The royalty revolution: inside Partners Group’s institutional playbook
From music to medicine, royalties offer long-duration cash flows and diversification. Stephen Otter explains the appeal.
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David Clark and Tom Oryl set the stage for a deep dive into the highly specialized world of royalties and uncorrelated alternative streams. Following up on our recent discussion regarding water rights, we shift our focus to Partners Group and the pioneering work they are doing to bring institutional-grade, illiquid assets into the wholesale and retail markets.
We sit down with Stephen Otter, Global Head of Private Markets Royalties at Partners Group - one of the world's leading experts in this space, to unpack the mechanics of investment vehicles like PG3. From music catalogs and future drug sales to litigation finance and insurance-linked bonds, we ask the hard questions that sophisticated investors need answered:
- How do you accurately value a portfolio of hit songs or pharmaceutical pipelines?
- What does the recurring revenue stream actually look like?
- Crucially, what are the hidden, binary risks that can lead to permanent capital impairment?
If you're looking to understand how these unusual assets truly sit within a modern client portfolio—and why their capped upside demands a strict understanding of risk—this conversation is essential.
Key Takeaways
- True Non-Correlation: Discover why assets like music royalties, insurance bonds, and litigation finance offer an escape from traditional equity market risk.
- The Valuation Challenge: Understand the complex methodologies required to value unique, recurring revenue streams.
- The Capped Upside Trade-Off: Learn why esoteric assets often feature limited maximum returns, and how to balance this in a portfolio.
- Binary Risk vs. Market Dips: Unpack the reality of permanent capital impairment—when an esoteric asset goes wrong, it doesn't just dip like the Nasdaq; it can disappear entirely.
- Democratizing the Illiquid: Explore how Partners Group is successfully bridging the gap, bringing once-exclusive institutional structures to wholesale and retail markets.
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David Clark is an Adviser & Partner at Koda Capital. In his podcast ‘Inside the Rope’, David interviews some of the leading minds in wealth management.
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This research note has been prepared without consideration of any client's investment objectives, financial situation or needs. Before acting on any advice in this document, Koda Capital Pty Ltd recommends that you consider whether this is appropriate for your circumstances.
While this document is based on the information from sources which are considered reliable, Koda Capital Pty Ltd, its directors, employees and consultants do not represent, warrant or guarantee, expressly or impliedly, that the information contained in this document is complete or accurate. Koda does not accept any responsibility to inform you of any matter that subsequently comes to its notice, which may affect any of the information contained in this document.
© Copyright Koda Capital 2020 | AFSL: 452 581 | ABN: 65 166 491 961 | www.kodacapital.com
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David Clark is an Adviser & Partner at Koda Capital. In his podcast ‘Inside the Rope’, David interviews some of the leading minds in wealth management.
Expertise
David Clark is an Adviser & Partner at Koda Capital. In his podcast ‘Inside the Rope’, David interviews some of the leading minds in wealth management.
Expertise
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