The Aramid Entertainment Fund, a new investment company run by the financiers of the hit British film The Queen, is backing Manolete, a keenly awaited biopic of Spain’s most famous bullfighter, The Times has learnt.

The film stars Adrien Brody as Manuel Rodríguez Sánchez, the legendary matador, and Penelope Cruz as Lupe Sino, the actress he loved until his death in the bullring at the age of 30. The fund, which was launched last October, expects the film to premiere at the Cannes Film Festival in May.

Aramid is expected to raise well above the £150 million originally targeted by the end of this year, as hedge fund interest in film financing picks up speed in Britain.

The Cayman Islands-incorporated fund provides bridge and mezzanine financing, as well as highly specialised discounting of tax incentives for film makers. It has attracted interest from hedge funds because of the strong track record of its management team.

As well as The Queen, which has won a Golden Globe and ten Academy Award nominations, Aramid’s team has financed films including Girl with a Pearl Earring, which starred Scarlett Johansson, Quentin Tarantino’s Kill Bill 2 and the surprise British hit Bend it Like Beckham.

Experts say that hedge funds are increasingly interested in asset-backed lending, such as film and television financing, because it offers an opportunity to diversify their investments. They also hope that blockbuster movies will provide returns exceeding those available in the traditional financial markets.

Eden Rock Capital Management, the $1.7 billion (£860 million) fund of hedge funds, is an asset-backed lending specialist. Edward Horner, managing director of the Mayfair-based fund, predicts that lending-based hedge funds will continue to gather momentum over the coming years.

Mr Horner said: “Lending and credit-based strategies are currently generating considerable interest amongst investors due to the stable double-digit returns and the lack of correlation with major markets.”

Hedge fund involvement in the American film industry has heated up in recent years as studios spread their risk by bringing in outside funding. Hedge funds are thought to have provided at least $6 billion in finance to the big Hollywood studios in recent years.

Last August, Tom Cruise said that he had secured $100 million of hedge fund backing for his new production company after he was unexpectedly dumped by Viacom.

The Dune Entertainment Fund, run by Dune Capital, has a $520 million 28-film investment deal with 20th Century Fox. Last year Relativity Media raised $1.3 billion through its two Gun Hill hedge funds to invest in 37 films with Sony and Universal.

Simon Fawcett, the chief executive of Aramid Capital Partners, the managers of the Aramid fund, said that the industry was newer to the UK but interest in film funding had increased rapidly over the past two years.

Rather than Hollywood blockbusters, the fund focuses on independent films with budgets typically ranging from £10 million to £50 million.

Aramid is the first British fund to offer credit to film companies based on the tax rebates that they will receive when the film is complete. A more common tax-based method of financing is for investors to lend money to finance films, then offset the cost of making the film against their personal tax liabilities. Aramid demands a minimum investment of $50,000 and targets a yearly return for investors of 20 per cent.

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