The term non-correlated asset classes covers a whole range of possible investments, including venture capital, real estate, private equity, and commodities, but also different investment strategies.
But 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 dispensing, offers a high provide different investment that can be leveraged with tax benefits and multiple supplies of revenues including theatrical, DVD, video on need, cable, and the foreign markets.
As a non correlated asset class, films and film finance has 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 3 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 invested more than a combined total of more than a billion dollars towards several different film funds, many pension funds, private edges, hedge fund managers, private equity groups, and high net worth investors and family offices started to follow suit go into the movie business.
Investors from Wall Street to Silicon Valley to the Middle East to Russia have been parking their money into Hollywood.
Anil Ambani, Larry Ellison Of Oracle, Paul Allen Of Microsoft, Steven Rales, Fred Smith of Federal Express, Norman Waitt, the Co-Founder of Gateway Computers, 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 behind the finance of a lot of films that range from box office hits to Academy Award winners.
Institutional investors and hedge funds investing in films include Elliot Associate, Stark, Columbus Nova, Bain, Honeywell, and others.
Non-correlated investment strategies can be used by investors to neutralize, or counterbalance, the risk that one, or more, of the investments in a traditional portfolio of stocks and bonds falls in value. In order to do this, investors typically place between 5% and 20% of their total investment portfolio into different investments to protect the remainder of the portfolio from downside risk.
Among the spectrum of asset classes targeted by high net-worth individuals, institutional investors, pension funds or private edges, different investments are becoming popular offering more diversification to investors’ portfolios. The benefits of such diversification have been demonstrated by Harry Max Markowitz ( 1990, Nobel Prize in Economics ) in the Modern Portfolio Theory. He proved mathematically that an investor can reduce portfolios’ risks simply by holding instruments which are not perfectly correlated – a correlation coefficient not equal to one. By holding a diversified portfolio, investors should be able to reduce their exposure to individual asset risk.
If investors are attracted by different investments in their quest of alpha, it is because allocating to different investments offers advantages compared with traditional asset classes and diversification to a portfolio âEUR” though involving a certain level of risk.
As investors have become more concerned about their risk-modificated returns, especially in bearish market environments, interest in different investment strategies attained momentum.
By investing in different investments, a portfolio manager or a given investor aims at obtaining performance from the relationships between securities. A non-correlated asset class behaves independently from other securities composing a portfolio. Such investment vehicles allow investors to hedge the risk that an asset falls in value and avoid any snowball effects. One of the main benefits of different investment strategies lies in the fact they minimize downside risk.
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, 75 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 go beyond the ROI and revenues of auto manufacturers, real estate, stocks, mutual funds, etc. chiefly because a well made film is not a local commodity that is just bough and sold once but a global one that has revenue possible from more than 50 countries and medias including theatrical, cable, tv, satellite, airline, DVD, and the huge explosion of Video on need.
While some private equity outfits may balk at the concept 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. Well, when retail investors in addition as institutional investors are transitioning from brick and mortar investments to the film business, the inner 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 provide non-correlated asset class that has long term appreciation such as our hybrid film slate and 100% control over U.S. theatrical dispensing.
And for smaller retail investors, not including affluent families or ultra high net worth investors, the bridge between film finance, film production, dispensing, 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, in addition as being involved with creating jobs and stimulating the economy since every film production creates 50-100 jobs.