MENU

Blue Sky Access Fund acts to stop the rot following Glaucus short report

The Blue Sky Alternatives Access Fund Ltd (ASX: BAF) (“BAF” or “Access Fund”), a feeder entity associated with Blue Sky Alternative Investments Ltd (ASX: BLA) today announced a number of measures to reassure investors in its portfolios.

As part of its monthly net tangible assets (NTA) report to the market, where the company has to state the value of its investments (BAF’s were down 0.3% to $1.1385 per share, pre tax), the Access Fund also announced that it would revalue its whole portfolio. Readers may already be familiar with the Glaucus report and our coverage from last week.

While the Glaucus report contained several flaws, it also struck a nerve with investors regarding Glaucus’ criticisms of Blue Sky’s lack of transparency regarding the valuations of its investments. In simple terms, and among other things, Glaucus essentially argued that Blue Sky was increasing the value of their investments to unjustifiable levels – leading to higher fees for Blue Sky and more investor demand for its funds.

Blue Sky itself fell more than 50% following the report, but the Access Fund (BAF) is also down somewhat, from $1.15 a few weeks ago to $0.91 at the time of writing. In the net tangible asset release today, BAF has apparently responded to criticism by increasing the level of disclosure and also commencing independent valuations of all its assets. BAF stated that it:

  • “will immediately accelerate additional independent valuation reviews for all investments which have carrying values of 1.2x or greater for each $1.oo invested.” (that refers to 28% of total NTA, and the other 72% will be reviewed in May and June)
  • BAF will also implement a valuer rotation policy, which would lead to the independent valuer being rotated regularly
  • In an appendix, BAF provided an overview of its allocations and investment amounts to all of its properties and private company investments like Foundation Early Learning and Wild Bread

The increased disclosure appears to be at least a part of what Glaucus was agitating for and it remains to be seen whether this will help or hurt both of the Blue Sky entities. The Glaucus report appeared to imply that Blue Sky was at least partly dependent on an opaque valuation process to do questionable things.

If this is true, and Blue Sky increases its disclosure levels substantially, then the valuations may fall apart as the company gets put through the ringer by the court of public opinion. On the contrary, if the Blue Sky business is entirely legitimate, then full disclosure should largely invalidate the Glaucus report.

The problem is that it is difficult to know on which side of the fence Blue Sky rests, and evaluating the winner and loser of this battle will likely take hours of meticulous work. As a result I think the situation is too difficult for many household investors, and I suggest remaining on the sidelines for now.

OUR #1 dividend pick to grow your wealth over the new financial year is revealed for FREE here!

Financial year 2018 is here and The Motley Fool's dividend detective Andrew Page has revealed his must buy dividend share to grow your wealth in 2018.

You might not know this market leader's name, but it's rapidly expanding into a highly profitable niche market here in Australia. Even better, the shares boast a strong, fully franked dividend that should balloon in the years to come. In other words, we're looking at the holy grail of incredible long-term growth potential AND income you can watch accruing in your account in real time!

Simply click here to grab your FREE copy of this up-to-the-minute research report on our #1 dividend share recommendation now.

Motley Fool contributor Sean O'Neill has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.