Alicia Keys Is Your Next Big Play. How a New ETF Can Be Music to Your Ears.
Barron's describes how MUSQ may provide investors with a potential way to invest in the music industry's hottest concerts.
Below is an excerpt from an article written by Avi Salzman which appeared in Barron's on 7/11/2023.
The MUSQ Global Music Industry ETF invests in Live Nation, producer of the summer tour for Alicia Keys.
Pictured here, Keys performs in London in 2022. Jeff J. Mitchell/WPA Pool/Getty Images
Taylor Swift’s record-breaking concert tour this summer and the rapid growth in streaming services show the music business is as lucrative as ever. But several parts of the industry—including companies that own catalogs of songs and Korean K-Pop producers—have been hard to invest in.
That is one reason music industry veteran David Schulhof launched the MUSQ Global Music Industry ETF (ticker: MUSQ), a fund that just started trading on the New York Stock Exchange. He wants to make the industry investible for the general public after a long period when it was available only to private investors.
Music labels that have dominated the industry for decades, including Warner MusicGroup (WMG) and Universal Music Group (UMG) have gone public in just the last few years, as have companies that produce K-Pop, one of the fastest-growing segments of the music industry.
MUSQ invests in a wide range of companies—streamers including Spotify Technology (SPOT), equipment-makers such as Sonos (SONO), events companies including Live Nation Entertainment (LYV), labels, and radio broadcasters.
Foreign music companies can be difficult for U.S. investors to buy, but MUSQ includes several of them. About half of the index’s assets are in non-U.S. names, with 17% in South Korea.
Schulhof worked with EQM Indexes, which builds ETFs around a variety of themes including cannabis and social justice, to build the index. He licensed it to ExchangeTraded Concepts to get it on the New York Stock Exchange. In an interview, Schulhof said he considers music to be a liquid alternative investment.
Goldman Sachs just released a report predicting the music industry would grow by 7.3% a year through 2030 as music streaming prices rise, and companies figure out how to get superfans to spend more.
The fund calls itself a pure play on music, but it does have a large weighting in stocks that make most of their revenue from other products and services. Amazon.com (AMZN), Apple (AAPL), and Alphabet (GOOGL) together make up more than 20% of the fund. All of them are major players in music, but make much more money in other areas.
Schulhof said the index is market cap weighted, meaning those stocks will make up a significant part of it—but each stock’s weighting is capped at 7% at the time of quarterly rebalancings, so they aren’t expected to grow in importance.
The gross expense ratio is 0.92%, although the net fee is 0.78% for now because of a temporary fee waiver, Schulhof said.
Music labels such as Warner have struggled as the larger advertising market has slumped this year, reducing their revenue from ad-supported music services. But streamers are doing better, with Spotify stock up 100% amid cost cuts and growth in subscriptions.
For a complete list of fund holdings, please click here. Holdings are subject to change.
MUSQ Global Music Industry Index ETF is offered by prospectus. Carefully consider the investment objectives, risks, charges, and expenses. This and other important information can be found in the MUSQ ETF prospectus, which should be read carefully before investing and can be obtained by visiting https://musqetf.com or by calling 1-855- MUSQ-ETF(687-7383).
Risk Disclosures
There is no guarantee the Fund will achieve its stated objectives.
In addition to the normal risks associated with investing, international investments may involve the risk of capital loss from unfavorable fluctuation in currency values, differences in generally accepted accounting principles or social, economic or political instability in other nations.
Emerging markets involve heightened risks related to the same factors as well as increased volatility and lower trading volume.
In addition to the normal risks associated with investing, investments in small- or mid-capitalization companies typically exhibit higher volatility.
The Fund’s concentration in an industry or sector can increase the impact of, and potential losses associated with, the risks from investing in those industries/sectors.
The Fund is non-diversified.
The Fund is new and has a limited operating history for investors to evaluate. A new and smaller fund may not attract sufficient assets to achieve investment and trading efficiencies.
The Fund may invest in securities denominated in foreign currencies. Because the Fund's NAV is determined in U.S. dollars, the Fund's NAV could decline if currencies of the underlying securities depreciate against the U.S. dollar or if there are delays or limits on repatriation of such currencies. Currency exchange rates can be very volatile and can change quickly and unpredictably.
All investing involves risk, and asset allocation and diversification do not guarantee a profit or protection against a loss. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, might be worth more or less than their original cost. ETFs are subject to risks similar to those of stocks, as well as other risks specific to the particular ETF.
ETF shares are traded on exchanges, and are traded and priced throughout the trading day. ETFs permit an investor to purchase a selling interest in a portfolio of stocks throughout the trading day. Because ETFs trade on an exchange, ETF shares are bought and sold at market price (not NAV). The prices of ETFs may sometimes vary significantly from the NAVs of a ETFs’ underlying securities. Brokerage commissions will reduce returns.
Exchange Traded Concepts, LLC serves as the investment advisor. The Funds are distributed by SEI Investments Distribution Co., which is not affiliated with Exchange Traded Concepts, LLC or any of its affiliates.