A 3rd music-focused electronic-traded fund — or ETF — is ready to debut on the New York Inventory Change on Friday (June 30). The aptly named MUSQ World Music Business ETF, buying and selling underneath the ticker MUSQIX, has 48 shares consultant of the fashionable music enterprise, together with Common Music Group, Spotify and Stay Nation.
To MUSQ’s founder, David Schulhof, the fast-growing ETF market is primed for an index that permits traders to simply purchase into the worldwide music enterprise’s progress story. “It’s been hard to invest in music for the last 25 years,” he says. “You had to be a [limited partner] at KKR or Blackstone or Apollo. And it was really hard to get liquidity.”
Schulhof, most not too long ago the president of music publishing at LiveOne, invested in music belongings because the co-founder and CEO of Evergreen Copyrights, which was acquired by BMG Rights Administration in 2010, however on a regular basis traders weren’t capable of take part in music’s rising reputation as an asset class. “There were a lot of other private equity-backed companies, but it was hard for investors to get exposure” to music, he says.
With MUSQ, Schulhof says he’s giving “the Robinhood investor” a liquid funding to take part within the music enterprise. MUSQ has 48 firms spanning the music content material and distribution (together with Warner Music Group, Imagine), digital music (Spotify, Tencent Music Leisure), dwell music and ticketing (Stay Nation, Madison Sq. Backyard, Vivid Seats), satellite tv for pc and broadcast radio (iHeartMedia, SiriusXM, Townsquare Media) and music tools and know-how (Dolby, Sonos). U.S.-based shares account for 45% of the index’s worth; the remaining 55% coming primarily from South Korea, Japan and China.
MUSQ avoids video streaming and different digital leisure shares which will rise and fall with music however aren’t devoted to music. Nonetheless, not the entire fund’s firms generate most or all of their worth from music. MUSQ’s three largest firms are Apple, Amazon and Alphabet. The subsequent-largest firm by weight, Sony Group Corp., owns movie, gaming and electronics divisions along with Sony Music Leisure. In accordance with the index’s standards, an organization may be thought of for inclusion if it derives not less than 50% of its annual revenues from the worldwide music enterprise, is a prime 5 firm, or have not less than 10% of the worldwide market share in one of many 5 segments of the music enterprise the index covers.
“I had to include them,” says Schulman, “and I couldn’t ignore them. But I created, I think, a fair, balanced approach, which was to cap their market share on the index at 7%.”
To be eligible for the index, an organization will need to have a minimal market capitalization or belongings underneath administration $100 million and a minimal common day by day buying and selling quantity of $200,000 over the earlier six months. Some small firms, comparable to music streamers Deezer and Anghami, and the newly public Alliance Leisure, didn’t make the minimize. However many different small, unheralded firms are among the many index’s 48 shares, together with Stingray, a Canadian streaming firm that companies cable tv networks, and Cliq Digital, a German supplier of streaming companies that bundle music, films, audiobooks and different content material.
MUSQ is a part of a pattern of music-focused funds making an attempt to faucet into the booming ETF enterprise. KPOP, which focuses on South Korean firms that create music and video content material, launched in 2022. TUNE, one other music-focused ETF, launched on June 22. Buyers more and more favor the simplicity of ETFs constructed round themes comparable to music, battery know-how and sustainability. ETF’s asset underneath administration ballooned from $3.4 trillion in 2016 to $10 trillion in 2021, in accordance with EPFR. PwC believes ETFs will develop to $20 trillion by 2026.
“I have to believe that some amount of that money is going to be interested in music,” says Schulhof.