Investors in Hipgnosis Songs Fund (SONG) have lost more than £200m over the 12 months to the 4 March 2024, with its share price having collapsed by 35.6% from 87p to 56p over the period.
An appraisal of the company was conducted by Shot Tower Capital and published yesterday (4 March), which placed a fair market value on SONG’s portfolio of between $1.8bn (£1.4bn) and $2bn as at 1 March 2024. This compares to a valuation of $2.6bn at the end of September last year, and means the NAV per share has fallen from $1.74 to $1.17 over the last six months alone.
James Carthew, co-founder and head of investment company research at QuotedData, told Portfolio Adviser: “The share price has long been indicating that shareholders did not believe the Citron Cooperman valuation. Valuation is as much art as science and it may be that Shot Tower have been too pessimistic. The truth of this will be seen if and when bidders emerge for the portfolio.
“The share price collapse is probably more reflective of shareholders’ loss of future dividend income than the publication of the new NAV estimate.”
See also: Hipgnosis shareholders back £20m offer to prospective buyers
Investors in SONG include impact firm CCLA, which is the largest UK manager of charity funds and is the investment manager for the Church of England CBF funds. The fund range manages £3.4bn assets for the church and £13.7bn for its clients overall, according to its website. Alongside two recently-launched UK retail funds, CCLA predominantly manages money for non-profit clients, offering pooled investments for trusts, foundations, and voluntary and community groups – alongside religious organisations.
As at 31 December 2023, CCLA owns 4.7% of the SONG investment trust, amounting to 57,023,043 shares. Other larger shareholders in SONG are Investec Wealth & Investment at 7.5% of the company (90,672,685 shares); Asset Value Investors at 6.2% or 75,307,201 shares; Cazenove Capital Management at 70,789,532 shares or 5.9% of the trust; and Aviva investors at 4.9% (58,876,113 shares).
SONG and the Church of England
CCLA is one of three investment bodies managing money for the Church of England, alongside the Church Commissioners, which manages a £10.3bn investment fund; and the Church of England Pensions Board which runs £3.3bn. When making investment decisions, CCLA – as well as the two aforementioned national investment bodies – works closely alongside the Church of England’s Ethical Investment Advisory Group (EIAG).
Had CCLA held the same number of shares over 12 months to the 4 March 2024 as is published on Hipgnosis’s website at present (5 March 2024), it would have fallen victim to losses of just under £17.4m as a direct result of SONG’s share price collapse. Approximately 24.8% of CCLA’s assets are held within its Church of England CBF funds, across several different asset classes, while 63.5% – or £8.7bn – is held in funds specifically for non-profit clients, housed under eight funds including the Catholic Investment fund, the COIF Charities Investment fund and the COIF Charities Global Equity fund. These also invest across a range of different asset classes.
CCLA had been one of 38 initial investors to first buy into investment company after it launched in July 2018. Around this time, CEO Merck Mercuradis had been vocal about advocating for the rights of songwriters and artists, telling Rolling Stone magazine in 2020: “As songwriters, they’re effectively giving their children to surrogate parents. They know they can trust me and that I’ll respect their art.”
CCLA is known for its approach to active ownership and its ability to drive positive change through engaging with its investments. This includes sustainability issues, with recent notable work on environment and climate issues, social programmes around mental health and modern slavery. It also includes actively engaging with boards and management teams promoting good governance and measures to improve shareholder returns. This type of practice would involve engaging with SONG’s board and investment adviser.
Despite having had to grapple with the trust’s unexpected difficulties and underperformance, however, CCLA has still managed to achieve positive returns for its clients over three, five and 10 years, according to data from FE Fundinfo, with its flagship CCLA Church of England Investment fund gaining 23.8% over three years, 58.1% over five years and 152.3% over the last decade.
Its Church of England funds, for example, manage much-needed money for parishes, dioceses and cathedrals across the UK. According to the latest Parish Finance Statistics from the Church of England, which cover the year 2022 and were published last month (February 2024), parish income grew “modestly” during the year but fell in real terms due to the impact of inflation.
The average salary of a Church of England vicar in the UK stands at £26,122 as of the end of 2023, according to research from both Payscale and Glassdoor, with most members of the clergy receiving a stipend funded by donations from the congregation to enable them to run their ministry without having to take another job.
Blackstone
SONG’s investment adviser is controlled by clients of Blackstone, which is in turn 20% owned by Stephen Schwarzman, Blackstone’s CEO.
Schwarzman, who was awarded an honorary British knighthood for services to philanthropy last week, has a net worth estimated to be in excess of $38bn, according to data from Forbes.
He was the single highest-paid CEO in the US asset management industry in 2022, according to research from S&P Global Market Intelligence. During that year, he received a total income of $1.3bn according to 10-K regulatory filings, and $896m in 2023, with a majority ($776.8m) coming from dividends on his Blackstone shares.
Schwarzman was recently in London attending a groundbreaking ceremony for Blackstone’s new London offices, pictured with Rishi Sunak and James Hartley, the US ambassador, on 15 February.
It is not known whether during his visit he made any concessions to alleviate the losses suffered by SONG investors over the past year, including clients of CCLA.
However, this seems unlikely as SONG’s board has since announced it will seek a Section 20 in the high court to indemnify SONG, should allegations of misconduct by Merck Mercuradis and the investment adviser lead to monetary damages for the fund.
See also: Hipgnosis investment adviser denies indemnity request
QuotedData’s Carthew said: “All shareholders deserve the best from the board and advisers. There’s a valid question as to whether the adviser was overpaying for catalogues. There has been a much bigger issue about whether the adviser was looking to profit at shareholders’ expense when it came to catalogue disposals and the issue around refusing to indemnify the fund with respect to legal expenses relating to events before the fund was created.”
The Church of England relies on its investment income to support parishes and their vicars. Based on yesterday’s announcement, it is unlikely that SONG will add much to the church’s offertory tray any time soon.
