From kings to catalogues: The overlooked asset class with a 600-year history

Stephen Otter, Partners Group’s Global Head of Private Markets Royalties, argues that royalties are uncorrelated to markets, low volatility, an inflation hedge, and generate a predictable yield. So, it’s surprising that most investors still have zero allocation to the asset class - despite royalties being around for a good 600 years.

They originated with royal families (as the name suggests), where a payment would be made to a sovereign in return for the granting of mining rights. Today, they cover everything from music, healthcare, film, television, mining, oil and gas, books, theatre, and increasingly YouTube.

To be clear, the asset class isn't without risk. Development-stage royalties can return zero if a drug fails approval or a mine never produces. Even established assets can disappoint.

In this interview, we dive into the opportunity in royalties today, what advisers get wrong about the asset class, and perhaps the most perplexing question of all - why so few investors have exposure.

Chapters:

00:00 Introduction

01:18 Why Evergreen Fits Royalties

03:56 Streaming Transformed Music

08:31 Beyond Music Royalties

11:41 Energy and Mining Royalties

13:42 How Royalties Are Valued

17:37 Royalties in Client Portfolios