No stranger to bold investment moves, such as loading up on hotels, Michigan’s pension plans are getting returns from tunes.
Michigan’s Treasury has a majority stake in Concord Music, a record label that owns the rights to nearly 400,000 songs. Thanks to royalties from airplay, streams, and sales, the $25 million investment made in 2010 is now worth $1.8 billion.
How’s that for an alternative station?
Unlike virtually any other investment, the idea is that music is not something that will slow down in the face of recession. True, although ticket sales to concerts and album sales might suffer during a down period, one guiding principle remains at the organization.
“We believe music is somewhat less dependent on the economy than many other industries and products, as well as business cycles,” Jon Braeutigam, Michigan’s chief investment officer, told CIO. “When a recession happens, people stop buying larger items; however, we believe they will continue to listen to music.”
Regardless of the economic situation, each time a Concord-owned song plays, Michigan’s pensions get a cut—and they’ll get it no matter what’s going on in the markets.
The state will also keep harvesting money from Concord’s artists for decades, as copyrights expire 70 years after musicians’ death. Some of the label’s big names include post-Beatles Paul McCartney, ZZ Top’s Billy Gibbons, Creedence Clearwater Revival, Santana, George Benson, and Miles Davis. It also owns the rights to a variety of musicals from composers like Richard Rodgers, Oscar Hammerstein, and Andrew Lloyd Webber.
It even gets a cut from pop singer Ariana Grande, who’s single “7 Rings” is a reimagining of Rodgers and Hammerstein’s “My Favorite Things” from The Sound of Music.
“The initial investment was made when there was uncertainty in the music industry as consumers were changing the way they were listening to music, going from compact discs to digital forms,” said Braeutigam. “Today, whenever you hear a song being played on a smart home device, streaming service, commercial, or some other format, music owners are getting paid the royalties which are due them.”
Despite owning a bulk of Concord, Michigan does not get involved in the company’s affairs. That’s done by Barings Alternative Investments, which the state has partnered with. Barings employs music businesses veterans.
“This is just one piece of our diverse investment portfolio,” the CIO said.
Michigan also owns stakes in several hit television shows, such as “The Big Bang Theory” and “Friends.”
The Treasury’s investment bureau keeps watch over the financial moves made by the state’s four retirement funds: the Michigan Public School Employee Retirement System, the Michigan Judges Retirement System, the Michigan State Police Retirement System, and the Michigan State Employees’ Retirement System. The funds collectively have about $70 billion in assets under management and serve 530,000 members, according to the Treasury’s most recent annual report.
Funding status differs from plan to plan, averaging to about 72% funded. The most well-off is the 97.8%-funded judge program. The remaining three funds’ ratios fall between the low and mid 60s.
Neither Concord Music nor Barings could be reached for comment.
Related Stories:Exclusive: Michigan’s Hotel-Heavy Strategy Pulls Real Estate Portfolio Ahead of the Pack
Michigan Endowment Dips Toe into Crypto Pool