With the S&P 500 down 14% since the beginning of the year and the economy wobbly the very wealthy are looking to add a stake in a sports team to their portfolios.
That’s the word from sports bankers who tell Forbes that interest in sports teams is hotter than it has been in a long time, in part because the asset class is not tied to the performance of stocks or the economy.
Another factor in the trend: The number of billionaires has increased significantly the past five years. In 2017 there were 2,043 billionaires with an average net worth of $3.75 billion. In April Forbes counted 2,668 billionaires, a 31% increase, with an average net worth of $4.76 billion.
The excitement for sports teams is evident in the flurry of deal activity. The Denver Broncos are on the verge of being sold for around $4.5 billion. AC Milan changed hands last week for $1.28 billion. A few weeks prior to that, Chelsea FC was acquired for $3.1 billion. MLB’s Washington Nationals and Cleveland Guardians are also on the block.
The market for non-controlling stakes is also hot. Last year, private equity funds spent roughly $2 billion purchasing pieces of U.S. sports franchises. That figure is expected to be surpassed in 2022. A sports banker currently representing the buyers for two limited partner stakes in MLB teams tells Forbes: “Whether teams are making money or losing money doesn’t matter. My clients have money and they feel owning a stake in a sports team is a safer bet than other investments right now.” Latest LP deal: Private equity firm Arctos Sports Partners is reportedly investing in the Philadelphia 76ers and New Jersey Devils (the NBA, NHL and MLB permit institutional investors).
History suggests those that invest in teams during market turbulence do well.
In 2009, during the Great Recession, the Ricketts family paid a then-MLB record $700 million for the Chicago Cubs and Wrigley Field, plus another $145 million for Tribune’s 25% stake in Comcast SportsNet Chicago, handing the media giant a 13-fold increase in real terms on the investment it made two decades earlier. The Cubs have appreciated more than five-fold more since then and are now worth $3.8 billion, putting the team at No. 4 on the Forbes list of the most valuable teams in baseball.
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Likewise, Stephen Ross bought control of the Miami Dolphins and their stadium for $1.1 billion, an all-time high for a football franchise at the time, in a two-park deal in 2008 and 2009, also during the Great Recession. The Dolphins are now worth $3.42 billion.