About Private Syndicates

  in Investor Guides

Nov 20, 2020

The Royalty Exchange marketplace offers several different investing formats to suit the needs of all investors and all rightsholders. 

One format, designed for higher-value catalogs, is called Private Syndicates. 

WHAT ARE PRIVATE SYNDICATES?

Private Syndicates pair larger music catalogs with accredited and institutional investors. They are unlike auctions or marketplace listings in several ways. 

First, Private Syndicates are not winner-take-all transactions like our other listings. Private Syndicates are investment vehicles that allow investors the opportunity to buy an equity interest in individual catalogs.

To do so, we create Special Purpose Vehicles (SPV) designed to acquire music catalogs. Investors can then buy shares of that entity, which grants them a proportional share of the royalty income it generates.

Essentially, we create an LLC that holds the music royalties in question. No other royalties will be owned by each LLC. It is specifically set up to hold a single catalog and direct royalty income to its shareholders.

This gives investors the flexibility to take a position size in each catalog as suits their preferences. What’s more they allow more than one investor to participate in the same asset without losing out to a higher bidder.

WHO CAN INVEST IN PRIVATE SYNDICATES?

Next, because Private Syndicates allow investors to buy shares in a revenue-generating entity, only accredited investors can participate per SEC regulations. Accredited investors include anyone with over $1 million of investable assets outside of a primary residence OR investors with an annual income of $200,000 ($300,000 for joint income) in each of the last two years. 

While any accredited investor can buy shares in a Private Syndicate, demand for shares historically outstrips supply. For that reason, we reserve first-access to Private Syndicate shares to members of our All Access investor program. 

When each Syndicate goes live, investors have the opportunity to review the financials and earnings history, then submit a request to reserve shares. Once the reservation window closes, we allocate shares to All Access members first. If any shares remain after this process, shares are allocated to non-members on a first-come-first-served basis. 

WHAT KIND OF CATALOGS ARE INVOLVED? 

The last difference involves the type of catalogs selected for the Private Syndicate treatment. These are higher-value catalogs valued between  $3 million and $10 million… far higher than the list prices you’ll find in the Auction House or The Market. 

While each Syndicate has a per-unit price, the minimum buy-in is usually between 5 - 10 units. Each also has a maximum unit allocation to ensure we can accommodate as many qualified investors as possible. 

ARE THERE ANY FEES?

The way we’ve handled Private Syndicate fees has changed. Initially, Royalty Exchange kept what’s called a “carry” for each Private Syndicate, meaning the company held a small percentage of Syndicate shares for itself as payment in lieu of fees. 

We’ve since changed that model, and now add a flat sourcing fee to each Private Syndicate, the cost of which is covered in the initial sale price. The details of that fee are clearly published in each Private Syndicate offering. 

HOW HAVE PAST PRIVATE SYNDICATES PERFORMED?

As always, past performance does not guarantee future results. An analysis of the first two Private Syndicates offered reflect the following 12-month return on investment (as of 11/2020): 

  • DS LLC: 8.08%
  • CTE LLC: 7.03%

If you are interested in the Private Syndicate model and want to guarantee the ability to reserve shares in future offerings, be sure to join our All Access membership program. 

Join All Access