Film royalty fund seeks to offer 6% yield

Citywire - May 6, 2014

A closed-ended fund that will invest in film distribution rights is hoping to raise £195 million at an initial public offering later this year.

The Paradigm Entertainment Royalty fund will have an initial portfolio comprised of films with aggregate worldwide box office receipts in excess of £7 billion and with 10 Academy Awards between them, and which includes franchises such as The Matrix and Ocean’s trilogies.

The fund will be managed by Village Roadshow Entertainment Group, part of an Australian media conglomerate formed in 1997. Village Roadshow will invest up to £10 million of its own money in the fund.

The trust will target a net dividend yield of 6% per annum, payable quarterly, and a net internal rate of return (IRR) of 9-11%.

The portfolio will not have any production or box-office risk, as it will invest only in films that have been released for more than one year. Revenues from the initial portfolio are diversified geographically, with for example 19% from the UK, 12% from Japan, and 10% from Germany.

Paradigm Entertainment will be structured to have a continuation vote after seven years and a realisation opportunity after 10 years.

Its annual management fee will be 1%, with a 15% incentive fee for returns above a 12% net IRR hurdle.