Lights, cameras, earnings
Attracted by glamour and rich pickings, Asian investment firms are jumping on the movie bandwagon. But, as Cameron Dueck reports, it is an industry fraught with risk
Wealthy Hong Kong investors will soon have the opportunity to add a little glitz to their portfolios.
Local private equity firm Aquitaine Investment Advisors is teaming up with Regent MB, a Tinseltown film production and distribution company, to launch the Magnet Media Asia fund.
It aims to raise US$200 million over the next two months that will be invested in entertainment content, especially movies. The minimum subscription amount for individual investors is US$250,000, with banks required to stump up US$5 million to get in the door.
About 60 per cent of the funds are expected to come from Asian clients.
It is all part of a wider trend in the region, where the fragmented film financing industry is becoming more organised and professional. Standard Chartered has got in the on act, forming a media-finance unit a year ago with a focus on Asian films.
'There has been a real love affair with film finance in Asia in recent years,' said Marlene Wittman, group managing director of Aquitaine.
The fund will be evenly split. The private-equity portfolio will invest in Asian media companies, and the film portfolio will finance films in Hollywood, Bollywood and on the mainland.
'The usual complaint we hear from investors here is that there is not enough liquidity with the private-equity fund,' Ms Wittman said.
'The film-finance portion will give us more liquidity. The first money should be coming back to the clients in the middle of year two.'
The fund has already inked deals to finance 10 films, two of which are Indian. No Chinese deals are in the works just yet. However, the private equity portfolio is already looking at a deal with a radio content company and a digital cinema outfit on the mainland, as well as a Korean animation firm.
Hedge funds have been attracted by the volatile financial nature of the US film industry for several years, not least by the chance to rub shoulders with stars of the silver screen and add some glamour to their numbers game. Since 2005, these funds and private equity investors have committed US$4.5 billion to movies, betting the box office can beat the markets, according to Bloomberg.
Slowly, those financiers are moving into the Asian market, spurred on in part by the west's growing demand for Asian content.
Of course, films, with frequent cost overruns, can be as loaded with just as much risk as glamour.
One of the funds to get in early in on the trend in North America, the US$9.4 billion-valued Stark Investments, last May fired its Hollywood frontman after getting soaked at the box-office by the ocean liner disaster film, Poseidon. The individual concerned had put US$264 million from the firm's kitty into movie projects.
Although Ms Wittman's phone has been ringing off the hook with budding producers and film library owners looking for funding, much of the film-financing decisions will be left to Regent MB and its team of industry experts across Asia.
The fund has already begun marketing to clients in the US, with plans to open up to Asian private banks and family offices in the second week of February.
The fund is unlikely to appeal to institutional investors with strict investment guidelines, such as pension funds, because it does not fit neatly in the categories to which those institutions are accustomed.
'Combining these strategies in this way has not been done before, as far as we are aware,' Ms Wittman said.
Bringing bankers and institutional investors into the film world requires both parties to make some accommodations.
Few financiers know the lingo of the industry, and can find the temperament of artists a frustrating, though refreshing, change from the buttoned-down world of money management.
'In order to attract institutional funding, the industry is going to have to grow up, which means producers have to be more professional,' Ms Wittman said. 'Institutional funding is a risk-managed way of getting into an industry that is normally fraught.'