Blue Sky Alternatives Access Fund shifts to WAM, time to buy?

The process is finally over, Blue Sky Alternatives Access Fund Ltd (ASX:BAF) shifts to the management of WAM.

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Blue Sky Alternatives Access Fund Ltd (ASX: BAF) investors may be able to breathe a little easier amid the coronavirus market sell-off. Its management will shift to Wilson Asset Management (WAM).

What has been announced?

The Board of Blue Sky Alternatives Access Fund has announced it has finalised all key commercial terms with all parties to change the manager to Wilson Asset Management (WAM) from Blue Sky Alternative Investments Ltd (ASX: BLA).

This has been a long-running process ever since the collapse of the Blue Sky manager.

The existing management services agreement (MSA) between Blue Sky Alternatives Access Fund and Blue Sky the manager will terminate subject to finalising legal documents and shareholder approval.

There are six areas where Blue Sky Alternatives Access Fund outlined some key commercial terms to investors:

Fees – The fees that Blue Sky Investment will be able to charge is a 1.2% management fee and a performance fee.

Performance fees – The portfolio performance fee deficit at 31 December 2018 has been agreed at $2.86 million. That date was agreed after which no deployments of new capital were made into Blue Sky Funds. This deficit has been allocated against 11 underperforming funds, which won't be entitled to any performance fees until the fund's share of the performance fee deficit has been recovered from rebates paid to Blue Sky Alternatives Access Fund from that particular fund.

Rebates – Under the MSA, BSAAF pays rebates to Blue Sky Alternatives Access Fund to refund management and performance fees charged at the investment fund level as and when they are received. Going forward, fund level managers will pay rebates on management fees and allocated fund performance fees when the cash is received from the fund.

Management fee stepdown – If an allocated fund held by Blue Sky Alternatives Access Fund underperforms for two consecutive years in the first five years following termination of the MSA, the management fee able to be charged to Blue Sky Alternatives Access Fund will be halved to 0.6%.

Voting rights – The voting rights attached to Blue Sky Investments are currently vested in BSAAF without restrictions. Following termination of the MSA, these voting rights will revert to Blue Sky Alternatives Access Fund, to be exercised by WAM.

Transitional services – BSAAF has agreed to provide 60 days transitional services after termination to assist WAM to ensure that monthly NTA reports and other disclosures and obligations can be met during the manager transition.

The Blue Sky Alternatives Access Fund Board said it thinks WAM is the best option because it has extensive experience in managing investment funds and it has hired investment professionals for the alternatives strategy. The Board also said that a different option of trying to sell its assets would take a long time, asset sales could lead to lower asset prices and a worsening share price discount to NTA. Attempting to terminate its agreement with BSAAF could have led to an expensive, prolonged and uncertain legal process.

What now?

Blue Sky Alternatives Access Fund went into a trading halt. At the share price of $0.82, it's trading at a 28% discount to the stated net assets at 31 January 2020.

This could be the start of a turnaround, but alternative assets may not be for everyone, particularly with the fairly high management fees.

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.

More on Share Market News

Share Gainers

Why Bank of Queensland, DroneShield, Evolution Mining, and Lynas shares are storming higher today

These ASX shares are having a very strong session on hump day.

Read more »

Man looking concerned head in hands at laptop
Share Market News

Worried about an ASX stock market crash? Here are 5 reasons AMP says the bull market has legs

Despite the potential for a pullback, the ASX bull can keep on running, says AMP.

Read more »

A woman has a thoughtful look on her face as she studies a fan of Australian 20 dollar bills she is holding on one hand while he rest her other hand on her chin in thought.
Dividend Investing

Is Telstra stock a smart buy right now for dividends?

Would I buy Telstra shares for that hefty dividend yield today?

Read more »


1 top ASX growth stock to buy that's down 40%

Here’s why I think this stock could fly higher.

Read more »

Business woman watching stocks and trends while thinking
Share Market News

5 things to watch on the ASX 200 on Wednesday

Here's what to expect on the ASX 200 today.

Read more »

property prices represented by person holding on to miniature house
Share Market News

Shares vs. property: Record stock ownership amid landlords' exit

Household wealth derived from owning shares just hit a record $1.4 trillion.

Read more »

A man wearing a red jacket and mountain hiking clothes stands at the top of a mountain peak and looks out over countless mountain ranges.
Share Gainers

Here are the top 10 ASX 200 shares today

It was mayhem on the markets today, with one of the worst days in a long time for ASX shares.

Read more »

A businesswoman pulls her glasses down in shock to look at the bad news on her computer.
Share Market News

The Aussie stock market just wiped out all of 2024's gains! Time to buy?

We're back to the start for 2024 after another negative session. Is there a way for investors to make the…

Read more »