Blue Sky Alternative Investments has fallen into receivership and been suspended from trading on the Australian share market.

Key points: Blue Sky's market value has plummeted from $1.2b to $14m

Blue Sky's market value has plummeted from $1.2b to $14m ASIC investigated the company for potential breaches of continuous disclosure obligations

ASIC investigated the company for potential breaches of continuous disclosure obligations Three major law firms are trying to launch class actions against Blue Sky

The Brisbane-based fund manager, which manages $2.8 billion in investments, appointed Pilot Partners as its voluntary administrators on Monday.

It came after the former market darling breached the conditions of a $50 million lifeline provided by US hedge fund Oaktree Capital Management — which then led to Oaktree appointing KordaMentha as Blue Sky's receivers.

Blue Sky was required to maintain a minimum level of cash earnings (before interest and tax).

In February, the company reported a half-year loss of $26 million and warned shareholders that it was at risk of breaching the terms of its Oaktree loan.

At its peak, Blue Sky was worth almost $1.2 billion, when its share price was $14.70 in late December 2017.

But its market value plummeted to just $14 million within one-and-a-half years, with its shares last trading at 18 cents.

"Our objective during the first phase of the receivership is to stabilise the business as a strategic assessment is undertaken," Mark Korda, one of the receivers, said.

"The appointment will not affect the day-to-day operating activities of Blue Sky and its investment management business subsidiaries."

Why is Blue Sky in trouble?

"The appointment follows a period of significant instability and uncertainty for all stakeholders, including further commentary regarding possible class actions, turnover of senior corporate executives and departure of certain limited partners," KoredaMentha wrote in a statement.

Over the past year, short-sellers and market analysts expressed serious concerns about Blue Sky charging its customers excessive fees and exaggerating the value of assets that it has managed, including Vinomofo and Shoes of Prey — a footwear retailer that collapsed earlier this year.

It led to Blue Sky shedding $800 million in market value within months in early-2018.

This also prompted an investigation by the Australian Securities and Investments Commission (ASIC), about whether the fund manager had breached its continuous disclosure obligations.

The corporate regulator, however, issued Section 33 notices under the ASIC Act, requiring Blue Sky to hand over documents as part of the investigation.

"The company has received confirmation from ASIC that it does not propose to take any further action in respect of the section 33 notice," Blue Sky told investors last Wednesday.

But there is still the possibility ASIC may re-open its investigations.

"ASIC has reserved its rights to take further action if further information concerning the matter comes to ASIC's attention," Blue Sky said.

Potential class actions

Several major law firms including Shine Lawyers, Gadens and Piper Alderman are trying to recruit disgruntled investors to be plaintiffs in potential class actions against the fund manager.

"In a report published by Glaucus Research Group on 27 March 2018 … Blue Sky has been accused of grossly exaggerating its assets under management, misrepresenting the performance of its investments and collecting management fees far in excess of its entitlements," Gadens partner Simon Theodore said.

"These are serious allegations which raise grave concerns about possible breaches of the Corporations Act, ASIC Act and the ASX Listing Rules.

"Gadens is currently investigating whether Blue Sky and/or any of its officers have failed to comply with their statutory obligations and have misled the market."

The fund manager's related entity — the Blue Sky Alternative Access Fund (BSAAF) — is not in receivership or administration.

However, BSAAF shares tumbled on Monday, closing 5.8 per cent lower at 73 cents.