Blue Sky over halfway towards A$300m fund target – exclusive

The listed Australian alternatives manager has raised around A$180m for the fund, which will target water entitlements, irrigated farmland and integrated supply chain infrastructure.

Australian alternatives firm Blue Sky Alternative Investments has raised around A$180 million of the A$300 million ($228.1 million; €200.9 million) it is targeting for a new agri vehicle, and expects to hold a final close by year-end, the firm told Agri Investor.

Michael Blakeney, investment director of Blue Sky Water Partners, the firm’s real assets division, told Agri Investor that the Blue Sky Strategic Australian Agriculture Fund (StratAg) has raised 60 percent of its target amount, declining to name any investors. Meeting materials released by the Texas Municipal Retirement System reveal that the US public pension fund’s investment staff recommended a A$75 million commitment to StratAg at a board meeting in late June. Australian superannuation fund, LGIAsuper, has also made a commitment according to an Australian Stock Exchange statement Blue Sky filed in January, but that amount has not been disclosed.

StratAg – which the Texas pension says is targeting gross returns of 14 percent – will invest across Australian water entitlements, provide expansion capital for irrigated farmland development and invest in integrated supply chain infrastructure.

“Blue Sky currently invests across these strategies for both onshore and offshore investors via both open- and closed-ended funds and separately managed accounts,” Blakeney explained. “However, StratAg is Blue Sky’s first institutionally-focused investment fund that invests across all three strategies within one vehicle.”

Blue Sky’s previous funds to date include Blue Sky Agriculture Funds I, II and III, which Blakeney said are stand-alone closed-ended vehicles established to invest in individual growth capital opportunities, such as a 6,000-hectare irrigated cotton development, a 360-hectare irrigated citrus re-development and integrated specialty grain supply chain infrastructure.

The firm’s other real assets fund, the Blue Sky Water Fund, is a water entitlements vehicle, which allows wholesale investors to invest directly in the ownership of Australia’s water resources.

Asked what led to the decision to create a hybrid vehicle, Blakeney responded: “Understanding water gave us the ability to look at adjacent opportunities that might be irrigated farmland development or might be a new agri infrastructure development. When we talked to our investors, they told us that they were interested in investing across the sector and while water had proven to be very attractive, they also appreciated that there were adjacent and complementary opportunities that they suggested we look at as well. So, the strategy has really evolved as a result of our team’s deep agri experience plus our investors’ desires to broaden our approach.”

The fund will target investments in the mid-market, ranging from A$10 million to A$20 million and has an investment term of eight years with the possibility of two, one-year extensions. Blakeney said that “a full pipeline” of validated investment opportunities has already been developed.

“Our approach is very much through a private equity partnership with existing operators in the sector,” Blakeney said. “Building on this, StratAg targets […] private capital opportunities and the majority of these are off-market, proprietary deals based on existing relationships with operating partners and supply chain participants.”

In addition to real assets, the Brisbane-based alternatives manager, which is listed on the Australian Securities Exchange, also invests in private equity, venture capital, real estate and hedge funds. As of May 31, 2017, the firm had more than A$3 billion of assets under management.