Blue Sky Alternative Investments has reported a significant rise in revenue, profitability, cash flow, margins and fee-earning assets under management for the half-year period ending 31 December 2016, driven by growth in alternative assets.
Underlying net profit after tax (NPAT) was up 130 per cent to AUD10.1 million (1H FY16: AUD4.4 million), while underlying EBITDA margins expanded to 41 per cent (1H FY16: 28 per cent).
Underlying income for the period was up 53 per cent to AUD36.4 million (1H FY16: AUD23.8 million); and net operating cash flow was up 200 per cent to AUD9.3 million (1H FY16: AUD3.1 million).
The company says it is on track to deliver underlying NPAT of AUD24 to AUD26 million in FY17, representing approximately 50 per cent growth on FY16.
Blue Sky’s fee-earning AUM at 31 December 2016 was AUD2.7 billion, with the company adding AUD1 billion in the last twelve months. The fund manager saw a significant rise in investments from Australian and overseas institutional investors, from 25 per cent to 37 per cent of its fee-earning AUM during the period – a trend that has continued in 2017 with Blue Sky announcing a new significant mandate in January.
Fee-earning AUM is expected to be between AUD3.1 and AUD3.3 billion by 30 June 2017. The company confirmed it was on track to meet or exceed its longer-term target of AUD5 billion by 30 June 2019.
The alternative asset manager outperformed market benchmarks in each of its asset classes – private equity and venture capital, private real estate, real assets and hedge funds – delivering investment performance of 16.4 per cent per annum net of fees since its inception more than ten years ago.
Blue Sky reported a robust balance sheet with net tangible assets of AUD134 million including a net cash position of AUD52.1 million.
Blue Sky managing director Robert Shand (pictured) says the company’s strong financial performance comes down to three key drivers: the mainstreaming of alternatives, the company’s 10-year track record and institutional backing.
“We have returned 16.4 per cent per annum net of fees over 10 years to investors, and have won the endorsement of major institutions,” says Shand.
“Long-term trends have seen investors increase their allocation to alternatives and we are benefiting from the same structural tailwinds as global alternative asset managers such as Blackstone and Partners Group.
“While we have done well to grow to AUD2.7 billion in fee-earning AUM in our first 10 years, we have barely scratched the surface. Australia’s funds management industry has AUD2.8 trillion under management, and with alternatives forecast to be our largest asset class in the next decade, the opportunity in front of us is enormous.”
A McKinsey & Company report notes growth in alternative investments continues to outstrip that of traditional assets.
“The alts boom is likely to be one of the richest asset management growth opportunities in the years to come,” the international report states.
Closer to home, Australia’s Future Fund allocates nearly 40 per cent of its portfolios to alternatives.
ABS data shows that over the last decade, the value of listed equities has treaded water, increasing from AUD1.66 trillion to just AUD1.69 trillion. Over the same period, the value of unlisted equities has increased by almost 50 per cent, from AUD1.96 trillion to AUD2.95 trillion. The size of unlisted equities in Australia today is approximately 74 per cent more than listed equities.
“What investors have experienced in Australia over the last decade is that growth in private markets has far outstripped growth in public markets. As a business that has specialised in investing in private markets, we are uniquely positioned to capitalise on this growth,” says Shand.
