Sporting teams and leagues are becoming serious investments for global firms managing billions of dollars, as private equity funds eye off the sector\u2019s growth potential and resilience to economic slumps.<\/p>\n
But if retail investors want to get exposure to sport as an \u201casset class\u201d, it\u2019s still rare to find these businesses listed on the sharemarket (though it\u2019s possible your super fund might have some money with a private equity fund betting on sport).<\/p>\n
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Ed Cowan, former Test cricketer and member of TDM Growth Partners investment team.<\/span>Credit:<\/span>Peter Rae<\/cite><\/p>\n Since COVID-19 lockdowns smashed the finances of many sporting competitions, there has been a flurry of private equity investments in sport overseas, with Bloomberg reporting that private equity firms spent $US51 billion ($76 billion) on global sports transactions last year.<\/p>\n Private equity firms have also shown an interest in Australian sports including rugby and netball – though they have met resistance from some sports administrators and critics overseas and in Australia, amid worries about private equity\u2019s \u201ccorporate raider\u201d reputation.<\/p>\n Despite such concerns, close observers from the financial sector say the trend is only getting started, and there\u2019s a growing view among big investors that sporting teams can be a lucrative \u201casset class\u201d.<\/p>\n Former Test cricketer Ed Cowan, who is on the investment team at fund manager TDM Growth Partners, says the wave of institutional investment in sport has occurred because private equity funds have spotted the potential to get a \u201cdouble whammy\u201d from their investments: higher growth by reaching a wider audience, and efficiency gains in how sports are run. There\u2019s also a view that sporting assets are resilient to most economic ups and downs.<\/p>\n Partner at US firm Upfront Ventures Kara Nortman.<\/span><\/p>\n \u201cThey\u2019re great assets and private equity love them because they are seen to be recession-proof, generally speaking, not pandemic-proof by any means, but they can be great global brands in all market cycles,\u201d he says.<\/p>\n Cowan will host a panel session on private investment in sport at Sohn Hearts & Minds, an investment conference that raises funding for medical research that is being held in Tasmania in November. This masthead\u2019s owner, Nine, is a media partner of the Sohn event.<\/p>\n Kara Nortman, a managing partner at US venture capital firm Upfront Ventures, who is speaking at Sohn with Cowan, also says sporting teams and leagues are becoming a serious asset class in the financial world.<\/p>\n \u201cOverall it\u2019s starting to be viewed almost like a hard asset uncorrelated to other asset classes that might be in a family office portfolio, and that\u2019s pretty interesting I think for sports more generally,\u201d she says.<\/p>\n Nortman co-founded the Los Angeles-based women\u2019s football team Angel City, which launched in 2020 and has raised $US20 million, mostly from institutions and family offices. She says the club initially had a hard time raising money, but that\u2019s changed as it has beaten its own financial expectations.<\/p>\n \u201cThe majority of our capital has come from institutions or very professionally run family offices,\u201d she says.<\/p>\n While private equity investors may see sport as a lucrative investment, there has been pushback overseas and domestically. A $6.5 million private equity bid to privatise Super Netball in July was withdrawn last month, and reports that Cricket Australia was considering private equity funding last year prompted a former CEO of Cricket NSW to warn such a deal would damage the game.<\/p>\n Despite such concerns, Cowan and Nortman argue the trend of institutional investment in sport has further to run, highlighting a shift in investor attitudes.<\/p>\n Cowan notes previous debates about whether Rugby Australia could follow NZ\u2019s example and get a cash injection from private equity, and says the issue often comes up in cricket, too. AFL is a less likely target because it is a domestic game.<\/p>\n But what about the risk of sport becoming even more commercial if big investors start moving into more leagues and teams?<\/p>\n Nortman responds by highlighting the need to recruit people who want to build \u201csustainable organisations\u201d for decades into the future, and says it\u2019s important to \u201ckeep greed and ego in check\u201d.<\/p>\n Cowan says that the returns private equity funds are trying to achieve are outcomes of having more engaged fans, or a bigger market, which come from giving people \u201cbetter experiences\u201d.<\/p>\n \u201cI don\u2019t think we could get any more commercial in a traditional sense than what we\u2019ve got already – there\u2019s hardly a spot of advertising left on any rugby league team\u2019s jersey,\u201d he says.<\/p>\n The Business Briefing newsletter delivers major stories, exclusive coverage and expert opinion. <\/i><\/b>Sign up to get it every weekday morning<\/i><\/b>.<\/i><\/b><\/p>\n<\/p>\n
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