Tue, 05/01/2010 - 14:27
Investing in film is traditionally regarded as a risky activity, but BVI Company P&C Arcade Film Fund has developed what it says is a low-risk model for film investing.
Investment manager Christopher McGinty says: "We are replacing the banks who have all withdrawn from this market due to their lack of liquidity, by offering secure lending in first position to the global media and entertainment industry. We are delighted that the year one performance of our fund has netted investors an 11.24 per cent return after costs.
“Film producers are interested in getting their films made, almost at any price. They have become used to paying interest rates of Libor plus five per cent for secured loans and arrangement fees of five per cent to ten per cent of the amount loaned. For short-term bridging loans (three to six months), the availability of which can mean "make or break" for a production, monthly interest rates of two per cent to three per cent are not uncommon.
“Our investment objective is to secure a high level of accumulated interest income from investing in specially structured short-term loans made to film, TV and entertainment production companies and re-investing the investment proceeds on a continuous basis in a portfolio of new productions."
McGinty's strategy means that his fund provides short-term asset-backed liquidity to TV and film producers by way of short-term loans. These are not equity investments, nor are the returns dependent on film box office performance.
In essence, the fund is involved in the "manufacturing" of film, not the sale and distribution to end consumers. The fund takes securities over all available assets of each film to protect its investments. Types of finance typically include secure bridging and government credit discounting.
McGinty is now launching a similar fund listed in the Cayman Islands, Grand Arcade Film Fund. The objective of this fund is to deliver an annual return of 12 per cent in GBP after all fees and expenses, whilst operating within their conservatively managed risk environment.
Institutional and retail share classes are available in Grand Arcade Film Fund, which is suitable for direct investors as well as Sipps, Ssas and other tax exempt vehicles.
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