Your Hedge Fund$$ At Work...This Is What They Mean By Investing In "Uncorrelated AssetS"

Your Hedge Fund Investment $ At Work

One of the marketing mantras of Hedge Funds is that they invest in assets “uncorrelated” with conventional asset classes like stocks. Among the asset classes they have delved into is movie production. Not that they had any particular expertise….or that anyone in the industry seriously argues that they have any reliable methodology for consistently producing profitable movies. But that didn’t stop the hedgies. So I wasn’t surprised to find this NY Times article about a hedge fund financed film production company

An Aspiring Mogul’s Quick Rise and Fall

LOS ANGELES, March 7 — The journey of Henry Winterstern is a classic Hollywood tale: of this town’s irresistible lure, the particular hunger it breeds and the hubris that so often leads to a sudden demise..

A gravel-voiced, Canadian-born investor with a flair for turning around ailing companies, Mr. Winterstern arrived two years ago,….. Backed by millions from a New York hedge fund and a blue-chip Wall Street investment bank, much like a new crop of other Hollywood ventures, he wasted little time building his mini-empire….

By last Friday he was gone, done in by a disastrous 2006 at the box office and a taste for spending, with little cash flow to show for it.

While neither First Look Studios nor Prentice Capital Management, the hedge fund that backed him, gave a reason for Mr. Winterstern’s resignation,…

. “There was a divergence of opinion,” he said. “I wanted to build the company and make it

Prentice Capital invested $70 million with Mr. Winterstern to build the studio, in tandem with a credit line of $80 million from Merrill Lynch.

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….But Mr. Winterstern’s first movie choices didn’t register with the public. Despite some good reviews, “The Dead Girl,” about a mysterious corpse, took in a paltry $19,000. “Wassup Rockers,” about a group of skater boys, written and directed by Larry Clark (“Kids”), took in just $620,000. The box office returns didn’t deter First Look from moving into the gleaming new building that was erected as headquarters for the Creative Artists Agency. Furnished at a cost of $4 million, …..

Senior executives, who spoke on condition of anonymity for fear of losing their jobs, said the company had $50 million in losses last year. Mr. Winterstern said the loss was not nearly that high but declined to be more specific. .

Mr. Winterstern is not the only comer who has found Hollywood an easy place to enter but a hard place to survive. Philippe Martinez came to Hollywood two years ago backed by capital from London, and has had disastrous results with films like “National Lampoon’s Van Wilder 2: The Rise of Taj,” World

Maybe the hedgies would have better luck spending more times in front of their trading screens and less time in front of movie screens

It was an investment uncorrelated to the financial markets: the global stock markets went up and this investment went to zero.