A pop and rock star management firm hopes to raise up to £200 million for an investment trust investing in the royalties of hit songs by the likes of Rihanna and Adele.
Hipgnosis Songs, set up by Merck Mercuriadis, the former manager of bands and singers including Guns N’ Roses, Iron Maiden, Sir Elton John, Morrissey and Pet Shop Boys – pitched to investors last week and is planning an IPO at the end of this month.
The Hipgnosis Songs fund will target a 6.5% dividend yield, payable semi-annually, with the first dividend expected to be paid in November 2017. It will target a 10% a year total return over the medium term net of fees.
Hipgnosis said song writers are willing to sell their music to the firm as it is a ‘trusted’ member of the ‘artist and songwriter community’.
It will charge an advisory fee of 1.5% of assets on the first £200 million, 1.25% on the next £100 million and 1% on assets in excess of £300 million.
The trust will also charge a performance fee of 10% of any excess total net asset value (NAV) return over a 10% hurdle, subject to a high watermark and cap on total fees of 5% of NAV.
Once fully invested, the trust will own a minimum of 300 songs, with acquisition prices based on 3-5 years’ historical normalised income. It will have an eight-person team to exploit untapped value by actively managing songs.
Catalogues of songs identified by Hipgnosis include pop hits of the last decade by singers such as Rihanna, Beyoncé and Jay Z, as well as other hit songs by the likes of Adele, Bruno Mars and Snoop Dogg.
In total, Hipgnosis has targeted acquisitions of approximately 1,005 songs.
The firm said legal streaming has replaced illegal downloading as streaming revenues are forecast to grow to $23 billion (£18 billion) by 2030, compared to $2.3 billion (£1.8 billion) in 2015.
Royalty income in the UK is protected by law, with copyrights lasting for 70 years after the death of the writer or last surviving co-writer.