The Round Hill Music Royalty investment trust has become the largest new investment trust on the London market in 2020.
The trust has raised $328m (£242m at the exchange rate when the raising happened) in a series of share issuances this year, the latest of which completed yesterday morning (December 16) and brought in $46m (£33m).
The trust buys up the back catalogues of musicians, paying the artists a one-off lump sum, and then pays an income to its shareholders from the royalties earned each time the music is played on a streaming service or the radio.
In a statement confirming yesterday's fund raise, Round Hill said it would use the cash to acquire works by the Beatles, Louis Armstrong and others in its pipeline. In addition to the equity raised, debt will be used to complete the purchase of the music catalogues in its pipeline.
Round Hill is competing in a space already occupied by the Hipgnosis Songs fund, another investment trust which has grown to £1.2bn in size. The trust has a yield of 4.3 per cent.
Richard Parfect, multi-asset investor at Seneca Investment Management, said having owned shares in Hignosis since it came to market, he recently sold some to buy into the Round Hill trust. He said this was because Hipgnosis had already risen sharply in value.
Adrian Lowcock, head of personal investing at Willis Owen, said: “These investments are niche in nature. Hignosis has done very well, but the yield of just over 4 per cent, while attractive in this climate, might not look so attractive next year when equity dividends come back.
"I also think the value of the assets is susceptible to changes in musical taste. I also think the music labels will themselves now try to buy music rights directly from the artists, potentially phishing up the costs for trusts if they try to buy more of these catalogues in future.”
The fundraising can be seen in the context of a number of asset managers having to withdraw their proposed fundraisings for new investment trusts this year, including offerings from Tellworth and SDL, while a trust launch from Schroders raised just £75m at launch.
Round Hill has offices in New York, Nashville, Los Angeles, and London.