Although music royalties may not be thought of as a real asset, such as a road or building, there is something strangely tangible about hearing a well-known song and realising you own the rights to it.
We have exposure to this relatively young asset class via the Hipgnosis Songs Fund, which listed on the London Stock Exchange in July 2018. It has so far acquired 1230 songs, which have achieved 1646 top-10 chart positions across the world. These include the English-language version of Despacito featuring Justin Bieber, as well as Single Ladies, Rapper’s Delight and Umbrella.
Hipgnosis is paid every time these songs are performed, regardless of the artist, streaming platform or medium. Funds such as Hipgnosis buy catalogues of songs and effectively own the writer’s share of the songs. Although it is early days, Hipgnosis is targeting an attractive yield of 5% a year - which is quite compelling in today’s low-interest-rate environment
From an asset allocation standpoint, music royalties provide an interesting means of diversifying away from other alternative investments and traditional asset classes. Brexit news flow and US President Donald Trump’s tweets can influence the direction of equity and bond markets, but these factors are unlikely to dictate whether a song gets played.