In partnership with

We do not have that many collective experiences as our lives continue the transition to phones and personalized screens. Sport is one of the biggest things left when it comes to watching stuff together as a people. It’ll continue to hold a monopoly on our attention when it comes to being present. That’s why we believe the value of assets across sports leagues will continue to go up in the future, not down.

This has been, and will continue to be, the prime thesis of this newsletter. So, this week, we’re going to talk about sovereign wealth funds in American sports.

Looking for unbiased, fact-based news? Join 1440 today.

Join over 4 million Americans who start their day with 1440 – your daily digest for unbiased, fact-centric news. From politics to sports, we cover it all by analyzing over 100 sources. Our concise, 5-minute read lands in your inbox each morning at no cost. Experience news without the noise; let 1440 help you make up your own mind. Sign up now and invite your friends and family to be part of the informed.

Subscribe to 1440 today.

American Sports: Profitable…sort of

Major league sports are a profitable business in America. But not in the way you might think. If you own a team, it’s incredibly hard to have break-even years.  And that’s when you’re really trying.

No, the profit comes from the sale and re-sale of teams.

Imagine owning the stock of a business that performs at a slight loss year over year, but the price of the stock keeps going up. That’s what owning a sports team is about. That’s why in the next decade, as valuations of teams across major league sports (NFL, NHL, MLB, NBA) continue to go up, we’re going to see an influx of foreign money coming into these sports. 

Yes, we’re talking about the things like the Saudis taking over the Lakers.

Well…sounds like a reach. Why sovereign wealth funds? Why the next decade? Well, as a thing continues to get more expensive. The number of people who can buy that thing keeps getting smaller. And if you put restrictions on who can buy that thing, then the number of potential buyers gets even smaller. 

Recently, the NFL started allowing Private Equity groups to make small investments into NFL teams*. The purpose of this allowance was 2 things: 

1. Existing owners could start liquidating some percentage of their teams to cash.

2. Making it easier for individuals to raise money to buy a team.

*The NFL is one of the leagues that allows sovereign wealth funds to invest directly into teams.

These 2 things are for 1 very giant huge thing: ensure that the value of a team is protected. If something is priced a certain amount, and no one can buy it, then the market would dictate that the price is too high, so the value of the thing itself will be diminished. 

Don’t let all PR BS fool you, every major league commissioner’s job is simple: Protect + grow asset value at all costs

Sovereign Wealth: An Impending Necessity

Let us just say this first: Sovereign Wealth Funds are ideal investors for sports teams. They have a very long time horizon and better incentives than large private equity groups. For one, SWFs are not playing to clients on a management fee and taking a cut of profit. They’re also not in the business of extracting value over and flipping the asset over a 5–10-year period.

Getting them on board will NOT be easy.

As the value of American sports teams continues to increase, you’re going to need to get new kinds of buyers into the mix to make sure that there are enough entities who can either afford them or want to buy them. Bringing sovereign wealth funds into American sports will not be easy. Not only that, but it will also require a monumental shift in the way American sports are presented.

Great right? Yes! But there’s a ‘but’. A SWF’s purpose is to increase the country’s domestic product. Buying a sports team may be thinking too small. We’d also have to examine the context in which the SWF exists for country. Is the incentive to grow tourism? Then yeah, sports make sense. A SWF would probably be looking to make long term investments in multiple cornerstone assets of popular sports leagues.

But while all these reasons are valid. Let’s not forget that buying and holding a sports team for 20 years also means beating the S&P on an annualized basis when it comes to the team’s value. Look the Broncos, look at the Celtics, jeez…look at the Commanders.

 Have a great week!

Ahmed and Peter