ETF Trends
ETF Trends

A closed-end fund for silver managed by Sprott Asset Management LP of Canada that trades at a premium has outperformed a rival exchange traded fund (ETF) in 2011.

Sprott Physical Silver Trust (NYSEArca: PSLV) is up 47.6% so far this year through April 18, according to Morningstar, while iShares Silver Trust (NYSEArca: SLV) gained 40.6%.

The performance disparity may be partly explained by the fact that the Sprott silver trust is a closed-end fund, and is trading at a premium to net asset value (NAV) of more than 20%.

Some observers speculate the premium is fueled by a unique feature of Sprott Physical Silver Trust that allows shareholders to redeem large chunks in exchange for physical delivery of silver bullion.

The iShares Silver Trust has a so-called ETF arbitrage mechanism that generally keeps the price of a share close to NAV. In other words, it doesn’t see the premiums and discounts that sometimes appear in closed-end funds.

Sprott Physical Silver Trust has total assets of $972.4 million, according to Sprott, compared with $15.2 billion for iShares Silver Trust.

Sprott Physical Silver Trust

Full disclosure: Tom Lydon’s clients own SLV.

The opinions and forecasts expressed herein are solely those of John Spence, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.