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Church of England reaps reward from early investment in popular music fund

19 March 2021

Hipgnosis Songs Fund now has the rights to more than 60,000 popular songs


The singer, songwriter, and lead vocalist of Blondie, Deborah Harry, is one artist whose back catalogue is included

The singer, songwriter, and lead vocalist of Blondie, Deborah Harry, is one artist whose back catalogue is included

THE Church of England is reaping the fruits of investment in the unlikely area of popular music. Through its investments in funds managed by the independent investment company CCLA, it was an early investor in Hipgnosis Songs Fund, a company that has acquired the intellectual property rights to more than 60,000 popular songs from some of the biggest names in the industry.

Hipgnosis uses investors’ money to buy the rights to between 50 and 100 per cent of all future royalties for a substantial lump sum. It buys not from the record companies, but from the songwriters themselves, who used to earn royalties primarily from album sales and airplay when a new record came out, and were frequently disadvantaged in comparison with the artists.

But music-streaming, in which digital services such as Spotify and Apple Music give subscribers access to millions of songs, is acknowledged to have changed the face of an industry that struggled for decades with piracy. Music can now be licensed for use in myriad ways, notably through streaming, and for films, TV, and video games, advertisements, and merchandise — something that has increased both the income of songwriters and their bargaining power.

The company’s founder and chief executive, Merck Mercuriadis, is an industry veteran, who formerly managed high-profile names such as Guns N’ Roses, Elton John, and Beyoncé. He describes himself as an advocate of artists and songwriters, and told the magazine Rolling Stone in an interview last year: “As songwriters, they’re effectively giving their children to surrogate parents. They know they can trust me and that I’ll respect their art, and only use songs in ways they’re comfortable with.”

The Church of England uses the independent investment company CCLA, which has £12.6-billion of assets under management for charities, religious organisations, and the public sector. Hipgnosis, launched in July 2018, was CCLA’s first venture into the specialist area of entertainment copyright, and its fund was one of the 38 initial investors.

Close analysis of the publishing industry had built up a picture of opportunity, CCLA’s portfolio manager, Solomon Nevins, said. “We are always looking for asset classes that bring some diversification within our portfolios,” he said on Tuesday.

“What we like are investments where we can be confident that they can make money for our clients in a more tricky economic environment, and what we know about music is that people listen to it when they’re happy or sad. Demand is very stable through the cycle.”

Despite the general financial crisis, the subscriber model of music access had increased across all forms, and proved less sensitive to the downturn than the purchase of CDs or DVDs. “One of the key theses this points to is that once people start a streaming subscription such as Netflix or Spotify, it becomes quite difficult to give it up. It represents good value for money, with monthly subscriptions generally not far from the price of a single CD, and almost all music available to you.”

Mr Mercuriadis had demonstrated his enthusiasm and knowledge of the industry, and had taken steps to built a team around him with solid experience on a financial level, Mr Nevins said. “We have been really pleased with how well he has been able to deliver and build this up.”

CCLA’s investment of just under one per cent in the company has yielded a return of 26 per cent over three years, annualised at 9.5 per cent. The investment had been a “particularly bright spot” in the past year, Mr Nevins said, as people had been forced to stay at home and looked to entertainment to get them through.

The investment landscape is acknowledged to be changing: fossil-fuel companies are among those no longer considered to have sustainable business models. “We are the stewards of our clients’ assets, and our clients entrust us to invest responsibly to generate sustainable financial returns,” the head of ethical and responsible investments at CCLA, Dr James Corah, said.

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