The Footprint film fund is a closed-ended fund which aims for growth by offering a range of film financing services to film producers.
The fund will target a net return of at least 21 per cent a year over its five-year life and will focus on providing finance of films with budgets up to $20m.
Until recently, tax relief was used to attract investors into this area of investment. Films with small budgets used to be financed through S48 sale and leaseback schemes, while S48 schemes were used to fund films with bigger budgets.
In 2006 these schemes was replaced by a system of tax credits for producers, effectively cutting out the middleman. This led to more production companies turning to enterprise investment schemes.
However, the Government then restricted the amount that could be raised by an EIS to £2m, which reduced the attractiveness of film to producers and investors. Against this background, Footprint Films is positioned as an investment in its own right, not simply a means of obtaining tax relief. To reinforce this, it has appointed Thesis Asset Management to manage the assets in much the same way as other asset classes are managed.
The fund will finance films intended for the cinema, dvd, tv and the internet. It is able to provide up to 60 per cent of a film’s budget by offering short to medium-term loans to film producers and distributors, who will have to pay a premium for this service. The loans will secured against a range of assets such as tax credits, distribution rights, underlying copyright, revenue participation rights and sales contracts. Strict lending criteria will be applied and the fund will invest on the basis that it is the last investor in and the first out.
Footprint Films says investors will start to get a return within 21 months. They will receive payments until the end of the five years plus fund performance payouts above the 21 per cent target return.
The directors have experience in both the film and finance industries and say they will work only with quality producers, talent agents and distributors. They are also integrating carbon credits into the fund, creating a carbon neutral film investment but advisers and investor may see this aspect as a gimmick.
This fund may be a solution for people who want to invest in the film industry as a diversifier, but find there are limited opportunities. Although steps have been taken to reduce risks, so the returns are not heavily dependent on the success of each film, investing in this area is still regarded as high risk.