In focus
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This niche trust makes its money from music royalties, meaning it
can play an important role in terms of portfolio diversification
TRUSTNET
“Once the income stream from
a song dries up, it’s hard to see it
holding its capital value,” he added.
The trust is currently the only
member of the IT Royalties sector.
It is up 5.26 per cent since launch,
which takes into account this
year’s market collapse – while its
underlying assets are unlikely to
be affected by the coronavirus-
related economic shutdown, it is not
immune to investor sentiment.
FACT BOX
Manager: Merck Mercuriadis / Launched: 11/07/2018 / Discount/Premium: -1.02% / OCF: 1.53%
CROWN RATING N/A
PERFORMANCE OF TRUST SINCE LAUNCH
Hipgnosis Songs ( 5.26% )
15%
10%
5%
0%
-5%
-10%
De
-15%
Each song is treated as a separate
asset, with Mercuriadis looking for
one of four characteristics when
considering potential additions
to the portfolio: first, the song has
proved to be a “hit” with a track
record of success; second, it is
culturally influential, meaning that
it is likely to be played consistently
or even covered by a different
artist; third, it is under-exploited
meaning that it has the potential
to be synched or covered more;
and fourth, it offers an improving
royalty income via negotiation of
competitive fees.
Jim Harrison, director of advisory
firm Master Adviser, said that while
this is obviously a niche trust, it can
play an important role in terms of
diversification and encouraging first-
time investors.
“It feels zeitgeisty and may appeal
to younger investors with a long
I
f someone can manage
Beyoncé, Elton John, Mary J
Blige and Guns N’ Roses, would
you trust them to manage your
money, too?
Merck Mercuriadis, previously an
executive music manager, founded
The Family (Music) Limited
and launched the alternative
investment strategy Hipgnosis
Songs in 2018.
The £657.8m trust is made
up of songs and the associated
intellectual property rights,
receiving three streams of royalties
as its income: a mechanical
royalty when a song is downloaded
online or onto a physical CD; a
performance royalty when the
song is performed live, broadcasted
or streamed; and finally a
synchronisation fee, which applies
when the song is used on television
or in a video game.
Hipgnosis Songs
horizon and a taste for something
other than vanilla,” he explained.
“Like an infrastructure fund, it
is mainly a capitalisation of cash
flows, although the catalogues and
individual songs can be sold on.”
However, he warned this isn’t
without risks as the music industry
has always been vulnerable to
people distributing songs for free,
while “today’s chart-topper can
quickly fade”.
Source: FE Analytics
trustnet.com