This new ETF is trying to give investors a way to trade on the music industry

Published Thu, Jun 22 20231:10 PM EDTUpdated Thu, Jun 22 20232:27 PM EDT

Jesse Pound @/in/jesse-pound @jesserpound

A new thematic exchange-traded fund is trying to give investors a way in to music and entertainment by combining some of the industry's biggest U.S. stocks along with international holdings and some companies with no obvious music connection at all. The Clouty Music, Media and Entertainment ETF (TUNE) began trading Thursday with 50 stocks in its portfolio. The launch comes as companies and investment firms have been looking for new ways to get exposure to music, including buying the back catalogues of famous musicians, as Sony did with Bob Dylan . There are only a handful of music industry stocks available to investors, such as Spotify , Warner Music Group and South Korean company Hybe. The TUNE ETF, which has an expense ratio of 0.65%, includes those stocks but also others in media and entertainment. The equal-weighted fund also has positions in companies such as Snap , Fox and Netflix . "We believe this product is giving you access to the companies that power the rails of how we experience music," said Clouty founder and CEO David Umeh. Also, 20% of the fund, or 10 stocks, is made of companies whose stock price is correlated to seasonal patterns of music streaming, but could be completely unrelated to music. Paycom and Pfizer are two examples of companies with zero connection to music. The correlation was determined based on a five-year regression analysis, Umeh said. The music industry is also one area that could see significant change alongside the recent breakthroughs in artificial intelligence. Umeh pointed out AI has already been used in parts of the industry before and could make companies more efficient, but added it is too early to determine the long-term effect. "Up until this point, it's been a tool. I think it's just the rate of acceleration that is going to tell the future," Umeh said. Clouty's longer-term plans include other ways to invest in music, such as potentially creating futures contracts to let investors bet on the popularity of different genres. Umeh called the ETF an "important milestone" toward that goal. It is unclear how much investor interest TUNE will find. Its closest comparison is probably the KPOP and Korean ETF (KPOP) , which launched in August but still has less than $5 million in assets.