Blue Sky Alternatives Access Fund Ltd (ASX: BAF) is the listed investment company (LIC) run by Blue Sky Alternative Investments Ltd (ASX: BLA). It would have been hard to miss all the news recently about how an overseas entity called Glaucus wrote a scathing report about how Blue Sky was allegedly charging a lot of fees and its asset valuations could be too high.
This caused the share prices of both the Blue Sky manager and LIC to fall. The LIC’s share price dropped by nearly 25%. However, the LIC recently announced a buyback of its shares and today it has given an update on some of the investments that it is exiting.
- Gundaline is a large cotton growing development. The LIC made its investment in 2014 and it is now exiting this. Blue Sky estimates that the sale proceeds will be at a slight premium to the carrying value and it achieved an internal rate of return (IRR) of 16%. These are currently estimates.
- Foundation Early Learning is a childcare operator. The LIC invested in 2014 and has signed the sale of this to an international childcare operator. This sale is estimated to be at a discount of carrying value at 14% to 23% and it is estimated to have generated an IRR of 4% to 7%. Blue Sky blamed this outcome on the substantial de-rating of comparable listed peers.
I think it’s a good thing that Blue Sky is being far more transparent about its assets and its goings on now. However, I find it an odd move to sell the Foundation Early Learning asset at a low point. There is every chance that the childcare industry could recover in time.
I was interested in the Blue Sky LIC at one stage, however this whole debacle has made me question whether I would be getting my money’s worth.
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Motley Fool contributor Tristan Harrison 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.