TUNE, a Music-Focused ETF, Debuts on the New York Stock Exchange

TUNE, an exchange-traded fund (ETF), that focuses on music and digital entertainment, debuted on the Thursday (June 22), giving investors a simple way to buy into a growing number of publicly traded music companies.

TUNE stock opened at $19.99 and closed up 0.1% at $20.01 with just 133 shares traded. Clouty executives will ring the bell at the NYSE on July 7, helping give the ETF more visibility.

Launched by Chicago-based startup Clouty, TUNE taps into proven investor interest in music companies at a time ETFs are an increasingly common way for retail and institutional investors to tap into the stock market. In the last three years, nine companies — ranging from Universal Music Group to streaming services Deezer and Anghami — have gone public to capitalize on the booming streaming market and billions have poured into funds that invest in recorded music and publishing assets.

ETFs surged in popularity in recent years due to the popularity of online platforms, the ease of investing and the relatively low costs compared to actively traded mutual funds. ETFs’ assets under management almost tripled from $3.4 trillion in 2016 to $10 trillion in 2021, according to financial insights firm EPFR. PwC forecasts ETFs will experience a 17% compound annual growth rate and surpass $20 trillion in assets under management by 2026.

Like individual stocks, ETFs trade on a stock exchange and change in value according to demand. But unlike an individual stock, an ETF is diversified and carries less risk. What’s more, ETFs often around a particular theme, such as ESG — environmental, social and corporate governance — precious metals, solar power technology and cannabis. “There’s a world of investors looking for thematic ETFs,” says Clouty CEO David Umeh. “They want to have exposure to things that matter to them.”

TUNE comprises 50 securities including two of the three major music groups, Universal Music Group and Warner Music Group, concert promoter Live Nation, music streaming companies Spotify and Tencent Music Entertainment and satellite broadcaster SiriusXM. About 80% of TUNE will consist of a global basket of 40 securities of the largest companies engaged in music, media and entertainment businesses as classified by FactSet RBICS sub-industry classifications.

Aside from strictly music companies, TUNE also includes Netflix, Paramount, The Walt Disney Company, Adobe, Fox Corporation and LG. “The investment strategy was to invest in the rails — the companies that leverage media and entertainment to get in front of people,” explains Umeh.

The remaining 20% of the index is constructed by identifying companies traded on U.S. exchanges whose securities’ price changes “typically align with digital music consumption patterns,” according to the prospectus. Those aren’t necessarily entertainment companies, according to Umeh, but could be a health care or data company whose stocks show a historical correlation with the returns in digital music. The fund charges a management fee equal to 0.65% of the investment value annually.

TUNE is the second ETF that allows investors to own a variety of music and other entertainment companies. Last year, South Korea’s CT Investments launched KPOP, an ETF that allows American investors to buy into Korean entertainment companies such as HYBE and SM Entertainment that trade on South Korea’s stock exchange. Umeh is surprised there aren’t more ETFs like TUNE given the connection people have to music and music’s established track record in recent years. “I suspect after this there will be other than come behind us,” he says.