Central Fund of Canada

Central Fund of Canada did not employ an external portfolio manager. A small internal team, overseen by a board of directors, executed ministerial custody and settlement functions. Investment decisions were non-discretionary, dictated entirely by the fund's charter, which required at least 90% of net assets in gold and gold equivalents with the remainder in silver (per public record).

Sprott identified Central Fund of Canada as a structurally inefficient closed-end fund trading at a persistent discount to net asset value. Because the charter mandated physical-only holdings with no active management, Sprott argued that the fund's legacy governance and fee structure created an arbitrage opportunity. By acquiring shares and campaigning for conversion into the Sprott Physical Gold and Silver Trust, Sprott aimed to realign the vehicle with its own lower-fee, exchange-listed structure (per Reuters, January 2018).

Central Fund of Canada was a closed-end fund, not an ETF, which meant it issued a fixed number of shares rather than creating and redeeming units in response to demand. This structure caused the share price to deviate from net asset value — sometimes at a discount, sometimes at a premium. ETFs like SPDR Gold Shares (GLD) use an authorized-participant mechanism to keep market price tightly aligned with NAV. Central Fund also held a dual-metal mandate (gold and silver), whereas GLD is gold-only.

The fund's gold and silver bullion was held in allocated and unallocated accounts at Canadian Imperial Bank of Commerce in Canada. Physical vaulting occurred at CIBC facilities. The custody arrangement was a foundational part of the fund's governance, with independent verification and audit rights built into the operating model (per public record).

Shareholders who approved the transaction in January 2018 exchanged their Central Fund of Canada shares for units of the Sprott Physical Gold and Silver Trust on a one-for-one basis. The conversion was designed to be tax-deferred for Canadian investors. Those who voted against the takeover retained dissent rights, allowing them to demand fair value for their shares as determined by a court process (per Reuters, January 2018).