INVESTMENT GROWTH DRIVES BLUE SKY'S PROFIT HIGHER
Written on the 24 August 2015 by Karen Rickert
A YEAR of heavy investment has bolstered Blue Sky Alternative Investments' (ASX:BLA) bottom line, with the asset manager posting a $10.4 million profit for the year to the end of June.
The result is a 68 per cent lift on the previous year, with revenue also improving 82 per cent to $43.6 million.
The company has also reached $1.35 billion in fee-earning assets under management (AUM) in the past year, up from $700 million in FY14.
Blue Sky capitalised on low interest rates and low inflation in Australia by funding investments in healthcare, student accommodation, water, agriculture and education.
Founder and managing director Mark Sowerby (pictured) says the achievement is a culmination of numerous factors, including attracting new talent to the business.
Blue Sky's headcount has grown to 75 during the last 18 months, across its offices in Melbourne, Sydney, Adelaide and the recently relocated head office in Brisbane.
"We achieved what we'd set out to do for the year, but the breakthroughs around institutional capital are important," Sowerby says.
"We've now got institutional capital in each of our primary asset classes. Although it doesn't make a huge difference financially, it does bring additional credibility to the business and also to the team."
Growth in private equity and venture capital division is expected to continue well into FY16, with a number of exit strategies in the pipeline. Investment performance in the hedge fund business is significantly stronger compared to a year ago.
Sowerby says Blue Sky's foray into student accommodation has been a boon for its private real estate division, with Brisbane facing an undersupply in the market.
The company will construct $160 million worth of student lodging in the city, after securing two development sites in April.
"I think the Brisbane market still has a way to go; you've got to be careful where you're building as always," he says.
"We haven't seen a lot of revenue growth. Mostly it's been about good sites, good product and good delivery.
"Student accommodation is really an interesting platform for us in the next couple of years and will probably eat up a lot of our resources in residential assets.
"The nice thing about our business is we don't have to be in anything, but we can be anything. If we want to allocate resources to a particular sector because we think it's more attractive, then we can."
Since inception in 2006, Blue Sky has delivered an internal rate of return across its funds of 15.4 per cent annually, net of fees.
The fund's performance reflects changing investor attitudes towards alternative assets, backed by the company's track record for returning capital.
"When you decide to allocate to alternatives there's not a very big list of managers that you can give your money to."
"Australia has traditionally been about equity and fixed income, while every other developed nation in the world has graduated from that and have 25 per cent of their money allocated to alternative assets," Sowerby says.
"As an investor, when you decide to allocate to alternatives there's not a very big list of managers that you can give your money to."
Sowerby says the company has invested heavily across all the sectors, particularly advances in agriculture "where others fear to tread".
Blue Sky Water Partners facilitated First State Super's $150 million acquisition of almond orchards from Secret Harvests Limited last week.
The deal will contribute to the fund's target of achieving $2 billion in assets under management by the end of 2016 a year earlier than initially forecast.
However, Sowerby says the team's real aspirations are more investment-focused. The team plans to deploy more capital in burgeoning businesses, as well as continue to invest through the Blue Sky Alternatives Access Fund (ASX:BAF).
"Good investing and exiting really drive everything we do. We definitely want to grow the venture-capital side of the business and that is happening naturally," he says.
"Socially it makes a difference. You're bringing through new entrepreneurs, growth and jobs."
Blue Sky will pay a fully franked dividend of 11c per share on October 2.
Image credit: Glenn Hunt.
Have you ever thought of taking a chance at alternative investments? That's what Mark Sowerby, founder of Blue Sky Alternative Investments (ASX:BLA), does every day.As founder and managing director of Australia's first diversified alternatives asset manager, Sowerby is well versed in investment opportunities beyond traditional markets.
Sowerby, who has grown Blue Sky's assets under management to $1.35 billion in the past nine years, knows what it takes to test his comfort zone. He has just returned from a personal journey to the UK where he swam the English Channel.