WAM Alternative Assets WMA: LIC Winding Clause Nears Deadline – asx 200 Implications

Highlights:

• WAM Alternative Assets Limited (ASX:WMA) faces a clause-triggered vote if a trading condition remains unmet

• The fund has consistently traded below pre-tax net asset value since its inception under Wilson Asset Management

• Original structure from Blue Sky Alternatives set terms that could lead to liquidation by shareholder vote

WAM Alternative Assets Limited (ASX:WMA), previously Blue Sky Alternatives Access Fund, operates in the alternatives sector with a presence on the ASX 200. Initially structured to give access to non-traditional investments, WMA now holds assets like private equity, agriculture, and student accommodation.

The listed investment company, originating from Blue Sky Alternative Investments, was transitioned to Wilson Asset Management after Blue Sky’s financial and reputational decline. During its peak, the predecessor company reported substantial funds under management before facing scrutiny over the accuracy of those figures.

Historical Transition and Structural Legacy

Following Blue Sky’s collapse, Wilson Asset Management assumed control of the fund, renaming it WAM Alternative Assets. The change was formalised in a management agreement, and the entity was repurposed under the WAM investment umbrella.

Crucially, a stipulation was embedded in the deal requiring the share price of WMA to trade above its pre-tax net asset value for a sustained period, at least three times in five years. Failing this, shareholders would receive the option to vote on terminating the management agreement and winding up the company.

This Premium Condition was set by the remaining Blue Sky board members to protect shareholder value and provide a clear performance threshold.

Trading Performance and Discount to Asset Value

Throughout its post-transition lifecycle, WMA has traded at a persistent discount to its pre-tax net asset value. The assets it manages remain largely illiquid due to their alternative nature, ranging from agriculture holdings to niche business operations.

Based on available share price and net asset data, the fund has not met the criteria needed to trigger the Premium Condition positively. As the five-year window approaches its end, the structure of the original agreement enters a critical phase.

The absence of premium trading periods means the clause will automatically grant shareholders the right to vote on whether the company should continue under current management or be liquidated.

Asset Management and Fee Structure

Since taking over, Wilson Asset Management has overseen the WMA portfolio, with management fees paid in alignment with the assets under care. The fund has not incorporated a performance fee model, relying solely on standard management fee arrangements.

Over time, the WMA portfolio has included various real-world investments originally backed by Blue Sky, including macadamia farming and other consumer-focused ventures. Some of these holdings have ceased operations or been restructured.

Shareholder Vote and Implications for the Fund

With the deadline approaching for the Premium Condition clause, WMA faces a shareholder decision that could determine its future. If the vote proceeds and a majority favours termination, the company may move toward liquidation, returning funds based on asset values.

The board, led by its current chairman, has publicly maintained its stance against winding up the fund, citing views on longer-term value. However, the clause provides a structural mechanism independent of board opinion, relying solely on shareholder majority if triggered.

Sector Reflection Amid Broader Index Presence

WMA’s journey from Blue Sky’s troubled legacy to its current standing within the ASX 200 reflects the complexities tied to alternative assets in listed formats. The outcome of this structure-driven scenario may serve as a wider case study across listed investment vehicles, especially those operating outside traditional asset classes.