Hipgnosis Songs Fund SONG

[BullDog]

Hmmm. HL are showing a much lower discount today. But a very high annual charge of 2.76% and there's a performance fee on top. Makes a 4.5% yield look pretty mean if the management are taking nearly 3% just to do their job?

[airbus330]

Feel a little unsettled by the complexity of this, even though getting the Pink Floyd songbook would be a coup.

https://citywire.com/investment-trust-i ... ea=1359160

[nmdhqbc]

Hmmm. HL are showing a much lower discount today. But a very high annual charge of 2.76% and there's a performance fee on top. Makes a 4.5% yield look pretty mean if the management are taking nearly 3% just to do their job?

https://www.hipgnosissongs.com/wp-conte ... 22-web.pdf

not sure where HL get the 2.76% from but in the 2022 annual report (above) on page 9 it says the ongoing charge was 1.58%. also the ongoing charge has other costs in it as well as the management fee.

from AIC website (and it matches what's in the annual report)...

Management agreement
Management fee 1%. p.a. of the Average Market Capitalisation up to GBP 250m; 0.9% p.a. from GBP 250m and up to GBP 500m; and 0.8% p.a. in excess of GBP 500m. Performance fee equals 10% of the Excess Total Return if the sum of the Advisory Fee and the Performance Fee is no more than 5% of the NAV at the end of the Period. The Advisory Fee shall be payable quarterly in advance for the first four quarters following Initial Admission and monthly in arrear thereafter. Contract is terminable on 12 months' notice.

page 165 says Ongoing Charges % is calculated by...

Annualised ongoing charges ($32,344,173) divided by Average Operative NAV($2,044,830,931)

and on page 126 it says the Advisory and performance fee was $16,548k. so by my reckoning for 2022 the management fee alone was about 0.81%. something seems wrong there as the very lowest tier is 0.8% according to AIC website. even with zero performance fee the advisory fee should be a touch higher i would have thought. probably just some nuance to how these things gets calculated that i'm missing.

so a lot of that 1.58% is other costs. not sure which ones on page 126 get included in the ongoing charge. must be a lot more costs involved compared to a standard trust. i'm guessing the collection of royalties may be more complex than just receiving dividends from a company. i know they are campaigning for some song writer rights to be changed. maybe they have to spend cash chasing down copyright infringers. just my guesses here but those things must cost money.

[torata]

i'm guessing the collection of royalties may be more complex than just receiving dividends from a company. i know they are campaigning for some song writer rights to be changed. maybe they have to spend cash chasing down copyright infringers. just my guesses here but those things must cost money.

What's the contractual relationship between HSF and the management company Hipgnosis Song Management? I don't have them so I'm not going to check, but I imagine there'll be a hefty management fee to HSM to pay for them trying to maximize the royalties.

torata

[SalvorHardin]

not sure where HL get the 2.76% from but in the 2022 annual report (above) on page 9 it says the ongoing charge was 1.58%. also the ongoing charge has other costs in it as well as the management fee.

from AIC website (and it matches what's in the annual report)...

Management agreement
Management fee 1%. p.a. of the Average Market Capitalisation up to GBP 250m; 0.9% p.a. from GBP 250m and up to GBP 500m; and 0.8% p.a. in excess of GBP 500m. Performance fee equals 10% of the Excess Total Return if the sum of the Advisory Fee and the Performance Fee is no more than 5% of the NAV at the end of the Period. The Advisory Fee shall be payable quarterly in advance for the first four quarters following Initial Admission and monthly in arrear thereafter. Contract is terminable on 12 months' notice.

page 165 says Ongoing Charges % is calculated by...

Annualised ongoing charges ($32,344,173) divided by Average Operative NAV($2,044,830,931)

and on page 126 it says the Advisory and performance fee was $16,548k. so by my reckoning for 2022 the management fee alone was about 0.81%. something seems wrong there as the very lowest tier is 0.8% according to AIC website. even with zero performance fee the advisory fee should be a touch higher i would have thought. probably just some nuance to how these things gets calculated that i'm missing.

so a lot of that 1.58% is other costs. not sure which ones on page 126 get included in the ongoing charge. must be a lot more costs involved compared to a standard trust. i'm guessing the collection of royalties may be more complex than just receiving dividends from a company. i know they are campaigning for some song writer rights to be changed. maybe they have to spend cash chasing down copyright infringers. just my guesses here but those things must cost money.

I reckon that part of the 2.76% charge comes from using the method used to calculate charges for the Key Investor Information Document (KIID) by treating the interest on debt as being part of the fees charged. In KIIDs, no allowance is made for the returns that can be made by investing the borrowed money. As I mentioned recently in another thread, in these KIIDs if you pay interest of £X and you then also earn £X by investing this money, the earnings are completely ignored and X is added to the costs for the purpose of calculating the KIID annual charge even though it hasn't cost the fund anything.

As to the rest of the costs, IMHO investors should try to avoid thinking of Hipgnosis Songs as an investment trust, even though it is classed as such. Some of the costs are those you'd expect to see in the accounts of an operating company, not an investment trust. There's a lot of work involved in sorting out the song catalogues once they are purchased, such as chasing up income and using the catalogues to generate more income.

Hipgnosis doesn't operate like a conventional investment trust by buying and selling shares. Rather it's more like a venture capital fund IMHO where the managers of the fund get involved with running the businesses in which the fund has invested.

The Capital Markets Day video that's on the main page of Hipgnosis' website has a very interesting piece by the Chief Catalogue Officer about the work involved in dealing with the catalogues starting at about 21 minutes 50 seconds.

https://www.hipgnosissongs.com/

I am a shareholder and wouldn't be in the least bit surprised if Blackstone eventually launches a takeover bid. They already work closely with Hipgnosis' managers and Blackstone (and the other major alternative asset managers) have no difficulty in attracting client funds to invest in things like this.

[nmdhqbc]

What's the contractual relationship between HSF and the management company Hipgnosis Song Management? I don't have them so I'm not going to check, but I imagine there'll be a hefty management fee to HSM to pay for them trying to maximize the royalties.

looks to me like Hipgnosis Song Management are the managers of the trust. so the 0.81% i estimated for YE2022 above is what they got paid i think. the term they seem to use is "Investment Adviser" in the annual report.

[nmdhqbc]

I reckon that part of the 2.76% charge comes from using the method used to calculate charges for the Key Investor Information Document (KIID) by treating the interest on debt as being part of the fees charged. In KIIDs, no allowance is made for the returns that can be made by investing the borrowed money. As I mentioned recently in another thread, in these KIIDs if you pay interest of £X and you then also earn £X by investing this money, the earnings are completely ignored and X is added to the costs for the purpose of calculating the KIID annual charge even though it hasn't cost the fund anything.

i think you could be onto something as on page 126 they have loan interest at £20,377k. if we add that to their calculation we get (20,377,000+32,344,173)/2,044,830,931 = 2.58%
getting pretty close the the number on HL which today is showing a different number (2.53%)

i feel like they should be forced to show us exactly how they get their figures in full detail. not just the methodology being explained but the actual breakdown of the numbers each time the work it out.

completely agree with everything else you wrote too.

[UncleEbenezer]

getting the Pink Floyd songbook would be a coup.

Indeed it would.

Perhaps the very kind of coup that raises "must have" enthusiasm and ends up in a bubble?

[airbus330]

getting the Pink Floyd songbook would be a coup.

Indeed it would.

Perhaps the very kind of coup that raises "must have" enthusiasm and ends up in a bubble?

I'd agree with that. I've been a fan of SONG for some time, but a niggle in the back of my mind about the feeling that there is something of the wide boy in the leadership has now made me a bit less keen. On the watch list.

[CryptoPlankton]

getting the Pink Floyd songbook would be a coup.

Indeed it would.

Perhaps the very kind of coup that raises "must have" enthusiasm and ends up in a bubble?

I'd agree with that. I've been a fan of SONG for some time, but a niggle in the back of my mind about the feeling that there is something of the wide boy in the leadership has now made me a bit less keen. On the watch list.

And did we tell you the name of the game, boy
We call it 'riding the gravy train'
(Roger Waters, 1975)

[torata]

getting the Pink Floyd songbook would be a coup.

Indeed it would.

Perhaps the very kind of coup that raises "must have" enthusiasm and ends up in a bubble?

I'd agree with that. I've been a fan of SONG for some time, but a niggle in the back of my mind about the feeling that there is something of the wide boy in the leadership has now made me a bit less keen. On the watch list.

yes, for me too. I loved the idea of a bond like alternative investment that I could participate in. Bowie sold off his back catalogue years ago, and it struck me then how useful that could be as an income stream. But not only the (to me anyway) slightly opaque nature of, as SalvorHardin said, what is effectively an operating company, but also the seemingly ever-increasing valuations of the back catalogue, and then the private equity involvement of Blackstone and their Hipgnosis Songs Capital, all put me off.
torata

[Laughton]

Even The Mail on Sunday gets confused - from today's edition:

"In recent days, it emerged that Hipgnosis Songs could end up owning the rights to Pink Floyd's back catalogue. The fund already owns the rights to more than 65,000 songs from artists such as Amy Winehouse, Nirvana and Rihanna"

In case you weren't paying attaention - in recent days, it's emerged that another "Hipgnosis" advised company could end up owning the rights to Pink Floyd's catalogue.

Surely time for management to stop all this confusion by renaming the various companies - but then maybe that's what they like.

[torata]

Interesting article in the FT about Hipgnosis

One snippet: "the London-listed vehicle has reported that “aborted deal expenses” increased to $1.6mn, four times higher than the prior level. That includes the cost of doing due diligence on potential deals that the fund did not sign."

Google "FT Blackstone-backed song rights machine suffers growing pains"
which should get a one time pass through the paywall.

torata

[torata]

What's the contractual relationship between HSF and the management company Hipgnosis Song Management? I don't have them so I'm not going to check, but I imagine there'll be a hefty management fee to HSM to pay for them trying to maximize the royalties.

looks to me like Hipgnosis Song Management are the managers of the trust. so the 0.81% i estimated for YE2022 above is what they got paid i think. the term they seem to use is "Investment Adviser" in the annual report.

A bit from the very end of the FT article I referenced above:
"HSM generated $16.5mn in fees from HSF last year."

torata

[torata]

There's an in depth piece in the FT on the securitization of songs, covering Hipgnosis/Blackstone, KKR, Carlyle, rising interest rates and valuations.

Direct link is:
https://www.ft.com/content/e879f856-3ec3-4bd7-b564-ada5b590e3ef

Or google "FT How Wall Street stormed the music business" in incognito mode for one-time access.

torata

[Itsallaguess]

There's an in depth piece in the FT on the securitization of songs, covering Hipgnosis/Blackstone, KKR, Carlyle, rising interest rates and valuations.

Direct link is - https://www.ft.com/content/e879f856-3ec3-4bd7-b564-ada5b590e3ef

Or google "FT How Wall Street stormed the music business" in incognito mode for one-time access.

Alternatively, for a quicker solution, try this -

https://archive.ph/MpOuR

Cheers,

Itsallaguess

[pje16]

Hipgnosis Songs Fund Ltd – Guernsey-registered music intellectual property investment and song management company – Declares interim dividend of 1.3125 pence per share for the April 1 to June 30 quarter, unchanged from last year. Hipgnosis targets paying an annual dividend of 5.25p, unchanged from last year. Also notes "positive tailwinds" due to the US Copyright Royalty Board's decision in the Phonorecords III proceedings in July. The decision confirmed and made retroactive the increase in mechanical streaming royalty rates for songwriters and publishers between 2018 and 2022.

Current stock price: 104.30 pence, up 2.5% in London on Wednesday

Source:
https://www.ii.co.uk/secure/my-news-fee ... 0651827000
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