Have you thought about investing in your favorite artist, such as Raça Negra, Daniel, Alexandre Pires, Bruno and Marrone, and still earn money from it? This is possible with the Fidcs (Receivables Investment Funds). When you invest in this type of fixed income fund, it is as if you anticipate some payment to the company. One of the options is precisely to anticipate the payment of the fees of your favorite artists.
For artists, the gain is in the early receipt of the fee, which is now paid before the show, when the market practice is the receipt after the event. For investors, the remuneration is up to 8.25% above the CDI (indicator close to the base interest rate), depending on the fund. Understand below how this type of investment works, if you can invest in this type of fund and who are the artists who joined this wave.
Modality is not new, but it has been growing in Brazil
Fidcs focused on music have space in some English-speaking countries, which have large funds, such as Hypnosis songs Fund, Royalty Exchange and AGI Partners. Around here, there are Hurst Capital and Arbor Adaggio on the market. XP entered this market recently, which launched a fund that has already raised R$260 million for the benefit of renowned Brazilian music artists.
This fund guarantees payment in advance for whoever gets on stage. The investor, on the other hand, obtains shares of what will be paid for tickets and other products during the event. Remuneration can reach 8.25% above the CDI. But this profitability is not for everyone.
XP has not confirmed the amount needed to invest in the shares, but the Fidcs generally have an initial down payment of R$ 25,000 and the individual or legal entity needs to prove that they have more than R$ 1 million invested in investments — it’s that investor qualified.
The list of shows included in the background has Alexandre Pires, Seu Jorge, Daniel, Leonardo, Bruno and Marrone, Raça Negra, Clothes Nova, Vintage culture, EME DJ and Maurício Manieri. According to XP, artists who have high engagement among fans were selected.
Filipe Mattos, head of special Situations gives XP asset, says that there are two types of investments within the Fidc released by the company. One of them is for the resale of shows, with profitability linked to the gain on tickets sold. “Basically, it’s buying for R$100 and selling for R$150, for example,” he says.
Another possibility is to receive a part of the ticket from the show. “In addition to the resale of shows, is the production. That is, bar, food, box office and sponsorship, and other variables that involve the execution of these events. In this modality, all the effective profit stays with the fund”, says Mattos.
Music-focused fidcs have risks
Investment advisor Luciana Ikedo warns about the low liquidity of the Fidcs, and about the possibility of a considerable loss if the investor wants to leave before the agreed deadline.
For her, there is a reason why this type of fund is aimed at qualified investors, who have the resources to risk more.
“The biggest risk is that of credit. It is always important to remember that this is a private credit, which is granted through receivables that this other legal entity, which is the Fidc, will make available”, he says.
The main risks involved are that the shows don’t happen, either because of a problem with the artist’s schedule, or because of a problem of greater restriction, as in the case of the pandemic.
“These are precautions that investors must take. There is a risk that they will not receive back what was invested,” says the advisor.
She also highlights that the persistent pandemic scenario may further increase the risks of this investment. “If we’re talking about a concert schedule and, hypothetically, the delta variant comes with force, there are restrictions on circulation again and this schedule may not happen. Only with the expectation that this will happen, it already exists a reduction in market value,” he says.
There are also legal risks
although the fidcs are in the fixed income category, music-focused funds also have legal risks.
Jener Jardim, media and entertainment coordinator at Mansur Murad, explains that there are risks that the authorities who look after artists’ rights will refuse to share the gains, which increases the risk for these investments.
“While the US copyright system allows all rights to be negotiated by the author and become part of the funds’ assets, Brazilian legislation is more protective in favor of the author and artists, and defines that some rights are non-waivable and inalienables,” he says.
Due to the short period of activity of funds in Brazil, there is still no definitive prognosis on how the judiciary will interpret contracts and catalog acquisitions, evaluates Jardim, “which brings some uncertainty to the market until the issue is pacified” .
The lawyer assesses that the funds have been well received by artists in Brazil and, therefore, questions in court should not hinder the development of this new market. “Recent experience shows that if the catalog acquisition businesses establish a healthy relationship between the funds and authors and artists, they will enable symmetrical gains for everyone”, he says.
Funds that finance music and records have smaller contributions
There are funds that also open up the possibility for investors to invest their resources in the acquisition not only of shows and merchandising, but also of songs or entire records. In these cases, in which the investor acquires a share of the work or artist, the source of income comes from revenue from digital distribution through streaming platforms, public performance, use in advertising videos and games, among other possibilities.
And there are already artists joining this modality. The composer and interpreter Zeca Baleiro it is selling shares starting at R$ 100 of his new song “O Tempo Não Espera”. Quotaholders will receive 80% of the net revenues that are generated each time the music plays on streaming platforms. The artist receives the remaining 20% and part of the money collected with the quotas.
Carlos Gayotto, CEO of TuneTraders, the company that made it possible to distribute quotas of the Brazilian artist’s music, says that the idea is to eliminate intermediaries in the distribution process and bring the fan and the artist closer. The proposal aims to use blockchain technology to “simplify the distribution of royalties, dilute executive production of music among fans and track revenue from play”, says the executive.
Quotas can act like shares of companies that pay dividends. Dividends are earnings from the economic exploitation of the work, but there is still the possibility that the investor will earn money by selling his share more expensively than he bought it after the artist’s appreciation.
“With the acquisition, the funds will be able to recover the investments made from the valuation of the works themselves or of the artists who interpret them in future negotiations”, says Jardim.