Music: The New Asset Class

Posted by Bull Bear Trader | 11/17/2008 08:42:00 AM | , | 0 comments »

First State Investments' Media Works fund has acquired the copyrights to more than 26,000 songs, earning a royalty fee every time they are played commercially (see Financial Times article). Using leverage up to 50 percent, the fund expects to generate minimum returns of 15 percent or more, net of fees, including a dividend of 8-10 percent. The fund has already raised $130 million from institutional investors and private wealth managers. One benefit of the fund is that it is uncorrelated to other asset classes and believed to be largely immune to current problems in the economy. Better yet, since royalties are relatively consistent, the generated cash flow is easier to predict, making it easier to value and generate a net present value. At least now you can encourage others to listen to some music as a distraction from the markets, and make money in the process.