By Cliona O’Dowd
Fund manager Geoff Wilson expects a new wave of consolidation to hit listed investment companies in the coming year, but says the prospects for the sector are the best they have ever been.
Speaking to The Australian a day after succeeding in his bid to take over the running of embattled Brisbane-based fund manager Blue Sky Alternative Investments, Mr Wilson said he is on the hunt for more opportunities.
“Our expertise is listed investment companies, most of which trade at a premium to their net tangible assets. So that puts us in prime position to be singularly involved in anything that happens in the sector,” he said.
“Unfortunately there will be companies whose boards do make stupid decisions. And they have to be held to account. If that creates an opportunity for our shareholders, then we’re very happy to take that opportunity.”
Even before Blue Sky was a done deal, Mr Wilson had others in his sights. Last month he put forward a proposal to take control of ASX-listed Contango Income Generator and bring it into his stable of LICs.
It followed Contango’s recent decision to adopt a new global investment strategy and appoint a US-based investment manager, as well as launch a capital raising of up to $30m.
“We were just appalled. That capital raising was highly dilutive to shareholders. Very, very poor behaviour,” Mr Wilson said.
“And changing from an Australian manager trying to find dividend yield to a US hedge fund was just illogical.”
Earlier this month, Mr Wilson also lobbed an off-market takeover bid for another LIC, Concentrated Leaders Fund, again following a board decision he didn’t agree with.
“We were shareholders (in the fund) and happy. It was internally managed, they internalised management two years ago. And then all of a sudden they decided to have it managed externally. And we didn’t think that was fair. Again, they didn’t go to shareholders.
“So in both instances, with Contango, and Concentrated Leaders, we were calling them to account,” he said.
This differed to Blue Sky, which was “very strategic” and a way for his shareholders to get access to alternative assets, Mr Wilson said.
“There’s an enormous amount of logic to get exposure to alternative assets. They don’t have that volatility that you see in equity markets, so the opportunity we have here is significant.
“There’s a lot of demand for a product like this in the market. It’s the only way to get exposure to a really diversified alternative asset portfolio.”
Before it was targeted by short seller Glaucus Research in 2018, Blue Sky had traded at a premium to its net tangible assets. Its share price took a pummelling on the Glaucus accusations, which included that it had exaggerated its fee-earning assets under management and charged excessive fees. The shares never recovered and still trade at a discount to net tangible assets.
Mr Wilson is confident he can get the share price up. Indeed, it rose more than 5 per cent on Wednesday to 92c following the successful takeover.
Commenting on the outlook for listed investment companies, Mr Wilson predicted a new wave of dislocation and consolidation in the next six to 12 months.
“In times of dislocation the strong players get stronger and the weak players get absorbed. That’s just how the cycle operates,” he said.
“There were a lot of listed investment companies, a lot of money raised over the last six years, and it reminds me very much of 2003-2004, when there were 22 investment companies listed over a 10-month period.
“By the time we got to the GFC, half of them had either privatised or been taken over or been rationalised. And I think we’ll go through a similar period now.”