Broadway Producer Hunter Arnold on Theater Investing and Identifying Tomorrow’s Hit Shows

The producer also discussed the SEC's probe of his fund and Broadway's response to its rapidly-changing demographics.

Tony-award-winning producer Hunter Arnold is the man behind countless Broadway hits like Kinky BootsDear Evan Hansen and Spring Awakening.

But despite his early interest in theater management, Arnold had nearly committed to life as a tech executive before finding his way back to Broadway.

Two middle-aged men in suits at Little Shop of Horrors red carpet.
Hunter Arnold (right) and his husband Jason Squatriglia. Playbill

“I woke up in my mid-20s as a tech C-Suite guy,” he told Observer. “I realized if I didn’t go back and do the thing I said I was always going to do, that I never would.”

After years spent working on CareerBuilder’s predecessor Netstart and a series of real estate start-ups, Arnold moved to New York City and entered the theater world. In addition to his star-studded producer resume, he is now also a general partner at the Broadway Strategic Return Fund, which claims to be the only data-driven fund in theatrical finance. As of 2023, it has produced more than 140 shows, investing in titles like Moulin Rouge! and Pretty Woman.

Merging VC and Broadway

Arnold, who is originally from Pasadena, California, first picked up on Broadway’s need for revamped investing when he began attending Broadway-frequented restaurants while working as a lead producer.

“I would hear other producers pitch their products and say things like, ‘I just feel it in my gut, this is the one,'” said Arnold. “From somebody who comes from an angel and [venture capital] background, I thought wait, that sounds like terrible advice.”

Shortly afterward, the producer earned his MBA at Trium, a joint program between New York University, H.E.C. Paris and the London School of Economics where he met Curt Cronin, a former U.S. Navy SEAL and his future business partner. Alongside mathematician and software developer John Joseph, the trio launched the Broadway Strategic Return Fund in 2015.

“We didn’t create the fund to monetize Broadway,” said Arnold. “We created the fund, sure, to make money. But you have to make a product viable or the market will not accept it forever.” He wanted to ensure Broadway wouldn’t fall victim to profit losses similar to those experienced by institutions like the Metropolitan Opera, which recently cut back programming and withdrew $30 million from its endowment. “Over my dead body was I going to watch theater fall prey to that in my lifetime,” he said.

Is theater actually profitable?

While theater is commonly seen as a financially unstable sector, Arnold claims it can be surprisingly profitable when approached through a venture capital model.

The Broadway Strategic Return Fund’s rate of return since 2020 has been approximately 24 percent, with an even higher figure of 34.8 percent before the Covid-19 pandemic. The key is not to try and pick hits, according to Arnold. “If you were to make one guess on one of 80 shows between New York and London that open every year, you’re probably going to get obliterated,” he said.

Hunter Arnold onstage with two other men accepting award
Hunter Arnold (right) accepts the Tony Award for Best Play for “The Inheritance” in Sept. 2021. Theo Wargo/Getty Images for Tony Awards Productions

Arnold’s fund disregards the bottom half of shows which statistically stand to make less profit. Factors can include too many cast members or moving scenery, the business experience of its operator and the structure of vendor deals. “We’re just looking for the top 50th percentile of likelihood to recoup in profit.”

The fund, which currently has more than $167 million in assets under management, also doesn’t have to worry too much about competitors. Investors like Arnold need to gradually gain the trust of those in Broadway, ensuring they won’t mess with the artistic development or creative vision of what is a tight-knit and small circle. “There are only about 25 people on planet Earth who do what I do,” he said.

A sudden SEC probe

More than five years after it opened for business, Arnold’s fund made headlines in September when it became subject to a probe by the Securities and Exchange Commission (SEC). The SEC, which sued Arnold’s partner for failing to comply with a subpoena, said at the time it was investigating whether Cronin and Joseph made misleading statements to investors concerning the fund’s assets.

The investigation was later dropped on March 6 with the SEC recommending zero action, according to Arnold, who says he kept a physical copy of the SEC’s letter in his jacket after hearing the news. “It’s a fairly terrifying process, to be honest,” he said. “They don’t tell you what it’s about, they don’t tell you what they’re looking at. They just ask endless questions, and you never really know if they take issue with you, or if you did business with a vendor they take issue with.”

Despite attempting to stay positive, Arnold said he worried about the fund’s future. “Certainly there are moments where you’re like, is this thing going to drag on so long that it won’t matter if we were good guys or not [or] that you might run out of rope?”

Although the experience was a harrowing one for the fund’s partners, the group continues to believe in the importance of oversight. “It’s a little less comfortable when you become the subject of the oversight,” added Arnold. “But philosophically, I think we’re all on board.”

How is Broadway changing?

The Covid-19 pandemic presented another unexpected challenge for the Broadway Strategic Return Fund. While it temporarily closed down, the fund searched for ways to weather the crisis through government grants for shuttered businesses and the launch of a Broadway tax credit in New York state.

At the same time, the pandemic was prompting significant shifts in the theater industry’s audience. Broadway has long been dependent on “multi-buyers,” according to Arnold, referring to affluent theater-goers who live in the Tri-State area and typically see five or more shows a year. But multi-buyers are also typically snowbirds, and many of them didn’t return to New York after leaving for their second homes during the pandemic.

Broadway’s demographic changes were also prompted by a social reckoning over the past few years and an increased focus on shows appealing to potential theater-goers across race, ability and gender identity. “There’s already a huge change in the content being produced,” said Arnold.

Theater is adapting to the needs of younger audiences, for example, who are more interested in “100-minute musicals that are more contemporary, not a three-hour Rodgers and Hammerstein,” he said. “That shift has already begun, and it will continue to be a huge sea change in the landscape.”

Broadway Producer Hunter Arnold on Theater Investing and Identifying Tomorrow’s Hit Shows