14-Jan-2021:  In mid-December 2020 (1 month ago) WAM Alternative Assets Portfolio Manager (PM) Dania Zinurova and Geoff Wilson discussed the WMA investment portfolio, Dania’s passion for alternative assets and the megatrends shaping the portfolio.  You can listen to a recording here. 

If that link doesn't work, try this one:  https://wilsonassetmanagement.com.au/2020/12/16/wma-investorqa/

16-Oct-2020:  WAM’s alternative strategy targets digital economy

Source: The Australian Financial Review (Published October 13, 2020)

By Luke Housego (AFR)

[Uploaded from the WilsonAssetManagement.com.au website]

WAM’s alternative strategy targets digital economy

Wilson Asset Management’s new alternative assets strategy will expand into growth industries in the digital and low carbon economies in a bid to shake up interest in the often typecast space, says new lead portfolio manager Dania Zinurova.

With an intention to steer away from traditional alternative assets such as toll roads and airports, the highly credentialled investment professional plans to look at infrastructure assets such as data centres, echoing the growth-over-value focus in sharemarkets.

The idea is “to see where are the strong tail winds that we see in the market, for example digital infrastructure [and] renewable energy,” said Ms Zinurova, who will oversee the WAM Alternative Assets listed investment company.

“Those are assets if you look at their underlying contracts and income and capital appreciation, they would be less linked to GDP compared to more traditional infrastructure.”

The objective takes on greater meaning with the weak growth outlook in an economy still reeling from the pandemic.

“The lesson learnt for investors is really to structure a portfolio in a way that it would be resilient throughout different economic cycles,” Ms Zinurova said. “Given where we are now in the moment, it’s probably one of the major global economic crises that [we’ve ever been] through.

“Let’s take as an example, infrastructure. Infrastructure has been a very popular asset class among Australian investors but also among global investors.

“And most of the traditional infrastructure strategies, they would be invested in GDP-linked assets.”  That includes airports, ports, and toll roads. “Those portfolios would be significantly affected by the current economic crisis.”

The Russian-born fund manager explained that the WAM strategy will also target growth in private debt as well as areas of infrastructure benefiting from structural tailwinds.

Antipodean

WAM recruited the investment veteran from the investment services arm of insurance and financial services giant Willis Towers Watson, where Ms Zinurova led research teams with coverage across, equities, credit and alternative assets.

And while Ms Zinurova’s professional life has largely been based in London, New York and Sydney, her career in finance started in 2002 at Bank Uralliga in Chelyabinsk, 1500 kilometres east of Moscow where she grew up.

At the time, the Russian banking sector was in its infancy after the state-controlled system was liberalised under the reforms of the Soviet Union’s last leader, Mikhail Gorbachev.

Recalling this period, the Russian banking system at the time was still going through its developmental stage, Ms Zinurova explained.

“It was a period when sometimes you would have a new bank opening and then closing again within two months time. It was definitely very exciting but also challenging periods for the banking sector.”

After further study in Europe and the UK, Ms Zinurova entered funds management with the global asset manager Russell Investments before moving to Australia in 2013 to head up Willis Towers Watson’s real assets team.

Valuations and liquidity

The experience in property and other unlisted assets gives WAM’s new portfolio manager an acute sense of the risks tied up with putting a price on an asset in the current climate.

“In the current market environment, the liquidity has really dried up—there are not as many transactions happening,” she said. “And when you look at independent valuation reports now, you will see they add a disclaimer that the valuation should be used with caution.

“So even independent valuers are not really in the position to come and say ‘This is by how much your asset fell or the [capitalisation] rate has contracted.'”

WAM was awarded the management rights of the old Blue Sky Alternatives Access Fund listed investment company following shareholder approval in September. It intends to return the share price to a premium to net tangible asset value.

--- ends ---

[I hold BAF shares, which will soon trade under the ticker code WMA - their new name is WAM Alternative Assets.  I have been reducing my exposure now that the management transition has been fully approved - to lock in profits, however I am keeping some exposure for the potential uplift and further reduction of the NTA discount (in the SP) as Wilson Asset Management begin to seriously promote this fund.  Their ability to promote their LICs is formidable - and should not be underestimated.]

09-Sep-2020:  Manager Transition - Appointment of Directors

The Board is delighted that the Company is one major step closer to the completion of the manager transition to Wilson Asset Management (International) Pty Limited (‘WAM’) with shareholders overwhelmingly approving the proposal at yesterday afternoon’s extraordinary general meeting (‘EGM’). A communication from Mr Geoff Wilson, WAM’s Chairman and Chief Investment Officer is set out in the Annexure for your information.

Following the EGM, and as previously proposed, the Board is also delighted to announce the appointment of Mr Geoff Wilson AO and Mr Adrian Siew as Directors. It is not intended that either of the appointees will receive directors’ fees initially due to the existing director fee cap in place.

The legal documentation for the manager transition provides for some further conditions precedent to be satisfied before the existing management services agreement terminates. It is likely that these remaining conditions precedent, which are procedural in nature, will be satisfied in the coming days.

About Geoff Wilson AO:

Geoff has over 40 years’ direct experience in investment markets having held a variety of senior investment roles in Australia, the UK, and the US. Geoff founded Wilson Asset Management in 1997. Geoff created Australia’s first listed philanthropic wealth creation vehicles, Future Generation Investment Company and Future Generation Global Investment Company. Geoff is Chairman and Chief Investment Officer of WAM Capital, WAM Leaders, WAM Global, WAM Research, WAM Active and WAM Microcap. Geoff holds a number of additional directorships with investment companies and non-profit organisations.

About Adrian Siew:

Adrian has over 24 years’ experience in investment markets, specialising in private equity and alternative asset classes. He started his career with Goldman Sachs European investment banking advisory team in London before moving to Hong Kong and Singapore. He also spent 11 years with The Carlyle Group as part of their private equity buy-out investment team in Sydney and Singapore.

For more information, please contact:

Michael Cottier

Chairman

Blue Sky Alternatives Access Fund Limited

Email: [email protected]

Website: blueskyfunds.com.au/alternatives-fund-shareholder

[I note they haven't updated that webpage (link above) with the two new directors, but I'm sure they will soon.]

Wilson Asset Management (International) already owns almost 6.4m BAF shares (6,391,129 shares), as shown in the Initial Director's Interest Notice for Geoff Wilson AO, also lodged today.

Today's announcement (link at the top) also contains a letter from Geoff Wilson:

Good morning,

Shareholders of Blue Sky Alternatives Access Fund Limited (ASX: BAF) have overwhelmingly voted in favour of our proposal to see the Company join the Wilson Asset Management stable as WAM Alternative Assets Limited (ASX: WMA) at an Extraordinary General Meeting held yesterday afternoon.

We would like to thank existing shareholders for their support, patience and confidence; we were pleased by the 99.97% votes in favour of the proposal. We would also like to thank the Board of Directors, Michael Cottier, Kym Evans, John Baillie and Miles Staude, for their tireless work to achieve this outcome.

In managing WAM Alternative Assets, we will provide Australian retail shareholders with access to alternative investment opportunities managed by a strong team. We will engage with current shareholders and market to new shareholders with a plan to return the share price to a premium to net tangible assets (NTA).

Alternative investment opportunities, managed by an exceptional team

Australian retail investors have limited exposure to alternative investment opportunities.

Alternative asset classes, comprising real assets, private equity, real estate, private debt and infrastructure, provide investors with absolute returns uncorrelated with equity markets and with lower volatility, diversification and exposure to innovative investment products and strategies typically available only to wholesale and institutional investors. The investment portfolio’s current holdings provide significant investment opportunities, such as water rights, venture capital, growth capital and private real estate.

Our highly experienced alternative asset professionals will be investing alongside highquality investment managers under the Company’s flexible “best-of-breed” mandate. The alternative assets investment team will be supported by a dedicated Investment Committee comprising individuals with intimate knowledge of the Australian and international alternative investments sector. Adrian Siew, who will also join me on the Company’s Board of Directors, has almost 25 years’ professional experience gained in senior roles at Nacre Holdings, The Carlyle Group and the Straits Trading Company, beginning his career in M&A with Goldman Sachs. John Roberts will also join the Investment Committee, bringing almost three decades of investment experience gained at Macquarie Group, currently as Chairman of Infrastructure and Real Assets. In the coming days, we will announce the highly experienced and credentialed portfolio manager responsible for WAM Alternative Assets.

Expertise in LICs, commitment to shareholder engagement

Wilson Asset Management is a specialist listed investment company (LIC) manager with a strong track record of delivering risk-adjusted returns for investors and making a difference for shareholders and the community for more than 20 years. Our investment team is comprised of 14 highly experienced investment professionals with combined investment experience of more than 190 years. Shares in the majority of LICs managed by Wilson Asset Management trade at a premium to their underlying NTA.

We have a dedicated team of seven corporate affairs professionals who work closely with our finance and operations teams to engage with shareholders and market the LICs we manage. Our engagement calendar includes regular shareholder calls, presentations, investment insights, market updates and shareholder advocacy. We have a strong track record of growing our LICs in terms of gross assets, market capitalisation and shareholder numbers. Last month, WAM Microcap raised more than $88.0 million through an oversubscribed Share Purchase Plan and Placement, with more than 55% of shareholders participating in the SPP, well ahead of LIC peers and other companies with significant retail shareholder representation.

Returning to a share price premium to NTA

Blue Sky Alternatives Access Fund’s shares previously traded at a premium to NTA; in light of our experienced team and track record of managing and marketing LICs, we believe that WAM Alternative Assets will deliver the same. To this extent, we have agreed to deliver on the Premium Target, a first of its kind in the Australian market. The principle of the Premium Target is simple: the Company’s share price needs to trade at a premium to its pre-tax NTA for a period of one month for it to be achieved. If this does not occur at least three times during the next five years, shareholders will automatically have the right to vote to terminate the arrangements with Wilson Asset Management, and to liquidate the Company.

We are highly committed to ensuring the success of WAM Alternative Assets. I personally hold 6.4 million shares in the Company, I hope you will join me in becoming a shareholder of WAM Alternative Assets.

If you have any questions about WAM Alternative Assets, please call me on (02) 9247 6755, Jesse Hamilton on 0401 944 807, James McNamara on 0416 734 080 or email Olivia Harris at [email protected].

Kind regards,

Geoff Wilson AO

Chairman and Chief Investment Officer

Wilson Asset Management

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[I hold BAF shares, the company formerly known as the Blue Sky Alternatives Access Fund Limited, and now called WAM Alternative Assets Limited (ASX: WMA) - although that WMA code is not yet active - I expect it will be tomorrow or Friday.  I note that despite yesterday's EGM votes really being nothing more than procedural  - in that this management change was ALWAYS going to be voted up - because there was no credible alternative - BAF has been up as high as 93.5c today, being 6.25% above yesterday's 88c close (which was also Monday's closing price) - on a day when the All Ords is down by -2%+...  Go figure...]

08-Sep-2020:  4:23pm:  Results of EGM

Resolution 1 (APPROVAL TO TERMINATE EXISTING MANAGEMENT AGREEMENT AND ENTRY INTO A NEW MANAGEMENT AGREEMENT) - 99.97% FOR (0.03% against).  Carried.

Resolution 2 (APPROVAL TO CHANGE COMPANY NAME AND CONSTITUTION) - 99.88% FOR (0.12% against).  Carried.

08-Sep-2020:  BAF EGM Presentation - Wilson Asset Management

and   BAF EGM Presentation - Chairman

I'm sure that BAF shareholders voted overwhelmingly FOR the EGM resolutions.  They'd be crazy not to.  I did, via proxy - a couple of weeks ago.  Poll/Voting Results will be released shortly.

28-Aug-2020:  Just a few comments about @Carbonite's "Sell case" straw for BAF:

1. The discount to NTA is still above 20%.  That might not be up around 35% like it was a couple of months ago, but it's still a significant discount.  The pre-tax NTA of the Alternatives Fund increased by 0.09 cents per share, or 0.08%, to $1.0863 per share in July.  They closed yesterday at 85 cps, so that's still a 21.75% discount to their July 31 NTA (their most recently disclosed NTA).  Of course, that may change today, or in the future, but that was the situation as of yesterday.
2. Don't forget the significant cash levels that BAF have.  At June 30th, they had $55 million in cash, of which $53.7m was unrestricted cash.  That $55m represented 25.8% of their total portfolio.
3. Their largest single investment is in Argyle Water, but it's not 43%.  That 43% includes $55.2 million in the Argyle Water Fund, $7.5 million in 1 operating agribusiness asset and 1 renewables asset, and $29.2 million in the Strategic Australian Agriculture Fund (which includes $12.7m into the Argyle Water Fund), so it's more like 31.8% in Argyle Water.  The 43% is their total exposure to real agricultural assets which includes Argle Water.  
4. 31.8% in Argyle Water is still significant, and is still their largest single exposure, however it has also been their best performing asset since inception, and I think it's short-sighted to look at a month, a quarter, or even a year, and then extrapolate that because the asset value and/or the income produced from it has declined in that period, that it will continue to decline.
5. As explained in the Chairman's letter that I included here in a straw yesterday, they have not made any new investments in the past year, while they have sold some assets and exited some other investments, and that's why their cash has increased and their income (revenue) has decreased.  The reasons for this were well explained in the letter.  
6. That situation will change once the new management take over and deploy that sizable cash into new investments.  They are earning next-to-nothing on that cash at the moment.
7. LIC's aren't restricted to paying out their dividends directly from their earnings/profits.  They have the ability to smooth dividends using a dividend reserve or by returning excess cash to shareholders in the form of dividends.  Just because the current BAF board chose to reduce the final dividend from 4c partially franked to 3 cents fully franked this particular year doesn't suggest to me that we are necesarily going to see decling dividends going forwards, although, as you say, that is certainly one known risk, as is a declining NTA.
8. My main point is that most of your points about declining income is based on the declining asset base that BAF has seen occur due to their refusal to reinvest any of their cash as their cash has grown over the past year, and that is directly to do with the push to change to a new management structure.  This situation will not continue once the new management takes over running the fund.  It will all change.  Most of that $55m in cash will be deployed into new investments.  Some investments might be changed - swapped into new investments.  We don't know.  What we DO know is that FY21, particularly the second half is not going to be anything like FY20 was.

In summary, I don't accept that the situation is as dire as you make out at all.  I think you are looking at the FY20 results and expecting that the picture they paint is of a situation that will continue going forwards, and that is highly unlikely in my opinion.  Of course, I have a decent position in BAF, and I have followed WAM Funds for many years, and hold a number of their LICs as well, so I am clearly biased, and readers need to take that into account when reading my comments, but I think there's still plenty of upside from here, compared to the downside - at this point in time.  Not as much upside as there was two months ago, but still enough to keep me in BAF.

28-Aug-2020:  FY20 Results - Final Dividend   and   Appendix 4E and FY20 Annual Financial Report

Total revenue, profits, and the final dividend were all down for BAF for FY20, however it's all about the future, particularly after the management transition to Wilson Asset Management (International) is finalised in September (subject to the September 8th BAF EGM shareholder vote).  The upside with BAF is mostly in the closing of the large gap (discount) between the NAV and the share price.  The trick will be in keeping the NAV at similar or higher levels while getting the SP to keep rising to meet it, rather than allowing the NAV (aka NTA) to fall back towards the SP.  I believe WAM has the team to achieve that goal, and the management agreement is fair and reasonable, as explained in my straw yesterday.

[I hold BAF shares, which should soon be trading under the ticker code WMA, and be called the WAM Alternatives Fund.]

27-Aug-2020:  Chairman's Letter - Manager Transition

The following is a letter sent to all BAF shareholders today regarding the upcoming EGM concerning the transition to a new manager - Wilson Asset Management (International).  It was uploaded to the ASX announcements platform this morning:

Dear Shareholder

On 8 September 2020, Blue Sky Alternatives Access Fund Limited (‘BAF’ or the ‘Company’) will hold an Extraordinary General Meeting (‘EGM’). At this meeting, shareholders have the opportunity to vote on a set of proposals which, if approved, your Board believe will open an exciting new chapter for the Company. To reach this critical milestone, the Board resolutely pursued a series of complicated and lengthy negotiations with ten distinct counterparties, each integral to presenting a final solution for shareholders to vote on. While this process has taken longer than hoped, the Board believes that the proposals being presented to shareholders represent a compelling final outcome, given the prevailing circumstances.

Significantly, the Board has secured a number of important achievements for shareholders. These include discounted management fees remaining in place, a substantial performance fee deficit being retained, new further management fee reductions, and a new and unique Premium Target with the selected new investment manager, Wilson Asset Management (International) Pty Ltd (‘WAMI’).

Termination of existing management arrangements

The ongoing connection of the Company to Blue Sky Alternative Investments Limited (‘BLA’), the owner of its investment manager, has weighed heavily on sentiment towards BAF over the past two years. This impact was greatly exacerbated in May 2019 when BLA went into receivership. The Board was very conscious of mitigating any risks to BAF associated with the BLA receivership, and it took decisive action. As the Board announced in May 2019, the BAF Directors secured control of BAF’s bank account holding (at that time) in excess of $29 million by placing a stop on the account and replacing all manager account signatories with the three independent non-executive BAF Directors.

From the outset, the challenge that the Company has faced in terms of appointing a replacement investment manager - and rejuvenating the BAF investment proposition - has been the fact that contractually there still remained a significant term on the Company’s existing Management Services Agreement (‘MSA’). Today, the face value of the remaining term on this contract equates to approximately $9.5 million in management fees* , a substantial figure for the Company. Additionally, under the existing MSA, BAF was entitled to a number of valuable provisions, including, among others:

• Discounted fees. BAF was entitled to reduced management fee arrangements on its investments into funds managed by Blue Sky.
• Performance fee deficit. BAF was entitled to offset any historical portfolio underperformance from Blue Sky funds against future performance fees payable to the investment manager.

A simple termination of the MSA would have ended these benefits to the significant detriment of BAF shareholders; in the Board’s view, particularly in relation to issues such as the accrued performance fee deficit, this was an unacceptable outcome.

The process of extricating the Company from its existing management arrangements, whilst at the same time holding onto many of the original benefits within the existing MSA, has required dogged negotiations with a changing and expanding number of parties and underlying stakeholders and, unfortunately, the substantial passage of time. In the Board’s view however, the final result that has been achieved represents a significant outcome for shareholders. At the pending EGM, shareholders have the opportunity to vote to terminate the current MSA, without the Company incurring any financial penalty to do so. Furthermore, if the EGM resolutions are approved, many of the existing benefits under the original MSA will remain in place, while further additional benefits have now been secured, notably:

• Discounted fees remain in place. Despite the termination of the MSA, BAF will retain the discounted management fee arrangements it had in place for its investments into funds previously managed by Blue Sky.
• Substantial performance fee deficit retained. Regardless of the termination of the existing MSA, a portfolio performance fee deficit of $2.9 million will be carried forward and allocated across eleven funds which have historically underperformed (‘Allocated Funds’).
• Further fee reductions. If an Allocated Fund now underperforms for two consecutive years during the next five-year period, the management fee payable to that fund will be halved going forward. This step down in management fees for underperformance is a new feature that was not included in the original MSA.

To reach the final outcome which shareholders are being asked to vote on has required the Board to make difficult trade-offs. Most often, these have seen the Directors needing to balance a desire to consummate a deal swiftly, with the determination of the Board to secure good overall value for its shareholders.

New management agreements

In addition to negotiating an exit from its existing management agreement, a comprehensive selection process was undertaken to secure a new investment manager for the Company. In running the selection process, the Board had three important attributes foremost in its mind. Firstly, the new manager would need to have the resources necessary for it to successfully manage the Company’s alternative investment portfolio. Secondly, the manager needed to have a proven track record of engaging with, and understanding the needs of, a predominantly retail shareholder base. Finally, the Board strongly believed that the chosen manager would need to be able to deliver on a clear and important objective - reducing and ultimately removing the discount to asset backing at which the Company’s shares have traded since early 2018.

After running a competitive process, the Board is pleased to have engaged WAMI as the chosen investment manager for the Company. WAMI runs one of the most successful Listed Investment Company (‘LIC’) operations in Australia and brings with it a proven track record of meaningful shareholder engagement and highly effective LIC marketing. Further, WAMI has invested heavily into building the resources necessary for it to manage the Company’s new multi-manager investment approach, both in terms of its investment team and shareholder engagement and marketing capabilities.

Manager Premium Target

In addition to selecting WAMI as the chosen investment manager for the Company, the Board has secured on behalf of shareholders the inclusion of a ‘Premium Target’ objective within the new management arrangements. The principle of the Premium Target is simple: the Company’s share price needs to trade at a premium to its pre-tax net asset value for a period of one month for it to be achieved. If this does not occur at least three times during the next five years, shareholders will automatically have the right to vote to terminate the arrangements with WAMI, and to liquidate the Company**.

Based on the current discount to pre-tax NTA that BAF shares trade, a successful achievement of the ‘Premium Target’ represents a 28%*** uplift to the current share price.

The Board believes that the inclusion of a premium target like this is a first in the Australian LIC market. It is a testament to the WAMI team’s conviction for their future plans for the Company, that they are willing to align their interests with shareholders in such an admirable fashion.

Value proposition remains

Finally, the Board continues to believe that the substantial disconnect between the share price of the Company and its underlying asset value remains unwarranted.

In March 2018, Glaucus Research published a high-profile short-sellers report against BLA, the parent company of BAF’s investment manager. This report made a number of allegations, including an assertion that many of the assets that the Blue Sky group managed were materially misvalued. These allegations were sensationalised in the press and, in the Board’s view, served to create a narrative in the market that material write-downs to the carrying values of Blue Sky managed funds were imminent. For more than two years, the spectre of these allegations has hung over the Company, while BAF, which has spent much of this time seeking to change investment manager, has not had the adequate shareholder communications resources necessary to successfully refute these claims.

In fact, since the publication of the Glaucus report, the underlying BAF investment portfolio has performed adequately for the Company. The most notable developments in the investment portfolio during this time have not been material impairments, but rather, impressive total returns from the Argyle Water Fund – by far BAF’s largest investment – and a substantial uplift that occurred from the successful sale of the student accommodation portfolio. This exit took place in October 2019 at a 17% premium to carrying value.

Since March 2018, the BAF investment portfolio has generated total net investment returns of 7.6%. While this return is clearly below the targets which were set for the current manager, an important mitigating factor is that these returns have been achieved while the investment portfolio has been substantially underinvested. Since March 2018, the average cash weighting of the Company’s investment portfolio has been 17%, while today it sits at 26%**** . This high cash weighting has been a function of the Board halting all new investments in light of the substantial share price discount to NTA that has persisted for more than two years under current investment management arrangements, and while it worked to install a new investment manager.

While the cash holdings of the Company have been a drag on investment performance in recent years, it is worth highlighting that the current COVID-19 environment should present much cheaper investment entry levels than in recent times. Thus, for the new investment manager, having substantial ‘dry powder’ today could prove a valuable asset.

Excluding the cash holding of the Company, the current BAF share price implies a valuation of $110 million, or $0.57 per share, for the Company’s diversified portfolio of agricultural and private equity assets, a 29% discount to their carrying values. Moreover, the Company has a $68 million investment in the Argyle Water Fund, the value of which is independently reviewed each month with reference to observable market prices. Further excluding the water fund investments from the Company’s current market capitalisation results in an implicit market value of $41 million for BAF’s remaining investment portfolio. This compares to their assessed fair value of $87 million, an effective discount of 53%.

The valuation of any portfolio of alternative and unlisted assets necessarily requires some subjective assessment. However, the Board believes that the current implied market valuation of the Company’s investment portfolio remains substantially disconnected from its realisable value.

EGM Vote

Through trying circumstances, the Board has endeavoured to bring to shareholders an opportunity for them to decide if they wish to take the Company in a new direction. The Directors believe that the proposals to be voted on at the pending EGM offer shareholders a compelling opportunity for a much brighter future for the Company. The Directors encourage all shareholders to vote in favour of the EGM resolutions and look forward to a rejuvenation of the BAF investment proposition.

Yours sincerely

Michael Cottier

Chairman

Blue Sky Alternatives Access Fund Limited

Notes:

1. (*) Based on the July unaudited Net Asset Value of the Company and the remaining term of the existing MSA.
2. (**) Details of how the Premium Target works are set out in the EGM notice of meeting.
3. (***) Based on the reported July pre-tax NTA per share and the Company’s closing share price on 26 August 2020.
4. (****) As disclosed in the July 2020 monthly shareholder report. 

--- click on link above for the full letter - although I have reproduced all of it here ---

[I hold BAF shares, as well as shares in 3 of the Wilson Asset Management group's LICs:  WLE, WGB and WMI.  I am not currently holding shares in their flagship fund, WAM Capital (WAM), due to their near-zero profit reserve and very high premium to NTA, I'm not holding WAX because of their very high premium to NTA, and I'm not holding WAA because they're sub-scale, with a very low profit reserve, and poor performance.  However I do like WLE, WGB and WMI here (and hold all 3), and I am expecting a significant positive re-rating with BAF once they become WMA - the WAM Alternatives Fund.  This vote will be pretty much unanimous you would expect, considering the alternative is a much worse outcome for existing BAF shareholders whichever way you look at it.  BAF have been trading at a persistent 30% to 35% discount to their NTA/NAV over recent months, and while that discount has been narrowing in recent weeks due to the BAF SP rising as this vote approaches, they are still trading at a very significant discount to their underlying assets - their NTA - net tangible assets - or NAV - net asset value.]

I spoke for around 45 minutes on Wednesday morning (yesterday, before I went in and had another knee operation - Left knee arthroscopy to fix another cartilage tear - keyhole surgery - back last night - and right as rain today) to Kate Thorley, the CEO of Wilson Asset Management Group.  Kate rang me to talk about the upcoming vote and my intentions.  I told her I'd already lodged proxy votes for all the BAF shares that I manage and they were all in favour of all proposals.  It's important for existing BAF shareholders to do this, because the meeting is a virtual one, and it's best to get those votes in early - rather than to rely on technology to perform seamlessly on the day.  Also, not everybody will be attending the virtual meeting, as we all have busy lives, and it's being held on a Tuesday morning (Sep 8).  Appointing a proxy in advance is the way to go, and I have appointed the Chairman - who wrote the above letter - as my proxy - which is the default option. 

Kate and I did discuss a lot of other matters, but that's probably best left for another straw, particularly as most of them related to their other LICs and their various respective managers and analysts, those LICs' respective MERs (Management Expense Ratios), and other matters, including WAM Groups' Martyn McCathie - who does a lot of work with Louise Walsh for the FG Funds - ringing me back in May while I was in hospital recovering from a total right hip replacement operation - to talk about an email I'd sent to FGX asking why the haven't yet removed LHC Capital as one of their investment managers for FGX in light of the many allegations against them and their huge professional and personal investments in ISX (iSignThis).  But that's getting way off topic...  Point being that my call with Marty lasted over an hour, and my call with Kate was heading towards an hour, so I might end up on their "do not call" list if I keep going like this...

Two things Kate and I discussed that are relevant here is that (1) rather than have a lead portfolio manager for WMA (BAF), they are planning to have an investment committee instead (similar to what FGX & FGG have), for even greater accountability and oversight.  There will be at least 4 people on that investment committee, and the first two will be Adrian Siew and Geoff Wilson.  I got the feeling they'd already hired one or two more alternative asset specialists but Kate didn't refer to them by name.  And (2) they don't intend to dump the extensive Water assets that make up a large proportion of BAF's curent assets.  Kate agrees that water has been one of BAF's most successful investments, and should continue to be a good investment for the fund, and that if the government was to change the rules around water entitlements, water trading, or water allocations, as I think they might at some stage, it would have to be done in a fair manner that would not negatively impact too much on companies that had heavily invested in water based on existing laws and guidelines.  It's a broad concept that if the government significantly moves the goal posts on an industry without adequately compensating the participants, they can open themselves up for potentially very expensive lawsuits.  This does NOT apply so much to tax loopholes being closed, as we saw a few years back with Federal Labor's proposed changed to Australian FBT (fringe benefits tax) law which were going to massively impact car leasing companies that had a large proportion of their business in salary packaging - like MMS - and other salary packaging companies - with no government compensation planned, but I think it would certainly apply here.  Federal Labor lost that election, so those FBT laws were never changed and MMS have recovered from that shock, as have the other companies.  Not having learnt anything it seems from that debacle, that same political party then proposed changes to the refundability of franking credits at the most recent federal election, and then lost that election as well, from an even stronger position, in part thanks to Geoff Wilson (of Wilson Asset Management) running a very effective campaign against the proposed law changes.

So, I'm comfortable with BAF's water investments and it sounds like Wilson Asset Management is too.  That's not to say they are necessarily going to maintain Water's current very large percentage of the fund's overall assets - they may trim it to make room for other investments, but they're not planning to dump it (remove it from the portfolio) - at least - not at this point.  

7-Aug-2020:  Notice of EGM and Proxy Form   and   Chairman's Letter

Also, in WAM Funds' July 2020 Monthly Report, they discuss the management transition in the top right corner of the first page under the heading, "WAM Alternatives Assets Update".  I was wrong about my guess for their new code.  It won't be WAL - it will be WMA.

The BAF shareholder vote (at their EGM) to terminate the existing management agreement and to enter into a new management agreement with Wilson Assset Management (International), part of the WAM Funds Group, will take place on Tuesday, 8 September 2020 at 3:00 pm (Sydney time) virtually through an online platform at https://agmlive.link/BAFEGM20

They will also vote on whether to change the company name, code, and constitution.

[I hold BAF shares and I've already submitted my proxy votes electronically - and I voted in favour of both proposals.]

16-7-2020:  BAF begins transition to WAM Alternative Assets

And the positive re-rating (and the closing of the massive NTA-gap) begins...

[I hold BAF shares]

15-7-2020:  BAF have gone into a trading halt this morning pending an announcement about the management transition to Wilson Asset Management (International). 

I think there's a 99% chance this is the big one - that the long-form documentation has been completed and signed - and the management transition will be complete once ratified at a BAF shareholder meeting.

In an email I received today from BAF, they said:

Dear Shareholder

Please click here to view the May 2020 NTA report for Blue Sky Alternatives Access Fund Limited (the 'Alternatives Fund') (ASX: BAF). This report was released on the ASX yesterday.

The Board confirms that the pre-tax NTA of the Alternatives Fund decreased by 0.50 cents per share, or 0.46%, to $1.0854 per share in June.

During the month, the Alternatives Fund acquired an additional 938,771 shares at an average price of $0.7277 representing a 33% discount to June’s pre-tax NTA.

The Board acknowledges the significant volume of work undertaken by the underlying investment managers and management teams of the portfolio companies in response to the COVID-19 outbreak. Whilst the NTA report for the period ending 30 June 2020 has been prepared with the most up-to-date information, in light of the fast changing landscape it is likely that further valuation adjustments may be made as additional final valuations are received or external independent valuation reviews are finalised.  In addition, the auditor Pitcher Partners will be reviewing the valuations as part of their regular full year financial statement audit. We look forward to finalising the year-end financial statements with lodgement targeted for the week commencing 24 August 2020.

Manager transition update
The Company announced during the month that after lengthy negotiations between BSAAF Management Pty Limited, Wilson Asset Management (International) Pty Limited and the Company, remaining transaction issues have now been resolved in principle on terms the Board considers acceptable to be put to shareholders. The parties are close to finalising the long-form documentation on the basis of the in-principle revised terms and the Board expects that the various parties will be able to agree, finalise and execute the long form legal documentation shortly.

The Board will provide a further update to shareholders on the agreed terms and indicative timing upon execution of the long form documents.

--- ends ---

[I hold BAF shares]

30-June-2020:  Update on manager transition

The Board of Blue Sky Alternatives Access Fund Limited (BAF or the Company) is pleased to announce the Company, together with BSAAF Management Pty Limited (BSAAF) and Wilson Asset Management (International) Pty Limited (Wilson Asset Management or WAM(I)) are progressing the long-form documentation to effect the change in manager to Wilson Asset Management, on the basis of the inprinciple terms announced on 28 February 2020 and subsequent negotiations between BAF and BSAAF.

Regrettably, there has been a delay against the indicative timetable for the completion of long-form legal documentation referenced on 28 February 2020. This is partly due to impacts of COVID-19 on the parties' ability to progress the work. However, it is also partly due to differences of understanding between BAF and BSAAF that emerged in relation to one aspect of the non-binding term sheet signed in February 2020, being the details of the treatment of different categories of fee rebates on the transition of management services away from BSAAF.

The Board would like to thank its shareholders for their patience during this period, as the issues that emerged over the past few months required re-opening certain aspects of the negotiations with BSAAF in order to resolve the differences between the parties before the overall transition proposal could be progressed and put to shareholders.

After lengthy negotiations between the parties, the Board is pleased to say that these issues have now been resolved in principle on terms the Board considers acceptable to be put to shareholders. The parties are progressing the long-form documentation on the basis of the in-principle revised terms and the Board expects that the various parties will be able to agree, finalise and execute the longform legal documentation shortly.

The Board will provide a further update to shareholders on the agreed terms and indicative timing upon execution of the long-form documents.

--- ends ---

I hold BAF shares.

12-June-2020:  BAF Net Tangible Asset (NTA) Backing Report for May 2020

Blue Sky Alternatives Access Fund Limited (ASX: BAF) (the ‘Alternatives Fund’) – Net Tangible Assets (‘NTA’) per share for May 2020

The Board confirms that the pre-tax NTA of the Alternatives Fund decreased by 0.63 cents per share, or 0.57%, from $1.0967 to $1.0904 per share in May. 

As announced on 1 May 2020, the Company refreshed its share buy-back program which expired on 15 May 2020 for a further twelve month period.  During the month, the Alternatives Fund acquired an additional 398,095 shares at an average price of $0.7069 representing a 35% discount to May’s pretax NTA.  

Manager transition update

The Company announced during the month that Pitcher Partners Sydney has been appointed as auditor for the Company.  This appointment follows the outcome of an audit tender process undertaken by the Directors.  In addition to anticipated cost savings, the change will result in the alignment of auditors with the proposed new manager of the Company, Wilson Asset Management (International) Pty Limited, to be appointed subject to shareholder approval. 

A further announcement in relation to the ongoing progress of the manager transition will follow later this month.

--- click on link for more, including their dividend history, current sector weightings piechart, fund performance numbers over multiple time periods, and a portfolio valuation breakdown as at May 31 vs April 30. ---

Disclosure:  I hold BAF shares.

14-May-2020:  BAF April 2020 NTA Report

The share price of BAF on April 30, 2020, of 72 cps represented a 34%+ discount to their NTA (both their pre-tax NTA of $1.0967 and their post-tax NTA of $1.0927).

That discount (to their April 30 NTA) was at 35.7% yesterday and this morning (share price = 70.5 cps).  

Disclosure:  I hold BAF shares.  They are an alternatives fund that hold alternative assets.  60% of their portfolio is currently water assets and cash.

14-Apr-2020:  BAF March 2020 NTA Backing Report

Due to 57% of the Alternatives Fund’s (BAF's) portfolio being in cash (25.4%) and Water Fund investments (32.1%), their pre-tax NTA decreased by only 1.94 cents per share, or 1.73%, to $1.1033 per share in March.  This is in line with my estimate during March that they'd probably end the month being worth around $1.10, hence $1.10 is my valuation for BAF.  I do NOT think that NTA is likely to fall further in April, certainly not if the back half of April is as good as the first 2 weeks.  The Agricultural and Water investments within the portfolio (approximately 42% of the overall portfolio) have felt little to no impact to date, with Water having a strong month in March.  Demand for farm produce has not fallen, and all of the export channels remain open. The portfolio also has a number of unhedged investments across the broader portfolio, in particular investments into the US (esVolta, Cove).  These were insulated to a degree by the 13% or so fall in the Australian dollar over the last quarter (6% fall in March).  However, there are certainly significant negative impacts in the other parts of the portfolio, and the portfolio managers and the Board have been taking action to mark down carrying values as a result.  The bottom line however is that the NTA of BAF fell by less than 2% in March as I had expected (see my valuation), and that compares VERY favourably with other LICs, and underlines the value of having exposure to Alternative Assets, most of which are NOT correlated to share market movements.  You can argue that cash performed even better, however, cash has less upside from here.  Despite the fund having an NTA of just over $1.10 on March 31, their SP closed the month at 65.5 cps, being a 40% discount to their NTA.

BAF's last closing price before this announcement (Thursday's close) was only 1 cent higher at $0.665.  They're up around +7.5% today at $0.715, but that's still a 35% discount to their NTA, which would be at least $1.10 now.  That's still a very significant discount.  Remember too that the management of this fund is being transferred to Geoff Wilson's Wilson Asset Management soon (as confirmed again in this update - link above).  That will be, in Wilson's own terms, a catalyst for a positive market rerating, one of the things his team look to identify when assessing potential investments for their 6 LICs - BAF will be their 7th LIC (listed investment company) and will be renamed the "WAM Alternatives Fund", removing the "Blue Sky" reference from the fund name.  The ticker code will also be changed.  I doubt whether this fund will be trading at a 30% to 40% discount to their NTA when they are being managed and marketed by WAM.  The management transition (including the BAF EGM) will probably take another couple of months, but they are pushing hard to have it all finalised by June 30 obviously.

Disclosure:  I hold BAF shares in two of my portfolios, as well as on my Strawman.com scorecard.

This is straw 2 (of 2) about BAF's announcement yesterday that they've succesfully negotiated an exit agreement that allows WAM (International) - or WAM(I) - part of the Wilson Asset Management Group (or WAMG) - who already manage 6 LICs (WAM, WAX, WAA, WMI, WLE & WGB) - to takeover the management of BAF, which will now likely be renamed "the WAM Alternatives Fund".  The following are most of the bits of the announcement that wouldn't fit in the first straw that I just posted:

Wilson Asset Management is a Sydney-based fund manager with specialist experience in managing listed investment companies for retail shareholders. Wilson Asset Management manages over $3 billion on behalf of more than 80,000 retail shareholders across six listed investment companies with a track record of delivering for shareholders. Wilson Asset Management has invested in highly experienced alternative asset professionals to expand its offering in this area. The BAF Board believes new management under Wilson Asset Management will provide BAF shareholders with the opportunity to continue to gain access to a portfolio of alternative assets within an attractive structure managed by an experienced and specialised investment manager.

In considering the Proposal, the Independent Directors have assessed alternative initiatives that are available to the Company, as well as the potential implications for shareholders if any one or more of those initiatives were pursued.

In addition to:

• a new manager and new investment mandate; and
• an orderly wind-down of the Company’s portfolio and return of capital to shareholders,

the Independent Directors also considered:

• a mutually-agreed cessation of the Blue Sky MSA and subsequent internalisation of the management function; and
• broadening the investment mandate, but BSAAF remaining as the Company’s investment manager.

A unilateral termination of the MSA for breach by BSAAF was considered, but was a least preferred option.  This would have involved an expensive, prolonged and uncertain legal process for BAF shareholders, and could have left BAF without any management resources or access to investment fund managers, and without valuation evidence which ultimately could have led to BAF’s delisting for failure to lodge semi-annual or annual audited accounts.

If the Proposal is not approved by shareholders at the proposed extraordinary general meeting of shareholders, or otherwise does not proceed, the Company will consider the options that are available to it at that time. It is likely that:

• whilst a material share price discount to NTA persists, the Board will maintain its directive for no deployments or commitments of new capital to Blue Sky investments; and
• the Company will continue operating under the existing management arrangements with BSAAF, but most likely on a wind-down basis with investments realised in the usual course by Fund Level Managers.

The Independent Directors maintain the view that a wind-down scenario would likely lead to sub- optimal outcomes for shareholders, as:

• an orderly realisation of all existing assets in the portfolio is likely to take an extended period of time.  [...details...];
• BAF, having been established in 2014 as a co-investment fund for retail investors to access Blue Sky’s predominantly wholesale and institutional investment strategies, does not have control over the timing of exits / realisations from underlying investments. In many cases, BAF’s capital is significantly less than the capital contributed by other investors in the relevant underlying fund (and BAF cannot hold more than 50% of an underlying Blue Sky fund). The trustees of the underlying Blue Sky Investments have a fiduciary duty to act in the best interests of each fund’s investors as a whole, which may not facilitate BAF’s desire to accelerate the realisation of its portfolio in a wind-down scenario.  [...details...];
• it is unlikely that, with the Company’s portfolio in wind-down mode and no investment-grade rating, the current share price discount to NTA would close. In fact, it may deteriorate further; and
• there would be reduced economies of scale with respect to the ongoing listed investment company operating costs. Although management fees are calculated according to portfolio net asset value, a large proportion of BAF’s operating expenses are largely fixed in nature.  [...details...].

The BAF Board is targeting submitting documentation to the ASX for review by mid-March 2020 for an EGM targeted to be held in late April 2020.

The BAF Board would like to thank its shareholders for their patience during a frustrating period and would also like to thank BSAAF, the Fund Level Managers and Wilson Asset Management during the lengthy negotiations in achieving this outcome for BAF shareholders. The BAF Board will keep shareholders advised of progress.

--- ends ---

For the full announcement, including the bits that I have omitted - and replaced with "[...details...]" - (due to the 5,000 character limit on straws) - click here.

28-Feb-2020:  BAF successfully negotiates favourable transition

BAF successfully negotiates favourable exit from existing management arrangements

The Board of Blue Sky Alternatives Access Fund Limited (BAF or the Company) is pleased to announce that the Company has finalised all key commercial terms with all parties to effect a change of manager to Wilson Asset Management (International) Pty Ltd (Wilson Asset Management) from BSAAF Management Pty Ltd (BSAAF).

The key terms are set out in a non-binding term sheet and ancillary documents. The signatories to these documents are BAF, Wilson Asset Management, BSAAF, and Argyle Investment Management P/L, AAAP Securities Limited, January Capital GP P/L, BSPRE Investment Management P/L, Blue Sky Private Real Estate P/L, January Capital P/L, FIP Holdings P/L and Blue Sky Alternative Investments LLC, the managers of the underlying Blue Sky funds (Fund Level Managers) in which BAF has invested (Blue Sky Investments).

Under these documents, the existing Management Services Agreement (MSA) between BAF and BSAAF will terminate, subject to the finalisation of binding long-form legal documentation (based on the agreed commercial terms) and, most importantly, the approval of BAF shareholders to the change of manager proposal (the Proposal).

Details of the terms of the Proposal will be contained in the documentation accompanying the notice of meeting, including the following key commercial terms:

• Fee Structure.  The fees that any existing Blue Sky Investment will be able to charge BAF is a 1.2% management fee and a performance fee, which is the lower of a 17.5% performance fee in excess of an 8% IRR hurdle and the performance fees set out in the relevant fund offer document.
• Performance Fee Deficit.  The portfolio performance fee deficit as at 31 December 2018 has been agreed at $2.86m. This date was agreed as it was the date after which no deployments of new capital were made by BAF into Blue Sky Funds.  This deficit has been allocated against 11 underperforming funds (Allocated Funds) on a fund by fund basis. These funds will not be entitled to charge any performance fees to BAF until the fund’s share of the performance fee deficit has been recovered from performance fee rebates paid to BAF from that particular fund.
• Rebates.  Under the MSA, BSAAF pays rebates to BAF to refund management and performance fees charged to BAF at the investment fund level as an when they are received. Accrued rebates in relation to paid and unpaid fees at the Fund Level owing to BAF will be paid by BSAAF in full as part of the Proposal as an offset against management fees and certain expenses owed by BAF to BSAAF. Going forward, Fund Level Managers will pay rebates on management fee and Allocated Fund performance fees when cash is received from the fund.
• Management Fee Stepdown.  If an Allocated Fund held by BAF underperforms for a period of 2 consecutive years in the first 5 years following termination of the MSA, the management fee that the underlying fund is able to charge BAF will be halved, falling 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 BAF to be exercised by Wilson Asset Management.  BAF has agreed to appoint the relevant fund manager (or its nominee) as its proxy in the event of any meeting called to consider the removal or replacement of that fund manager or the fund trustee.  This obligation to appoint the relevant fund manager (or its nominee) as its proxy will not apply in the event of material breach, wilful default, negligence, insolvency or breach of fiduciary obligations by the relevant fund manager or fund trustee who is proposed to be removed or replaced.
• Transitional Services.  BSAAF has agreed to provide 60 days transitional services after termination to assist Wilson Asset Management.  This is intended to ensure that BAF is able to lodge its monthly NTA reports and meet its other disclosure and regulatory obligations during the manager transition from BSAAF to Wilson Asset Management.

The BAF Board has constantly strived to produce the best result for BAF shareholders – implementing necessary changes to narrow the persistent discount between BAF’s share price and its NTA, ensuring that shareholders have the greatest opportunity to maximise their investment in BAF while at the same time ensuring liquidity.  After a comprehensive selection process which involved BAF receiving and evaluating proposals from various manager candidates in Q4 2019, the BAF Board believes that a manager transition to Wilson Asset Management is the superior outcome for BAF shareholders. Wilson Asset Management is a Sydney-based fund manager with specialist experience in managing listed investment companies for retail shareholders.

[continued in 2nd straw]

25-Feb-2020:  Appendix 4D and Interim Financial Report

BAF's headline numbers for the half:

• Revenue from ordinary activities: $13,216K (pcp: 3,968K), so up +233%
• Profit from ordinary activities after tax attributable to members:  $9,014K (pcp: 1,898K), so up +375%
• Net profit for the period attributable to members is the same (just over $9m, up +375%)

They also said this:

"On 13 November 2019, BSAAF (Blue Sky Alternatives Access Fund) and the Company reached a consensus on key commercial terms (on a without prejudice and without admissions basis) to facilitate a consensual transition of the Company’s management rights to Wilson Asset Management ('WAM').

The Board’s negotiations with WAM, KordaMentha and Oaktree continue as the Board works with its legal advisers to settle the final terms of the manager transition. As meaningful new developments occur, these will be communicated to shareholders on the ASX.

For the half-year ended 31 December 2019, the Company has continued to see its share price trade significantly below the NTA of the Company, albeit in a more stable range. In order to address this, the Company has implemented a range of initiatives throughout the year including the continuation of the share buy-back program. The Board has also worked with the Manager and service providers to significantly strengthen and improve the investment valuation process, including the appointment of a new lead independent valuer, streamlining processes, and increasing the transparency of the valuation process supporting individual asset values."

Disclosure:  I hold BAF shares.

14-Feb-2020:  Net Tangible Asset Backing

Blue Sky Alternatives Access Fund Limited (ASX: BAF) (the ‘Alternatives Fund’) – Net Tangible Assets (‘NTA’) per share for January 2020

The pre-tax NTA of the Alternatives Fund increased by 0.45 cents per share, or 0.40%, to $1.1389 per share in January.

January remains a traditionally quiet month for asset movements with most assets being reviewed in December as part of the interim financial statement preparation.  Accordingly, the only asset movement was an uplift in the value of the Argyle Water Fund which is revalued monthly.

During the month, the Alternatives Fund continued its on-market share buy-back program and acquired an additional 666,485 shares at an average price of $0.8893 representing a 22% discount to January’s pre-tax NTA.  The buy-back will recommence following lodgement of this report.

The negotiations with Wilson Asset Management, KordaMentha, Oaktree and other stakeholders, continue as we work with our legal advisers to settle the final terms of the manager transition.  The other stakeholders referred to include the management teams created out of the former Blue Sky Group that are now partly owned by Oaktree; namely Argyle Group, January Capital and Fortitude Investment Partners.

We hope to be in a position to advise of meaningful new developments shortly.  You may wish to listen to my discussion with Alan Kohler for the Eureka Report from 14 January 2020 (https://omny.fm/shows/ceo-interviews/michael-cottier-blue-sky-alternatives-access-fund) which covered off on the status of the manager transition.

Please note that we are targeting 25 February 2020 for lodgement of the Alternatives Fund’s interim financial statements.

Yours faithfully,

Michael Cottier

Independent Non-Executive Chair
- - - - - - 

Disclosure:  I hold BAF shares.  I added the bold emphasis above to highlight the references to the management transition to WAMG (Wilson Asset Management Group).  It's taking a long time, but it is happening.

13-Nov-2019:  Market Update (transfer of management to Wilson Asset Management Group)

13-Nov-2019:  AGM Presentation

Some History:

29-Nov-2018:  https://www.afr.com/rear-window/absent-geoff-wilson-triumphs-at-blue-sky-alternatives-access-fund-20181129-h18j21

13-Nov-2019:  https://www.afr.com/markets/equity-markets/blue-sky-set-to-hand-management-of-lic-over-to-wam-20191113-p53a3t

Something more recent:

14-Jan-2020:  https://www.eurekareport.com.au/investment-news/are-blue-skys-clouds-parting/146613

Alternatively (no pun intended), for those without access (again, NPI) to Alan Kohler's Eureka Report (the link above has a paywall), here's the free podcast of that interview between Alan and BAF's Chairman, Michael Cottier:  https://omny.fm/shows/ceo-interviews/michael-cottier-blue-sky-alternatives-access-fund

Another thing to note is that BAF have an active on-market share buyback program in place, as their daily announcements to the ASX will highlight.  LICs trading at large discounts to NTA who are prepared to undertake substantial share buy-backs are to be commended.  While it shrinks their FUM (funds under management) because they are using their cash to buy back their own shares and then cancel them - which inevitably reduces fees (the fees being based on the shrinking FUM - and that's the main reason why a number of LIC managers will not do share buybacks), it increases their NTA/NAV and is great for existing shareholders in terms of immediate value creation.  Those LICs that engage in active on-market share buy-backs often have substantial shareholders (such as WAMG) who are agitating for the board to take steps to close the SP-NTA gap.  Another example is TGG (the Templeton Global Growth fund) which WAMG are also substantial shareholders of (via their WAM & WAA LICs).  If you've heard the saying, "speak softly but carry a big stick," that resonates with me when I think of Wilson's approach to other underperforming LICs.  I'm not sure how softly he does speak, but his big stick is that he will move on the board and look to take over management of the LIC if they don't do as he suggests and improve their own performance.  He usually targets LICs with unhappy shareholders, and that lack of confidence in the current LIC management (BAF, TGG, CYA, WIC, PIA, CIE, and extending also to financial services companies that are NOT LICs - such as KBC) can be attributed to poor performance, large and persistent NTA-gap (in the SP), sub-optimal shareholder communication from the board or management, and a general lack of vision or a well-articulated plan to get back to where shareholders want them to be.  Sometimes, the LIC will just lift their game, sometimes they will get an alternative white knight to ride to their rescue (as Pengana [PCG] did with the Hunter Hall Global Value Fund - HHV - now PIA, but Pengana's results with PIA have been pretty ordinary since then) to keep Wilson at bay, and sometimes they will end up becoming part of Wilson's managed funds (as CYA did).  There are also times where the stand-off persists for years - such as with TGG.  TGG have their active on-market share buy back, they've increased their dividends, they've increased their communications efforts (including via roadshows, videos, media interviews and improved newsletters to shareholders), and their NTA-gap has narrowed more recently but still remains in the double digits.  TGG is a global fund, and now that Geoff Wilson's global LIC (WGB) is firing and kicking goals (under Katriona Burn's impressive leadership), it might just be a matter of time before Geoff looks to try to absorb some of these underperforming global funds like TGG.  I do hold TGG shares.  They pay a reasonable dividend and there is also that possibility that Geoff might make a move on them at some point.  In the meantime, TGG are doing what they can.  Peter Wilmhurst (their previous PM) has quit, but they have a large team (over 40 Franklin-Templeton people) working on the fund globally and their value-investing style will have its day in the sun again soon enough (after a LONG period of outperformance by growth-oriented investing).  But back to BAF.

Their latest NTA announcement (for December 31, 2019, in this case) gives a good overview of BAF and the alternative assets that they are invested in.  I particularly like their water investments which have been VERY profitable for the fund thus far.  There are also investments in private equity funds, agricultural assets, and residential/property assets.  26.1% of their assets were actually cash in the bank at Dec 31, which is handy.  It will give WAMG some options regarding new investments when they officially take the reigns.

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Disclosure:  I hold BAF, TGG, WAM, WLE and WGB shares.