Fred Hubler | Creative Capital Wealth Management

Taylor Swift and her team are a genius organization, to be this popular for this long and put out a product that changes but keeps original fans still engaged. When artists update the type of music they create, some people drop off because that was not what they wanted. With Taylor, she keeps those fans and attracts even more. Add to that the “Easter eggs” in all she does and it is a business strategy that should be taught in business schools.

There are 10 ways where Taylor Swift is like an alternative investment. Let’s dive in.

Uncorrelated With Traditional Markets

Most alternative investments are not tied to the public stock market. That is basically the point of an alternative. Just like the fact that Taylor’s success isn’t directly tied to the popularity of the type of music. She has country songs but is not considered a traditional country star. Her albums span many different genres regardless of market popularity of the genre. This is very similar to alternative investing because there are times that the thing out of favor (like multifamily) could also be a good place to invest. She also started as a young woman in the stuffy country music genre and made her own space there before moving on as a teenager no less. The lesson is that good alternative investments might come out when and where you least expect it.

High Growth Potential

Taylor Swift ’s ability to reinvent herself and captivate new audiences is by plan. Alternative investments also benefit from changing what you invest in overtime. Real estate has cycles, energy has a cycle, and many alternative investment strategies have their time to shine. Only if you are aware of the need to do something different will you make changes to where you invest. I’m not against the stock market, and when it goes on sale, dollar-cost averaging would be a strategy to review. Revising at a strategic level where your money should go is a prudent choice. It’s not always going to be the same alternative, and someday it may not be an alternative at all; it may be going back in the market if the time is right.

Limited Availability

Ownership rights to Swift’s music masters (like owning a rare asset class) create scarcity and potential for value appreciation. She’s been at the forefront of artist rights and she understands the creation of something out of thin air is a valuable service and should be rewarded as such. Swift has walked a balanced path of serving her fans but not milking them. Most of the alternative investments I’ve seen work in good and bad weather are also limited in availability. Deals considered small are sometimes more than 100 million of a capital raise but that is probably a rounding error compared to the volume the largest nonalternative firms do in a day. This limited availability is usually because the underlying asset is a business or real estate, and there is an appraisal value that caps out the capital raise.

Active Management

Swift’s strategic control over career moves (like hedge funds actively managing investments) can significantly impact returns. She doesn’t just stick with something until it gets unpopular, she makes moves before they are needed.

Intangible Value

Swift’s brand loyalty and cultural influence, like brand recognition in luxury goods, contribute to value beyond just album sales. There are many intangible values when it comes to alternative investments. As I wrote in an earlier post on Forbes.com, the best alternative investments have three things in common. They have a legal, ethical, and morally unfair advantage. That unfair advantage is a type of intangible value. Tell a room of her fans that you don’t think she’s a good singer and you’ll feel the impact of brand loyalty.

Long-Term Investment

Swift’s career longevity suggests a long-term hold strategy, similar to private equity investments. She’s already rich, so she’s not just doing it for the money. She’s already a vocal supporter of artists’ rights and she’s comfortable making industry players uncomfortable. This long-term view and strategic outlook are shared with most if not all alternative investments. All investments tend to need time for the investment thesis to be applied to real life. This is one of the few things alternative investments have in common with the public stock market. Only with a long-term outlook can real wealth be created.

Emotional Connection

Fan devotion creates a passionate investor base, similar to the passionate following some alternative asset managers attract. Life is a contact sport and if you find a great alternative investment company or management team, there is a tangible emotional connection when your investment goes full cycle and you do it again with the same company. You do need to be cognizant that you are not running the same play just because it’s familiar and easy.

Innovation and Adaptation

Swift’s constant evolution in music and marketing is a major element to her historic success. Most alternative investments share the intent to be creative and adapt to a changing economy and the opportunities that exist in any situation reflect the need for innovation in alternative investment strategies.

Calculated Risks

Taylor Swift ’s strategic re-recordings and ownership battles are calculated risks, mirroring risk management in alternative investments. In a year that would exhaust anyone else, she decided to re-record all her previous albums in 2003 and name them “Taylor’s Version.” This not coincidentally is the version played on the streaming services. Every investment worth its weight needs to take risks, and the more calculated you are when looking at the risks, the better you are able to handle rough patches.

Focus On Brand Building

Swift’s focus on building a strong personal brand aligns with the importance of brand building in alternative asset classes. There are many alternative investment shops that build a brand and reputation that gets stronger over time.

Are you in your alternative investment era?