Collectibles, song rights & litigation funding: exploring alternative investments

As the world slow­ly shakes off the impact of the coro­n­avirus cri­sis and the econ­o­my gen­tly recov­ers an even keel, some peo­ple in the UK are start­ing to build up cash reserves. 

Bank of Eng­land data shows house­holds deposit­ed an addi­tion­al £18.5 bil­lion into bank accounts in Jan­u­ary, but the amount of inter­est earned on this is like­ly to remain low as lenders keep rates down to enable a speedy eco­nom­ic upturn.

In all, there is an extra £160 bil­lion of sav­ings in UK cit­i­zens’ back pock­ets and retail inter­est rates aren’t cut­ting it. For that rea­son, it’s no longer pru­dent to put cash into Pre­mi­um Bonds or to scrimp the frac­tions of a per­cent from sav­ings accounts offered by high street banks. In their place, how­ev­er, is a cor­nu­copia of oth­er trad­ing strate­gies the ordi­nary per­son can access.

Whether you’re will­ing to bankroll law­suits with the poten­tial of receiv­ing a cut of any win­nings from a court case, want to invest in your favourite musician’s long-term future in the charts by buy­ing the rights to their back cat­a­logue or chance your arm on the roller­coast­er of the stock mar­ket with­out pay­ing a cut to a stock­bro­ker, there are options aplen­ty.

Litigation funding

A poten­tial new mar­ket for invest­ment is the rise of lit­i­ga­tion fund­ing, where fun­ders with spare cash can bankroll law­suits against com­pa­nies that oth­er­wise could not be brought because of a lack of funds. The investors agree to pro­vide finan­cial sup­port to a legal case in exchange for a pre-agreed share of any pro­ceeds from the case. If the lit­i­gant being fund­ed wins, then the finan­cial backer also agrees to pay part or all of the claimant’s legal costs, but if they don’t win, they don’t pay the costs. 

The ben­e­fits, par­tic­u­lar­ly if fund­ing a class action case against a large com­pa­ny, can be enor­mous. But as with any invest­ment, it’s pos­si­ble to lose as well as gain from the amount you put in, and lit­i­ga­tion fund­ing is much more clear cut in its wins and loss­es. Should the par­ty you bankroll end up los­ing in court, you lose all your invest­ment.

Retail trading apps

One of the most high-pro­file trad­ing strate­gies in recent months has been the use of retail trad­ing apps, such as Free­trade, Trad­ing 212 or eToro, to invest on the stock mar­kets with­out hav­ing to go through the tra­di­tion­al means of employ­ing a stock­bro­ker. From your phone, it’s pos­si­ble to invest tens of thou­sands through ISAs or tax­able trad­ing and to play the mar­kets. 

“There are lots of apps out there and if you’re new to invest­ing then it can be tricky to say which is right for you,” says David Kim­ber­ley, ana­lyst at Free­trade. Think about what you want to invest in as some apps don’t cur­rent­ly offer access to high­er-risk, high­er-reward cryp­tocur­ren­cy assets, which can yo-yo in val­ue, while oth­ers pro­vide a dif­fer­ent range of funds along­side the stan­dard stocks. 

“You should look for an app that is a part of the Finan­cial Ser­vices Com­pen­sa­tion Scheme that pro­tects assets up to £85,000,” says Kim­ber­ley. 

And of course, always be con­scious of the fact that no mat­ter how many bells and whis­tles there are, and how easy it may seem, you’re invest­ing real mon­ey. “Invest­ing ulti­mate­ly entails you putting your mon­ey on the line. You want to make sure you’re doing that with the right com­pa­ny before you open an account with any­body,” he says.

Song rights

Every time a song is played in a movie, on TV or on the radio, the artist behind it gains income. It can be pen­nies, but as some of the world’s biggest music super­stars can attest along­side can­ny investors, if you look after the pen­nies, the pounds begin to look after them­selves. You too can buy into the action, own­ing the right to song roy­al­ties which give you a pay­ment when­ev­er the music is played some­where world­wide. 

Roy­al­ty Exchange, an online ser­vice auc­tion­ing off rights to songs, esti­mates the aver­age invest­ment bro­kered by them returns around 10 per cent to those who splashed out. You can buy ten-year or life­time rights to songs.

Empire State of Mind by Jay‑Z went under the gav­el and was pur­chased for $190,000. Some of Rihanna’s hits, bought for $200,000 or more, have earned a 20 per cent return with­in a year. But you don’t need to spend big as less­er-known songs can be bought, yes, for a song, but keep get­ting played. And if you’re not keen on rely­ing on a sin­gle track to deliv­er returns, you can invest in spe­cial­ist funds, such as Hipg­no­sis Songs Fund, which is list­ed on the Lon­don Stock Exchange.

Crowdfunding

The world of ven­ture cap­i­tal has long helped pro­pel star­tups into the stratos­phere, but for the rank-and-file investor with a lit­tle bit of extra cash to spare, it can some­times be dif­fi­cult to gain a foothold in the mar­ket. Crowd­fund­ing invest­ment plat­forms, such as See­drs and Crowd­cube, which were recent­ly blocked from merg­ing by the UK’s Com­pe­ti­tion and Mar­kets Author­i­ty, give ordi­nary investors a chance to get in on the ground floor of poten­tial­ly boom­ing busi­ness­es. 

Such plat­forms list busi­ness­es seek­ing invest­ment from the crowd. If you choose to invest in a firm, you’re giv­en shares that are held on to and man­aged by the plat­form you’re invest­ing through. If the firm man­ages to make it big, you strike it rich and have the oppor­tu­ni­ty to sell on or divest your share­hold­ing in the com­pa­ny, poten­tial­ly for a prof­it. 

But, as with all these things, there is a risk that you won’t make any mon­ey at all. The major­i­ty of star­tups don’t deliv­er a return on invest­ment, mak­ing it a dif­fi­cult deci­sion to pick and back a win­ner among the also-rans.

Collectibles

The world of col­lectibles may seem like a hobbyist’s game, but it is increas­ing­ly seen as a viable option for peo­ple seek­ing to invest large amounts of cash and make a prof­it. Along­side trad­ing cards, rare bank notes and stamps, there is a more up-to-date ver­sion of invest­ing that many younger peo­ple aim­ing to dip their toe in the world of invest­ing have inves­ti­gat­ed: sneak­er trad­ing.

Buoyed by big brand names and high-pro­file col­lab­o­ra­tions with celebri­ties result­ing in lim­it­ed-run items, the world of train­er invest­ment has become an oppor­tu­ni­ty for those with the knowhow and will­ing­ness to work the mar­kets to make sig­nif­i­cant returns. Sites includ­ing StockX enable investors to buy and sell rare train­ers for thou­sands of pounds, eking out a prof­it. 

The sec­ondary sneak­er mar­ket is a mul­ti-bil­lion-dol­lar busi­ness, with plat­forms han­dling vol­umes of pur­chas­es. Indi­vid­ual pairs of train­ers can sell for more than $100,000. The prob­lem is that, as with oth­er invest­ment oppor­tu­ni­ties, it’s high risk, high reward and the poten­tial mon­ey to be made has attract­ed a new range of sell­ers look­ing to sneak coun­ter­feit train­ers through the sys­tem. For that rea­son, enter­ing the sneak­er mar­ket is best saved for those who have a pas­sion and knowl­edge for all things to do with train­ers, for fear of los­ing out.