In a financial landscape brimming with thematic funds, MUSQ strikes a distinctive chord. The first pure-play music industry exchange-traded fund (ETF), MUSQ is the brainchild of music industry veteran David Schulhof, who recently sat down with Wealth Advisor Managing Editor Scott Martin to discuss the need for a specialized fund that provides investors with exposure to the booming music industry. Their conversation reveals why MUSQ isn’t just another fund but a strategic play in an undervalued industry poised for growth.
As MUSQ, LLC Founder and CEO Schulhof puts it, MUSQ is the gateway to the whole music ecosystem, offering investors a unique avenue for exposure. The music industry is hailed as the most undervalued media asset by such Wall Street giants as JPMorgan and Goldman Sachs. This outlook isn’t mere speculation; the numbers speak for themselves.
Consider Spotify’s strategic price hike: a seemingly modest increase translates into substantial incremental revenue growth. With the industry forecast to triple its paid subscribers by 2030, MUSQ represents an untapped crescendo of investment potential.
The platforms that now dominate the music streaming universe didn’t just materialize; they scaled massively and are now positioned to monetize at scale. With a 16% increase in paid subscribers in a single quarter, the precedent for growth is firmly set. This expansion represents a trend that’s expected to continue, heralding a robust future for the industry, Schulhof notes.
MUSQ’s portfolio is a thoughtful blend of domestic and international entities: 45% are familiar domestic companies, and 55% are global players that are less known yet critical to the industry’s international pulse. South Korea’s Genie Music and Kakao are just a couple of examples. The ETF’s global reach allows investors to benefit from growth rates that far exceed those of developed markets, particularly in regions where the industry’s growth outpaces GDP expansion by significant margins.
The music industry, rich with undervalued opportunities and significant barriers to entry, presents the kind of investment moats that savvy investors seek. As Martin points out, the principles of renowned value investor Warren Buffett resonate with the philosophy behind MUSQ because undervalued pure plays are somewhat difficult to get to and require behind-the-scenes expertise to create. That’s where Schulhof’s quarter-century of industry experience comes in, underscoring the fund’s curated approach and creating a product that’s as exclusive as it is valuable.
The accessibility of MUSQ to both domestic and international investors speaks to the democratization of music industry investing. Schulhof’s insider expertise, crystallized into an ETF, offers a rare opportunity for investors to gain exposure to the nuanced and historically private corners of the music business. It’s an expertise that, until now, has been largely inaccessible to the average investor and even to the most ardent music aficionados.
The MUSQ ETF is diversified beyond geography to capture industry verticals as well. From streaming stocks to live music and ticketing, each segment of the fund is meticulously chosen to capture the industry’s full spectrum. This composition ensures that investors have a stake in every note of the industry’s score, from content creation to distribution and technology.
The past few years have taught us that market volatility is a given, says Schulhof, but MUSQ has demonstrated resilience. During the pandemic, while other sectors struggled, music streaming stocks experienced an uptick. This countercyclical nature suggests that MUSQ could serve as a sound hedge in a diversified investment portfolio.
MUSQ’s performance during the pandemic underscores the music industry’s potential as a defensive play. With the rise of streaming services and digital distribution, music has proven to be more than just entertainment; it’s a commodity that thrives even in the face of global economic headwinds.
MUSQ isn’t just another thematic ETF; it’s a strategic addition designed to offer both diversification and growth potential. With the music industry’s expansion outpacing traditional market rates, allocating a portion of an investment portfolio to MUSQ could be seen as both a growth strategy and a diversification tactic, Schulhof explains, pointing to the noncorrelated nature of the fund’s performance in relation to the broader market.
As technology continues to disrupt the music industry, MUSQ positions investors at the forefront of this evolution. From streaming technology to virtual reality concerts, the fund invests in companies that are not only adapting to change but are driving it. This approach gives investors a stake in the transformative trends that are shaping the future of music consumption and production.
Looking ahead, the music industry is poised for significant changes, with emerging markets set to play a pivotal role. As digital access increases globally, so does the potential for revenue growth in regions previously untapped by traditional media. MUSQ offers a forward-looking approach, tapping into this growth trajectory that could redefine the music industry’s role in global entertainment.
An often-overlooked aspect of music investing is the regulatory environment, particularly regarding intellectual property rights. MUSQ’s inclusion of companies that prioritize sound IP practices ensures that investors are aligned with entities that understand and navigate these complexities. This is crucial in an industry where content is king and protecting it is paramount to value creation.
Market sentiment around the music industry is shifting, with consumers increasingly willing to pay for premium content. This shift is a critical driver for industry revenue and, by extension, for the valuation of companies within MUSQ’s portfolio. Understanding these behavioral trends is vital for advisors seeking to capitalize on the industry’s growth.
Investing in MUSQ isn’t just about buying into a fund; it’s about understanding the cultural shift toward digital media consumption and the monetization opportunities that trend presents. RIAs and BD advisors looking to offer clients a tune into the future of media can find a compelling narrative within MUSQ’s composition. MUSQ stands out as the ticker that advisors should consider having at the ready for its blend of growth, value, diversification, and innovation.
