Business

Sports sector has created a virtuous circle of family office growth

Through her investment group, tennis megastar Serena Williams has become a savvy investor. Billionaire Joseph Tsai’s investment group recently bought a stake in a sports entertainment company. Michael Dell’s family office wanted to buy an English football team. 

These are just a few recent examples of an investment ecosystem driven by principal/family offices in the world of sport that has created one of the most dynamic growth paradigms anywhere. And that dynamic is set to grow rapidly in the years ahead. 

They see the world of sport as perhaps the most suited to digital disruption, with the “old economy” of stadiums and loyal fans dovetailing well with the “new economy” of esports and streaming of live events

Many of the world’s wealthiest individuals and their families want to invest in sports brands and their stars, and the sports stars themselves are setting up investment offices as they get richer with the vast sums of money flowing into the sector. 

Sports stars, in turn, invest in sports brands and tech/media platforms linked to the sector, all of which fuels the boom. 

Williams, through her investment group Serena Ventures, has been an active investor in a host of businesses and startups since 2014. Most impressively, Serena Ventures recently backed SpringHill Entertainment, a media group set up by basketball legend LeBron James and business partner Maverick Carter. 

Serena Ventures joined a group of investors, including Murdoch-controlled News Corp., finance group Guggenheim Partners, and the University of California to back the group with $100 million. A sports star’s investment office is co-investing with some of the savviest investors out there.  

Other notable sports stars with investment groups include David Beckham’s DB Ventures, Lionel Messi and Gerard Piqué’s Kosmos Holdings, Earvin “Magic” Johnson’s Magic Johnson Enterprises and Detroit Venture Partners, and Tiger Woods’s TGR Ventures. Even the disgraced cyclist Lance Amstrong has an investment group, Next Ventures.

Like Serena Ventures, many of these groups invest in non-sports-based businesses. Still, they also stick to what they know best and plough their many millions of dollars of excess capital into sports teams and sports-related companies.  

Overlay this investment activity of sporting starts with the desire of many of the world’s wealthiest entrepreneurs and family business dynasties to own sports teams and the dynamic gains even more momentum.

One of the most prominent entrepreneur investors is Joe Tsai, the Taiwanese born billionaire and co-founder of Alibaba. Tsai’s sports investment group J Tsai Sports is linked to Blue Pool Capital, his Hong Kong-based investment group. The group has made numerous investments in mostly US sports team, and late last year bought a 10% stake in G2 Esports, the fast-growing Spanish sports entertainment group. 

A whole host of billionaires from the Middle East, China, Russia, and India have bought into global sports teams, mainly European football teams, often using family offices to do the deals. 

Also, US billionaires have for years bought prominent sports teams throughout America and now increasingly abroad. Notable names here include Stephen Ross, Stanley Kroenke, Steve Ballmer, Robert Kraft, Malcolm Glazer, Larry Ellison, and the Allen family in Seattle. And, again, most of these teams are owned through investment offices of these billionaires and their families.  

Of course, the very rich have for years bought big brand sports teams. What is new is billionaires see the investment opportunities in these brands more than ever. 

In the past, many teams were bought more as trophy assets. Billionaires had made their money and could afford to splash out on a sports team to bask in the glamour of owning a high-profile team. Who cared if they lost a bit of money along the way? 

Although the glamour around sports team ownership remains, billionaires, steered by their investment offices, believe they can now make a sizable return on their investments in sports brands and the entertainment platforms linked to them. 

They see the world of sport as perhaps the most suited to digital disruption, with the “old economy” of stadiums and loyal fans dovetailing well with the “new economy” of esports and streaming of live events on new entertainment platforms. 

Also, unlike many old-economy businesses, the valuation of sports teams doesn’t appear to be too affected by the Covid-19 pandemic. Wigan Atheltic, a second-tier English football side that few people outside of the UK have heard of has just received 12 bids to buy the team. 

Billionaires are piling up to buy sports teams, even less well-known brands. Sunderland football club in England is a third-tier football club – Michael Dell’s MSD Capital came close to buying it last year. 

The confluence of factors means more capital will flow into the sector, making it one of the most lucrative investment areas in the years ahead. 

And so the virtuous circle of investments and the growth of family offices in the sector will continue. 

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