How Hedge Funds Invest in Films and Movie Production Projects.
The hedge fund industry is one of many mega capital financing alternatives that enable the commercial and underground film and entertainment industry. Hedge funds are a somewhat special financing arm such that they often create additional investment opportunities for entities similar to multinational & investment banks and private equity firms. Private investors are interested to put money into the next potential Hollywood blockbuster and hedge funds provide that opportunity. Funds then propose to finance a potential movie or a pool of movies in a revenue sharing agreement with the necessary partners.
Since the bursting of the tech bubble in 2001 and the real estate bubble in 2004, add to that the recent global economic and financial crisis, Hollywood has to rely on “maverick” forms of investment. The “supply chain” revenue stream created by a well received, expensive/non expensive blockbuster or a risk pool of multiple movies can be considerable. Public expenditure in dollars for entertainment is resilient in economic downturns. The industry is akin to that of public utilities, beer & liquor, and bar & restaurant. Many investment companies are seeking returns in this area and hedge funds are a strong source for lending to the entertainment industry.
“The pis is bigger in general. You have the growth of the international marketplace, (and) you have home video and markets that were not available years ago.” Thomas Tull, Executive – Legendary Pictures
“The emergence of the hedge fund, a form of investment company that enjoys wide latitude as to where it can place its money, has created millions of dollars in capital that is now being made available to the entertainment industry. Experts also note that the recent slowdowns of real estate and the stock market in delivering solid returns on investment have helped shift Wall Street’s focus to Hollywood.” Steven Galloway, Writer – Visionquest Management
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