Niche Investing - Noci Pictures hopes to raise $300m for market neutral film fund - Opalesque

Niche Investing - Noci Pictures hopes to raise $300m for market neutral film fund - Op

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Chicago Private Equity Fund Targets Hedge Funds,VC,Portfolio Managers,Pensions, & Affluent Families As Alternative To Wealth Advisers & Swiss Banking

Many Hedge Funds, including New York’s Elliott Associates, are seeing premium returns from investing in film and media. While historically, film financing has been met with skepticism from portfolio managers, private equity groups, high net worth investors, family offices, and pension funds, the returns that Elliott Associates is generating as well as Honeywell Pensions, which reportedly parked more than $600 million to finance a slate of Warner Brothers’ films is opening the door to a Chicago company’s structure for being the next in a wave of attracting both institutional and retail capital.

"As a non correlated asset class, films and film finance has outperformed every non correlated asset class in the world", states Yuri Rutman, head of media finance and consulting firm Noci Pictures ( www.noci.com ). "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."

The Company is in discussions with both U.S. and international private equity partners in closing a $300 million dollar structured media & entertainment fund that would not only finance 20-30 films, but have the infrastructure in place for U.S. Theatrical Distribution either with one of a few major film studios the company is in talks with, or, as a stand alone distributor similar to Lions Gate or Summit Entertainment.

“The reason Wall Street, Silicon Valley, the Middle East, Asia, or European investors are all secretly wanting to be in the film business is that there is an exponential growth in terms of distribution channels. With digital cinemas on the rise, digital print costs minimal, the evolution of same day theatrical and video on demand releases, as well as leveraging global social media and marketing for lower cost advertising and word of mouth branding, filmed entertainment will always have revenue streams. Even tech investors are starting to look at movies as technology in terms of their delivery methods as well as productions that utilize 3D or heavy CGI”, Rutman states.

Rutman is more optimistic about film as a superior growth oriented long term investment because its not based on regional factors and has a global base. "When educated about properly structuring leveraged film finance which may also include U.S. and international tax incentives to minimize the risk", states Rutman, "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", states Rutman. "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 exceed the ROI and revenues of auto manufacturers, real estate, stocks, mutual funds, etc. Primarily because a well made film is not a local commodity that is just bough and sold once but a global one that has revenue potential from more than 50 countries and medias including theatrical, cable, tv, satellite, airline, DVD, and the huge explosion of Video on Demand".


While some private equity outfits may balk at the notion that Hollywood is safe, Rutman adds "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 as well as institutional investors are transitioning from brick and mortar investments to the film business, the underlying factor is 'why'?"

Rutman's Noci Pictures Entertainment is currently advising on several structured film slates including their own.

"From prospective clients inquiring if IRS Section 181 benefits can be transferred to foreign investors to family offices and wealth managers wondering how an investment in film slate deals can offer their clients an absolute return based on monetizing state and international tax incentives as part of revenue streams, I am amazed by the stratification in investment needs from $100,000 to $20 million", Rutman adds.

"Some U.S. investors and C corporations are looking for a strict 100% deduction of their investment under IRS Section 181. Overseas investors simply want a high yield non-correlated asset class that has long term appreciation such as our hybrid film slate and 100% control over U.S. theatrical distribution".

Rutman's model is attracting not only large scale private equity groups, but smaller retail investors as an alternative to oil & gas, real estate, stocks, commodities, etc. "The minimum participation used to be $10,000,000 to get into deals, but we are scaling our strategies to accommodate the $100,000-$500,000 investors as well", Rutman adds.

Rutman's model offers in some cases a 40-70% ROI on equity prior to revenues. "I don't know any business that you can start today where you know exactly what your ROI will be exclusive of proformas and risk analysis. Its like owning a piece of 50 fast food franchises where the total return from each and the final sale of all will net you a nice premium".

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 alternative 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 banks, alternative 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 alternative investments in their quest of alpha, it is because allocating to alternative investments offers advantages compared with traditional asset classes and diversification to a portfolio though involving a certain level of risk.

As investors have become more concerned about their risk-adjusted returns, especially in bearish market environments, interest in alternative investment strategies gained momentum.

”By investing in alternative investments such as a film fund, 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 alternative investment strategies lies in the fact they minimize downside risk”, adds Rutman

Hedge Fund Job In Film Finance Targets Hedge Fund Managers,Wealth Advisors,& Venture Capitalists

A CFO and hedge fund job opportunity for an experienced portfolio manager, wealth adviser, oil & gas fronter, investment banker, venture capitalist, or family office rep has opened up with a Chicago & Los Angeles based film finance company that is looking to structure an innovative tax advantaged, risk minimized private equity fund.

Many Hedge Funds, including New York’s Elliott Associates, are seeing premium returns from investing in film and media. While historically, film financing has been met with skepticism from portfolio managers, private equity groups, high net worth investors, family offices, and pension funds, the returns that Elliott Associates is generating as well as Honeywell Pensions, which reportedly parked more than $600 million to finance a slate of Warner Brothers’ films is opening the door to a Chicago company’s structure for being the next in a wave of attracting both institutional and retail capital.

"As a non correlated asset class, films and film finance has outperformed every non correlated asset class in the world", states Yuri Rutman, head of media finance and consulting firm Noci Pictures ( www.noci.com ). "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."

The Company is looking to bring on board an experienced hedge fund, private equity, or alternative investment capital raiser to identify U.S. and international private equity partners in both institutional and retail sectors in closing a $300 million dollar structured media & entertainment fund that would not only finance 20-30 films, but have the infrastructure in place for U.S. Theatrical Distribution either with one of a few major film studios the company is in talks with, or, as a stand alone distributor similar to Lions Gate or Summit Entertainment.

“The reason Wall Street, Silicon Valley, the Middle East, Asia, or European investors are all secretly wanting to be in the film business is that there is an exponential growth in terms of distribution channels. With digital cinemas on the rise, digital print costs minimal, the evolution of same day theatrical and video on demand releases, as well as leveraging global social media and marketing for lower cost advertising and word of mouth branding, filmed entertainment will always have revenue streams. Even tech investors are starting to look at movies as technology in terms of their delivery methods as well as productions that utilize 3D or heavy CGI”, Rutman states.

The company is asking all prospective applicants to submit a confidential inquiry including a resume, professional deal summary outlining capital raised and/or managed, reason for transition, and any other information via email to careers@noci.com

Yuri Rutman, CEO of Noci, Says Investing In Film Is Safe ForThe $10,000 & The $10,000,000 investor

The current global economic crisis, the plunging of real estate and stocks as "safe" investments, and hedge fund operators like Bernard Madoff have put an international dent into what has historically made millions of retail, private equity, and venture capital investors feel secure.

With U.S. companies folding every day if bailout funds don't rescue them, real estate, stock market, and Angel investors running for the hills, is there any industry or investment that can still be considered "safe" whether its for the $10,000 investor or the $10,000,000?

"Film, Entertainment, Media, And Hollywood in general seems to be thriving and immune from economic woes", states Yuri Rutman, the head of Noci Pictures Entertainment (www.noci.com) a Chicago and Los Angeles film production and structured finance company which is opening its doors to the smaller retail investors as well as institutional ones. "If you look at the theatrical box office receipts and DVD growth of recent films, including 'Slumdog Millionaire' which had zero movie stars, the ROI on these and numerous other films exceed the ROI and revenues of auto manufacturers, real estate, stocks, mutual funds, etc/. " adds Rutman. "Primarily because a well made film is not a local commodity that is just bough and sold once but a global one that has revenue potential from more than 50 countries and medias including theatrical, cable, tv, satellite, airline, DVD, and the huge explosion of Video on Demand".

Rutman is currently seeing that the value and opportunity for either a smaller $10,000-$250,000 retail investor or large private equity fund with millions to generate a 60-100% ROI on their investment before a film shows profits is unmatched in today's shaky economic avenues.

"Retail Investors who either want to take a 100% Federal deduction under Section 181 or “The American Jobs Creations Act” against their passive income, or corporate investors and family offices that want to take the deduction against their ordinary income can leverage their investment with monetized state tax credits to get a return before a return", stresses Rutman.

"In practical terms a $50,000 investment in a film will generate approximately a $17,500 federal tax reduction assuming an investor's tax rate is 35%, and, a $15,000 cash return from the sale of a film production tax credit assuming a film is shot in Illinois using the 30% state tax credit.

"The same holds true for larger private equity players or regular C corporations that want to reduce their overall federal tax liability. For larger deals a $10 million dollar film shooting in Illinois, $5 million would be equity, $5 million would be non-recourse debt through international pre-sales of a film” adds Rutman. “Assuming a discounted rate of about 28% (from 30%) tax credit from Illinois, that equals approximately $2.8 million dollars back into a film fund before revenues. Now assuming a Section 181 deduction is applied at a federal tax rate of 35%, an additional $1.75 million dollar reduction in Federal income taxes may be achieved so in effect investors are getting back almost $4.6 million dollars on a $5-10 million dollar investment before revenues, additional pre-sales, licensing, etc.”

“No matter how bad things are in the world, people need to be entertained”, states Yuri Rutman, Noci’s CEO. “And while the crowd mentality of panic in the U.S. financial markets exists, overseas, properly structured commercial films generate more revenues which add to bigger distributor buys with the value of the Euro vs. USD.”

Many Angel investors including billionaires,family offices from Wall Street such as Dune Capital and Elliot Associates 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.

While the glamor of the movie business may be appealing to most, at the end of the day, it is still an unknown business that many try to gamble on, and only a handful come out as winners. The real key is to minimize risk, maximize profits, and offer a steadier stream of revenues than what other alternative investments may offer such as real estate, oil & gas, commodities, hedge funds, or practically any other investment in today's market.

Traditionally a lot of media and film funds have sunk because the equity parlayed into these deals was junior. Most of these funds have, and continue to, finance large budget studio films in the $40-$100 million dollar range with senior and mezzanine debt being first and second in position while the junior equity is usually never recouped.

Instead of dazzling investors with smoke and mirror Monte Carlo simulation models that offer various IRR's and scenarios based on unpredictable film revenues streams and junior equity to trigger senior and mezz debt,the key is to offer an absolute return on investment utilizing international and U.S. public tax incentives that in certain instances can guarantee 100% or more of invested capital prior to revenues by leveraging equity positions with non-recourse debt vs. recourse debt.

"Historically, the doors to great commercial films were only open to the big private equity players. Now, its the dentist, doctor, trader, or other Angel Investor can participate with smaller amounts and still have all the upside".

For smaller individual accredited investors and family offices who are not aligned with large capitalized hedge funds and fall into the $10,000-$250,000 retail investor markeptplace, Rutman can accommodate such situations using single picture financing strategies incorporating risk minimization techniques and tax advantages that are part of the entire U.S. economic stimulus package.

”I am surprised how many accredited investors, family offices, asset managers, hedge funds, fund of funds, Venture Capitalists, tax planners, CPA’s, tax attorneys, public and private companies have no clue about these benefits”, Rutman adds. “Federal Preservation, New Markets Tax Credits, etc was the usual route for tax credit planning or alternative investments , but film production incentives offer a more liquid premium, equity, as well as a little Hollywood adventure".

Rutman continues that "Investors never realized that apart from the upside in revenues, high ROI's, etc., they are literally creating jobs. Every movie has anywhere from 50-100 people who work on it for 3-4 months and that's all the money some of them may earn in one year or more. If I can provide enough film projects that the same crew can work on year round, everyone wins at the end of the day. Now that's my definition of a 'conscious investment'".

Sovereign Wealth Funds, Private Banks, Family Offices, Pension Fund Eye Alternative Asset Class Investments In Movies, Media, & Entertainment

When defense contractor Honeywell invested nearly $600 million dollars in a film fund a few years ago, it was the beginning for many pension funds, private banks, hedge fund managers, private equity groups, and high net worth investors and family offices to enter the movie business.

And in today's economy of crashing public equity markets and non-existent real estate plays, one structured media finance company believes investing in film slates offers a high yield alternative investment.

"As an asset class, films have outperformed most industries in the world", states Yuri Rutman, head of media finance and consulting firm Noci Pictures (www.noci.com). "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."

Many Angel investors including billionaires,family offices from Wall Street such as Dune Capital and Elliot Associates 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.


Rutman is more optimistic about film as a superior growth oriented long term investment because its not based on regional factors and has a global base. "When educated about properly structuring leveraged film finance which may also include U.S. and international tax incentives to minimize the risk", states Rutman, "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 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".

source: FPR

"Film, Entertainment, Media, And Hollywood in general seems to be thriving and immune from economic woes", states Rutman. "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 exceed the ROI and revenues of auto manufacturers, real estate, stocks, mutual funds, etc. Primarily because a well made film is not a local commodity that is just bough and sold once but a global one that has revenue potential from more than 50 countries and medias including theatrical, cable, tv, satellite, airline, DVD, and the huge explosion of Video on Demand".

While some private equity outfits may balk at the notion that Hollywood is safe, Rutman adds "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 as well as institutional investors are transitioning from brick and mortar investments to the film business, the underlying factor is 'why'?"

Rutman's Noci Pictures Entertainment is currently advising on several structured film slates as well launching their own in house deal which also has a new U.S. theatrical distribution entity which will be headed by the former Chairman and President of a major movie studio.

"From prospective clients inquiring if IRS Section 181 benefits can be transferred to foreign investors to family offices and wealth managers wondering how an investment in film slate deals can offer their clients an absolute return based on monetizing state and international tax incentives as part of revenue streams, I am amazed by the stratification in investment needs from $1 million to $20 million", Rutman adds.

"Some U.S. investors and C corporations are looking for a strict 100% deduction of their investment under IRS Section 181. Overseas investors simply want a high yield asset class that has long term appreciation such as our hybrid film slate and 100% control over U.S. theatrical distribution".

Rutman's model offers in some cases a 40-70% ROI on equity prior to revenues. "I don't know any business that you can start today where you know exactly what your ROI will be exclusive of proformas and risk analysis. Its like owning a piece of 50 fast food franchises where the total return from each and the final sale of all will net you a nice premium".