The plant gig appears to be Shand’s first investment since the collapse of Blue Sky in May last year after the dubious valuations of its assets under management were exposed in a flurry of negative research against the company. Blue Sky had pitched itself to investors as the "KKR" of Brisbane, freely comparing itself to one of the greatest private equity outfits and alternative asset managers in the world. It dominated the glitzy world of Australian venture capital where young turks such as Blue Sky founder Mark Sowerby had made a name for themselves discovering "hot" businesses and clever assets like water rights for investors to pour money into. It also managed a sprawling funds empire with property and agribusiness assets. But in the hard spotlight of short sellers betting on the stock price falling, the group unravelled. It was soon revealed to be the Fyre Festival of funds management - where the glitzy promises faded and instead shareholders were left with something far less than what they thought they had bought into. In the process, investors were wiped out.

More than $1 billion in shareholder wealth was torched as the share price of Blue Sky's listed headstock - Blue Sky Alternative Investments - crashed from over $14 to a low of 18 cents before its shares were suspended and administrators and receivers appointed. (A separate listed fund Blue Sky Alternative Access Fund lives on.) "It really is very sad," says one former executive who declines to be named for employment reasons. "I’m just glad the miserable period is over." But there will be little recourse for shareholders. The Australian Securities and Investments Commission (ASIC) has been investigating the group but has, for the time being at least, decided to take no further action against Blue Sky.

And for the time being there is a moratorium on shareholder claims as part of an agreement to resurrect some parts of Blue Sky’s business. Shareholders are expected to receive zero cents in their dollar. Doubters started early How it all went wrong for Blue Sky and the lessons for investors is now important Australian corporate history. It is commonly accepted that Blue Sky started to really unravel in March 2018 when a short seller's report from Texan hedge fund Glaucus accused the group of aggressively valuing up its assets so that it could charge high fees and bolster its returns, and in turn lift its share price.

But the group had been facing serious questions about its lack of transparency, governance and how it valued its assets and judged its returns for more than a year before the March "attack". In early 2017, proxy advisor group Ownership Matters, which advises institutional investors on the governance and performance of ASX-listed groups, was already questioning Blue Sky over its accounts, governance and board structure, particularly its lack of independent directors. They called themselves the KKR of Brisbane. It was just ludicrous. It was fantasy that an asset manager could achieve such returns investing in those sort of asset classes. Soren Aandahl, Glaucus "There is potential risk that without independent directors, there is significant incentive for members of the audit process, non-independent board and management team for these assets to always be rising in assessed value, as this creates increased income/earnings for Blue Sky. There is little incentive to mark down asset values." In August 2017, Blue Sky’s then-chairman John Kain responded to a lengthy set of questions put forward by Ownership Matters' co-founder Peter Wuchatsch. In Kain’s letter, seen by The Sydney Morning Herald and The Age, the chairman defends the lack of transparency as "in the best interest of shareholders".

Mark Sowerby, one of the founders of Blue Sky. Wuchatsch kept hammering away, releasing fresh research into the group on December 17, in the same year. The 19-page report raised so many serious questions Wuchatsch included a helpful cover page so readers could keep up. The questions included: Why doesn’t BLA [Blue Sky Alternative Investments] provide breakdown of fee-earning assets under management by asset class? Why are some assets revalued so rapidly? Why has BLA seemingly changed the policy for which assets are included in its IRR (internal rate of return) calculation? Why do BLA funds and BLA itself lend to other BLA funds? But Blue Sky’s shares kept on rising. In 2017 Blue Sky doubled its share price from $6.99 to $13.99 as it continued spruiking its investment wares to self-managed super funds and investors offshore including in the US. In the first week of March 2018, Blue Sky raised $100 million from investors, including Fidelity at $11.50 a share. It was just weeks before the Glaucus report landed. Red flags

It’s a glorious winter’s day – 21 degrees and sunny – in Austin, Texas, when Soren Aandahl the man behind the Glaucus note and now head of investment at Blue Orca Capital answers the phone. The American investment guru explains that it was Blue Sky’s incredible returns and the high receivables on its balance sheet that in part piqued his interest in the outfit. "[It’s a] combination that is really deadly for an asset manager." "They had claimed a 15 per cent net IRR since inception and if that were true that would essentially make them one of, if not, the greatest investor of the past 20 years. "They called themselves the KKR of Brisbane. It was just ludicrous. It was fantasy that an asset manager could achieve such returns investing in those sort of asset classes." Aandahl says Blue Sky’s lack of transparency set them apart from other asset managers such as KKR or Apollo which have fulsome disclosures.

"They have spreadsheets and spreadsheets of data of how they measure their returns and asset values. Those conventions exist because it’s so easy for asset managers to essentially inflate performance on unrealised investments. "From almost day one that’s what we suspected Blue Sky were doing. That explains the riddle of why the receivables were going up so high and why they never seemed to sell any of their assets." The Glaucus note was another serious blow to Blue Sky. On a conference call with analysts in early April, Shand hit out at Glaucus. "These allegations are both fundamentally flawed and materially misleading.

"The reality of what has happened here – that a foreign short seller can launch a co-ordinated attack in an opinion piece that bears no resemblance to reality with the explicit intention of profiting from it – is, I believe, appalling." Loading But while other groups have weathered short seller "attacks" and polarised the investment community – see Harvey Norman for example – Blue Sky could not recover from the Glaucus report, in part because of its own doing. "It was like every time they opened their mouths to respond to their critics the share price fell," said one fund manager who held shares in Blue Sky before exiting in early 2018. Shand resigned in late April. Perversely for Blue Sky and Shand, Blue Sky’s fresh disclosures to prove Glaucus wrong added fuel to the fire.

A key example being, despite saying it could not state its assets by asset class, Blue Sky later provided those figures. Despite saying their assets were fairly valued, Blue Sky later issued a slew of write-downs. It wasn’t long before the group was forced to confess that ASIC was investigating and had asked them to hand over their books and records. By September 2018, Blue Sky was in crisis. Near the end of that month it had accepted a $50 million line of credit from distressed securities specialist, US firm Oaktree Capital Partners. Within months Blue Sky started breaching its debt covenants. By May last year Oaktree called in receivers. In the six months of sudden quiet following Blue Sky’s collapse, Oaktree has brokered a deal with Blue Sky’s receivers and administrators for its subsidiary to take control of Blue Sky’s "real assets" business. That deal also placed an interim moratorium on legal claims, including shareholder claims, despite three law firms - Gadens, Shine and Piper Alderman - doing preparatory work for investor actions.

Shine class actions practice leader Craig Allsop - who was previously a lawyer at ASIC - says ASIC canning its investigation doesn't stop a class action claim. "It’s always helpful if the regulator has found wrongdoing but the standards they have to meet and their internal processes for selecting what they investigate and what they don’t investigate are quite different to the considerations for a shareholder class action," he says, adding: "I don't think they took the investigation very far. "I think its potentially very arguable that Blue Sky’s disclosure was not sufficient for the purposes of a civil shareholder claim." Shareholders are expected to receive nothing. When asked for an update on shareholder outcomes, a spokesman for receivers at KordaMentha referred to an announcement from Blue Sky in July. As one shareholder said of the group’s collapse: "I still don’t understand what happened to the business."

Documents partially released by ASIC under a freedom of information request that relate to ASIC’s investigation are largely redacted. One sentence cruelly reads "It is recommended that no further action be take in relation to this inquiry for the following reasons:" – those reasons are entirely redacted along with most other details of the investigation. Sailing into the sunset In the meantime, many of Blue Sky’s most well-known executives and directors have seemingly sailed off into the sunset. Sowerby, who was replaced by long-time business partner Shand in 2016, could not be reached. ASIC records show he remains a shareholder through his business Blue Dog Group in Beach Burrito Company Pty Ltd alongside new shareholder Oaktree. Other key executives involved in the Blue Sky saga have not been named for legal reasons.