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
19:07 Understanding Regulatory Risk
20:57 When Royalty Investments Go Wrong
24:03 Why Invest in Royalties Now
27:08 Music’s Untapped Growth
📈 Stocks and ETFs Mentioned: Deterra Royalties (ASX: DRR), BHP Group (ASX: BHP)
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CPD Points: This episode is accredited for the following CPD points by the Financial Advice Association of Australia (FAAA). Complete the quiz here to claim your points.
0.5 Total Hours
Knowledge Requirements: Alternative Assets (0.50 hour)
Legislated CPD Area: Technical Competence (0.50 hour)
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