Round Hill raises £212.8 million at IPO

The Round Hill Music Royalty fund had been targeting £283.66 million

The first investment trust to rival the hugely successful Hipgnosis Song fund has raised £212.8m ($282m) at IPO despite a difficult fund-raising backdrop.

The Round Hill Music Royalty fund had been targeting £283.66m ($375m) but confirmed that it was still happy with the results given the difficult market backdrop.

Its only rival in the Association of Investment Companies Royalties sector is the £1.2bn Hipgnosis Song fund, which raised £202m at launch in July 2018.

The trust has since raised an additional £850m through secondary fundraising, joining the FTSE 250 in September, and is trading at a premium of 6.6%, according to AIC data. Its most recent issue in September brought in £190m following a £236m raise over the summer.

Investors in Hipgnosis Song fund include the £35.4m Sanlam High Income Real Return, in which the investment trust is its top holding at 8.2% of the portfolio, while the £205.6m Jupiter Monthly Alternative Income fund holds a 4.1% weighting. The £52.6m BMO Managed Portfolio Trust holds a 3.5% weighting and the £61.1m Seneca Global Income & Growth Trust holds 2.4%.

The investment trust has returned 24.7% since its 2018 launch, according to FE Fundinfo.

The Round Hill Music Royalty fund is targeting 9% to 11% annual net asset value returns, including a 4.5% dividend yield, through catalogues made up of between 100 to 1,000 copyrights diversified by artist, genre, decade and royalty type. It intends to invest predominantly in classic, older copyrights.

M&G Investments has already been named as a cornerstone investor.

IPO proceeds are expected to be invested with three to six months with the investment manager reporting a pipeline of over 40 catalogues representing 120,000 songs.

Chairman Trevor Bowen said he was happy with the IPO results. When considered against the global turbulence prevalent during the IPO process due to Covid-19, this achievement clearly demonstrates a strong investor appetite for both the music royalty asset class, the performance of which is highly uncorrelated to movements in the global economy, and the recognised expertise of the Round Hill team as an investment manager in this sector.

In the year to date it has been a dry year for investment trust IPOs although activity is picking up.

Nippon Active Value raised £103m in February, days before the coronavirus sell-off took hold. In October, eight months later, the £241m Home Reit and £100m Triple Point Energy Efficiency Infrastructure trust both launched.

Now, global energy infrastructure specialist Victory Hill Capital Group announced it would target £400m through the launch of VH Global Sustainable Energy Opportunities in January 2021, while Downing Renewables & Infrastructure is seeking £200m before Christmas.

In the UK equities space, Schroders announced it would target £250m via the Schroders British Opportunities investment trust, despite failed IPOs from rival products, Buffettology Smaller Companies and Tellworth British Recovery & Growth.