Executive Director’s Blog: Retirement System’s investments are music to our ears

In my college days working with a concert promoter, the music business was a great way to make some money and help pay for tuition and books.  Interesting to find out that today the music business is helping to pay the pensions of our MARSP members.

The investment strategy for the state’s pension funds is not something most of us think much about, but it was interesting to learn recently that the Michigan Bureau of Investments’ has been investing in music.  The fund’s strong performance is due in part to the bureau’s majority ownership of Concord Music, which holds the copyrights to almost 400,000 songs.

That means that every time a song by such artists as Creedence Clearwater Revival, Dolly Parton, Ray Charles and several others is streamed over the internet or played in a concert venue, Michigan’s pension funds get paid.

It’s good news not only for Michigan retirees, but also Michigan taxpayers as a whole.

The Bureau of Investments, part of the Michigan Department of Treasury, is responsible for investing money in the retirement systems that pay state worker pensions – including the Michigan Public School Employees Retirement System that, of course, is of particular importance to MARSP members.

The Concord investment is an example of the forward-thinking, creative and ultimately sound approach to investing for which the bureau has gained a reputation.

A state Treasury Department analysis shows that from Sept. 30, 2017, to Sept. 30, 2018, the State of Michigan Retirement System (SMRS) earned a rate of return of 11.6 percent, exceeding peer public pension fund median returns of 7.7 percent.  Over a 10-year period, SMRS earned a return of 8.5 percent, exceeding the peer median return of 7.6 percent.

During the past decade – a time that included the Great Recession – SMRS assets gained more than $9.5 billion above the peer average investment return.  Because of these gains, contributions from the state’s General Fund and School Aid Fund during  Fiscal Year 2018 into pension fund pools are nearly $780 million less than they would have been if SMRS had earned the peer average investment return.

While pensions for public school and other state retirees are constitutionally guaranteed, the strong returns garnered by the Bureau of Investments is important because they help stabilize the state’s overall finances.

And speaking of stability, that’s exactly how Michigan Deputy Treasurer Jon Braeutigam views the Concord Music investment.

“We think music rights is somewhat shielded from recessions, compared to more cyclical businesses, like autos,” he recently told the Lansing State Journal. “If a recession comes, people stop buying big-ticket things.”

In other words, the Concord Music investment is part of a diversification strategy that is a key part of a sound investment strategy.

The Concord Music catalog itself is well diversified.  Not only does it feature oldies but goodies such as the aforementioned Creedence Clearwater Revival, Dolly Parton and Ray Charles, but it also benefits from newer artists, such as Ariana Grande.

Her hit song “7 Rings” borrows liberally from “My Favorite Things,” a Rogers and Hammerstein creation that appeared in the movie “Sound of Music.”  Because Concord Music owns the Rogers and Hammerstein catalog, each time Grande’s chart-topping song is played, it rings up additional dollars for the company – and ultimately Michigan’s pensioners.

I always look forward to the summer concert season, when Common Ground and other music events happen in Michigan, but I’ll enjoy them even more knowing that some of the music is helping to keep MARSP members’ pensions financially strong.

 

 

 

 

 

 

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