Sports organizations were once exclusive institutions available only to the ultra-wealthy. However, demand for capital, an expanding opportunity set, and loosening regulations have given way to a new field of investing.
Today, private equity firms have made significant inroads. Historically, strong and stable returns have perpetuated the appetite for this type of investment, adding valuable diversification to portfolios. Evolving regulations across various sports leagues have made this vertical undoubtedly one of the fastest-growing sectors in private equity. Yet, there is still work to be done. While private equity firms can take on huge minimums, there will be challenges for the retail investor until these minimums can be more accessible.
For many investors, simply being a fan is not enough. That’s because being a part-owner of a sports organization makes fandom that much more exciting. Investing in sports franchises is tempting for those looking to actively participate in their most coveted passion while creating a more diverse and well-rounded portfolio.
We are now seeing a major disruption to the previously established regulations across various leagues, which barred a wider range of investors from participating in the business side of their favorite sports.
The rise in private equity interest across multiple sports verticals is also reinforced by a transforming business model that includes several exciting areas. These areas include:
First, private equity firms typically invest equity and/or debt in return for a stake in a newly incorporated holding company or join a venture vehicle of the sports organization. That equity and/or debt is then leveraged to manage the commercial side of the business. The capital generated from these endeavors is typically allocated to explore monetization opportunities. The visible division between the commercial and operational sides allows sports organizations to maintain a level of control over the governance of their businesses.
Investors are paid after an exit following a certain period, typically between five and 10 years. In some cases, investors will receive a portion of cash flows from the organization itself.
The value of all major sports leagues within the U.S. as well as several soccer clubs in Europe, has outpaced the S&P 500, especially within the past decade.
At Yieldstreet, we unlock direct access to private equity funds and co-investments, including opportunities within the world of sports. With accessible minimums and investor-friendly structures, explore our latest offerings now.
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