PSP terminates strategic agreement with Blue Sky

The Canadian pension and the Brisbane-based fund manager have agreed to end their strategic partnership, covering some A$200m of assets.

Canada’s Public Sector Pension Investment Board has ended its strategic agreement with ASX-listed Blue Sky Alternative Investments, effective March 31, 2019.

PSP signed the agreement with Blue Sky in December 2017, saying at the time that it would work with the Australian fund manager to “deploy capital over a multi-year period.”

The precise value of the agreement has never been confirmed by either party, but Blue Sky said in an announcement to the stock market that it expects to manage “over A$900 million [$642 million; €566 million] in water entitlements and agricultural assets” following the termination of the agreement with PSP.

As Blue Sky’s real assets division managed A$1.1 billion as at December 31, 2018, it is understood that the value of PSP’s assets being managed by Blue Sky was approximately A$200 million.

In its statement to the ASX, Blue Sky said PSP now intends to manage the assets covered by the agreement “directly with its local operating partners.” PSP does not tend to widely use fund managers for its investments in agriculture or infrastructure, instead developing platforms and working with local operators.

Blue Sky’s managing director of real assets, Kim Morison, told Agri Investor: “Since 2017, we have assisted PSP in putting together a portfolio of assets in sectors of Australian agriculture that they had limited exposure to, including fresh produce and water rights to support its irrigated farmland investments.

“The size of PSP’s assets under management by Blue Sky has grown quickly and now reached a sufficient scale that they have decided to take the management in-house, as they do with other assets they own.”

PSP declined to comment for this story.

Blue Sky also moved to reassure shareholders that the termination of the agreement is “not considered material” to the company’s earnings as it will trigger a realization of co-investments the firm made alongside PSP.

One deal made under the agreement was the purchase of the Millewa vineyard in Victoria in October 2018, although both parties declined to comment at the time.

Blue Sky is due to release its results for H1 FY19 on February 27. In an update to the market on February 12, the firm said it anticipates making a loss of between A$28 million and A$32 million.

The firm also said Blue Sky Water Partners continues to grow its assets under management, with water entitlement prices in the Murray-Darling Basin continuing to trade at high prices following an extended dry period.

Morison returned to his role as managing director of real assets in December, having acted as the group’s interim managing director since April 2018.

Agri Investor revealed in January that Michael Blakeney and Nick Waters, two of Blue Sky Water Partners’ senior personnel, have also either left the firm or are serving out notice periods.

PSP has been investing heavily in Australian agriculture and agribusinesses over the past few years, last month buying a stake worth several hundred million dollars in New South Wales cropping enterprise BFB. It also acquired a 19 percent stake in ASX-listed Webster in August 2018.

PSP managed C$158.9 billion of assets as at September 30, 2018. It has not disclosed the total size of its exposure to Australian agriculture, but it is now thought to have reached several billion dollars.