Collectibles, song rights & litigation funding: exploring alternative investments

With bank interest rates at an all time low, many investors are looking to new ways to increase their reserves


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.


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