Blue Sky Alternative Investments reported a strong FY17 result at the top end of the guidance range after profitably exiting several private equity investments, adding to its credibility, particularly in the private equity space.

The company has built up an enviable track record across its key asset classes having delivered returns of 15.9% p.a., net of fees, to investors since its inception in 2006.

Blue Sky has what we consider to be the imperatives of a successful asset management business, namely a solid reputation, excellent investment returns, quality investment professionals and a very strong distribution team and network.

Fee-earning assets under management (AUM) finished FY17 at $3.25b and we expect this to continue to accelerate towards management’s target of $5b in AUM by 30 June 2019.

Unlike typical ASX-listed funds management businesses that tend to focus heavily on equity investment, Blue Sky has the bulk of its exposure in asset classes that typically have little correlation with the stock market, including real assets (e.g. water and agricultural assets), student accommodation in Australia and the US, retirement assets and US commercial property.

The outlook for the business is strong and we are particularly upbeat about the prospects of the US Cove property JV which we believe has some high-quality projects run by outstanding people and could add materially to the earnings of the group in the coming years.