A new music-focused actively managed certificate is getting its groove on in Asia, as it prepares to ride out volatile markets.
Available to accredited and professional investors - the Music Finance Note - has bought the shares of Sony Corp following the October market meltdown.
Anthony S Casey, investment sponsor of the Music Finance Note said: 'Markets have recovered somewhat and we used the opportunity to pick up some shares in Sony Corp, the world’s largest music publisher, following their recent acquisition of EMI for $2.3 billion.'
Sony recently boosted its annual profit outlook by 30% on the back of royalties received from music streaming, according to Casey. He said the music conglomerate has also seen its share price rise 15% year-to-date and is currently trading at JPY 6,056 ($53.2).
October was the first full month of trading for the Music Finance SIX Swiss Exchange-listed Note, which is down 8.37% since inception.
Aside from Sony, the note holds the publicly-listed shares of streaming platforms such as Spotify and Line Corp, as well as shares of record label Vivendi, which owns Universal Music Group.
However, Casey, who previously ran the Football Finance Note, believes the certificate is relatively uncorrelated to equity markets in the long run despite this exposure.
He said that while the certificate invests in listed stocks, it also invests in the Hipgnosis Songs Fund – a UK-listed fund that has bought into global hit songs from the early 2000s.
The Hipgnosis fund buys these songs at a discount from songwriters, such as ‘The Dream’, who has written songs for Beyonce, Rihanna and Justin Bieber. The fund captures royalty income each time one of the songs is played on a streaming platform or synced to an advertisement, movie, sporting event or e-game.
The Music Finance Note is also holding about 33% in cash as it awaits the initial public offerings of Universal Music Group and China’s biggest music streaming company, Tencent Music.
‘As soon as you activate the company that Tencent Music is part of - WeChat – you will have over one billion users starting to press the little icon on the mobile application to listen to the music they want. This could drive revenue dramatically upwards,’ Casey said.
He believes that streaming platforms will make old songs popular again, and generally make the music industry profitable, giving rise to new investment opportunities.
Currently, clients at five private banks in Asia have bought the note, with negotiations underway in six other banks, Casey said.
He is targeting a fund size of $100 million over the next 12 months and recommends an investment horizon of three to five years.
Expected annual returns for the Music Finance Note is 5% in dividends plus 10% in capital growth. The product's management fee is 1.5% and performance fees can go up to 15%.