Transcription of Finance News Network Interview with Blue Sky Alternative Investments Limited (ASX:BLA) Managing Director, Mark SowerbyLelde Smits: Hello I’m Lelde Smits for the Finance News Network and joining me from Blue Sky Alternative Investments Limited
(ASX:BLA), is its Managing Director, Mark Sowerby. Mark welcome to FNN.
Mark Sowerby: Thank you.
Lelde Smits: Blue Sky Alternative Investments is a listed Australian manager investing in alternative assets. How do you define alternative assets?
Mark Sowerby: Alternative assets include four different asset classes. Primarily it’s private equity in venture capital, which is really where alternatives started. And that’s grown out now into private real estate, which is private equity into real estate, hedge funds and real assets. And real assets include infrastructure, timberland, agriculture; so basically tangible assets that generate income.
Lelde Smits: Why do you believe alternative assets provide compelling investment opportunities?
Mark Sowerby: I think through the Financial Crisis people saw the correlation amongst many asset classes of the equities markets. I think what alternatives have proven time and time again, is that they can generate uncorrelated, or at least not as correlated returns, over a much longer period of time. And the reason for that is a lot of the assets are unlisted.
Lelde Smits: Blue Sky has more than $550 million assets under management. Could you recap your track record in delivering returns and the investment themes underpinning your strategy?
Mark Sowerby: We’ve done 13.9 per cent net of fees compounding since 2006, across all the investment classes as a bucket. And what we’ve seen is we’ve seen high performance in our private equity venture capital or private real estate, the really unlisted areas. So where there’s less liquidity, we’ve got higher returns. In the more liquid asset classes of water and hedge funds, we’ve had good returns, but lower than you’d expect in the unlisted space. And that’s what you should get at the price of liquidity. So overall, it’s been a great result compounding up.
And the reason for that I think is we’ve invested in the right themes, so the essentials is the area that we’ve been playing. We think that consumerism has slowed right down, so we’ve been investing in affordable housing, water, infrastructure, land, food. A whole range of different opportunities that are much more defensive. But we do think that the Ag [Agriculture] theme is a really interesting place to play, we think the food boom is real. And we’ve been playing that and it’s playing out well for us in our numbers.
Lelde Smits: The Company is about to launch the Blue Sky Alternatives Access Fund on the ASX. What will be your relationship with the new entity?
Mark Sowerby: Well it’s a listed investment company that’s run by Blue Sky, so it’s a Blue Sky run Fund. And what it will do, it will invest across all the different things that we’re in. Whether that be private equity, venture capital or opportunities in the real estate sector, water - which is an area that we specialise in, water infrastructure, and of course our hedge fund business as well. And what we found over time is always businesses do have their cycles, and they have their good times and their bad times. What we found is that over time, we’re generating much higher returns with lower correlation if all of them are put together. And that’s the power of alternatives and we think the Fund will help deliver that.
Lelde Smits: Can you explain the rationale behind taking the Alternatives Fund public?
Mark Sowerby: I think the ASX platform is by far the best platform to deliver these types of products and also funds, its relatively cheap distribution platform. So one of the big expenses of a Fund Manager is distribution; we’re already listed and I think we’ve had quite a degree of success as a listed company. We can leverage off that and launch a Fund onto this platform.
Lelde Smits: When do you expect the Alternatives Fund will debut and how much are you seeking to raise?
Mark Sowerby: Yes so the Blue Sky Alternatives Access Fund is looking to list on June 16, 2014. We’ve opened the offer now; it’s a $50 million minimum and $100 million dollar hard cap, so we’re not taking more than $100 million out of this Fund. The reality is the opportunities and alternatives are more difficult to find, so $100 million I think is the right number for us to invest well.
Lelde Smits: What is your strategy for growing the Alternatives Fund and how would you like to see it positioned by the end of this year?
Mark Sowerby: That’s a great question. So the reality is for us, this is a first step. So we’ve been working for eight years to get to the point where the alternatives story is real, and people understand it and where Blue Sky is seen as the leading light in that space. And so this Fund becomes I think, the primary vehicle over time, for 40 or 50 per cent of the population to access alternatives. And, I’m really hopeful that this over time will grow into a multibillion dollar Fund, where people will have this as part of their portfolio for the long term.
Lelde Smits: Finally Mark, what is Blue Sky’s strategy for the Company’s future?
Mark Sowerby: I think the reality of our business is that the alternative story has just begun, and we now have a seven or eight year head start on most of our competitors. The track record of this space is critical and we have a seven or eight year head start. So I think capturing that value and making sure we continue to do what we’ve done in the past. We’ll see that assets under management will grow naturally. Allocations to alternatives have grown from five per cent to 14 per cent in the last 10 years; we’re going to 20 per cent in the next five or 10.
So, a lot of money coming through from the natural superannuation growth that we see in Australia, and that’s going to get allocated to alternatives and then there aren’t many managers to allocate to. So, I think there’re a lot of natural tail winds that we’re seeing and really, it’s just our job to keep our nose clean, work hard and make sure we keep making people money.
Lelde Smits: Mark Sowerby, thank you for the introduction to Blue Sky Alternative Investments and all the best for listing the Alternatives Fund.
Mark Sowerby: Cheers, thank you.
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