The entire professional sporting ecosystem has paid the price. While supporters haven’t been able to cheer on their teams, sportsmen also haven’t been able to play and clubs have had to cut salaries, as revenues plummeted. Often forgotten, sports investors have also faced unprecedented uncertainty.
However, Wednesday 17th June marks the start of the new normal – for football at least – and players, clubs and supporters can get the ball rolling again. Following most major European leagues earlier this month, the recommencement of the Premier League marks a moment of opportunity for sports investors, from investment managers, family offices to HNW investors, with a variety of new investment opportunities to explore.
In the high-profile world of the sports industry, however, investors are increasingly under the microscope. From our experience working with major sports teams, premier league footballers and associated industries such as the Professional Cricketers Association, NFL, British Athletics Association and Edison Group for Borussia Dortmund and Manchester United, we know how critical it is to ensure robust understanding and management of any reputational risks or challenges that arise from acting in this space.
But with the right approach, investors can look ahead to a rich array of opportunities as sports finally comes back onto our screens.
Possibly the most widely recognised means of gaining exposure to sports investment is through listed clubs.
This avenue is, of course, appealing to sports fans and can generate strong yields (see, for example, Ajax´s share price following their win against Juventus in last year’s Champions League). And while share price is typically pegged to a team’s performance, we have seen several listed clubs outperform the wider market in recent years.
Manchester United, Borussia Dortmund or Ajax are a handful of the clubs/stocks investors might look to follow. Investors can also consider increasing their exposure through a dedicated fund. Companies such as Mapfre Asset Management do exactly that through their Behavioural Fund.
With social distancing measures still in place for the timing being, it seems unlikely that we will be able to support our teams live in their stadiums anytime soon. With that in mind, sports fans are racing to upgrade their sports TV packages, with BT Sports experiencing the highest ever Bundesliga viewership of 650,000 in March this year.
So, investing in the only means supporters will have to watch their teams has never been more attractive. Amazon Prime (Premier League), BT (Bundesliga and Champions League) are just some of the options for investors looking to make the most of stadium closures.
With transfer prices increasing yearly, match day revenues, TV rights and sponsorship deals are now not enough to finance those mega-money deals. However, with many banks still refusing to recognise the actual value of a club’s assets, teams are seeking alternative means to fund those deals.
As a result, clubs are increasing looking to investors for support via direct lending. Just look at 23 Capital, which has financed transfers of some of football’s biggest names in recent years.
The idea of private equity firms taking stakes in professional clubs isn’t a new one, however the creation of a fund dedicated to buying stakes in teams is a novel opportunity for investors.
Although more mature in the US, Arctos Sports partners registered over $430 million in commitments with the SEC in early May. It shouldn’t take long for the company to start looking towards Europe.
So, the new post-pandemic era for sports looks to be rich with a variety of opportunities for investors to increase exposure to the global sporting industry, forecast to be worth $614 billion by 2022.
However, new investment opportunities bring challenges and risks – reputational risk among them, with investors in such a popular space under increasingly intense scrutiny.