Fund administration case study: Hipgnosis Songs Fund Limited
Fund administration case study: Hipgnosis Songs Fund Limited
This case study demonstrates how we supported the Guernsey-registered Hipgnosis Songs Fund Limited in bringing an entirely new asset class to the London Stock Exchange - some of the most commercially successful songs of all time.
Hipgnosis Songs Fund Limited (Hipgnosis), a closed-ended Guernsey registered investment company which was admitted to the London Stock Exchange (LSE) in July 2018 after an initial public offering (IPO) raising £202.2 million. Since inception, Hipgnosis has raised over £1.05 billion from the market, with its most recent equity raise in September 2020 grossing £190 million in just 72 hours.
Hipgnosis brought a new asset class to the LSE, offering investors a pure-play exposure to songs and associated musical intellectual property (IP) rights. Both Hipgnosis and its investment adviser, The Family (Music) Limited (TFM) were founded by Merck Mercuriadis, the former manager of hugely successful international recording artists such as Elton John, Iron Maiden and Beyoncé.
Merck’s vision is to create a £2 billion fund that invests in the best music catalogues whilst recognising the contribution of songwriters and promoting their interests in the economic equation. This would provide the investment community with access to a new asset class that, through the expert management of the songs acquired would deliver strong and growing returns for shareholders.
As a newly formed investment adviser, TFM not only required an experienced fund administrator that could provide a highly personalised service and support it through the fund's initial stages, but it also needed an administrator with requisite scale to service the fund throughout its ambitious growth journey.
A success story
Hipgnosis has been a real success story, raising over £1.05 billion (gross equity capital) in total through its IPO in July 2018 and five subsequent issues.
This level of success led Hipgnosis to transfer the entirety of its issued share capital from the Specialist Fund Segment to the Premium segment of the Main Market in September 2019. In March 2020, Hipgnosis became a constituent of the FTSE 250 Index after just 20 months since its first fundraise.
In September 2020, Hipgnosis took two major steps on its growth journey. Firstly, it completed the acquisition of the entire share capital of Big Deal Music Group, a highly regarded, boutique full-service song company which owns a portfolio of copyright interests in global hit songs including One Direction’s ‘Story of My Life’. Big Deal Music's catalogue of over 4,400 songs perfectly complements Hipgnosis' existing portfolio of songs that produce a predictable and reliable long-dated income stream. The acquisition also bolsters Hipgnosis' operational capacity with the annexation of Big Deal Music's full-service US music platform which provides the necessary expertise and resource for managing and promoting its growing portfolio.
Secondly, Hipgnosis also acquired a portfolio of 42 catalogues from the investment fund, Kobalt Music Copyrights S.à r.l. for $322.9 million. The acquisition was funded with the net proceeds from Hipgnosis' September equity fundraising together with its existing leverage facility. The 42 catalogues include over 33,000 songs written by over 1,500 songwriters.
Hipgnosis now owns 117 music catalogues comprising in excess of 57,000 songs, some of which TFM believe to be the most culturally important and commercially successful songs of all-time. These include: Journey - Don’t Stop Believin’; The Pretenders - Don’t Get Me Wrong; Eurythmics - Sweet Dreams (Are Made Of This); Chic - Le Freak; Bon Jovi - Livin’ On A Prayer; Al Green - Let’s Stay Together; Beyonce - Single Ladies (Put A Ring On It); Ed Sheeran - Shape of You; Amy Winehouse - Back to Black; Fleetwood Mac - The Chain; Mariah Carey - All I Want For Christmas Is You; Beyoncé – Halo; Enrique Iglesias -Bailando and Hero – Enrique Iglesias; and B52s - Love Shack.
The entire portfolio has an aggregate acquisition value of £1.18 billion, representing a blended acquisition multiple of 14.76x historic annual income, net of right to income.
Hipgnosis chose to appoint Ocorian as its fund administrator and company secretary following a competitive selection process. Our extensive experience in providing flexible and bespoke services to a wide variety of alternative funds listed on the LSE was a key factor in their decision. Our experience in servicing new promoters and new asset classes was also an important consideration.
We perform all the day-to-day administration, accounting, corporate secretarial, governance and regulatory services, ensuring the effective functioning of the fund and subsidiary companies in compliance with all applicable regulations and best practices.
We are very proud to be a part of the Hipgnosis family and are delighted to be supporting the fund throughout its incredible growth journey, adapting and tailoring our services as the fund has scaled up to match investor demand.
Commenting on our role as fund administrator, Hipgnosis founder, Merck Mercuriadis said: "The systemic change in the way people consume great songs via streaming has created a four year or so window to acquire these predictable and reliable uncorrelated assets with 3 x NAV growth as the target. Taking full advantage of this opportunity requires moving at a blistering pace and Ocorian have been with us from pound one through to £1 billion, and from IPO through to FTSE 250 company and being one of the biggest yielders on the index, all the while dealing with an entirely new asset class and investment adviser. They have handled the learning curve remarkably well and we have had tremendous support in reaching the fund’s goals.”
Fund administration is a highly specialised service that requires precision and expertise if investment managers are to focus their efforts on the formulation and implementation of strategy without distractions. At Ocorian, we combine a high level of technical experience with a proven track record in the administration of fund structures, private and listed, investing in alternative asset classes.
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