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Hipgnosis Songs Fund to raise over £250m

The investment company is continuing its rapid expansion, raising money from institutional and retail shareholders
September 21, 2020

Hipgnosis Songs Fund (SONG), which invests mainly in music royalties, has unveiled another share placing to raise over £250 million from institutional and private investors as the investment trust continues its rapid expansion. 

The shares are being issued at 116p - a 7.9 per cent discount to the share price at time of issue. The trust hopes to raise £250m from institutional investors, with a further £4m of shares available via a retail offer. Hipgnosis says it will invest the proceeds in a “significant pipeline of catalogues” which include some of the most influential hit songs of the past six decades.

The trust, which launched in 2018 and now has net assets over £700m, is designed to capitalise on the changing way we consume music. The managers pay a lump sum to artists for song rights and aim to maximise revenue potential through streaming rights and by placing the song in films and TV shows.  

Hipgnosis now owns the rights to nearly 20,000 songs with Barry Manilow and Amy Winehouse among its big names. The fund’s pipeline includes exclusivity on approximately 50 catalogues worth roughly £250m, according to the fund’s investment adviser, with discussions on further catalogues worth a total of more than £1 billion.  

Private investors can buy shares through the PrimaryBid platform. At the time of writing, the placing was expected to be open until 11am on 24 September, but could be closed earlier or later at the trust’s discretion. PrimaryBid does not charge investors commission, and there is a minimum investment amount of £100.  

The placing comes shortly after the trust announced it had invested more than 80 per cent of the proceeds from a share issue in July which raised over £230m. Recent acquisitions for the fund include songs from Pretenders lead singer Chrissie Hynde and English songwriter Steve Robson. 

The trust currently yields 4.17 per cent, according to Winterflood data, and has been popular among investors looking to diversify portfolios away from equities and bonds. Owing to the rise in paid-for music streaming and the longer-term nature of contracts, the revenue stream has proved more resilient than equity dividends over the coronavirus crisis. 

Ryan Hughes, head of active portfolios at AJ Bell, says “the trust should certainly bring diversification to a portfolio and offer low correlation to equites and bonds.” However, he adds that one point that may be an issue for some investors is the lack of transparency around the deals it is doing with artists which makes the trust difficult to accurately value.

James Carthew head of investment company research at QuotedData, says “it would be fair to say that there was some scepticism about the concept of the fund when it was launched, especially given that Hipgnosis was shy about saying what they were paying for these catalogues, but, as successive results have demonstrated the success of the fund to date, even shrugging off the fall in income from live music, nerves have settled.”