Seneca Investment Managers has backed the Hipgnosis Songs Fund, a royalty-based investment fund, across its portfolio of funds.
Gary Moglione, fund manager at Seneca Investment Managers, told GBI Magazine: “The Hipgnosis Songs Fund has raised £200m to buy catalogues of songwriter royalties. Songwriters receive a share of royalties from a variety of different sources, including when their music is used in TV adverts, films, and videogames or digitally streamed, and essentially the fund seeks to acquire this copyright interest.
“The catalogue is managed by Merck Mercuriadis, an industry veteran of 34 years who has managed artists such as Elton John, Guns N’ Roses and Iron Maiden and is supported by an experienced advisory board.
“The fund’s objective is to pay investors a 5% yield whilst targeting a total NAV annual return of 10% over the medium term (net of fees).
“Although music industry earnings had been in decline over the last 15 years, we believe that an inflection point has been reached and we are potentially entering an era of growth. Life is becoming more difficult for piracy sites and the rise of Spotify has resulted in streaming revenue growth averaging over 40% per annum between 2013 and 20172.
“Given valuation levels in fixed income markets, we are spending more time analysing other instruments that will give us access to “bond like” income streams and Hipgnosis Songs Fund fits this mould. Our scenario analysis shows the 5% yield target is highly achievable and there is a lot of potential upside. This gives the fund a good risk/reward profile. It also has the added benefit of diversification from many other investments in our portfolio.”