Sports Teams and Wealth Diversification
A lot of UHNW individuals and other private investors buying up sports teams all over the world. Josh Harris and David Blitzer are spending most of their net worth on buying stakes in major sports teams. These investments don't come cheap and are often in the billions. Why are these individuals spending so much to buy sports teams? To what extent are these vanity purchases and to what extent are they actual investments with ROI higher than opportunity cost? These are savvy and sophisticated investors, so surely the latter must be a huge part of it, especially since places like Sixth Street / Silver Lake are also getting involved.
But in what other case would people put so much of their net worth into a single asset class? Even if you have $5bn cash lying around, when would it ever make sense to throw $2bn of that into a single asset? Apart from sports teams, are there other assets that people essentially throw everything they have at it?
Would appreciate some color from people familiar with the space, and be curious regarding the P&L, margins, and cost structure of these businesses.
It’s fairly simple: teams’ valuations only go up.
I’d give the ‘Invest Like The Best’ episode w/ Marc Lasry (Ep 371) a listen. He dives into that world and the motivations those people have
It’s gotta be way more fun to own and run a sports team vs really any other type of investment.
Why just buy a portfolio of stocks or whatever with 2/5 of your billion and when you can have a sports team?
Ignore title. I work in Valuations. Also just an analyst so tf do I know.
The way I see things, for some sports investors they have some crazy good first mover advantage. They've negotiated some pretty sweet deals with all sorts of clauses that make their return well worth the lockup or lack of liquidity in the market. It's a unique form of diversification (though like you mentioned at a pretty large amount). Sports could even be seen as "recession-proof" to an extent, given the perseverance through COVID. Despite financial performance or regular season/playoff performance, historically successful teams, teams in large metropolitan areas, and teams that know how to garner franchise loyalty can be found high on the Forbes franchise valuations (which I feel like is a bit ambiguous).
So what could make team valuations go down? I'm skeptical about the valuations and multiples paid for some of the teams these days, but I can't think of a solid answer to the question. Anyway, I think that is some of the appeal in sports investing (not to mention it being an exciting industry) and there still seems to be a lot more room for future growth.
It’s also the “sexy” thing to invest in right now and a lot of high net worth individuals like to have measuring contest and “out sexy” their peers. As an advisor, I’ve had a few clients ask how they can invest in sports related things just because it’s what’s hot these days and becoming more mainstream with a few PE funds dedicating their strategy solely to sports investing. A lot of ultra high net worth people have egos, and investing in a sports team, feeds it. On top of the increasing valuations, etc.
Not just an investment. Local power relevance and influence. Could be a great investment if you extract the right concessions locally, own property or retail all around. On the flip side being a minority is brutal, none of the glory but unbearable capital calls to fund losses while being told on paper that your investment is going up
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