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Spotlighting the relatively young music-royalty fund industry

Long-term institutional entities that invest in mutual funds and other savings vehicles are obviously always looking for attractive growth opportunities. That is especially true when they are making a “link up with us” pitch to potential customers.

So what they are eyeing presently?

Established performers like precious minerals, stock ownership in proven companies and title to realty holdings are still in the mix, of course. These days, though, a growing number of investors are prominently looking elsewhere for juicy dividends. Specifically, they are jockeying to buy music catalogs.

Those portfolios of songs are potential – and many times actual – goldmines for sage investors who know the music industry. Entrepreneurs and even a number of established companies are increasingly buying up the rights to catalogs and then actively managing them with the goal of sweetening licensing deals to drive more revenue. They are then packaging their offerings to investors via so-called music-royalty funds.

How attractive is the bottom line in select instances?

The data centrally germane to music-royalty funds paints a clear picture: Smartly purchased output catalogs coupled with sound management thereafter can bring huge profits to IP owners. Reportedly, catalogs bring annual yields of up to 20%. An estimated $3.2 billion is currently invested in music-royalty funds, with that amount expected to spike sharply in the near future.

This too is attractive to many investors: Investments are often gauged by their ability to promote portfolio diversification, and royalties earnings have consistently shown a lack of correlation with other asset classes and across markets. That makes music-royalty funds even more attractive to many people.

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