Ultra-rich families are increasingly casting their eye on sports as an asset class. According to Goldman Sachs, interest is fuelled by rising valuations and lucrative media contracts.
Bankers at Apex, the family office arm of Goldman Sachs, argue that sports is an uncorrelated asset class that outperforms the general market. Increasing demand from family offices worldwide is one of this year’s key themes for the Wall Street bank, according to a media roundtable following the Apex Global Family Office Symposium in New York.
The enthusiasm for sports as an investment does not come out of the blue. Over the past 25 years, both the four major US sports leagues (American football, basketball, baseball and ice hockey) and the European football leagues have outperformed the S&P 500 by about 5 percent and 2.5 percent, respectively, data from US multi family office Certuity shows.
The average baseball team from the US major league MLB is now valued at over $2.3 billion. Top teams like Los Angeles Dodgers and Boston Red Sox are even worth more than four billion dollars. The Yankees 7.1 billion dollars. In the NFL, the biggest league for American football, the average value of a team is 4.47 billion.
Valuations of football teams are also rising steadily. The 30 most valuable teams are worth 2.3 billion dollars on average, up 5.1 per cent from last year. Forbes calculated that the top teams’ earnings average 397 million dollar this year, a three percent increase from last year.
Family businesses also exploring opportunities
While owning a sports team has a certain prestige, Anushka Gupta, head of Apex in the Americas, sees family businesses also exploring opportunities within the sports ecosystem. According to her, the growth of professional sports is not correlated with other sectors as it is driven by media rights deals.
According to Certuity, deals were valued at more than 50 billion dollars in total by 2022. Sports teams and leagues also sign long-term rights contracts, keeping revenues flowing even in tough times. This year, the value of global sports TV contracts is expected to peak at 62.4 billion dollars.
“We are working hard to understand the structure of media contracts,” said Gupta. From traditional sports like golf, sailing, rugby, surfing, to new favourites like Nascar and UFC, interest is broad, she said.
For family businesses, sports leagues like the National Women’s Soccer League, WNBA and the Women’s Tennis Association are becoming increasingly interesting as investment opportunities.
Private equity
Not only family offices, but also private equity firms are discovering sports as a lucrative investment. According to global data company Pitchbook, private equity firms hold stakes in 63 major sports teams in North America in January this year, with a total value of 234.3 billion dollars.
The largest stakes are in teams in the NBA (basketball), MLB (baseball) and Major League Soccer (football), all of which allow 30 percent of their clubs to be owned by private equity firms or other investment funds. That does not stop individual Wall Street titans from taking over a club, by the way.
David Rubenstein, the top executive of The Carlyle Group, made headlines in March with his $1.7 billion purchase of the Orioles, Baltimore’s baseball team.
Josh Harris, co-founder of Apollo Global Management, followed in July with his purchase of american-football team the Washington Commanders for six billion dollars.
European investments in football
In Europe, investments traditionally focus more on football. Darren Allaway, Apex’s head of Emea, noted: “What we see in family businesses is that larger families with established sports relationships own multiple properties in the major European leagues. They are competing with each other on a sort of pan-European basis.”
This season, 37 of 96 European football clubs in the biggest five leagues are receiving financial backing from private equity, venture capital or private credit parties. Last year, deal makers invested 4.9 billion euro in Europe’s five biggest football leagues, compared to just 66.7 million euro in 2018, according to Pitchbook data.
In addition, there is growing interest in secondary and tertiary leagues. This is evidenced, for example, by the acquisition of Welsh football club Wrexham AFC by Hollywood stars Ryan Reynolds and Rob McElhenney in 2021.
Under their leadership, Wrexham promoted to the EFL League Two in 2022-23 and to the EFL League One a year later. After a 15-year absence, the club returned to England’s third professional level. The attempt to revive the club was captured in the popular docuseries Welcome to Wrexham.
“This show changed the dynamic where foreign investors in small local clubs were viewed with suspicion and reluctance. Now there are many smaller clubs looking for money and willing to welcome foreign owners. These can be wealthy families who do not have substantial interest and experience in sport, but for whom this is their first step into this world,” Allaway said.
Max Severijns contributes to Investment Officer from New York.