October 18, 2018

Only one day after Blue Sky’s CFO Michael Whyte resigned, Blue Sky Alternative Investments announced a split with its $177 million Blue Sky Alternative Access Fund (BAF). Concurrently, Pinnacle Investment plans to launch Alterum Investment Management, a new affiliate tasked with taking on and managing the assets of the BAF. 

The separation follows a horrible year for Blue Sky, which has seen its share price fall by 90 percent after Glaucus, a U.S.-based short seller, accused the manager of exaggerating the value of its assets under management at $4 billion, and over-charging its investors. After also seeing its CEO Kim Morrison step down, Blue Sky’s Naomi Rule temporarily assumed the role of CFO at the firm until a replacement is named.

At the end of September, U.S.-based alternative asset manager and distressed debt investor Oaktree agreed to a $50 million loan to Blue Sky in exchange for a 30 percent stake in the group – and it is believed that the split with BAF will streamline Blue Sky’s structure prior to a vote that will pave the way for Oaktree to one day convert its loan into equity, reports AFR. The funds from the loan will be used for co-investments and to provide general working capital, while Oaktree also will provide expertise and additional asset management.

The initial mandate for Alterum to begin managing BAF’s assets, which include holdings in Blue Sky Water Fund and a range of other ag and venture capital investments, is scheduled for January 1, 2019. However, it is subject to conditions precedent, including securing approval from BAF shareholders for the termination of the existing management carried out by Blue Sky Alternative Investments.

Founded in 2006, Pinnacle is a pure-play investment management firm that has $47.8 billion under management through its equity interests in 12 specialist investment managers, according to Business News Australia.

“Establishing Alterum is an exciting development in Pinnacle’s strategic drive to increase our capabilities in alternatives investment management, particularly in the management of unlisted assets such as agriculture, infrastructure, credit and private equity,” said Ilam Macoun, managing director of Pinnacle, in a company statement. “In addition, with Alterum managing the assets of BAF, this would further expand Pinnacle’s commitment to the listed investment company market as the addition of Alterum will take the assets managed in LICs by Pinnacle affiliates to over $2 billion.”

If plans align, once Alterum assumes the helm of BAF, it will focus on private markets and multi-management, under the leadership Andrew Champion, the current executive chairman of BAF.

“The proposal seeks to preserve the nature of BAF as a unique vehicle for retail investors to gain access to sought after private market investments typically only accessible by institutional and wholesale investors, while broadening its scope to a multi-manager strategy,” said Blue Sky.

-Lynda Kiernan