Stage Fright: Hedge Funds May Snub Big Studios

The announcement that major moviemakers had signed on with hedge funds to finance future film deals is just part of the Hollywood finance story now being written.

The announcement that major moviemakers had signed on with hedge funds to finance future film deals is just part of the Hollywood finance story now being written. Changes in the film industry have resulted in studios cutting back on the number of flicks they release, and on the surface that could have hedge funds and private equity funds reeling from the loss of the recently discovered market for returns. In reality, it’s created new opportunities for old hands in show business. The New York Times reports that hedge funds have been turning to independent filmmakers – not just anyone but some big names looking to make a comeback: Chris McGurk, former vice chairman at MGM; Robert Friedman, one-time marketing honcho at Paramount Pictures; and Tom Pollock, former chairman of Universal Pictures. Says The Times, it’s the availability of cash that has lured these veterans back to the sound stage. “There is an awful lot of money out there right now –private equity money, hedge fund money – flowing toward the business, McGurk told The Times, “It’s very tempting for those in this business to create something with it.” Especially now that hedge funds may be a little disenchanted with their current crop of deals. According to The Times, hedge funds and other private investors are beginning to snub the big studios because of some of the mediocre returns they’ve received as a result of less than stellar hits and some outright flops. Worse, however, is that hedge funds perceive that the major picture makers are keeping the best projects for themselves and locking out the hedgies. “It does represent a shift of thinking by the hedge fund, from a mentality where they don’t want a middleman involved, to a mentality where they want qualitative selection as part of the investment process,” investment banker Stephen Prough, who is involved in fund-raising for movie projects, said in a Times interview.