When talking about investing in Hollywood films, one of the interesting things about this article is that it doesn't talk about return on investment or making money, but rather the glamour of being connected to something attached to Hollywood.
The only real comment on returns was concerning that some predict that the hedge funds could possibly achieve double-digit returns. Predict? Possibly? What does that mean? It means that it's a crap shoot. Just throw the dice and something may happen.
Arthur De Vany, a professor emeritus of economics at UC-Irvine and an expert on film industry economics, said in the article: "How the investors are going to fare is pretty much up for grabs."
Another recent example was the "Poseidon" disaster (pun intended). Virtual Studios, which is a hedge-fund-backed company, invested $125 million in the film and has been reported to have lost $50 million on the deal. This is by no means an exception. It is more the rule.
Some of the comments made as to why people make these investments, is reiterated again by comments in the article.
Lawrence Ulman, the co-chairman of the entertainment group at Gibson, Dunn & Crutcher also said that lawyers that represent studios will push the studios toward "passive investors who won't interfere too much when it comes time to make and market the film."
Think of the implications of that statement. Basically they're saying that they don't want any checks and balances in place, but they do want your money. Any company attempting to do this in another industry would be considered shady at best.
There are other "passive" investors in other industries, the point is that Hollywood self-consciously seeks out these types so that they can pour money down any hole they want to without being challenged. I guess if people want to manage their money that way their free to. Just be aware if your money is being used in this way.
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