MUMBAI: Relativity Media, the film and television production and distribution firm, and New York-based hedge fund Elliott Management have announced that they are spinning off the co-finance vehicle with Universal, Beverly 2, to funds managed by its long-time strategic partner Elliott Management Corporation.

Elliott Media Investments, a newly created affiliate of the funds, will manage Beverly 2. Also, the two companies said that Elliott has agreed to invest additional capital into Relativity to help further its 2012 home-grown production slate.

The spin-off of Beverly 2 will allow Relativity to avoid the inherent conflicts of interest that have arisen as a result of Relativity‘s move into distribution.

Relativity will remain a production company on each Universal-selected film and Ryan Kavanaugh will remain an executive producer. Relativity will now receive a producer fee on each Beverly 2 film for its production services. Relativity will solely be a production partner with Universal.

"As our core business of developing, producing and distributing our own product has grown to be competitive in size and scope with the majors, this move allows us to focus our energy on that business," said Relativity Media CEO and majority shareholder Ryan Kavanaugh.

“This move allows Relativity to focus on producing and distributing its own home-grown product," said Elliott Media Investments president Michael Joe.

Joe was recently installed in his new position pursuant to a joint decision by Elliott and Relativity.

Meanwhile, the dissolution has come as a surprise to Universal which had no clue about the developments. Relativity, which is based in West Hollywood, California, is trying to build its own movie production and distribution business.

Now, Relativity has got into a deal with Sony Pictures to finance their films. Sony remains unaffected by the dissolution between Relativity and Elliot.