. The equities have been fairly quiet. As Whitney said, we've had this incredible V-shaped performance recovery. And what that has -- if you look at our mutual fund, the U.S. mutual fund, it went from about $1 billion down to $650 million in assets, and now it's back over $1 billion in a very short period of time. And over that period of time, we didn't really see a lot of activity. People were kind of sitting tight. They weren't redeeming. And we expect that once people start to take notice of the performance, we'll start to attract some more capital. We have had some institutional redemptions, not totally unexpected. Institutions obviously behave a little differently than retail investors, but we would expect that we'll more than offset those with new sales and other products.

[Gary Ho, Analyst]

Okay. That's good color. And then second question, just as gold prices quite high here, Kevin, can you maybe talk about the EBITDA margin benefit kind of what we should see across the various segments?

[Kevin Lloyd Hibbert, Senior MD, CFO & Co]

Sure, Gary. So generally speaking, if the gold prices rise, it's obviously going to be very positive to our operating margins, primarily because a lot of our operating expenses are fixed as far as our SG&A and then obviously, we've got a nice balance in terms of variable compensation items as well in the case that, heaven forbid, gold prices were to move in the opposite direction. But I'd say what you're seeing now as far as total operating margins. And if you look at slide -- sorry, Page 6 of our MD&A, we're kind of running at about 43% right now. I think it's safe to say that we could run comfortably north of that for the foreseeable future, assuming that the gold markets continue to be as constructive as they are now, putting us well within the top 1% of global asset managers.

[Gary Ho, Analyst]

Okay. And then, Peter, can you talk a little bit about the increased equity originations activity in Q1, then I think also tracking kind of Q2, that activity continued, maybe outlook in your pipeline for future deals as well.

[Peter F. Grosskopf, CEO & Director]

Are you talking about the dealer revenue?

[Gary Ho, Analyst]

Yes, exactly.

[Peter F. Grosskopf, CEO & Director]

Okay. I mean Q1 was kind of a modest uptick and just continued, I guess, what we'd call stable performance. Initially in Q2, there was a little dip as things went very quiet with COVID, but now we've seen a substantial increase in activity. So I would say the private client group folks have never seen more incoming business. The dealer groups are reacting to liquidity conditions in the deal markets, which all of a sudden, in the last 2 weeks have exploded. And we see this now as being a sector that's kind of being chased both from a client perspective and a deal perspective. So I would expect our private client folks in the U.S. to be kind of on the upswing, but it's a modest upswing because it takes a long time to -- for them to realize revenue benefits from clients, whereas the dealer in Canada, which kind of syndicates into these larger institutional deals, should have an immediate uptick now.

[Gary Ho, Analyst]

Okay. And then just last question for me. Peter, you mentioned you closed the second resource fund and commented on robust pipeline. So your capital deployment language in your MD&A, I think it's between $100 million to $200 million, hasn't changed. Are you expecting some capital kind of distribution from these funds? Can you help me connect those 2 points?

[Peter F. Grosskopf, CEO & Director]

Okay. Maybe I'll link with Kevin on this, but I'll just explain it to you from my view. The LF I is winding down and paying out. And the last large loan in that portfolio was the loan to TMAC, which announced today a takeover by Shandong Gold. So although the takeover will take a long time to close. The LF I has basically been dischargers in the process of being discharged with a very handsome return. That hits our numbers in a positive way because we're a big investor in that LP. But it's had -- as LF I has been repaid, it's been lowering our AUM on that side. LF II, the AUM, as we went from a fundraising focus to a deployment focus started to click in Q1. So $60 million in Q1. There's about $250 million of signed term sheets and facilities that we expect to deploy in the near future. And then there's another $300 million to $500 million of pipeline. And so that's now ramping up. It's impossible to tell exactly when the monies will be drawn. And I would expect that just in general, and this is, again, a bit of a guess, I would expect that AUM to just solidly and steadily move higher now going forward, even as TMAC is repaid. So it's a fairly large fund. It's $820 million plus co-investment. So getting to $1.2 billion or so deployed over 2 years, you've got to kind of go at the pace of around $400 million, $300 million to $400 million per quarter. So those numbers will start to override what was there in the past.

[Kevin Lloyd Hibbert, Senior MD, CFO & Co]

Just to add a little bit of color on top of that, Gary. So when Peter was mentioning those numbers in the breakdown, basically, the $200 million that he mentioned first, which was essentially more like a firm commitment, so to speak, in terms of what is to come as far as capital calls is really what we would focus on in our outlook. And then to his point, the other $400 million that gets to the $600 million he was talking about is really we don't have enough line of sight into exactly when those capital calls would occur, and so we focus primarily on that $200 million. Hence, the $100 million to $200 million range that we disclosed there.

[Operator]

Our next question comes from the line of Geoff Kwan from RBC Capital Markets.

[Geoffrey Kwan, Analyst]

Just on your total AUM as it stands today. Can you just remind me what the rough mix would be as to how much of that would be physical gold and how much of that would be in gold equities?

[Kevin Lloyd Hibbert, Senior MD, CFO & Co]

Sure. Geoff, it's Kevin here. Just looking at my laptop here. Okay. So you're asking about the May 6 pro forma?

[Geoffrey Kwan, Analyst]

Yes.

[Kevin Lloyd Hibbert, Senior MD, CFO & Co]

Okay. So the exchange-listed pro forma in that would be $8.2 billion. The managed equities would be $2.3 billion, so on and so forth. You'll see that on Page 12 of the MD&A., and that's also on Slide 5 of the analyst deck today.

[Geoffrey Kwan, Analyst]

Okay. And on the decision to get the dual listing, the rationale for that was that having a lot of investors outside of Canada that couldn't invest in the Canadian listing? Is it more of a known institutional and/or retail tech demand? Just wanted to get some color on that.

[Peter F. Grosskopf, CEO & Director]

Well, in general, it's U.S. dollar reporting, U.S. dollar clients. It's a U.S. dollar-based firm. You'd be surprised still what a difference there is between a larger cap stock that is institutionally accredited and can be bought in any market at any time versus a company that is still supported by a lot of retail investors. A lot of those retail investors need specific approvals to trade non-U.S. stocks. And we were just finding that we were getting requests. I wish that you could come down and see us about this and that. And it just wasn't going to work unless we had the U.S. listing to support that. It's just -- it's where the greatest upside lies. It's where the greatest dollars lie in our business. The investors appreciate the uniqueness of our situation a lot more in that market. There's a lot more gold investors in general. So it just, for us, just made sense. It's where -- that's where the bulk of our future is being driven.

[Kevin Lloyd Hibbert, Senior MD, CFO & Co]

And just to add to that a bit for you, Geoff, about -- in addition to the majority of our clients and our funds being U.S.-based, almost 70% of our trading volumes actually have been occurring in the U.S. OTC. So we actually see more trade activity and interest in our stock on the other side of the border than we do up here. And so this is another way of just making access easier to the -- to, quite frankly, the folks and institutions most interested in us.

[Geoffrey Kwan, Analyst]

And sorry, those comments around wanting to be able to trade you more that was coming from retail? Or were those coming from institutional investors?

[Kevin Lloyd Hibbert, Senior MD, CFO & Co]

Probably more retail, but a healthy dose of institutions making up the back end as well.

[Geoffrey Kwan, Analyst]

Okay. And then just the last question I had was, again, relating to the listing. Are you aware, like on the listing, would you be qualified for any sort of, I guess, meaningful index -- indices that you'd be added to? And then what would be the incremental costs associated with the dual listing?

[Kevin Lloyd Hibbert, Senior MD, CFO & Co]

I can handle the cost part. I can't speak to the first piece, unfortunately. But on the cost side, I don't expect it to be terribly material. We may see a slight increase in the SG&A numbers you see in the corporate segment, but that would be largely related to things like the fact that we'd need increased D&O insurance, obviously, because the U.S. tends to be a little bit more of a litigious environment, and the SEC requirements tend to be a little bit more involved in the OSC ones from a SOX 404 perspective. So we may see a little bit higher expenses there, but nothing that will move the dial much.

[Geoffrey Kwan, Analyst]

Would it be like maybe like $300,000-ish type of thing or...

[Kevin Lloyd Hibbert, Senior MD, CFO & Co]

It won't be much. I can't get into specifics right now, but you'll see it through the numbers over time, but I don't think it will be material.

[Peter F. Grosskopf, CEO & Director]

In terms of the first question, Geoff, we haven't done the research, but we're not counting on anything. What -- our shares tend to sit outside of most comparable groups and it's more the fact that I think investors will look at us as a unique proxy to the gold business itself.

[Operator]

Our next question comes from the line of Graham Ryding from TD Securities.

[Graham Ryding, Research Analyst of Financial Services]

Just with that New York U.S. listing, what's the proposal to share consolidation?

[Kevin Lloyd Hibbert, Senior MD, CFO & Co]

It would be at...

[Peter F. Grosskopf, CEO & Director]

Up to 10 to 1.

[Kevin Lloyd Hibbert, Senior MD, CFO & Co]

For 10, Yes.

[Graham Ryding, Research Analyst of Financial Services]

But that requires shareholder...

[Peter F. Grosskopf, CEO & Director]

Will require shareholder approval, so we can't comment on the exact number until that's done.

[Graham Ryding, Research Analyst of Financial Services]

Got it. Okay. And then you talked about product expansion, then you mentioned a streaming fund, I think you said $210 million. Is that -- would that be within your lending bucket? Is that where those assets would fall? And what is the timing? Is that something that happens in Q2? Or how should we think about that?

[Peter F. Grosskopf, CEO & Director]

Well, it's a similar structure to the lending fund, but it's not directly associated with it. The -- it's a separate pool of capital. It has separate clients. It's managed by a separate team, and it is deploying now. So I would see that as just an ancillary business that is run in the same kind of structure, but it takes longer-term participations for one thing, participations that have more upside and has a different set of clients. What I meant by how it's becoming an increasingly important market is a lot of institutions don't like to see mark-to-market on their gold participations, whether they're in the public market. They prefer the private markets, and they're starting to want to take project -- these project participations directly at the asset level.

[Graham Ryding, Research Analyst of Financial Services]

Got it. And so the $210 million, that's something that is sort of committed that will build over time in terms of your AUM assets deployed, is that right?

[Peter F. Grosskopf, CEO & Director]

Yes. Ideally, it's the seed for a fund that becomes $500 million to $1 billion fund or maybe more. The thing about that particular area is it's chunkier and it's larger than loans. So it's dependent on finding the right deals and also finding the right investors.

[Graham Ryding, Research Analyst of Financial Services]

Got it. And the typical structure, you'll have a certain co-investment alongside this fund?

[Peter F. Grosskopf, CEO & Director]

Yes. So the typical structure is that the fund would drive the initial participation. And if the deal size was bigger, you'd have co-participations with the LPs or with outside LPs. And there's been lots of announced deals on the royalty side and on the streaming side, but one area of that market that we think is going to grow are just direct asset participations as well.

[Graham Ryding, Research Analyst of Financial Services]

Okay. Interesting. There was $133 million of inflows in, I guess, what you're calling your other bucket. Is that like your managed accounts business in the U.S.? Is that what we're seeing there?

[Peter F. Grosskopf, CEO & Director]

I'll turn it over to Kevin.

[Kevin Lloyd Hibbert, Senior MD, CFO & Co]

No, that relates to -- Graham, it's Kevin here. That relates to Korea. We closed on a Korean fund earlier in the quarter.

[Graham Ryding, Research Analyst of Financial Services]

Okay. Okay. And then just an update here. With the performance moving dramatically at the fund level, what about performance fees? Is there any color on sort of what you're seeing within your, I guess, your performance generating funds? Is there any update there on how things are looking?

[W. Whitney George, President]

This is Whitney. I think you're talking about Managed Equities. I think in the MD&A, there's -- on Page 11, it sort of breaks down the various products and where performance fees exist. We launched about a little over a year ago, a year and a quarter ago, the Sprott Hathaway joint venture partnership. It is still small. The performance is excellent. It generated performance fees for us last year. And we were splitting those with the Tocqueville organization because it was just a joint venture then. That's now 100% under our roof. And I'm very excited about its prospects, but it's still, as you'll see, a small product. And then some of our Canadian mutual funds have performance fee capabilities as well. Again, those are sub-advised relationships under Ninepoint, and there's a fee sharing arrangement that goes there. So I'd say on the equity side, performance fee business is still small, but building and very lucrative when it works. I'll let others address other products.

[Peter F. Grosskopf, CEO & Director]

Yes. I think on the private side, again, these are generally 5- to 7-year funds. So you only see that performance fee date once every 5 years. We are not accruing for some, but we have some that are in the money in the lending fund. Now that the TMAC is unwinding and will be repaid next year, I imagine it's fairly certain now that next year will be an incentive fee payday in the lending business.

[Graham Ryding, Research Analyst of Financial Services]

So that's -- is that 2020 or 2021, when you say...

[Peter F. Grosskopf, CEO & Director]

2021, I would think. But we don't know when the deal will close. But it could be late 2020.

[Graham Ryding, Research Analyst of Financial Services]

But you need that deal to close for that fund to wind down?

[Peter F. Grosskopf, CEO & Director]

To unwind. It's a pretty significant position in the context of that fund, yes.

[Graham Ryding, Research Analyst of Financial Services]

Understood. And can you provide any color on sort of what the embedded performance fees are sitting at within that fund?

[Kevin Lloyd Hibbert, Senior MD, CFO & Co]

Unfortunately, we can't get into carry discussions or disclosures or anything like that until after we get out the clawback period, which is essentially when the funds would actually close and unwind.

[Operator]

This does conclude the question-and-answer session of today's program. I'd like to hand the program back to Peter Grosskopf, Chief Executive Officer, for any further remarks.

[Peter F. Grosskopf, CEO & Director]

Well, just in closing, we appreciate all of your support during this difficult time. We appreciate your interest in our company, and we're obviously quite busy at Sprott. We look forward to reporting to you over the course of the year in what is now a very exciting environment for us. So thanks for your participation, and have a good weekend.

[Operator]

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.