Blue Sky has slashed the value of its fee-earning assets under management

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  • A review of the Blue Sky business and balance sheet is substantially completed.
  • Initial $3.8 million of cost cuts implemented.
  • Estimated $59.4 million negative impact on full year net profit after tax.
  • Fee earning assets under management revised down to $3.4 billion.

Blue Sky’s major review of the business has revalued down its fee-earning assets under management, slashed costs and decided to focus on Private Equity, Private Real Estate and Real Assets.

The funds manager is getting out of the domestic hedge fund business as it restructures and progressively exits its property management rights businesses and regional real estate development projects.

The restructure, coupled with the independent review of carrying values of investments, will cut $59.4 million from full year net profit after tax.

Blue Sky revised its fee-earning assets under management (FEAUM) to $3.4 billion as at the end of May, down from around $4 billion. This includes a reduction in $686.5 million of gross realisable value of property developments.

The company has decided not to pay a dividend for 2018. Blue Sky expects to have a net cash balance of $32.3 million at the end of June.

Blue Sky’s shares fell 12.9% to $1.95 after they came out of a trading halt.

The funds manager has been under pressure since Glaucus Research announced it was shorting Blue Sky, alleging the funds manager wrongly calculated the value of assets under management and charged exorbitant fees.

Blue Sky rejected the allegations and referred the Glaucus note to the corporate regulator ASIC, saying this could be a case of market manipulation.

The chaos that followed the Glaucus Research announcement claimed the scalp of Blue Sky CEO Rob Shand, along with chairman John Kain and other members of the board.

Kim Morison, Blue Sky’s interim Managing Director, says the profit impact of the review decisions is disappointing but the company is delivering on its review of the business and management structure and to reduce fixed costs to align with recurring management fees.

“The review has resulted in a restructure to allow the Company to focus on managing alternative asset classes that are scalable, profitable, institutional grade and demonstrate competitive advantage,” says Morison.

“In reshaping our business and making some tough decisions we believe that we are establishing the best platform to deliver growth for our shareholders and investors over the medium and long term.”

The company decided to delay the launch of new investment funds previously planned for April to June, which significantly impacted cash flow. However, Blue Sky has recently launched three new private equity funds.

Blue Sky announced in mid-April that it would conduct an independent valuation review for each one of its 93 assets.

The process has resulted in write-downs on some of its managed investments, with student accommodation projects hardest hit.

Blue Sky also announced the appointment of Andrew McNeil of Yarmouth Group as Independent Non Executive Chairman of Blue Sky’s trustee entity Blue Sky Private Equity Limited.

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