Feb 2 (Reuters) - UK's Hipgnosis Songs Management (HSM) said on Friday that founder Merck Mercuriadis will handover the CEO's position to Chief Operating Officer Ben Katovsky, and take on the role of chairman.

HSM, the investment adviser to the eponymous music royalties fund, is run by Mercuriadis and backed by private equity firm Blackstone.

Mercuriadis, who has managed bands including Guns N' Roses and artists such as Elton John, founded Hipgnosis in 2018, dazzling investors with a steady source of income on royalties from streaming and performances.

But Hipgnosis Songs Fund, which holds the rights to the work of artists ranging from Shakira to Neil Young, has been battling investor pressure over faltering song valuations and a widening gap between asset values and the company's share price.

In October, shareholders rejected a proposed $440 million catalogue sale deal, forcing a revamp and a strategic review of the fund.

On Wednesday, they will vote on a proposal to enshrine the payment of a fee of up to 20 million pounds as "cost protection" to prospective bidders who may be deterred by HSM's call option, which allows to purchase the fund's music portfolio if and when their agreement is terminated.

"As a matter of prudence, we have requested the Board of Hipgnosis Songs Fund to approve the planned transition of Merck's role," said Qasim Abbas, Senior Managing Director, Blackstone Tactical Opportunities.

HSF did not immediately respond to a Reuters request for comment. (Reporting by Eva Mathews in Bengaluru; Editing by Rashmi Aich and Varun H K)