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8 Nov 2006

Hedge Funds in Hollywood

Hedge fund money has been flowing into Hollywood as people who have made big fortunes develop an appetite to be in the movie business.

The hedge funds have been popping up rapidly, helping to steady studio film slates by allowing studios to finance pics at larger and more flexible budgets as the economics of the movie business cause more and more studios to rely on outside financing.

Last month the Cruise/Wagner team negotiated what they call “an unprecedented multi-faceted financing deal” for $100 million, with “two top hedge funds.” when they had trouble at Paramount.

Now, Fortress Entertainment, set up by hollywood producers Forbes and Rizzotti, is up and running. The two entrepaneurs created the American Film Capital fund, which now represents over 100 private investors. The company has raised over $6 million since starting to work with Wall Street investors.

Rizzotti said “We created a formula where we only went to individuals asking for $20,000 to $30,000. So it was never huge risk money for anybody. We would just say, ‘Give us a little, a small fraction, just a little bit.’”

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.”

One veteran hollywood agent said “It’s all about the formula, the numbers. It’s the conglomeratization of the business….if you have money, the studios show you the red carpet,”

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