As investor interest in football clubs jumped recently following the takeover of Newcastle United Football Club by a consortium involving the Saudi Public Investment Fund, PCP Capital Partners and RB Sports & Media, below is a commentary from Luis García Álvarez, CFA, Portfolio Manager of the MAPFRE AM Behavioral Fund.
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The Behavioural Fund has just reported a 3-year return of more than 35%, having made investments into three European clubs: Olympique Lyonnais in France, AFC Ajax in the Netherlands, and Borussia Dortmund in Germany. The Behavioural Fund invests in European equity. 25% of the portfolio remains invested in the sports industry, with 10% dedicated to professional football teams.
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Luis García Álvarez said: “The financial side of international soccer is experiencing a phase of transformation like we have never seen before. Professionalization of the industry is being reflected in increasing financial oversight and better corporate governance, among other effects. Offering stock on an exchange is another way for clubs to raise the capital they need to grow or to provide liquidity for their current shareholders. Spain is the country that has been implementing the best financial controls. Nevertheless, it has the only major European soccer league without any clubs being traded on the stock exchange. This is clearly an anomaly, so it would not be surprising to see this change during the next few years, with at least one club from Spain’s top league or second division listing its stock on the market.”
Football Is A Sport With A Significant Emotional Component. Is It A Good Idea To Apply Those Strong Feelings To Investment Decisions?
“It is precisely that substantial emotional component that causes many analysts and investors to keep their distance. However, in our opinion, they are missing out on the interesting historical changes taking place. We can also see the opposite position being taken by American investors. They are much less affected by the emotional side of soccer compared to the Europeans, and they have been buying up teams in various countries over the last few years. We must remember that emotions are a short‑term phenomenon. When a team wins or loses a major tournament, or its star player is injured, or when a new player is signed, the market often reacts very sharply. However, we make our investment decisions by applying a long‑term perspective. We try to filter out the short‑term noise, and we think this gives us a significant advantage when decisions are being made.”