Tom Cruise looking to Hedge Funds for Funding

Motion picture association Paramount pictures recently ended their 14-year association with Cruise/Wagner Productions, a company that Cruise floated with Paula Wagner. But the energetic and outspoken Tom Cruise has let rumours slip that he and Wagner had already found funding worth $100 million to produce independent films, something that the two had been planning for a while, adding that two hedge funds had already committed to the $100 million.

A recent wave of hedge funds and private equity investment in the business have been popping up to help steady studio film slates, allowing studios to finance pics at stratospheric budgets.

Amir Malin, the former CEO of Artisan Entertainment who is running the investment fund Qualia Capital said, “The more sophisticated equity and hedge funds have developed a great learning curve, and they are much more conservative about film financing,” he says. “There is so much capital out there, and there are hedge funds out there that have not entered that are enamored of the industry…...This is something that we have seen in the past four or five months.”

As austerity becomes the norm, executives will be forced to rationalize more unconventional projects, or lavish producer deals. The latter may look like a waste of money on Wall Street, but for studios they can mean a steady flow ideas into the system.

The Tom Cruise films that Paramount produced with Cruise/Wagner Productions earned revenues of over US$2 billion globally and were responsible for 15 per cent of the gross income the studio generated in the last 10 years.

Wagner said of the new hedge fund financial plan, “This is something we’ve dreamt of, to have an independently financed production company, where we can decide the films that we make, from high-concept to more personal pictures. I think we’re in the forefront of a trend. For us, this is a very new and exciting direction. We look forward to working with all the studios,”

The Cruise/Wagner team negotiated what they call “an unprecedented multi-faceted financing deal” with “two top hedge funds.” The deal will reportedly provide $100 million in revolving funds, which will be renewed annually, with an option to up the funding to as much as $200 to $300 million per year.