Ryan Kavanaugh made his name and fortune financing Hollywood movies. And while his latest investment looks a lot less exciting, it could allow him to make the kind of splash on Wall Street that he has on the red carpet.
Kavanaugh’s family office, Knight Global, in April bought Santa Monica’s Bay Mutual Financial, a registered investment adviser and independent broker-dealer that specializes in advising corporate pensions and manages $22 billion in assets.
It’s a deal that not only beefs up Knight Global’s investment capabilities but that could also provide a new source of capital for Kavanaugh’s Relativity Media, which has lately been dogged by rumors it’s short on cash.
Representatives for Kavanaugh and Knight Global declined to comment, but a source close to the deal said Kavanaugh isn’t interested in simply sitting back and collecting fee income from Bay Mutual.
Rather, the investment is a chance to bolt new capabilities onto Knight Global – namely Bay Mutual’s brokerage arm, which provides the firm with an in-house platform to make big investments in public equities. It also gives Knight Global access to a new base of investors who might want to get in on some of the firm’s deal flow, including early investment opportunities in startups and, yes, film financing.
Bay Mutual, founded by former Morgan Stanley managing director Bud Pernoll, manages money for sophisticated investors who want alternatives other financial advisers don’t have. Knight Global can provide access to those investments, and Kavanaugh’s imprimatur could give them some extra legitimacy, the source said.
Kavanaugh, 40, who has an estimated net worth of $1.6 billion and ranked No. 36 on the Business Journal’s most recent list of Wealthiest Angelenos, boomed and busted as a hedge fund manager – all before the age of 25 – and then turned his attention toward film finance.
Relativity uses a data-driven modeling approach to project how films will perform at the box office and then decides whether to invest in them. It tends to eschew expensive action films in favor of niche genres, which cost much less to make and often benefit from a core following of dedicated fans. The company is widely reported to be planning an initial public offering sometime in 2016.
Kavanaugh has said that most of Relativity’s investments are profitable, although the company has backed a few high-profile duds in recent years, such as “The November Man.”
Some of those misses have fueled rumors that Relativity is in a bit of a cash crunch. On May 22, Relativity released a statement accusing New York’s Colbeck Capital, which had previously provided financing to the firm, of trying to seize control of Relativity by spreading falsehoods about the company’s financial condition.
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