What is the Hipgnosis Songs Fund & How Does Hipgnosis Make Money?

As we know, more and more investors are looking into alternatives in the low-yield market environment. With the focus on active management through a low ratio of 500-1000 songs per team member, Hipgnosis is proving music to be a great asset class for diversification and enhanced ROI.

Revenues from songs are uncorrelated with the rest of the market, as Merck Mercuriadis emphasizes in his interviews. As of April 2021, Hipgnosis has around 129 catalogues and 60,836 songs.

With a dramatic surge in music streaming in the past 3 years and COVID-19 induced song nostalgia, Hipgnosis has recorded exceptional returns. The firm listed on the LSE 2 years ago and was added to FTSE 250 in 2020. Its share price maintained strong despite COVID-linked disruption to incomes in major music streaming markets, with music consumption proving to be viewed as an essential utility, rather than a luxury, by many consumers.

Today we turn to music as an investment theme, and our guest has worked with the greats, from Elton John to Beyonce, and has been in the front row of the music business for nearly 40 years.

Listed under SONG on the FTSE 250 Index, it holds the full or partial rights to over 60,000 songs, valued at £1.2 billion (at purchase price). Its portfolio includes 8 of the Top 25 Most Played Songs of All Time on Spotify, and 4 of the Top 5 Billboard Songs of the Decade. The firm’s oversubscribed LSE IPO took place in July 2018.

Hipgnosis’ Investment Strategy is to identify, select and invest into catalogues. Hipgnosis invests across a broad range of music genres, catalogues and artists, picking songs that have outperformed over a period of time and those that were underused. Managers’ focus on song potential and performance optimization feeds into legacies and superior royalty income.

User music consumption can revolve around 300 same songs, and Hipgnosis takes advantage of this by purchasing older exceptional hits, such as “Don’t Stop Believin” by Journey, Mariah Carey’s “All I Want For Christmas Is You” and Michael Buble’s “Christmas”.

As of 31 December 2020, almost 50% of their songs are 10+ years old and 53% of their songs are less than 10% years old, reducing an overreliance on recent hits.

Hipgnosis acquired 100% interest ownership in Shakira’s and Nelly’s songs at the end of 2020, continuing to create a unique combination of pop (44.4% of portfolio), rock (27.6% of portfolio) and other genres.

Hipgnosis’ competitive advantage lies within its strong The Family (Music) Limited Advisory Board, consisting of artists, songwriters and experienced producers. The fund acts in the long-term best interest of shareholders and songwriters, such as lowering the risks within songwriters’ futures by buying out catalogues.

Therefore, Hipgnosis is at the forefront of a songwriting revolution as well as an investing one!

Liza Bayankina is a Management student at the London School of Economics and a Money Maze Podcast Brand Ambassador. As a Co-Head of Online Learning Hub at Women Societies Alliance, she conducted interviews and online panels with female professionals working in finance. In her spare time, she enjoys dance lessons and running.

APRIL 13, 2021

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