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Fund Profile


Disclosure – Non-Independent Marketing Communication

This is a non-independent marketing communication commissioned by Hipgnosis Songs. The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.

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Hipgnosis Songs Fund (SONG) broke new ground in the London listed funds market, being the first to invest in music royalties. SONG launched in 2018 and has attracted considerable interest from investors, now having raised c. £1.3bn of equity since launch. It is listed on the main market of the London Stock Exchange, and is now formally an investment trust.

SONG aims to generate total returns of greater than 10% per annum, with a high dividend yield and the prospect of capital growth. Using the manager’s relationships and industry knowledge, SONG’s portfolio has been built up to 138 catalogues, representing a total of 64,098 songs.

Aside from the tailwind provided by the growth of streaming, as we discuss in the Portfolio section, the managers aim to add value through active management of the song catalogues owned, as well as the use of technology and their industry knowledge to increase the efficiency of royalty collection.

In addition, the team expect a material impact from entirely new revenue sources such as TikTok and Peloton, which according to the manager are expected to represent up to 15% of revenues in due course. Emerging markets such as India, Africa and China are also expected to be a driver of growth now that music piracy is largely redundant. Any contribution from these sources represents pure upside for investors.

Following the most recent placing which completed (over-subscribed) in early July 2021, the board have stated that they “do not intend to issue further shares for cash consideration until after publication of the NAV as at 31 March 2022”. This could mean the shares achieve “rarity value” and potentially trade at a premium.

Analyst's View

SONG has proved its resilience against the challenges that 2020 presented, but also shown that it is benefitting from structural changes to the music industry that are transforming what was arguably a broken model prior to streaming.

The impact of the pandemic has only had a marginal effect on revenues so far and has been mainly felt in performance revenues, which is expected to continue into the current financial year. That said, pent-up demand for concerts and live performances could mean a significant bounce-back in activity (and therefore revenues) in future years. We think the strength of SONG’s model is illustrated by (leveraged) free cash flow, which was $82.1m for the year ending March 2021, covering dividends paid out during the year by 1.58 times.

Aside from an improving background to earnings, the music industry shift towards subscription models could lead to important changes to the way that revenues are valued. An improvement in the predictability of revenues means that discount rates could move lower, offering a potential boost to returns.

This is a relatively new area for alternative income investors, and therefore arguably bears higher risks. However, should the managers achieve their objectives, the potential long-term total returns look attractive. SONG’s dividend yield of 4.3% compares to 4.9% for listed infrastructure funds and 5.7% for the renewable energy infrastructure funds. Whilst lower, we think SONG’s dividend yield is attractive because of the added potential for capital growth and the uncorrelated nature of its returns.

bull bear
Attractive yield, with prospect of income and capital growth Unfamiliar and illiquid asset class, meaning the portfolio is difficult to analyse, even as disclosure improves
NAV returns likely to be uncorrelated with equity and bond markets Gearing (currently c. 24% of NAV) can exacerbate downside
Opportunity for capital growth from industry trends as well as active management Possibility that current positive industry trends will reserve
Continue to Portfolio

Fund History

03 Jan 2024 Probably better asking an octopus
Our investment trust experts uncurl a tentacle each and choose their ‘top picks’ for 2024…
25 Oct 2023 We’re going to need a bigger boat...
We argue corporate activity is picking up, making the investment trust sector an exciting place to invest…
23 Aug 2023 Halfway there…investing on a prayer
We provide an update on our picks for 2023 and see which analysts' prayers are being answered…
03 May 2023 Alt-right or alt-wrong?
Infrastructure and renewables have moved from alternative to mainstream assets - what could be next..?
23 Feb 2023 The real book
SONG’s share price remains at a price that we think is an overreaction to legitimate worries…
04 Jan 2023 Here we go again
We review our ‘top picks’ for what was a wild year and place our bets for the year ahead – which doesn’t look much calmer…
30 Nov 2022 Cry havoc!
Lessons from a year in which an already troubled world was savaged by the dogs of war...
27 Oct 2022 Fund Analysis
The SONG portfolio’s significance is not reflected by its wide discount to NAV…
25 Aug 2022 O Brave New World
We ask whether private assets remain attractive as interest rates rise…
13 Jul 2022 Ready player one
We wonder where, if anywhere, should investors look for returns after a tumultuous first half of the year…
06 Jul 2022 A game of two halves
In the second article of our series on the AIC Flexible Investment sector we see how performance has stacked up during two years when markets were poles apart...
18 Feb 2022 Fund Analysis
SONG has continued to deliver, yet now trades at an attractive discount...
12 Jan 2022 Bargain hunt
We survey the discount opportunities in the market and update on the performance of our Discounted Opportunities Portfolio…
30 Dec 2021 Great expectations
As the last of the mince pies wilts in the fridge, topped with a generous helping of stilton, the Kepler Trust Intelligence team stick a finger in the air and point toward their top picks for the year ahead…
21 Jul 2021 Every which way but loose
We break down the AIC Flexible sector into more useful segments…
20 Jul 2021 Fund Analysis
2020 has proven SONG’s resilience, with potential for a re-rating…
19 May 2021 The complexity premium
We examine the idea that extra returns can be obtained from buying investments which are perceived to be more complex by most investors...
31 Mar 2021 Fund Analysis
With additional portfolio disclosures recently made, SONG looks set to benefit from tailwinds in the music industry…
24 Feb 2021 Dire Straits or Money for Nothing?
As discounts reach historically narrow levels across the board – our analysts debate whether a premium is a price worth paying…
30 Nov 2020 Flash update: Hipgnosis Songs Fund
SONG NAV moves up, and continues to offer potential income and capital growth…
25 Jun 2020 Fund Analysis
SONG owns and manages songwriter royalties, aiming to deliver a high income and capital growth...
09 Oct 2019 Bond proxy?
As a replacement or complement for longer duration bonds, listed alternative income funds look an interesting, well… alternative..
25 Sep 2019 One-stop shop: how multi-asset trusts offer superior diversification
Investment trusts are particular suited to this mode of investing. We examine their advantages over open-ended funds and highlight the trusts which do it well…
19 Sep 2019 Fund Analysis
SONG owns and manages songwriter royalties, aiming to deliver a high income and capital growth...
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