Some directors of Blue Sky Alternative Investments have been buying up stock with prices hitting three-year lows

THE crunching of Blue Sky’s stock price in the past two weeks has wiped tens of millions of dollars off the shareholdings of some institutions and key people at the Brisbane-based fund manager.

Mark Sowerby, founder and former managing director of Blue Sky Alternative Investments.

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THE crunching of Blue Sky’s stock price in the past two weeks has wiped tens of millions of dollars off the shareholdings of some institutions and key people at the Brisbane-based fund manager.

But some directors of Blue Sky Alternative Investments this week have also been buying up stock with prices hitting three-year lows.

The fund manager has been under fire for its level of disclosures from California-based short-seller Glaucus – which makes money from share prices falling.

The stock is down from $11.43 a week earlier when Glaucus dumped its 67-page report arguing Blue Sky was inflating assets. Then it accused Blue Sky of hiding behind confected confidentiality agreements when the Brisbane company did not release various financial details.

For days, despite Blue Sky’s denials of Glaucus’s claims, the share price haemorrhaged. It plunged as low as $4.45 on Friday before it saw some relief with stock closing up 8¢ at $5.70. Among the recent buyers were Blue Sky chairman John Kain, picking up 59,000 shares for $287,156, an average of $4.86. Also purchasing was managing director Robert Shand, acquiring 20,000 stock for $98,600, or an average of $4.93.

It’s a better price than institutions paid for $100 million in stock last month - $11.50 each – during a recent capital raising. That was the time that executive directors Tim Wilson sold $1.725 million in shares at $11.50 and Kim Morison $575,000 worth at the same price.

Both men still retain large holdings, with Mr Wilson seeing his paper wealth drop from $17.8 million to $8.9 million in the past two weeks, and Mr Morison from $10.3 million to $5.1 million. One of the biggest drops has been for founder and former managing director Mark Sowerby, whose 4.4 million shares dropped in value from $50.3 million to $25.1 million.

While sources close to the company suggest neither the top brass or Mr Sowerby have margin loans, which would expose them to potentially devastating margin calls of selling stock, Blue Sky refuses to comment and Mr Sowerby has not returned calls. Blue Sky’s trading policy allows margin loans.

Some big institutions are also hurting, such as Fidelity, whose holding has dropped from $50.7 million to $25.3 million.

The investors who avoided the carnage are those that were long cautious on the assets or accounts of Blue Sky, which has 80 funds invested in businesses from childcare to student accommodation.

Some potential investors found the accounts hard to decipher. The last half-year result saw Blue Sky promote an “underlying” profit rise of 59 per cent of $16.1 million, while the actual profit according to accounting standards was down 21 per cent to $8.5 million.

A big difference was a $9.3 million gain on investment income, using the way Blue Sky said represented a truer picture of the business. This included gains from its student accommodation and retirement living arms.

But what is not public is the actual performance of each fund that Blue Sky oversees. Blue Sky admits that a small number of investments have not fared well - The Courier-Mail revealed last year that one fund had to ask investors to keep their money parked longer with some assets in it, including chicken-chain Lenard’s, struggling.

Still, Blue Sky says returns from investments overall are 15 per cent. Yet these numbers include assets that have been valued up but are not yet sold. The final figure – better or worse – will depend on when all assets are sold.

Blue Sky maintains that independent valuers check their asset numbers. But Glaucus had suspicions. “If such returns are true, Blue Sky is one of the best asset managers in the entire world over the last decade,” Glaucus said.