The details of the Wilson Asset Management (WAM) pitch to manage Blue Sky Alternatives Access Fund Ltd (ASX: BAF) has been confirmed this afternoon.
A draft Investment Management Agreement has been announced to the market and will now be assessed by the non-executive directors.
WAM believes that its proposal is superior to the one offered by Pinnacle Investment Management Group Ltd (ASX: PNI).
There are a number of benefits that WAM pointed to:
WAM is a specialist LIC manager with the majority of its LICs like WAM Capital Limited (ASX: WAM) and WAM Research Limited (ASX: WAX) trading at a premium to the underlying net tangible asset (NTA) backing. WAM Capital, the largest, is trading at a premium of more than 20% to the September 2018 announced NTA.
However, WAM pointed out that the three LICs managed by Pinnacle are all currently trading at discounts to their respective NTAs. It is logical and fair to suggest that current shareholders want the share price to rise to a premium.
WAM has a long track record of strong performance and good engagement with shareholders, so Blue Sky Alternatives Access Fund shareholders would be benefit from quality stewardship.
How the new agreement would work
Under the new investment mandate for a diversified alternatives multi-manager approach, WAM would select market-leading investment managers in a particular asset class under the guidance of an experienced investment committee with access to a wide range of investment professionals.
No performance fee would be charged by WAM, however WAM would be entitled to an annual management fee of 1%. There would be an initial fee-free period on existing Blue Sky Alternative Investments Ltd (ASX: BLA) managed investments, which would cease its role as manager at a mutually agreed date – WAM suggested December 2018.
The agreement would be for an initial five years and the new Board of Directors would be committed to capital managements to ensure the share price of the company reflects the underlying asset value of the portfolio.
I took Blue Sky Alternatives Access Fund off my watchlist after the whole debacle at Blue Sky. However, if WAM were in charge it would definitely go back onto my watchlist. If I were a shareholder I would vote for WAM over Pinnacle.
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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.