Whether it’s cryptocurrency or rare metals, social housing funds or peer-to-peer lending, many new types of asset have become investible as part of your portfolio in recent years.
One new entry is funds which buy up royalty rights for music.
Is it time to get creative with part of your portfolio?
The pioneer in this field is Hypgnosis. This fund is dedicated to acquiring the rights to songs and is led by former Guns n Roses manager Merck Mercuriadis.
It owns the rights to hundreds of songs by artists from the Rolling Stones to Bon Jovi, and Eminem to Adele.
Every time you hear ‘Livin’ on a Prayer’ playing, the till is ringing at Hypgnosis.
There’s also a newer kid on the block in the form of Round Hill Music Royalty fund. This fund currently has a 1960s onwards flavour to its portfolio, with artists like the Beatles, James Brown and Rod Stewart.
Advocates of music royalty funds argue that the income streams from song rights are long term, predictable, and different to that from bonds and shares.
So a fund like Hipgnosis or Round Hill – while not without risks of its own – offers a chance to generate returns which are not closely correlated to your wider portfolio.
On top of that, in an income-starved investment world, music royalties offer the prospect of regular payments. Both these funds target a dividend level of 4.5%.
Lastly, there’s a sense that music royalty funds are only beginning to build their catalogues so there is a large amount of untapped growth potential.
On the other hand, song rights are difficult to value and there is increasing competition in the market, with a string of artists selling their back-catalogues recently – not least because they can’t generate income from touring at present.
The music industry is also tight-knit, so there’s a question about these funds’ ability to continue to acquire song rights: it seems to be highly dependent on the management team’s relationships with artists.
Should you invest?
Ultimately, the music industry has been transformed in recent years by streaming. Music royalty funds are a relatively new and unproven approach to monetising music rights in a new economy.
That could make them a good home to spice up a small portion of your portfolio and provide a return which is driven by different dynamics than the equity and bonds holdings which form its cornerstone.