GoldTrust, a Canadian-domiciled gold bullion investment trust, has partnered with Purpose Investments (Purpose), a Toronto-based asset manager, in proposing the conversion of GoldTrust into an exchange-traded fund managed by Purpose. The trust has written a letter to current unitholders, citing the enhanced benefits of the ETF format, including improved liquidity through dual Canadian- and US-listings, as well as less significant trading deviations from net asset value (NAV).
Som Seif, President and Chief Executive Officer of Purpose Investments.
The move has been initiated in response to a hostile takeover bid of GoldTrust by Sprott Asset Management. GoldTrust’s Board have urged current stakeholders to reject the Sprott offer, withdraw any units already tendered, and accept the proposed conversion to an ETF.
Bruce Heagle, Chair of the Special Committee of the Board of Trustees, commented: “Your Trustees, acting in the best interests of all unitholders, have conducted a thorough review of available alternatives to address unitholder concerns regarding liquidity and trading discounts to NAV. We are confident that the proposed ETF conversion in partnership with Purpose, a recognised leader in ETFs with significant experience managing bullion funds, will address these concerns and is in the best interests of all GoldTrust unitholders.”
GoldTrust has laid out their case for partnering with Purpose, stating several key benefits over the Sprott offer. These include fewer and less significant deviations from NAV due to the transparent, tradable nature of the ETF structure; the maintenance of the existing fee structure, which GoldTrust points out is 43% lower than Sprott; the creation of dual-listed physical ETFs in Canada and the US; enhanced liquidity; the introduction of designated market makers to further support efficiency; and the continuation of GoldTrust’s existing tax situation.
Som Seif, President and CEO of Purpose, added: “Purpose is honoured to partner with Central Gold Managers, a recognized leader in gold bullion investment products. We believe the proposed ETF conversion represents a unique and compelling opportunity for GoldTrust unitholders to participate in a growing, more liquid entity. Purpose is very experienced in ETF conversions, as we successfully accomplished similar conversions in our Claymore bullion funds. At Purpose, we are confident that the proposed conversion of GoldTrust to an ETF represents an attractive alternative for GoldTrust unitholders.”
The proposal is subject to the receipt of regulatory approvals and other customary conditions for transactions of this nature.