The Schulhof family name was first associated with the music business when he was a former vice president of Sony America Mickey Schulhoff led the negotiations to acquire CBS Records in the late 1980s. However, his son David staked his own turf in 2006 when, backed by Trilantic Capital Partners, he used institutional money to buy songwriter music publishing assets as co-founder of Evergreen Copyrights—an early player in a song catalog that would expand into the decade 2020. Schulhof and his partners later sold Evergreen to BMG for $80 million in 2010. Now, after spending about a dozen years as a publishing and business development executive for various film studios — as well as a two-year stint as managing director of G2 Investment Group, a media-asset-focused spinoff for private equity firm Guggenheim Partners — the 53-year-old Georgetown University graduate pitches music industry stocks to retail investors through his latest venture, MUSQ Global Music Industry ETF.
ETFs, or exchange traded funds, are essentially hybrids of mutual funds and index funds that allow investors to participate in the performance of publicly traded companies without buying individual stocks. ETFs tend to focus on a specific industry or investment theme. MUSQ (pronounced “music”) is an industry index fund that allows private investors to participate in the growth of the music industry by investing in 40 to 50 major company stocks, including the big three groups, the major digital service providers (Spotify, Amazon, Apple and Alphabet), Live Nation, SiriusXM, LiveOne and Sonos. It also includes international music labels HYBE, Alex, CTS, Believe and HIM International Music.
Schulhof, who designed the parameters of the index – which is a passive investment vehicle – and serves as its sponsor, launched MUSQ on July 7, 2023, with $2 million in seed funding from Goldman Sachs. This investment enabled the creation of approximately 100,000 shares in the ETF. On the first day of trading, it closed at $24.95. Today, the fund has grown to about 900,000 shares and is backed by stocks of music companies that have a net asset value of about $22.8 million.
On August 6, MUSQ closed at $22.17 per share, a week after Schulhof spoke Bulletin board about the reasons for the creation of the fund, as well as its performance since its inception.
The MUSQ website lists you as the CEO of the fund. If you are the founder and CEO, why does your name not appear in any of the financial filings with the US Securities and Exchange Commission? Jay Garrett Stevens is listed as CEO in the annual report.
Once I had the index, I emptied it. There are perhaps half a dozen or so turnkey service providers that manage and work with ETF investment trusts. To be listed on any of the stock exchanges, the fund must be a trust. So I found what I believe to be the best ETF service provider out there, Exchange Traded Concepts. If you go to their website, you'll see that they manage several billion dollars and about 60 ETFs in all kinds of other fund themes. Garrett is the CEO of ETC and is included in all these files like this, as are the names of [ETC’s] portfolio advisors.
Promotional material handed out by Schulhof during MUSQ's first trading day.
Nina Westervelt
In this case, what is your role with the MUSQ fund?
I am the founder, sponsor, owner and CEO. I handle all the marketing. I am the face of this fund. I've done a lot of podcast interviews and things like Fintech.tv. When reporters call, I'm the one talking about the results from Luminate's interim report, Goldman Sachs' Music in the Air report, or something like that Bulletin board may have written about. I'm also out there talking to investors, evangelizing about how the music industry is being undermined and cheap compared to streaming services like Netflix or Hulu.
How do your service providers work with MUSQ?
ETC does all the back-office work for me. It is the trading advisor and sub-adviser. Here's an analogy: If I buy a catalog of releases and have Kobalt handle collections, accounting, and all the other back-office stuff, it's basically the same thing. Meanwhile, VettaFi rebalances the index fund every quarter, aligning it with the eligibility requirements for the stocks of the companies in the fund. I give these results to ETC.
Do you have any fiduciary responsibility for the fund?
No. What I do on a day-to-day basis in addition to marketing is dealing with all the compliance. I clarify everything and [Financial Industry Regulatory Authority-approved]. And I have to approve my appearances on podcasts and other media based on compliance if I want to publish them on our site.
What are the eligibility requirements for a company's shares to be considered for inclusion in the MUSQ index?
Companies eligible for the MUSQ index must either generate more than 50% of their revenue from music or be top five players in [music] streaming or content, live music, ticketing, technology or radio. If you look at our fund, we have Apple, Amazon and Google, and clearly those names don't generate more than 50% of their revenue from music, but they are among the top five players in the streaming category.
A plaque presented to him by the New York Stock Exchange on July 13, 2023, when he rang the bell.
Nina Westervelt
What other requirements or limitations does MUSQ have?
No single stock can be more than 5% of the fund's total holdings. It used to be 7%, but I took it down. If a company has a good year and its stock makes up 8% of the index, it will rebalance at the end of the quarter. Other rules: No company can have a market capitalization of less than $100 million or daily trading liquidity of less than $500,000 per day. So these rules help give the index a good cross-section of liquid small, mid and large cap companies. And I added a little buffer: If a company falls below $100 million in market capitalization, then its market capitalization weight is cut in half. If the stock price continues to decline in the next quarter, it is taken out of the index.
Are there stocks in the mainstream music industry that do not qualify for inclusion in the index?
You may notice that Deezer is not in our index. Although it has a market capitalization of more than $200 million, it does not meet daily trading liquidity requirements.
Have companies been removed from the index?
IHeart was once in our fund, but the stock fell 70%, so it's no longer in the index. The reverse is true if it is small [music-related] The company is growing and now has a capitalization of more than 100 million dollars and also has the required level of daily trading liquidity. Then it can become selectable. It must have both components.
When a major index company releases its financials, does it have a big impact on the index's share price?
Yes. The share price is based on net asset value, but earnings have an impact. Spotify currently has an average weight of about 3.4% in our fund, so it's one of the top 10. The stock crushed earnings in July, and is up nearly 70% year-to-date, so this will have more gravity this quarter because it delivered spectacular results. Other stocks like Believe and Tencent are showing positive returns which will impact the weighting. But no name can be more than 5% of the fund. MUSQ pricing has been fairly stable over the past year [ranging from a high of $25.82 on July 31, 2023, to a low of $22.17 on Aug. 5, 2024].
This signed copy of The Chronic by Dr. Dre is a memento from Schulhof's first music industry internship with Jimmy Iovine at Interscope. Dre's caption: “Join Chronic Patrol and get the bomb hit! I'm awake.”
Nina Westervelt
What happens when the stocks in the index don't do well?
MUSQ is a highly diversified, non-correlated fund. So when markets are tanks, MUSQ doesn't go up. Also, we are in no way a meme game. This is really designed to record the growth and accurately track the global music industry. We see this as a long-term growth investment for investors.
Does MUSQ consist entirely of equity investments or do you buy fixed income from these companies as well?
It's all stocks.
You say your fund is diversified by industry sector, geography and genre.
The index has music labels and publishers that provide content, it has companies in the concert industry, it has technology stocks, and these companies are differentiated by genre. Also, the index is differentiated in many countries. Today, it appears to be 49% US, 21% Korean, 11% Japanese. If you go to the index page on our website, it will give you a breakdown. Internationally, we have some exciting companies: Tencent in China, CTS Eventim in Germany, Hipgnosis in the UK, Believe in France. And then we have 10 or 11 K-pop stocks like Genie Music Corp and Cocoa, [and] the two biggest streaming companies in South Korea, HYBE and YG Entertainment. We have companies like Cloud Music and Avex in Japan and Amuse, one of the biggest content companies in Taiwan.
Does the presence of international companies make the index more attractive to investors?
All international companies in this fund trade in local currencies. You'll have to open local accounts to exchange them, and that costs fees. MUSQ creates a very fluid, convenient and portable way for investors to access all these exciting companies.
Guitar that Bruce Springsteen autographed to Schulhoff when they met after an appearance on the Ghost of Tom Joad tour in 1996.
Nina Westervelt
How did you do at Hipgnosis?
Hipgnosis had a 2.3% weight in our fund, and since Blackstone is taking it private, it's up 42%, so we've made money from it.
Your fund has grown from $2 million in assets to over $20 million in assets. What is the next target?
To reach $25 million. Many finance companies have at least this before they offer it to their customer. Beyond that, it's $50 million. If the MUSQ fund gets to that point, it will have hundreds of thousands of financial advisors offering it as an investment option.
