Listed music royalties fund Hipgnosis has just reported that in all its completed six music catalog deals. According to Liberum’s note this morning, the music catalog now comprises 1,230 songs in total.
“The songs in the portfolio have achieved 1,646 Top 10 chart positions around the world including 402 Number 1’s. 20 songs were Number 1’s in both the US and UK with over 107 Top 10 chart positions in those markets, many of which are Grammy Award winners or nominees. The catalogs acquired to date comprise songs written for more than 100 recording artists. A total of £73.0m has now been invested on an aggregate multiple of 12.2x historic annual net income. “.
That suggests a “yield’ of around 8.19% which is midway between the target dividend yield of 5% and total returns of 10%. Overall just under 40% of total proceeds have been deployed.
So far, so good. But the artists targeted so far seem to me at least to be top tier players, with a Cannes sized swimming pool of hit number ones. That makes for great press releases but also poses another less obvious question – haven’t we seen the best returns from these star songwriters? Another way of saying the same thing is that many of the first wave of songs seem to be genuine tier 1, high-quality assets. These are presumably very competitive assets, targeted by major music labels and existing investors in this space. The risk here is that one is overpaying for artists and tracks we’ve all heard of? Presumably, like most things in life, the real sweet spot is in assets that are slightly less well known, but which still represent great value? Maybe that’ll come in the next stage of acquisitions.
Also interested to see that Riverstone has just sold its Meritage III assets for $600m in total across all its funds. The price fetched equates to the holding value in the listed entity which represents just under 5% of net assets, or $77m. Overall the uplift was a pleasing 2 times the initial investment though one might have hoped for a slightly higher uplift.
Numis now reckons that the NAV of the fund is running at around $20.66 per share which equates to £16.17 a share compared to the current share price which is £11.16 per share. The problem though is that getting on for 50% of all the net assets are now in just two big holdings – Hammerhead and Centennial, both of which have had a torrid few months, with Centennial listed on the US market.
Numbers for 2018 – intraday vol shot up
One of the more interesting pursuits in January for me is digging through the numbers for the previous year – most of the stats are about as exciting as watching paint dry but you do occasionally stumble across some interesting figures.
S&P Dow Jones’ star analyst Howard Silverblatt usually has the very best numbers – this year my highlight is his numbers on intraday volatility in 2018 for US equities listed in the S&P 500. This measure shot up to 2.56% in December (November 2018 was at 1.37%) and was 1.21% overall for 2018, up from 0.51% for 2017 (which was the low from 1962, when S&P DJ’s data starts; the average is 1.43%). The chart below tells this story of volatility speaking sharply towards the end of 2018.
The big table below digs deeper into this story of intraday volatility. On average there were 16 days in 2018 where the intraday vol was more than 3%, well above the average since 2009 of 10.4 days. There were five days where intraday vol was above 4% – 2011 boasted 10 such days. Looking at longer-term numbers, since 1962 we should have expected an average of 10 days where the S&P 500 moved by more than 3%, 3 where the index moved more than 4% and 1.5 days where moves of 5% or more were expected. Thus, intraday volatility seems to be moving back closer to the longer-term average which is I think mildly re-assuring, as financial markets might be starting to ‘normalise’ again. Great news unless you are a super bull – if we can live with “normal” market volatility, there’s a decent chance that we might just avoid a future market sell-off on the massive scale of 2008/9.