Investment Options in Professional Sports Teams: Single Asset vs. Pooled Funds and the Benefits of Liquidity

Investing in professional sports teams has become an attractive opportunity for high-net-worth individuals and institutional investors, driven by rising team valuations and diverse revenue streams like streaming, sports betting, and merchandise.

This report compares the benefits of investing in a single sports team (single asset) versus a pooled fund, while highlighting the innovative liquidity feature of your direct investment vehicle, which allows investors to exit after two years via a waiting list, akin to private golf club memberships. Additionally, it explores how the emotional appeal and team-spirit inherent in direct ownership are diluted in pooled fund structures.

Benefits of Investing in a Single Professional Sports Team

Financial Upside

Investing in a single professional sports team can offer substantial financial returns. For instance, franchises like the Dallas Cowboys have seen consistent value increases due to strong brand loyalty and multiple revenue streams, including ticket sales, merchandise, broadcast rights, and sponsorships (Investopedia). The emotional connection fans have with teams ensures consistent demand, making these investments potentially lucrative.

Emotional and Social Benefits

Owning a stake in a single sports team provides a unique emotional connection that is often lost in pooled fund investments. Investors can take pride in their team's successes, share in the community spirit, and enjoy the bragging rights that come with being part of a beloved franchise. This direct link to a specific team fosters a sense of belonging and excitement that is difficult to replicate in a diversified fund where investments are spread across multiple teams (Loeb & Loeb). High-net-worth individuals often value this social clout, which can also facilitate business connections and networking opportunities.

Control and Influence

Depending on the ownership stake, investors may have some influence over team operations, particularly if they hold a significant minority stake. However, most leagues require a clearly defined controlling owner, so minority investors typically have limited decision-making power (Loeb & Loeb).

Risks

The primary drawback is concentration risk. A single team’s value can fluctuate due to poor on-field performance, player injuries, scandals, or excessive player salaries. Additionally, these investments are traditionally illiquid, with returns often realized only upon the team’s sale, which can take years (Rockefeller Capital).

Benefits of Investing in a Pooled Fund

Diversification

Pooled funds, such as private equity funds or sports-focused investment vehicles, spread risk across multiple teams or sports-related assets. For example, funds like Arctos Partners invest in minority stakes across various leagues, reducing the impact of any single team’s underperformance (Sports Business Journal).

Accessibility

Pooled funds lower the entry barrier, allowing investors to participate with smaller capital commitments compared to purchasing a stake in a single team. This makes sports investments accessible to a broader range of accredited investors (Yieldstreet).

Professional Management

These funds are managed by professionals with expertise in sports investments, who can identify undervalued opportunities and manage risks effectively. This is particularly valuable in navigating complex league regulations and market dynamics (Akin Gump).

Trade-Offs

While pooled funds offer stability, they may yield lower returns compared to a successful single-team investment. Investors also have no direct control over specific teams, as decisions are made by fund managers. Moreover, the emotional connection and team-spirit that come with owning a stake in a single team are diluted in a pooled fund, where investments are spread across multiple entities, reducing the personal attachment to any one team.

Comparison: Single Asset vs. Pooled Fund

Innovative Liquidity in Your Direct Investment Vehicle

Our direct investment vehicles introduce a groundbreaking feature: investors can exit after two years by being placed on a waiting list, where their stake is purchased by the next investor. This enhances liquidity, addressing a key drawback of traditional private sports team investments. Moreover, by maintaining a direct link to a single team, your vehicle preserves the emotional appeal and team-spirit that are central to the allure of sports investments.

Parallels with Private Golf Club Memberships

This mechanism is directly inspired by the liquidity model of private golf club memberships, particularly equity-based clubs:

• Equity Golf Clubs: Members pay a significant initiation fee, granting them partial ownership of the club. Upon resignation, they can sell their membership to a new member on a waiting list, typically recovering most of their fee minus a transfer fee (10-20%) (Private Communities).

  
  

• Waiting List System: Exclusive clubs maintain long waiting lists due to high demand, ensuring a market for memberships. This allows exiting members to liquidate their investment relatively quickly while new members gain access to the club’s prestige and amenities.

  
  

We apply this model to sports team investments:

• Exit After Two Years: Investors can opt to exit after a two-year holding period, a significantly shorter timeframe than the typical 5-7 years for private sports investments (Yieldstreet).

  
  

• Waiting List Mechanism: Exiting investors are placed on a waiting list, and their stake is purchased by the next investor, ensuring a structured exit process.

  
  

• Maintaining Exclusivity: Like golf clubs, your vehicle can control who enters the investment pool, preserving the exclusivity and prestige associated with sports team ownership.

  
  

Why This is Innovative

• Addressing Illiquidity: Traditional private investments, including sports teams, are notoriously illiquid, with investors often locked in until a team is sold or a buyer is found. Your waiting list system creates a secondary market, similar to golf club memberships, allowing investors to exit without relying on unpredictable market conditions.

  
  

• Broader Appeal: The liquidity feature makes your vehicle more attractive to investors who value flexibility. It appeals to those who want the high returns and prestige of sports team ownership but are hesitant to commit to long holding periods.

  
  

• Preserving Emotional Connection: Unlike pooled funds, where the investment is spread across multiple teams, your direct investment vehicle allows investors to maintain a personal connection to a single team, enhancing the emotional and social benefits of ownership.

  
  

Potential Benefits

• Increased Investor Confidence: Knowing they can exit after two years reduces perceived risk, encouraging more investors to participate.

  
  

• Market Demand: The growing interest in sports investments, fueled by rising valuations and new revenue streams like streaming and betting, ensures a steady pool of potential investors to replace exiting ones (Yieldstreet).

  
  

• Competitive Edge: Your vehicle stands out against other sports investment options by offering a unique blend of high-return potential, liquidity, and the emotional engagement of direct team ownership.

  
  

Considerations

• Implementation: The success of the waiting list system depends on maintaining a robust pool of interested investors. Marketing the investment’s exclusivity and potential returns will be crucial.

  
  

• Regulatory Compliance: Sports leagues have strict ownership rules (e.g., the NFL’s 10% cap on private equity stakes) (Akin Gump). Your vehicle must navigate these regulations to ensure smooth transfers.

  
  

• Valuation Risks: While the waiting list provides an exit, the value of the stake at the time of exit depends on the team’s performance and market conditions.

  
  

Conclusion

Investing in a single professional sports team offers high potential returns and a strong emotional connection but comes with significant risks and illiquidity. Pooled funds provide diversification and accessibility but at the cost of diluted emotional engagement and potentially lower returns. Our direct investment vehicle uniquely combines the benefits of single-team investment with an innovative liquidity mechanism, allowing investors to exit after two years via a waiting list, much like private golf club memberships.

This approach not only enhances flexibility and broadens investor appeal but also preserves the bragging rights and team-spirit that are central to the appeal of sports team ownership, setting it apart from traditional pooled fund structures.