With the popularity of British festivals such as Glastonbury and ‘V’ soaring, does the space offer an investment opportunity?
David Glick, founder of Edge Group, an investment boutique for the entertainment industry, thinks so.
Glick says that over the last decade there has been a cultural shift, proving people value experience over product.
Research from the Performing Rights Society for Music, the UK association of composers, songwriters and music publishers, found in 2008 revenue from live music overtook recorded music for the first time in history.

According to Glick, because of the digital music age people do not care about the ownership of music anymore; now it is all about the experience of going to a live music event.
Chris Mayo, investment director at Fund Intelligence, can see the upside. 
“Festivals are growing and are in demand, so I imagine they would have a lot of upside potential. The number of festivals around the country has been growing over the years, advertising and the internet is involved and you see festivals like Glastonbury being sold out every year. So I can see why people would want to look into them as an asset class,” he says.
How to invest?
Paul Bedford is the investment director of UK investment and advisory group Ingenious, which offers two VCTs that invest in live music, including some of the UK’s biggest music festivals. He said music festivals have good investment potential, more so than concerts and tours.
“With touring you can make money, but you do not have an asset. We make good profits on the festivals every year, but we have this asset we own and there is a very liquid market there,” he says.
The Ingenious Live VCTs, which were launched in 2006 and are now called Ingenious Entertainment VCTs, allow investors to invest in a whole portfolio of music festivals, including Creamfields and Oxfordshire’s 1980s music festival, Rewind.
Bedford says the festivals in the Live and Entertainment VCT’s made net trading profits of £2.3m in 2009, £3.2m in 2010 and are anticipated to make profits in excess of £4m this year. The VCTs have varying equity interests in live events, but typically have an interest representing 20% to 30% of profits and/or losses.
He says: “Profits are strong and we are building up a significant ‘back end’ asset value in terms of our ownership of these brands, which can ultimately be sold for significant multiples of earnings.”
Bedford says Ingenious is targeting returns of between £1.15 and £1.20 from a £1 investment. With the inclusion of the 30p tax relief for coming in to the VCT, this works as a projected return of 13% per annum, or 64% over the five year minimum holding period for a VCT.
The minimum investment is £3,000 and the maximum you can put in is £200,000 in any one year.
Raising the bar
Bedford said the two most important factors when investing in festivals are genre and location. It is also important the festivals have a good pool of talent to attract punters and are value for money.
He says: “It is a crowded marketplace out there, so you have to know something has its own unique identity and attracts its own unique audience.
“A festival is a mini holiday. People will not accept what was offered five years ago. If you raise the bar people are willing to pay.”
Bedford says the best festivals to invest in are those where there is potential for growth and where a brand can be extended. This could be internationally or through a product, such as DVDs, CD compilations and merchandise. 
A festival that can grow into a chain, for instance, can be very profitable. Bedford believes that deals such as on talent, security and infrastructure, also mean the marginal cost of holding two festivals is cheaper than staging one.
It is also not expensive to extend the size of a festival if there is demand to increase its capacity.
This was the case with the three-day UK festival Creamfields, which has risen from a 30,000 capacity each day in 2009 to 40,000 in 2010 and 50,000 this year.
He says: “The thing about a festival is once you get over the breakeven number then you are making good profits per individual coming in. The marginal cost of those extra people coming through the door is incredibly small.”
Bedford points out that another major benefit of music festivals today, which helps increase profits, is tickets are sold online. Many festivals used to rely heavily on walk-up, which is when a number of tickets were sold on the day, but because of modern technology this is no longer the case.

Since the banking crash of 2007, something rather wonderful has come of age. It is called peer-to-peer (p2p) lending – a new way ‘to do money’ that actually bypasses the banks and allows individual people to lend and borrow money between themselves, at rates that they agree, without a banker in sight. 

It is a great example of necessity being the mother of invention - even if it predates the banking crisis.

Just as banks slashed savings rates and almost stopped lending, p2p lending has made millions of pounds available for loans to creditworthy folks, while paying those who lend a return on their money in a different league from the dismal and increasingly sub-inflation rates paid by the banks.

Good tradition
So what is peer-to-peer or ‘p2p’ lending?  In its broadest definition it is of course as old as the hills - and actually older than banking itself.  For thousands of years people have lent money to other people, whether within families, tribes, villages or working environments. 
But in its modern guise, it is an online service, which allows the connection between people to be much more distant, virtual, even anonymous. Although the nature of financial regulation ensures that each p2p lending business is constrained to within the boundaries of its home country, that is its only limitation in reach.

So unlike credit unions, which do have some conceptual similarities, membership of a p2p lending group can be much wider – theoretically the entire population of that country.
P2p lending works through the marketplace concept. 

The p2p lending website is where the two sides of the transaction - people with spare money to lend for a return, and creditworthy people who want to borrow - come together and do business at a rate they agree between themselves.

Although the business models and propositions vary considerably across the more than 40 p2p lenders set up across the globe, most offer some level of credit and affordability checking of would-be borrowers.

This is vital to ensure that lenders – who are ordinary people, not credit experts – are not taking excessive or unknown risks in lending via these marketplaces.  
This is the pivotal difference between p2p and banking. Banks take the customer’s money into their business – on to their balance sheet – and agree to pay a rate of interest on that money.

At the same time, they lend that money out to other people at another higher rate, but there is no direct linkage between the bank’s savers and borrowers.

The size of the difference or ‘spread’ is entirely at the banks discretion and is the measure that determines the relative strength - or weakness - of the offer.
Since the worst moments of the banking crisis, these spreads have hit record levels, as the banks seek to profit by paying out interest at very low levels (also driven by very low Bank of England rates) while charging very high levels of interest on loans.

Recent analysis by Moneyfacts shows that the average spread between savings accounts and personal loans is currently 11% or more. Savers are getting around 1% interest on average, while borrowers are paying around 12%, creating a spread of 11%.

Spread a little happiness
These very large spreads have undoubtedly helped the p2p lending concept attract significant media and consumer attention, as the much lower charges taken by these new marketplaces ensure that both the borrower and lender end up with a far better deal.   

  
The very first p2p lender anywhere in the world was Zopa.com, built and then launched in the UK in March 2005. In the Zopa model, all borrowers are checked very thoroughly through credit agencies and if of sufficient quality are placed in one of five ‘markets’ (A*, A, B, C and Young) based on the risk level they represent. 
Lenders then make offers into those markets of how much they are prepared to lend, over what term and at what interest rate. The technology carries out the matching process, assembling the best value loan for each individual borrower from the money offered by lenders on the marketplace, while spreading each lender’s money across at least 50 different borrowers to spread risk. 
If the borrower likes the rate they accept it, and that money is immediately ‘put aside’ for them. Further borrower checks are made at that stage – mainly to check that the borrower can readily afford to repay the loan – and if successful the loan is made at the rate originally offered.

Capital and interest payments are then made by direct debit from the borrower back to the client holding account where the payments are allocated to each of the borrower’s many individual lenders.     
More than six years after launch this first p2p model is proving very successful. More than £150 million of loans have been arranged, at rates agreed by borrowers and lenders between themselves through the marketplace.

Stringent credit and affordability checks have kept the loan default rate below 1%, while borrowers have secured interest rates at typically 20% lower than the best they could have got from a bank. Over the last 12 months, those lending through the Zopa markets have enjoyed an average return from their lending of 6.7%, after charges, but before any bad debt and personal taxation. 
In terms of market share, Zopa loans now represents around 2% of the new unsecured personal loans taken out in the UK. 
In commenting on the growth of the p2p lending market, bankers have been dismissive so far, mainly because in terms of relative size, the new players are very small.

However, consumer bodies and the Government have been much more positive and have welcomed this new innovation as just the sort of new competition that is necessary to apply pressure on the UK’s huge banks to operate more efficiently and far more in the interests of their customers.       

Getting a university degree is an expensive business these days, and set to get far more pricey next year. According to the Push university guide, the average graduate starting a course in 2011 will leave with debts of £26,100. And for those starting in 2012, after tuition fees at many universities will have trebled to £9,000 a year, the average debt figure is set to double to £53,400, according to the guide.

Such massive debts will have enormous ramifications for young people starting out their adult lives, and may well lead many to question whether going to university is worthwhile.
As a parent, if you are in a financial position to help your children shoulder the expense of university and avoid or minimize debt, what plans should you be making?
Back to basics

Simon Webster, managing director at Facts & Figures Chartered Financial Planners, says that when considering university education you should ask yourself three questions.
1. What will it cost to send a child to university for a year?
2. Can I afford it?
3. Before committing a great deal of hard earned cash, make sure your child is both suited and prepared to do the work to justify the investment.
“In theory a university educated student should command a higher salary in the job market, but in reality a 2/2 in an arts-based subject does not generally impress employers,” he says. In terms of funding, Webster says the trick is to start early; the longer you have to save the less you need to put aside each month.
“As to where you put it, for terms of over five years I would recommend stocks and shares ISAs; put the money on a wrap platform and spread it between a number of fund managers and markets. Seek independent financial advice for the selection.
“If you have a lump sum then ISAs for each partner first and perhaps a unit trust portfolio with the rest. If ISA allowances have been used up a series of maximum investment plans maturing in sequential years required might be an option for a higher rate taxpayer.”
Webster suggests that parents avoid friendly societies they are too expensive even with their bit of tax relief.
“If you have left it too late and you have some equity in your house a further advance may help. Flexible mortgages with a drawdown facility can be helpful.
“Last but by no means least student loans are an attractive way of funding late planners cheaply. Take the student loan and the parents can help pay it off later if they want to.”
 
A matter of time