Wealthy Investors Aim to Dwarf Billionaire Presence in the Sports Sector

In a significant shift for the sports industry, institutional investors are partnering with leagues to buy equity in sports franchises. At least four funds, aiming to raise an initial capital of nearly $4 billion, are set to make their mark.

These funds are eyeing limited partnership stakes in major sports league franchises, with some open to majority ownership and even less established leagues. The move marks the first time institutional money seeks to systematically take part in owning sports franchises.

The stock market's annual growth in the same time period was 8%, but sports team investments offer a valuable aspect of non-correlation. Sports teams have a lower correlation with the stock market than other assets, making them an attractive option for institutional investors.

Attorney Kuh stated that the funds include some of the most savvy and experienced sports executives, ensuring quick and efficient deal execution. Institutional investors, such as pension funds and endowments, are interested in sports private equity as a way to preserve and grow assets over decades.

One of the funds leading the charge is Beautiful Game Group, led by a diverse panel of sports executives, including Dr. Oliver Finlay, Doug Whaley, Marco Iannuzzi, and Noah Croom. The group aims to invest not only in major league stakes but also in minor league stakes and less established leagues.

Another fund, Arctos Sports Partners, has already raised at least $421 million, and it's likely higher today. Arctos aims to buy limited partner stakes across major North American and European sports leagues.

The demand for sports rights is expected to rise, with future contracts likely to be bid on by streaming services, social media outlets, and digital services. This increased demand could further boost the value of sports franchises.

Despite the high valuations, the value of teams in the NBA, NFL, NHL, and MLB has grown 12% annually since 1991. This growth is evident when looking at the Yankees, bought for $7.3 million in 1973, which are today worth perhaps $5 billion.

The interest from institutional investors comes as team ownership, on average, has generated strong returns even in down cycles. With many institutional investors having a hard time finding stable, predictable, low-leverage places to invest, sports represents one of the last asset classes that are not owned by them.

As leagues seek investment from institutional investors due to a lack of billionaires interested in buying teams, the sports landscape is set for a significant shift. Beautiful Game Group also intends to invest in developing leagues worldwide and provide more active management based on ESG principles.

This strategic partnership between institutional investors and sports leagues could pave the way for a new era in sports ownership and management, offering a more stable and predictable future for sports franchises.