May 25 (Bloomberg) -- Richard Gere is playing a financier as twisted as that other movie villain, Gordon Gekko, and whose downfall is no less spectacular than Bernard Madoff’s.
Gere is shooting “Arbitrage,” which will be released next year. While his character Robert Miller isn’t inspired by any real or imagined person, the film takes on hedge funds after other blockbusters exposed the bad side of banking.
Like some of those caught up in scandals and financial crises, Miller is wealthy, with a big New York house, a wife, a mistress and a daughter who runs the company with him. An investment bank moves in to buy his fund, threatening to expose a web of fraud. Miller’s greed makes him an ideal target for Hollywood, which has profited from films such as “Wall Street: Money Never Sleeps”, “Inside Job” and “The Company Men.” Another film, “Margin Call,” will be released in October.
“People are making pretty important decisions in a compressed period of time in highly leveraged situations,” Nicholas Jarecki, the director of “Arbitrage,” says of its plotline. “It’s dealing with issues of personal responsibility and hubris and what these things say about bubble economies.”
Jarecki, 31, has pulled in some heavyweight star interest in his independent production. Al Pacino, who was originally to play the title role, quit because of scheduling conflicts. Gere came on board soon after and is joined by Susan Sarandon, Eva Green, rapper Drake and Tim Roth.
Gere’s character is an “anti-hero” in the mould of Michael Corleone, Jarecki says. From Le Chiffre, the reptilian short-seller in James Bond’s “Casino Royale” who profits from crashing markets, to Gordon Gekko, the original merchant of greed, Hollywood financiers are typically stereotyped as solipsistic individuals who exploit other people’s misery.
While the caricature may please popcorn-munching audiences, it’s misrepresentative of the $2 trillion hedge fund industry, says Jim Chanos, who made his name short-selling companies and was among the first investors to predict Enron Corp.’s collapse.
“There is an ingrained view that somehow these shadowy hedge funds are behind all the world’s woes,” Chanos, founder of New York-based Kynikos Associates LP, says. “Part of it is my industry’s own fault -- for years we have been secretive and people wouldn’t go on TV and they had offshore funds. There was nothing necessarily nefarious or wrong with that -- it was done for legal and tax reasons: It heightened every lay person’s suspicions.”
Jarecki describes his film as the “French Connection of hedge funds” and says he’s aiming for a more realistic depiction of finance than previous efforts. His father, Henry Jarecki, is a commodities investor who was involved with the Hunt Brothers’ attempt to corner the world’s silver market in the 1970s, and now runs a $13 billion commodities fund, Gresham Investment Management LLC.
Arbitrage, which is a trading method for betting on price moves in related markets, hasn’t troubled Hollywood much, except in “Nine ½ Weeks” in 1986 when Mickey Rourke’s character says: “I buy and sell money. Some people call it arbitrage.”
Jarecki says audiences won’t need to understand the technicalities of the trading method to enjoy his movie.
“We will populate it with appropriate and accurate terminology,” says Jarecki. “If we do our job as dramatists, the impact will be felt and you will not need anything more than a grade-school education to watch this.”
Hollywood has maximized returns by keeping things simple. The original “Wall Street” grossed $43 million in 1987 while the sequel made $53 million in the U.S. last year, according to IMDB.com, a movie box office tracking site.
“Trading Places,” a 1983 comedy set in the commodities industry, earned $90 million in the U.S., the third-highest grossing film that year. In comparison, a film like “Inside Job,” a documentary on the financial crisis released last year, has grossed $4.2 million to date.
“If you’re making a small-budget, independent film you can be specific,” says Gitesh Pandya, the editor of Box Office Guru. “When you’re spending millions on a big film, the producer wants it to appeal to as many people as possible. Hedge funds are very technical, they’re very much part of the inner circle of finance, and the subject is something most Americans won’t understand.”
The role of hedge funds in financing Hollywood films has grown since the 2008 bankruptcy of Lehman Brothers Holdings Inc. and subsequent decrease in bank lending, which shrunk the amount of bank funds available to small studios to about $250 million from $1 billion, according to Clark Hallren, a former JPMorgan Chase & Co. executive whose Clear Scope Partners advises film companies.
“Financing for this movie took on a path similar to what’s in the story where we had all this money come in at the beginning and then suddenly it was all gone with the financial crisis,” says Jarecki. “So we set out and raised a bunch of money in a truly independent way.”
Chanos worked as consultant on Oliver Stone’s Wall Street sequel -- and helped convince the director to change the main character from a hedge-fund manager to an investment banker. Movies that reinforce the negative stereotype of hedge funders won’t help the industry, which is currently under intense regulatory scrutiny, Chanos says.
“The industry is already going to face an uphill battle,” he says. “Being painted as a villain in another set of movies probably isn’t going to help.”
“Arbitrage” is due for release next spring.
To contact the reporter on this story: Sarfraz Thind in London at Sthind3@bloomberg.net
To contact the editor responsible for this story: Mark Beech at email@example.com.