New music-royalty fund will cash in on classic pop hits
The Round Hill Music Royalty Fund, a rival to the well-established Hipgnosis Songs Fund, has just debuted on the London Stock Exchange. David C Stevenson takes a look.
London-listed fund Hipgnosis Songs (LSE: SONG) has raised over £1bn from investors looking to buy into a new, diversified asset class: music rights and royalties. The fund boasts a yield of 4.5% with the shares trading on a 4.4% premium to net asset value (NAV). Hipgnosis has been constantly raising fresh equity, in part to pay for new acquisitions. It has just announced the purchase of 42 catalogues from music major Kobalt Music Copyrights for $322.9m.
Each of the compositions comes with a regular yearly stream of payments from a variety of rights. Some of those are performance royalties; others are mechanical royalties (streaming comes into this category). Sync rights cover using music in broadcasts, while there is also a catch-all category called a master rights agreement, which gives the owner all rights. The Hipgnosis portfolio now comprises 117 catalogues and 57,000 songs with a total acquisition value of £1.18bn. The valuation multiple across the whole portfolio is now around 15 times income.
A new kid on the block
Friday 13 November saw a potential rival make its debut: the Round Hill Music Royalty Fund (LSE: RHM), which has been targeting a $375m fund-raising. The target yield is also 4.5%, with an estimated total return of 9% to 11% per annum based on a portfolio of over 40 catalogues and 120,000 songs.
MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Round Hill will provide some much-needed competition for the Hipgnosis fund. On paper it actually appears the safer bet. Round Hill has been in the music-publishing business as an investor for ten years now and is already the seventh-largest music-publishing firm globally.
It manages three funds with over $700m in assets under management and has a long record. Its first fund has, according to Round Hill, produced a gross investment return of 17% per annum. Crucially Round Hill has also tended to focus more on older, pre-1990 songs, with rock music tracks representing 32% of the portfolio and country 24%. Hipgnosis has not stood still, however, and recently bought an outfit called Big Deal Music. It provides in-house song administration expertise, which will apply across the US portfolio. In-house management is crucial.
Buying the rights to music is not just a passive exercise, and investors need to know that their music investments won’t suffer from diminishing returns over time as hits become forgotten. At Round Hill, its in-house Zync agency has been involved in this proactive management for many years and the real test for both Round Hill and Hipgnosis will be how they can add value to their vast catalogues. Most songs fade away but some classics can keep producing revenues. Round Hill points to Celine Dion’s version of Eric Carmen’s All By Myself, which produced $1m last year, 44 years after the original was first released. Crucially, Round Hill owns 100% of all rights to many of its classic tracks.
Putting a price on pop
Another big question for investors is how to value these music rights assets. There are some transactions to base calculations on, and both funds have independent valuers – but putting a value on some lesser-known tracks is more art than science. Given the high valuations being ascribed to music rights by tech firms (who are waking up to the potential value of music libraries at the likes of Warner Music Group and Universal Music Group), this might seem irrelevant, but bear in mind that this is still a small, illiquid market dominated by large institutions.
Still, given Round Hill’s track record and focus on classics, its shares will probably command at least the same premium as Hipgnosis’. The bigger question is whether music rights can keep producing solid, non-correlated (to the economic and market cycle) returns without pushing valuations too high.
Get the latest financial news, insights and expert analysis from our award-winning MoneyWeek team, to help you understand what really matters when it comes to your finances.

David Stevenson has been writing the Financial Times Adventurous Investor column for nearly 15 years and is also a regular columnist for Citywire.
He writes his own widely read Adventurous Investor SubStack newsletter at davidstevenson.substack.com
David has also had a successful career as a media entrepreneur setting up the big European fintech news and event outfit www.altfi.com as well as www.etfstream.com in the asset management space.
Before that, he was a founding partner in the Rocket Science Group, a successful corporate comms business.
David has also written a number of books on investing, funds, ETFs, and stock picking and is currently a non-executive director on a number of stockmarket-listed funds including Gresham House Energy Storage and the Aurora Investment Trust.
In what remains of his spare time he is a presiding justice on the Southampton magistrates bench.
-
Ofgem could write off £500 million of energy debt for 195,000 households – would you be eligible?Energy debt costs the average billpayer on the Ofgem price cap £52 a year.
-
Magnificent Seven earnings previewA busy week for Magnificent Seven earnings kicks off with three big tech companies announcing results on one night. What should investors expect?
-
Yoshiaki Murakami: Japan’s original corporate raiderThe originator of Japanese activism, Yoshiaki Murakami, was disgraced by an insider-trading scandal in 2006. Now, he's back, shaking things up
-
Cash in on the vast growth potential of the companies electrifying the worldOpinion Martin Todd, portfolio manager, head of sustainable equities, Federated Hermes, highlights three electrification companies where he'd put his money
-
Galliford Try has firm foundations for strong growthBuilder Galliford Try has a finger in a wide range of pies, notably important work in the public sector
-
Card Factory is a stand-out small-cap going cheapIn a digital world, we still value the personal touch. That’s good news for Card Factory, whose unique business model is suited to weather all economic storms
-
8 of the best smallholdings for sale nowThe best smallholdings for sale – from a medieval cross-passage farmhouse in Taunton, Somerset, to a former farmhouse with an orchard in the Welsh Marches
-
How much gold does China have – and how to cash inChina's gold reserves are vastly understated, says Dominic Frisby. So hold gold, overbought or not
-
How to invest in undervalued gold minersThe surge in gold and other precious metals has transformed the economics of the companies that mine them. Investors should cash in, says Rupert Hargreaves
-
Debasing Wall Street's new debasement trade ideaThe debasement trade is a catchy and plausible idea, but there’s no sign that markets are alarmed, says Cris Sholto Heaton