Eve Maddock-Jones, Investment Week, 14 October 2022:
Over the past few months investors have repeatedly been told the 60/40 portfolio model is dead, with equities and bonds falling into lockstep rather than acting as diversifiers amid the market turmoil.
This has seen more and more fund pickers recommend alternative assets to fill that diversification gap, with music royalties proving a popular choice.
Isabel Albarran, investment officer at Close Brothers Asset Management, highlighted this factor in the investment case for royalties, noting that it provided “low correlations to traditional asset classes”.
The Association of Investment Companies Royalties sector is made up of just two portfolios: Hipgnosis Songs Fund and Round Hill Music Royalty Fund.
Both operate on the same core basis: buying and owning songs or rather, the associated intellectual property rights of music, and using the royalties to create a reliable stream of income. However, the trusts are built in extremely different styles.
Chart toppers or classic anthems?
Hipgnosis has a bias towards relatively newer music, perhaps reflecting the knowledge of its founder Merck Mercuriadis, who managed Beyoncé, Elton John, Mary J Blige and Guns N’ Roses, to name a few.
Round Hill on the other hand invests more in older artists, adding the works of Alice in Chains and David Coverdale to its portfolio this year.
James Carthew, head of investment companies at QuotedData, explained that newer songs Hipgnosis favours “get played quite often and then that decays, initially quite quickly and then more slowly”.
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