Hit the right note with offbeat investments

How old pop songs can help tune up your nest egg

ALMOST 50 years after The Beatles split up, a film based around the Fab Four’s music has hit cinema screens.

The Danny Boyle-directed Yesterday tells the story of a young man who is the only person in the world who remembers the group ( pictured).

This aspiring musician claims the band’s songs as his own, and is soon propelled to international fame and stardom.

Of course, Boyle and his hero are not the first to recognise the power and potential economic value of an artist’s back catalogue. Fund managers were way ahead of them.

Music rights are just one among a plethora of unconventional options open to adventurous investors – from GP surgeries to aircraft leasing. It’s even possible to invest in lawsuits.

‘Over the last decade we’ve seen real growth in the number of new funds being brought to market underpinned by unusual assets,’ says Rob Burgeman, investment manager at Brewin Dolphin.

At a time when interest rates are low, and stock markets around the world look expensive, eccentric funds that don’t depend on the prevailing macroeconomic environment might look appealing.

‘They’re seen by some as that investment nirvana which will protect a portfolio from the vagaries of publicly listed companies,’ Burgeman adds.

The Hipgnosis Songs fund, for example, buys the rights to music and then rakes in cash from the royalties paid when radio stations or businesses use the songs.

It has recently bought the back catalogues of artists such the late Bernard Edwards of Chic and Jamie Scott, who co-wrote songs with One Direction, Ed Sheeran and Jess Glynne.

Founded last year by Merck Mercuriadis, who once managed the likes of Elton John and Iron Maiden, the listed fund’s shares have yet to take off.

But it has already paid shareholders 2.25p in dividends as it starts to see royalty payments filter in, generating a respectable 6.1pc yield.

Gary Moglione, of Seneca Investment Managers, bought into the fund last year and said: ‘Although music industry earnings had been in decline over the last 15 years, we believe that an inflection point has been reached and we are potentially entering an era of growth.

‘Life is becoming more difficult for piracy sites, and the rise of Spotify has resulted in streaming revenue growth averaging over 40pc per year between 2013 and 2017.’

Though local doctors’ surgeries are more prosaic than the music industry, Primary Health Properties has provided solid returns for investors over the past decade.

Structured as a real estate investment trust (Reit), Primary Health buys premises and leases them out to GPs.

It means that doctors themselves don’t have to stump up the cost of buying property, or deal with any faults or major renovations, while shareholders receive returns from the rent paid.

‘Sometimes excitement is overegged. Instead you want something boring and stodgy,’ says Burgeman. ‘Unlike some of the faddier investments, Primary Health Properties is unlikely to fall through the floor.’ UNCONVENTIONAL funds can be risky. Take Doric nimrod Air Three, which leases aircraft to Emirates.

Investors get their money from the payments the carrier makes, but shares took a nosedive earlier this year amid fears about the resale value of its aircraft when the leases came to an end.

Funds may not always be transparent. Burford Capital, for instance, is a litigation funder, meaning it stumps up the cash to help firms pay their legal costs in return for a cut of any winnings.

But it often cannot reveal the cases it is backing, so savers have to take it on trust that the managers are picking the right ones.

Its returns have been volatile in the short term but strong over a longer horizon. Scandal-hit stock picker neil Woodford, whose own flagship Equity Income fund has shut its doors to savers, is a Burford investor and will be hoping desperately for an uplift.

These unorthodox funds are of use to investors precisely because of their lack of correlation to the stock market. When share prices are falling because of an economic downturn, such funds may well hold steady – although on the flipside, unusual punts are unlikely to benefit from a trading boom.

But there have been disasters, for instance the Catco Reinsurance Opportunities fund, which specialised in retrocession – or insuring reinsurers, which in turn take on risk from standard insurance companies.

Once touted as a great way of diversifying investments, its shares collapsed after a series of natural disasters forced it to pay up.

Matters worsened when US regulators said they were investigating whether the fund had broken rules over its loss reserves.

The moral is only to invest in unconventional funds alongside more mainstream holdings, and don’t be bamboozled.

Burgeman warns: ‘Ultimately the golden rule should be that if you don’t understand an asset, don’t invest in it.’