BR Review: Sovereign IHT Solution

Hardman & Co

Sovereign IHT Solution is a non-AIM/unquoted Business Relief product. It is an Alternative Investment Fund, which will invest wholly into Sovereign Media Management Limited. The latter will purchase and develop music publishing rights. It may add other strategies in due course.

Why invest

Positives

  • Strategy: To purchase, develop and exploit music publishing rights.

Issues

  • Diversification: The company is new and has a single trading strategy.

Management

Positives

  • Team: The directors have a strong track record in the film and music industries, and an extensive network of contacts.

Issues

  • Track record: Although the team has experience of music publishing, this is a new strategy for Sovereign.

Nuts & bolts

  • Governance: The company board will have no independent directors.
  • Diversification: With no investments to date, we cannot comment on diversification.
  • Valuation: There will be a third-party valuer and trades will take place at audited NAV plus fees.

Fees

  • Annual fees: Stated annual fees total 1.25% p.a. plus VAT. With no directors’ fees, additional company costs should be limited. Overall costs are at the lower end of the sector.
  • Other fees: A 2% entry fee and 1% on exit; no performance fee.

Risks

  • Target returns: The target return is 3% p.a.. Modelling would suggest that, once invested, the company has a good chance of meeting or exceeding that target. This is unusual within the sector.
  • Investment risk: In common with most products in the non-AIM BR sector, Sovereign targets a lower return than the yield on the underlying assets. The fee and expected cost structure keep this gap reasonable.

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