The term non-correlated asset class covers a whole range of potential investments, including venture capital, real estate, private equity and commodities, as well as other alternative investment strategies.
In today's economy of crashing public equity markets, defaulting hedge funds and non-existent real estate plays, one company believes investing in film slates, including theatrical distribution, offers a high yield alternative investment that can be leveraged with tax benefits and multiple sources of revenues including theatrical, DVD, video on demand, cable and the foreign markets.
As a non correlated asset class, films (including film finance) have outperformed every non correlated asset class in the world. If you look at the more than $6 billion dollars poured into motion picture finance deals in the last three years, the IRR across the spectrum for both studios and independents are resilient to global economic declines in other industries.
When defense contractor Honeywell, New York Hedge Fund Elliot Associates and Dune Capital combined more than a than a billion dollars in several different film funds, many pension funds, private banks, hedge fund managers, private equity groups and high net worth investors followed suit.
Investors from Wall Street, Silicon Valley, the Middle East and even Russia have been parking their money into Hollywood.
Anil Ambani, Larry Ellison Of Oracle, Paul Allen, Steven Rales, Fred Smith of Federal Express, Norman Waitt, Jeff Skoll Of Ebay, Marc Turtletaub of The Money Store, Roger Marino Of EMC Corp, Sidney Kimmel Of Jones Apparel Group, Minnesota Twins owner Bill Pohlad; Real Estate Developers Tom Rosenberg and Bob Yari, and, financiers Sheikh Waleed Al Ibrahim, Michel Litvak and Philip Anschutz are all financing films.
When educated about properly structuring leveraged film finance, which may also include U.S. and international tax incentives to minimize the risk many private bankers, sovereign wealth funds, high net worth investors, family offices, and pension plans understand that they are not gambling on one film hoping to win a film festival. When a company is looking to finance 10, 20, 40, 50 films there is more than just upside on revenues from each one but a final exit strategy after 5-7 years that can bring 300-400% returns on capital invested.
Film, entertainment, media, and Hollywood in general seems to be thriving and immune from economic woes. If you look at the theatrical box office receipts and DVD growth of recent films, including Slumdog Millionaire or Twilight which had zero movie stars, the ROI on these and numerous other films exceed the ROI and revenues of auto manufacturers, real estate, stocks, mutual funds, etc. Primarily because a well-made film is not a local commodity that is just bough and sold once but a global one that has revenue potential from more than 50 countries and medias including theatrical, cable, television, satellite, airline, DVD, and the huge explosion of Video on Demand.
While some private equity outfits may balk at the notion that Hollywood is safe, this country was built based on blue chip industries and for the retail investors, Wall Street and Real Estate was the path to go. When retail investors as well as institutional investors are transitioning from brick and mortar investments to the film business, the underlying factor is ‘why'?”
Some U.S. investors and C corporations are looking for either a strict 100% deduction of their investment under IRS Section 181 or simply being in a portfolio of non correlates investment opportunities. Overseas investors simply want a high yield non-correlated asset class that has long term appreciation such as our hybrid film slate and 100% control over U.S. theatrical distribution.
And for smaller retail investors, not including affluent families or ultra high net worth investors, the bridge between film finance, film production, distribution, and technology are converging so that investors see their investment bring an immediate return from the monetization of state tax credits as part of the equity stream, an upside in a number of films vs. investing in a single picture, possible Section 181 benefits, as well as being involved with creating jobs and stimulating the economy since every film production creates 50-100 jobs.