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Many investors, perhaps the vast majority, are sports fans and probably more than casual fans at that. That fandom often reaches a fevered pitch around this time of year because it’s football and basketball season.
Thing is it’s hard for ordinary investors, even those in high-net-worth crowd, to invest directly in sports. Sure, sports betting stocks check that box to some extent, but those companies are beholden to the highly cyclical whims of consumer discretionary spending and are now facing new competitive pressures from prediction markets.
As for US-listed stocks directly tied to teams from the four major North American sports leagues, there are just two: Liberty Media (Atlanta Braves) and Madison Square Garden Sports (New York Knicks and Rangers).
Thank goodness for the increased accessibility, sort of, of private equity because that’s most effective, perhaps only avenue afforded to 99% of investors when it comes to even indirectly owning a sliver of a professional sports franchise. Make no mistake. Those are assets worth owning. Demand and Hope Diamond-esque rarity ensure that’s difficult to do anything but make money on pro team investments. That speaks to the utility of private equity as avenue for getting indirect sports ownership.
Expect More Traffic at PE/Sports Intersection
First, some demystification. If you’re a retail investor or even an advised client, chances are the private equity assets you’ll have access to are mutual funds or ETFs, meaning team ownership is diluted for end users. Even those with the means to be direct clients of a private equity shop may see their sports exposure watered down a bit. All that said, expect more PE/pro team transactions.
“Private capital is a relatively new entrant to major league locker rooms,” notes J.P. Morgan Asset Management (JPAM). “The MLB opened to institutional investment in 2019, but with restrictions: individual teams can sell up to 30% of their equity, while a single firm can acquire no more than 15% of a team. The NBA and NHL followed with similar guidelines in 2021. It was not until 2024 that the NFL welcomed PE investors, capping ownership at 10% of a team.”
The JPAM chart below underscores the theme of rising PE participation the four major sports leagues. The NFL is “golden goose” territory because the average team is worth $6.5 billion and current owners can dictate terms in their favor (scarcity) and that may be limiting private equity participation in that league, but that’s likely a temporary phenomenon.
Why Private Equity Loves Sports
Even investors that possess only rudimentary knowledge of private equity’s inner workings know the industry allocates capital in a variety of ways across a slew of industries, including but not limited to casinos, healthcare, real estate, restaurants, technology and much, much more.
While plenty of PE firms have struck gold in those spaces and others, some prime PE targets need significant reforming while others have finicky customer bases or volatile cash flows. Those situations are largely avoided with investments in professional teams. Actually, sports teams provide private equity investors with not only access to scarcity, but predictability, too. It’s predictability that really carries the day, because it’s predictable that teams increase in value. It’s nearly as sure of a thing as are death and taxes.
“Professional franchises have predictable, long-term cash flows backed by diverse sources of income: long-term agreements for lucrative TV rights, corporate sponsorships and stadium revenues,” adds JPAM. “As TV and streaming platforms fight for viewers, sports broadcasting rights are hotly contested due to millions of viewers reliably tuning in to watch these games. Of the top 100 broadcasts in 2024, sporting events made up 80 of them.”
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