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Private equity's increasing role in sports franchises presents financial advisors with a compelling investment opportunity. Explore how investing in sports franchises can be a good portfolio diversifier and generate attractive returns.
This year’s Super Bowl was the most-watched program in television history. Advertisers paid over $7 million for a 30-second spot,1 thousands of fans bought tickets, and the Kansas City region benefited from $993 million of football-related spending.2 There is an immense investment opportunity in the business of sports. The owner of the Chiefs and chairman of the NFL’s finance committee, Clark Hunt, announced that private equity is a potential source of capital for franchises. 3
There has been a perceivable shift in the ownership of sports franchises from single individual and family structures to private funds. Last year, 20 of the 30 teams in the NBA had private equity capitalization (valued at an estimated $74.2 billion4), and private equity invested significant capital in other sports throughout the year. For instance, Arctos Sports Partners invested in the Tampa Bay Lightning at a valuation of $1.4 billion5 and in Paris Saint-Germain with a valuation of $4.3 billion.6 A similar picture is taking place around the world as investment firms own 17% of soccer clubs in Europe’s most significant leagues.7
For the franchises, alternative investment firms have been shown to bolster revenue, returns, and popularity for teams. The English Premier League team Newcastle United had a valuation increase of 63% over a period of two years after a substantial investment from the Saudi Public Investment Fund.8 While the S&P experienced a decline of 16% in 2022, the average NBA franchise experienced valuation increases of 16% over the same period.9 Substantial financial backing has allowed many investment firms to improve their teams, attract top-tier talent and management, and spend capital on operations and marketing efforts.
For asset managers, the investment can create tremendous value for shareholders and provide enhanced visibility and brand recognition for the firm on a global scale. The leagues and teams are more than just a club; they come with sponsorship and broadcasting deals, ticketing sales, and merchandising agreements. Private equity managers investing in this sector also benefit from the diversity of sports franchises available for investment. Opportunities exist in teams in different stages of their life cycles, in a variety of geographies, and with unique risk profiles. As with other asset classes, there runs the full gamut of company types, from established franchises to emerging teams and leagues.
Another group that can benefit from increased private equity investment is financial advisors. Advisors should consider all options for managing and growing wealth and be cognizant of the ability to access investments in sports franchises through alternative investment funds. Investing in sports franchises can be a good portfolio diversifier, generate attractive returns, and complement traditional assets.
Before allocating, financial advisors should have a concrete understanding of the risks and benefits specific to this asset class. The profitability of a franchise is closely tied to its performance, which is dependent on many factors such as management, illness, and personnel. Economic downturns can lead to a reduction in ticket and merchandising sales and sponsorship deals. Regulatory rules can impact a team’s profitability, and public scandals have demonstrably impacted franchises’ reputations. There are also high ongoing operational costs required to keep a sports franchise in the top spot.
To this end, financial advisors can use third-party platforms to gain access to funds investing in sports, an industry that historically has been exclusive to a select group of investors. These platforms can help advisors compare performance across different funds, create portfolios of complementary investments, and access educational resources.
Sports has evolved into a multi-billion-dollar industry worldwide, and private capital is increasingly entering the space, providing an opportunity for both investment firms and the franchises themselves. A third category, financial advisors, can also stand to benefit by allocating to alternative investment firms investing in sports.
Steven Brod is senior partner, chief executive officer, and chief investment officer of Crystal Capital Partners. Crystal Capital Partners is a leading alternative investment platform for financial advisors.
1 The New York Times, Feb 2024. “How Big Was the Big Game?”
2 Chiefs, Feb 2024. "Chiefs Release Record Economic Impact of Nearly $1 Billion for the Kansas City Region"
3 Bloomberg, Feb 2024. “Kansas City Chiefs Owner Sees Private Equity as Option for NFL”
4 Pitchbook, Sept 2023. “Major league investors: Private equity’s pro sports ties”
5 Sports Pro Media, June 2023. “Report: Tampa Bay Lightning minority stake deal with Arctos values team at US$1.4bn”
6 Pitchbook, Dec 2023. “Top private equity sports deals of 2023”
7 Bloomberg, June 2023. “WHO REALLY OWNS YOUR FOOTBALL CLUB?”
8 Sportico, Jan 2023. “2023 EPL Franchise Valuations Rankings”
9 iSportConnect, May 2023. “What drives the price of an NBA franchise”
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Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.