Nothing Like the Real Thing: Sprott Physical Gold Trust

Sprott Asset Management Files Preliminary Prospectus in the US for a $ 575 Million Gold Bullion Fund

December 13, 2009

David Einhorn, the President of hedge fund Greenlight Capital, and fellow prominent hedge fund manager, John Paulson of Paulson & Co, may soon have another option for investment in the gold sector, and this time, it is physical.

Paulson has recently made news with his substantial holdings in SPDR Gold Trust (GLD), AngloGold Ashanti (AU), Gold Fields (GFI) and Kinross Gold (KGC). Einhorn is also betting on gold via the Market Vectors Gold Miners ETF (GDX) and Barrick Gold (ABX), and reportedly also owns a large amount of physical gold.

Now, a new product may be coming to both the New York Stock Exchange [NYSE] and the Toronto Stock Exchange [TSX] which will give them, and other investors, access to physical gold bullion.
On December 8^th, Canadian money management firm Sprott Asset Management, which manages approximately $4.4 billion in assets, filed a preliminary prospectus (Form F-1) with the US Securities and Exchange Commission for a US$ 575 million initial public offering [IPO] of the Sprott Physical Gold Trust. The Sprott Physical Gold Trust would exclusively hold physical gold bullion. The trust plans to list on the NYSE under the ticker “PHYS”, and on the TSX under the ticker “PHY”. The initial public offering price is expected to be $10.00 per unit.

Some specifics of the fund according to the prospectus include:

• The Trust was created to invest and hold substantially all of its assets in physical gold bullion.
• The Trust seeks to provide a secure, convenient and exchange-traded investment alternative for investors interested in holding physical gold bullion without the inconvenience that is typical of a direct investment in physical gold bullion.
• The Trust intends to invest primarily in long-term holdings of unencumbered, fully allocated, physical gold bullion and will not speculate with regard to short-term changes in gold prices.
• The Trust does not anticipate making regular cash distributions to unitholders.
• Sprott Asset Management LP is the sponsor of the Trust and serves as manager.