Blue Sky to offload access fund to Pinnacle Investment
Written on the 18 October 2018 by David Simmons
Just one day after Blue Sky Alternative Investments (ASX: BLA) CFO Matthew Whyte resigned, the struggling funds manager has announced plans to offload its alternative access fund to an external party.
The agreement will see Pinnacle Investment (ASX: PNI) establish a new affiliate called Alterum to manage Blue Sky's $177 million Alternative Access Fund Limited (ASX: BAF).
Subject to shareholder approval, BAF would be majority owned by Pinnacle under the new name Alternative Market Access Funds Limited (ASX: AMF).
If all goes to plan BLA will no longer manage the alternative fund from the start of next year. Alterum will focus on private markets and multi-management and be led by BAF's current executive chairman Andrew Champion.
Pinnacle managing director Ian Macoun (pictured) says the new fund is good news for both parties.
"Establishing Alterum is an exciting development in Pinnacle's strategic drive to increase our capabilities in alternatives investment management, particularly in the management of unlisted assets such as agriculture, infrastructure, credit and private equity," says Macoun.
"In addition, with Alterum managing the assets of BAF, this would further expand Pinnacle's commitment to the listed investment company market as the addition of Alterum will take the assets managed in LICs by Pinnacle affiliates to over $2bn."
In a statement about the transition, Blue Sky says the establishment of Alterum will help BLA to become a predominantly institutional-based fund manager of private markets.
"The proposal seeks to preserve the nature of BAF as a unique vehicle for retail investors to gain access to sought after private market investments typically only accessible by institutional and wholesale investors, while broadening its scope to a multi-manager strategy," says Blue Sky.
Founded in 2006, Pinnacle holds equity interests in 12 other specialist investment managers, and currently has $47.8 billion in funds under management. The company is a 'pure-play' investment management firm providing affiliated investment managers with distribution, infrastructure and other support services.
Blue Sky will keep some involvement however, taking a 1.2 per cent management fee payable on a fund-by-fund only basis monthly in arrears.
The current BAF portfolio includes significant investments in its Blue Sky Water Fund, strategic agricultural investments, private real estate investments and venture capital.
Blue Sky has had a rough year, which chairman John Kain described as "disappointing" in a letter to shareholders.
Attempts to turn the company's fortunes around have been ongoing. The most promising development came in September when the company announced that it executed a binding agreement with Oaktree to be the recipient of a seven-year loan facility worth $50 million.
The company says funds from the loan will be used for co-investments and general working capital requirements.
Blue Sky has been under siege during 2018 following a bout of bad news stemming from a short-selling report by Glaucus detailing a number of alleged holes in the business of Blue Sky.
The investment is potentially a saving grace for Blue Sky, as Oaktree intends to not only invest in the investment group but to give it some expertise and help with asset management.
In terms of the company's board, a number of reshuffles have occurred including yesterday's resignation of CFO Matthew Whyte.
CEO Kim Morrison resigned earlier in the year and has returned to his position as managing director in the longer term. Chairman, John Kain, is up for re-election at the 2018 AGM. Kain says he will stand for re-election to ensure there is a continuing 'corporate memory' at the company.
At 13:05 AEST shares in BFA were up 5.3 per cent at $0.895 while BLA and PNI shares were relatively unchanged.
Shares in Blue Sky Alternative Investments (ASX: BLA) are down 1.64 per cent to $1.20, and shares in the Alternatives Access Fund (ASX: BFA) are up 4.12 per cent to $0.88 at 12.12pm AEST.
Business News Australia
Author: David Simmons