Sprott Inc. (SII) Q4 2020 Earnings Report, Transcript and Summary

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to Sprott Inc. 2020 Annual Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded today, February 26, 2021. On behalf of the speakers that follow, listeners are cautioned that today’s presentation and the responses to questions may contain forward-looking statements within the means 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 actual -- may cause actual results to differ materially from expectations and 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 and U.S. securities regulators. I will now turn the conference call over to Mr. Peter Grosskopf. Please go ahead, Mr. Grosskopf.

Good morning, everyone, and thanks for joining us today. On the call with me today is Whitney George, our President; Kevin Hibbert, our Chief Financial Officer; and John Ciampaglia, the Chief Executive Officer of Sprott Asset Management. Our 2020 annual results were released this morning and are available on our website where you can also find our financial statements and MD&A. I’ll start on Slide 4. 2020 was clearly a year unlike any other. COVID-19 took a toll and altered the way we live and work, including the way we work at Sprott. Happily, we can now see that there’s a light at the end of the tunnel, and we can start to think about moving on with our lives as vaccine programs are rolled out. While the worst of the pandemic may be behind us, we now need to turn our attention to the impacts of pandemic response on the financial markets. As governments and central banks resorted to unprecedented monetary and fiscal stimulus, we believe they exacerbated preexisting conditions and ensured that continued interventions will be required to keep the global debt bubble from bursting. In this light, in 2020, gold performed well in its traditional role as a safe haven asset, reaching a record high in August before finishing the year up approximately 25%. For our business, it’s important to note that with equity markets at all-time highs and valuations stretched across the financial markets, investors are increasingly turning to gold as a portfolio hedge. Our universe is thriving. And at Sprott, our strategy to address this large and growing market segment by providing investors with access to a global year and metals and mining strategies is still in its relatively early stages. We see a lot of growth available to us in the market. And we see a lot of investors turning not just to gold and precious metals but other mining equities as they make their real asset investments for the future. Turning now to Slide 5. Looking at some of our 2020 highlights, in January, we completed the acquisition of Tocqueville gold strategies. In June, we took the next step in the evolution of the company with our listing on the NYSE. We believe this increased our profile in our largest market and made it simpler for U.S. investors to purchase our shares. In Canada, our strong financial performance was recognized with Sprott being added to the TSX composite and named to the TSX30. And as demand for precious metals surged, we finished the year with $17.4 billion in AUM, a record high for the company. So, we had a busy year to say the least. I wanted to take a moment on this slide to recognize how proud I am of the state of the company at this time. It’s directly a result of the contributions of our employees, management and our Board, specifically, the quality of the people and culture, our practices, including the treatment of customers, disclosure, regulatory and ESG and the breadth and global status of the company. With respect to 2020, it was the first year that I believe it all came together. First, each of the businesses performed well and capitalized on strong market conditions. Each hired and improved on their already excellent talent pool, and each produced growing financial returns. More importantly to me was how all the spokes of the wheel work together. I noticed how our collective DNA of mining investment helped each other succeed. Great talent is always mobile, but they still stay or come to Sprott because of the unique benefits of our platform. So I’ll -- turning now to Slide 6. Over the past 5 years, we’ve repositioned our business to focus on our core strengths in precious metals and mining. The results of this transition over the last 5 years have been significant improvements across all of our key financial metrics. Over this period, our AUM grew by 224%, and our adjusted base EBITDA increased by 240%. Last November, we increased our annual dividend by 8.7%. While we’re pleased with our progress so far, we believe that we’re still just getting started, and we look forward to capitalizing on the exciting opportunities ahead of us. With that, I’ll turn it over to Kevin for some details on our financial results.

Thank you, Peter, and good morning, everyone. I’ll start on Slide 7, which provides a summary of our AUM as at December 31, 2020. As Peter just mentioned, our AUM finished the year at a record $17.4 billion, up $1.1 billion or 7% from September 30, 2020, and up $8.1 billion or 88% from December 31, 2019. Our AUM benefited largely from strong inflows into our physical trusts and rising precious metals prices, particularly gold; the acquisition of Tocqueville’s gold strategies funds in the first quarter of the year; and strong market value appreciation across most of our equity fund products. Moving now to Slide 8, before I look at our 3 and 12-month earnings. Adjusted base EBITDA in the quarter was $14.8 million, up $7.3 million or 98% from the prior period, and was $44.2 million on a year-to-date basis, up $15.2 million or 52%. The increase in the quarter and on a full-year basis was primarily due to strong net inflows and precious metals price appreciation in our exchange-listed products, the Tocqueville gold strategies acquisition earlier this year, coupled with stronger equity valuations in our precious metals fund strategies and we also benefited from increased commission revenues in our brokerage segment due to strong equity origination and transaction activity. Those increases more than offset lower finance income in our lending segment and higher variable at-risk compensation on increased revenues, earnings generation, and strong operating margins across the company, which are key performance metrics for our AIP and LTIP programs. For more information on our revenues, expenses, and EBITDA, you can refer to the supplemental information section of this presentation, as well as our 2020 MD&A filed earlier this morning. With that said, I’ll pass things over to John.

Great. Thanks, Kevin, and good morning, everybody. 2020 was obviously a breakout year for Sprott on the exchange-listed products, specifically the Physical Bullion Trusts. We had extraordinary AUM growth, which came from a combination of market appreciation and net inflows. Last year, we did $2.8 billion in net flows into this product category, which was, by far, a company record. In 2020, gold was really the star performer as investors around the world shifted to the safe-haven asset, and our gold trust led our sales at $1.7 billion. Silver was respectable last year, but our silver trust, for example, came in at about $600 million. Flows into gold ETFs were at all-time highs last year, while flows in the silver ETFs were much more modest. However, the tide has turned in silver’s favor over the last few months. We’ve seen a very sharp rebound in investor sentiment related to silver, and we are benefiting from that interest. Our year-to-date sales, after having a more moderated level in Q4 have risen quite sharply. And year to date, the trusts have generated $964 million in new flows. Of that, $905 million is in the Sprott Physical Silver Trust. And as I said, that compared to $615 million for all of last year. If we go to the next slide, talk a little bit about what’s driving this activity. We believe that silver is benefiting from its dual roles as both a monetary metal and an industrial metal. There are a number of drivers underpinning the price of silver right now and the interest. First of all, it remains very inexpensive even after last year’s 48% rise. It’s still 40% below its 2011 high, and that does appeal to many value-oriented investors. With a recovery in the global economy, prime by easy money policies that Peter referenced, there is a growing narrative about reflation as central banks, even though they are talking down inflation, the bond market sees it differently as we’re seeing signs of inflation everywhere. If you look at food prices, prices of lumber, copper, housing, et cetera. We don’t believe the CPI numbers accurately reflect the true changes of inflation coming. Second of all, after a protracted bear market and commodities that lasted almost a decade, there is starting to, there starting to be more analysts in the marketplace talking about a new commodity, super cycle forming. The bear market led to underinvestment in many years in many commodities. U.S. silver is also getting an added lift from shift in the U.S. environmental policy and the ongoing transition to the green energy revolution in electric vehicles, which consumes silver. And then lastly, social, these social media-driven investors have turned their sights on silver in the last few weeks, which is giving it an ad lift. We believe we’re well positioned to capture the additional interest in the silver segment. We do have a number of products on both the physical side and the equity side, in different mutual fund and SMA, separately managed account, offerings. And I’ll just talk a little bit about the silver market. The retail silver civil market, which comprises largely coins and bars, has been under a lot of stress over the last few weeks in response to this spike in demand. There are shortages of coins and bars, and more importantly, the premiums on them, those are the prices people have to pay over spot sliver, have really increased substantially. For example, a 1 ounce silver coin can cost you anywhere between 40% to 50% above the spot metal price. We are starting to see signs of physical tightness as well on the wholesale side of the market. It is becoming harder to source 1,000 ounce London Good Delivery bars. We are also seeing in the futures market a rare backwardation in the silver market, which has only happened a few times in the last 10 years, most recently, back in 2010 and ‘11 where the price of silver had a very large jump that year. And finally, a couple of U.S.-listed silver ETFs in the last few weeks, amended their prospectuses to disclose a potential risk related to authorized participants being unable to source sufficient silver for the creation of new shares. This obviously send concerns that there is, indeed, a shortage or potential shortage or tightness in the physical market. Fortunately, we’ve been able to source bars this year, and we acquired 31 million ounces of silver for our funds year-to-date. We do have the ability to manage the inflows into our bullion trusts, and we are not, at this time, contemplating any similar changes to our perspective. It’s obviously going to be a bumpy ride and volatile ride as we’re seeing today, but we think the prospects for silver remain quite bright. And with that, I will pass it over to Whitney.

Thank you, John. I’m on Slide 11, and I wanted to just briefly touch on our managed equities business, which is probably our newest business, if you account for the transaction we did last January and the purchase of the assets and the team from Tocqueville with John Hathaway. I would characterize 2020 as kind of a shifting of consolidating that business, maybe slightly on the defense early in the year as is traditional and when new businesses are acquired. There is some movement among clients, uncertainty, which, by midyear, thankfully, started to abate. And during the course of the year, each successive quarter, we saw redemptions declining and new sales increasing. And with, as of January, we are in a net sales position for the first time and really, for the first time since the last bull market in precious metals miners going back to 2011. So we are now thinking more offensively. The market still, we think, is very, very attractive. While the metals, underlying metals have performed very well, we think the equities have lagged quite significantly, leaving them generally in a position of relatively inexpensive compared to the rest of equity markets. Lots of free cash flow, lots of earnings beats, dividend increases, all the fundamental drivers that would get one excited about, any equity category are currently in place. We had some very strong performance in our products last year, resulting in performance fees in several products for the first time in quite a while. And as I have remarked before, money does tend to chase performance. So I think we are very well positioned, and we have started to increase our marketing and sales staff levels to capture what we think is the potential opportunity in 2021. And we’ll be offering new products that are both modern and current in their thinking, incorporating ESG considerations to meet the new investor demand, particularly coming out of Europe, but I’m sure it will be a universal demand. So very excited about that part of the business. We exceeded our expectations last year. We have sort of locked in the ultimate purchase price by accelerating the earn-out payments into this year. And think that we will have a bright future in what will be a very important division for Sprott in 2021. Thank you. Peter?

Thank you, Whitney. Turning now to Slide 11 for a look at our private strategies. We have currently more than $1 billion in total AUM in our private strategies as well as substantial undrawn commitments. In our lending business, we are continuing to deliver outstanding results to our LPs. LF2 has now deployed $325 million, and we have a strong pipeline of new deals. Our streaming and royalty strategy had a very successful first year, participating in 4 transactions and attracting some of our key investors. We have substantial interest from investors in these strategies and expect that it will be a busy year securing new capital commitments both in our two core funds as well as two or three adjunct funds, which we expect to roll out. And so we believe that 2021 will be a transitional year for this business. As many of you, to put that in context, as many of you can recall, during the slower years of our market, we had substantial seed capital allocated from our balance sheet, which provided us with substantial financial returns. And it’s been slowly transitioning to a management fee and performance fee business for us from that state. And by 2022, we expect drawdowns of our available capital, and new AUM will provide some substantial earnings growth going forward. Another news on another front, we announced this morning that Rick Rule will be transitioning from his executive roles to what I would call semiretirement. Rick will continue to serve as a Director of Sprott, and he intends to maintain his share position. We have worked out an arrangement with Rick where he will be focused on doing what he loves, running a natural resource investment council, serving a large and broad media audience and referring new managed investment clients to Sprott. Rick will also continue to seek extraordinary investment opportunities in the sector and will serve as a sub-adviser to a few Sprott specialty funds. In the 20 years that I’ve known, Rick, and the 10 that I have worked with him, he has been a truly outstanding partner. We believe that both he and we will enjoy this new arrangement going forward, and we will continue to do lots of business together. We certainly wish him well and hope that he is truly happy in this role. Turning now to Slide 15 for some final comments. Despite the recent pullback in gold prices, we continue to be convinced that the outlook for precious metals has rarely been better. Massive stimulus programs are rolling out globally, and the fed and other central banks are signaling they will continue this as long as required. This is now the new normal, and the resulting distortion in financial asset valuations now appears to be so extreme that we believe that there has never been a stronger argument for investors to hold noncorrelated assets and specifically gold and silver. These are still underrepresented in portfolios of most generalist investors, and so we have a long runway in front of us. Looking ahead, we believe that our mission to build the world’s leading precious metal investment firm is still early on, and the time is right to increase our focus now on sales, digital marketing, and we’re adding new personnel in each of these areas to support these efforts. We also remain committed to extending our reach by increasing our presence in key markets such as Europe, Australia and Asia. Finally, we will expand our client base this year through the launch of complementary new investment strategies in our key segments. Stay tuned for those announcements. That concludes our remarks for today’s call, and I’ll now turn it over to the operator for some Q&A. Operator?

[Operator Instructions] Your first question comes from the line of Gary Ho with Desjardins Capital.

Maybe first questions for John or Peter. Looking at the net flows, seeing the spike in the fiscal silver in February, how sustainable is that? And what are the factors that will be potentially -- that could potentially move that even higher or lower? Just wanted your thoughts on that.

John? Oh, John may be...

I’m sorry about that. I’m here.

Okay. It’s the mute button.

It’s obviously difficult to predict, but I think the fundamentals that I outlined earlier present a very bullish case for silver. We’re astonished that silver is still -- has a two on the front of it. It was close to 50 in 2011. And you think about every other asset class in the world trading at multiyear highs. We still think there’s a very compelling opportunity just on the basis of its price. I think as long as the market remains somewhat dislocated, I think that does work in our favor. And what I mean by that is the U.S. mints and Canadian mints and whatnot are still operating with COVID protocols in place. And so the production of coins and bars, the transportation of those logistics, they’re all still being impacted, to some degree, due to COVID. So there is a lag in terms of meeting that demand response in the marketplace, which is why, a few weeks ago, you saw the coin dealers and whatnot sell out. If there isn’t supply to meet the demand, I think we’re very well positioned to capture our fair share. And in fact, we’ve been capturing well above our fair share. We’ve been -- our share -- our market share of flows is about 2x our market share of AUM in the last 30 days, to give you a sense. And our global share of silver ETFs, AUM has gone from 10% at the beginning of February to almost 13% today. So that’s a $27 billion category. So to gain almost 3 percentage points in a month, I think, is pretty spectacular. So I think we’re well positioned. And not -- it’s just not physical silver. There’s interest picking up in -- on the equity side as well. And we have one of the few actively managed silver equity funds in the world. It’s been around for 10 years, which is also seeing some increased interest as well. So it is having a positive impact around a number of our different product offerings. But we think we’re well positioned relative to the competitors to continue to get more than our fair share of flows.

And the bottom line is, Gary, we’ve got the silver. A lot of our competitors seem to be either scrambling or amending their documents to reflect that they -- they’re a little behind the 8-ball.

Makes sense. And then thanks for the updated numbers on the exchange-listed products. Are you able to give us some color on where Sprott’s total AUM stands today?

Well…

Particularly on the trust, Gary?

No, on a consolidated basis.

Okay. I’ll let Kevin answer that.

Well, we’re kind of slowly plumbing new highs. It does change quite a bit every day. We have a lot of gold and silver in the vaults. And so that gets marked every day differently. As to our equity strategies, we’ve got inflows, but we’re plumbing new highs.

Yes. I’d echo Peter’s sentiment there, Gary.

Perfect. And then, yes, Kevin, while I have you here. I just want to confirm on the compensation expense sensitivity side. I know that number could move quarter-to-quarter. But looking at it from a pre-comp EBITDA, let’s call it, compensation has been roughly in that 47% range in 2020 and 2019. Is that how I should model that line out going forward? I think in your disclosure, you called out a few variable factors that could move that line item around.

Yes. That’s -- yes, you have it exactly right, Gary. That’s the exact way to look at it. When you look at our comp number this year, it was up primarily due to two things that we’ve mentioned, which was, firstly, the acquisition, which led to the majority of the increase in salaries you saw, and then the rest of the increase was coming from our variable at-risk pay increase as the company did substantially better year over year. I think earnings were up about over 50%. And over the last three years, our efforts have led to shareholder value creation that was significant enough that we got included as the only FI in the TSX30. So the numbers were up, but to your exact point, in terms of the proportion of the pre-comp EBITDA, as you put it, that would be split between employees versus our shareholders. You’re absolutely right, it was about 47% this year, regardless of that increase in growth. And it was the same the year before. So I think it’s safer to use that or any of the other analysts on the call as a go-forward model for now.

Okay. That’s helpful. And then just my last question maybe for Peter or John. Just want to hear your thoughts on the bitcoin space. Any interest to expand products here? Are you getting asked from clients to have such product? Anything you can share would be helpful.

Well, maybe I’ll take that one. So the philosophies behind bitcoin and gold are undeniably similar. And there is a lot of crossover, an increasing crossover between client bases that are interested in bitcoin and gold. And some investors have been mixing the two together in their portfolio. So we understand that. But the attributes of the two are, in the end, quite different. And we have not yet got ourselves comfortable or excited about signing on to a product that involves bitcoin despite our huge client base that might be interested in it. And the reason is, we’ve just got too much to do in our own markets still. And I think that our commitment has been to be behind and to be a first mover and to hopefully make a big splash as gold becomes digital. Because gold is going to go on the blockchain, and we have some investments there. And when it really rolls out, it’s going to be a huge thing for the gold market. So that’s really our bet for now. And there’s no reason why gold can’t inherit the technological benefits of bitcoin and yet serve as a much more stable and regulated market without the risk that bitcoin has currently.

Thanks for your thoughts. Those are my questions.

Thank you. Your next question comes from the line of Geoff Kwan with RBC Capital Markets.

Hi, good morning. I know you talked a little bit on the Tocqueville strategies and having a positive monthly net sales. Just wondering if there’s additional color you can provide in terms of thoughts on the momentum of that potential pipeline to increase the sales more.

Sure. Whitney?

Sure. Thanks. So it’s a neutral fund, and investors will come, I guess, when they’re ready. It is nice to see the net number turn positive. Sales have been building, and redemptions have been declining fairly consistently and gradually throughout the course of last year and, obviously, crossed over this year. More importantly, though, are some new products. We have a new institutional mandate, and we’re in discussions with many more. So it’s -- the audience is broadening out. The discussion levels have picked up. And we would expect to have a lot more under institutional management as the year progresses, which is very healthy for the business.

Okay. And just my other question was just going back to the Physical Silver Trust. Obviously, it’s benefited a lot from increased focus, whether or not it’s from retail investors or others. As there been potentially like lower AUM and net redemptions, the associated impact on earnings, are there any other things we should be considering that may not necessarily be obvious if we saw kind of what was the run-up in silver actually go the other way as kind of quickly as what we’ve seen over the past couple of months?

Yes. It’s John here. Well, you know what the amazing thing is, yes, we’ve had a lot of inflows in the last month into the silver trust. But what’s amazing is the price of silver has done nothing over that whole time. So the lift we’ve got from the AUM has largely been inflows and not market. So in terms of the risk of the price of silver backtracking because of the interest, that hasn’t played out on a positive, so I don’t see it playing out on the negative. And it’s really hard to predict in terms of how the flows and -- will play out. But again, you have to remember that this is a closed-end fund, so the -- it doesn’t function the same way as an open-ended ETF with daily creation/redemption. So we experience stickier AUM than a traditional open-ended ETF.

Yes, I’ll go out on a limb and say, especially for our silver trust, those are sticky clients, like we have not historically had large outflows. And I think if you’re a trader, you’re quantitative or a machine or you’re in and out for the quick markets, you’re generally not doing that through Sprott, although our trusts are now big enough to do that. But we have some pretty sticky clients, and they’re -- they believe in the mission, so.

And would you say like the net creations that we’ve seen in the net sales over the past couple of months would be from those set by investors? Are you getting different types of investors that you might not have had previously?

Look at the media. I mean, John, you could probably comment better that I can.

Yes. I think we’re -- I think the answer is we’re getting different investors. We -- there’s a traditional group of silver buyers that are constantly buying silver irrespective of the price, and they actually tend to buy more when the price goes down. They tend to be more value-oriented than gold investors. And second of all, I can tell you, we’ve had a lot of conversations with people that have told us flat-out that they’re moving out of the iShares product and into ours because of recent concerns. So those are, I’m going to call, new -- net new clients that we’re adding. They tend to be more institutional in nature and more sophisticated in terms of their investment knowledge.

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

Do you -- following on the last theme, do you have a visibility on the flows into that silver trust in January and February? How much of that would be institutional in nature versus retail?

Yes. Graham, it’s John. It’s very hard to tell. With any ETF product, the level of transparency is limited. We do our best through 13F filings and subscription we have to Broadridge to try to get some transparency with respect to the shareholder base. But it is hard. I would say the most important thing is it’s not just a few large investors coming in. It’s a very broad range of investors. We do look at the block trades to try to get a sense of how many institutions are coming in. I would say the last couple of weeks, we’re seeing more block trading. But in the early part of the rally, it was lots of smaller tickets, which reflects more of the individual investing crowd.

Okay. That’s helpful. So market performance was positive in that AUM bucket that you label as other. Can you give us some context on what drove strong market performance there in the quarter?

So...

Kevin, do you want to take that? Yes.

Yes. So I’ll just trying to pull it up here. Okay. So the increases there were largely, if you look at Page 11 of the annual report, that’s some of our smaller private businesses. So Sprott Korea, for instance, so that’s the primary area where we were seeing some of the upticks. I don’t know, Peter, if you have any specific color on...

Well, we carry small inventories and positions, and most of them would have done well. We took some adjustments on digital gold from an accounting perspective. Those 2 kind of offset each other a bit. It’s not that material. But our favorite positions generally went up quite a lot in the last quarter to two quarters.

Yes. Okay. So you made that mention, too, you got a pretty ambitious pipeline for new products in 2021. Can you give us, or what can you tell us at this point on what you’re looking at?

Sure. Well, I’d start by saying we’re really firing on all cylinders here, like everybody is flat-out at Sprott. And on the private side, I’m more involved on the private side, we have a couple of adjunct products that clients have asked us for. On the public side, John and his team have a couple of what I’d describe as step-outs that they’re negotiating currently and that would make perfect sense when you see them. We do have other areas within mining, which are really starting to perform after long bear markets. And you’ve seen those movements in the specialty minerals, specialty materials. I mean it’s getting very, very hot in those areas now, and we have a lot of potential flows we can address. So it’s kind of step-outs. It’s like the core franchise can now expand a little bit.

Okay. And then my last question, just international distribution. You mentioned that you want to expand what markets? And what would that actually look like? Would you actually be hiring people or just doing partnerships?

Well, we are hiring people directly in sales and have a couple that we’ve negotiated and are bringing on now. So that’s important because, generally, we’ve been quite light touch in that area. And secondly, each area is unique. So what works in an area is more about a partnership, usually. And we have one -- new one that we’re testing. I don’t really want to talk about the location, but we have a leading partner in that location. And they’re rolling out a gold specialty strategy. And then I would say Europe with all the patchwork of regulations is challenging, but we’re exploring ways to expand there. So I guess -- and we’re looking quite globally. There isn’t one big market that we haven’t sort of explored.

Okay. Fair enough. And if I could throw in one more. Just on the performance fees, they’re pretty -- were they pretty broad-based? Or how many funds or which mandates were driving the performance?

Kevin or Whitney could talk about those.

Yes. Whitney, I’ll let you speak to it. You can add some great color around it.

All right. Sorry, I missed the question.

Performance fees...

Just the source of the performance fees for the year that we had this year.

Sure. Well, we have been attracting talent for the last few years back to Sprott, as Peter mentioned early on, Neil Adshead launched a product about 1.5 years ago called Drill Driven Alpha. It’s quite a small specialized product really at the starting point of the whole mining process, i.e., drill bit results. And that’s structured as a partnership with a management fee and a performance fee. We’re 2 years into the Sprott Hathaway Special Situations fund run by John and the team. That was a product we launched before. We concluded negotiations on the acquisition of the Tocqueville team, and that performed extraordinarily well last year. It also has a performance fee. And of course, Sprott has seed investors -- is the seed investor in both of these products, so we enjoyed a little bit of a pickup on our balance sheet in addition. And finally, we manage some products for 9-point a sub-adviser both in gold and precious metals as well as Maria Smirnova silver product, which carries performance fees as well. And they did extraordinarily well last year. It was a good year for the category, and I would say we ended up in a leadership position in terms of performance. And I think it goes to the strength, the depth and the experience of the team that we have and the resources that they have at their disposal throughout the Sprott organization.

I can also happily say that the private strategies, which have a long gestation period, as you can imagine, are finally old enough that with the repayment of the TMAC loan from our first lending fund, we’re going to start to generate performance fees there as well this year.

Okay. Got it. And then on the carried interest and performance fee payouts, the sort of net revenue that came back was, I think, just under half. Is that a reflection of 9-point and sort of being the sub-adviser and that performance fee payout would be higher than some of your own proprietary strategies? Is that how I should…

Yes, that’s the gist of it. The -- on the growth line, you got it, Graham, the -- there’s a portion of payouts that relate to them. And so that lowers the -- what the growth line would be when you’re calculating basically your payout ratio there. So it’s a little bit -- for lack of a better word, it’s probably a little bit understated. And so kind of overstates what that payout would be, the payout is actually lower when you factor that out.

We have reached the allotted time for questions. I will now turn the call back to Mr. Grosskopf for closing remarks.

Well, I think that concludes our call. I appreciate all of your interest. Look forward to reporting to you next quarter. Thank you, operator, and have a good weekend.

This concludes today’s conference call. You may now disconnect.