Blue Sky loses key personnel from water team – exclusive

Several members of Blue Sky Alternative Investments’ real assets team have either left the business or are in the process of serving out a notice period following a tumultuous 2018 for the group, Agri Investor understands.

Michael Blakeney and Nick Waters, both investment directors of Blue Sky Water Partners, which manages the firm’s flagship Water Fund and other water rights investment products, including several direct mandates, have either left or are serving out their notice period after resigning, according to several sources familiar with the matter. A junior analyst also left the business last year.

It is understood that Blakeney and Waters felt there was little future left for them at the firm, especially after Oaktree Capital Management invested in the firm last October, the sources said.

Blakeney has been contacted for comment and Waters declined to comment.

Kim Morison, managing director of Blue Sky Water Partners and head of Blue Sky’s real assets business, disputed this view and told Agri Investor that it was “not unusual” to see departures given the circumstances surrounding Blue Sky since it was subjected to an attack by now-defunct US-based short-seller Glaucus in March 2018.

He moved to reassure investors, saying there would be no change in strategy and that the departures would not affect the real assets division’s ability to manage its investments.

“While it’s disappointing that some people have made the decision to leave, we’re confident that we’ll be able to continue delivering for our investors, as our strategy is focused on irrigated agriculture assets and water rights,” he said. “We’ve invested in citrus fruits, almonds, table grapes, and cotton, really as a result of the fact that we’ve amassed a decent-sized water portfolio, which is unique in the market due to its size and the fact that it’s not tied up in agricultural property.

“The water rights will continue to be the cornerstone of our strategy and will enable us to continue to scale our operations. It would be pretty much impossible to replicate what we’ve got from now if you started from scratch.”

Blakeney and Waters’ future plans are not known, although there is no sign yet that any concrete moves have been made by either to set up a new venture.

Morison has recently stepped back into his role with the real assets unit after a period as Blue Sky’s interim chief executive following the departure of previous boss Rob Shand last year. Former Hastings Funds Management CEO Andrew Day was appointed as the firm’s new permanent chief executive in November 2018.

Morison emphasised his commitment to the firm, telling Agri Investor: “I’m not going anywhere. Nothing has changed in our strategy – our LPs have been well-informed of all the changes and they’re all still with us. Our real assets have performed extremely well, including the Water Fund, and that has more do with the overarching strategy than the people executing on it.

“This will give a few people within the team a good opportunity to step up into new roles.”

Among those taking on extra responsibility are Chris Hawken, Hugh Esler, Todd Winkley and Tony Tremlett, Morison said. The firm is also considering whether to take on another senior hire.

The Brisbane-based fund manager agreed a deal with Oaktree Capital Management in October 2018 that has seen the US firm invest A$50 million ($36 million; €32 million) in the business through a seven-year senior secured loan note facility. This brought a turbulent few months for Blue Sky to an end, although its share price has not recovered, closing at $0.75 on 21 January 2019.

Blue Sky’s shares were trading at A$1.585 at close on September 27, the last day before the Oaktree deal was announced, while they were trading at A$10.40 before Glaucus published its report.

First State Super’s infrastructure and real assets portfolio manager Mark Hector told Agri Investor in October 2018 that the superfund had paused new agriculture and water investments with Blue Sky while the firm worked through its challenges. First State Super has “a few hundred million dollars” invested in a water rights portfolio, Hector said, and that its investments with Blue Sky had performed well to date.