Straws are discrete research notes that relate to a particular aspect of the company. Grouped under #hashtags, they are ranked by votes.
A good Straw offers a clear and concise perspective on the company and its prospects.
Please visit the forums tab for general discussion.
Geoff has got the intern to drop MOM NTA comparison and movement in carrying values of each respective asset class.
What's left of my opinion of these guys is going down the toilet. They feed retail shareholders shit and keep them in the dark.
At LeaST TheY geT TheIr fRanKing CRedits tHo....give me a break.
Feb 24:
This is starting to be a pain in the backside. Share price performance has been average and portfolio performance hasn't been very inspiring either.
There's the problem of fees being charged on top of the fund level fees (which are obviously not disclosed).
There's also the problem of a persistent discount to NTA which old mate Wilson hasn't come up with a solution for yet.
I still think a 15% is pretty good value but I'm certainly having my patience tested.
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
--- ends ---
[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:
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:
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:
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:
--- 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.
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.
BAF is a LIC fund of predominately unlisted investments which was once managed by Bluesky who crashed and burned in spectacular fashion a couple of years back. There is nothing wrong with the BAF portfolio, however it still suffers from the stigma of sharing the Bluesky name.
Wilson Asset has just signed on to take over the fund (approval pending.) WAM funds are the polar opposite carry a huge premium for no real reason other than Geoff Wilson has an army of long time loyal shareholders who have over the years bid his LIC’s up often to crazy premiums.
I know what you are thinking.. sounds like a boring investment. But ask yourself what is going to happen when Geoff gets a hold of this thing and changes the name to Wilson? It currently trading at a massive 35% discount to NTA.
The the fund currently has ~25% in cash and over 25% in a water asset uncorrelated to equities.
In other words it is extremely low risk. When WAM get a hold of it I can see that discount moving from 35% to say 20% quick smart. A reasonable timeline for this may even be 4 months. So not accounting for any rise in the portfolio itself you could potentially make 15% in 4 moths, while taking very little risk.
A low risk annualised return of 45% doesn’t sound so boring after all and this name is worthy of a large position in the portfolio.
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:
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]