64. Football and the Moneymen: Is football the next big thing for hedge funds and private equity?
May 31, 2023
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Dr. Christina Philippou, an expert in sports economics, discusses the shift in football ownership to private equity and hedge funds, the challenges of financial stability in clubs, and the impact on community involvement. The conversation explores revenue streams, pandemic effects, and the balance between short-term success and long-term sustainability in the football industry.
Football ownership is shifting towards private equity and hedge funds, driving club valuations beyond £10 billion.
Financial growth in football attracts alternative investment firms seeking high returns despite profitability challenges and sustainability concerns.
Deep dives
Changing Landscape of Football Club Ownership
The landscape of football club ownership is evolving drastically with the emergence of billionaire owners, sovereign wealth funds, private equity, and hedge funds investing huge sums in the industry. The trend indicates a shift towards financial powerhouses taking control of clubs, driving up valuations, potentially exceeding £10 billion for English Premier League clubs. This trend is not exclusive to football but extends to sports teams globally, with increased interest from alternative investment firms.
Financial Growth and Potential in Football Clubs
Football clubs have witnessed tremendous financial growth, exemplified by clubs like Chelsea, Manchester United, and Newcastle United, being acquired for significantly higher valuations over the years. Private equity and hedge funds see opportunities in high revenues, brand recognition, and potential for growth through broadcasting deals, commercial sales, and global branding. While profitability remains a challenge with low profits, the inelastic demand for football suggests a promising investment arena.
Financial Sustainability Challenges in Football Clubs
Amidst the financial successes of football clubs, sustainability remains a critical issue, with poor financial practices prevalent, especially in lower-tier leagues. Reports highlight alarming statistics of clubs facing administration, high wage-to-income ratios, and financial instability. Issues such as negative equity, poor cash flow management, and instances of insolvency plague clubs, prompting discussions on the need for improved financial governance and management.
Football ownership has rapidly transformed in recent years, shifting away from local businesses and family enterprises to an era characterised by billionaire owners and sovereign wealth funds. Now, new players are emerging in the form of private equity and hedge funds, looking to take a slice of the action.
So, is football ownership the next big thing for private equity and hedge funds? And should fans be excited?
To answer these questions and more, we are joined by Dr Christina Philippou, an expert in football finance from the University of Portsmouth who recently conducted a government-commissioned study on the financial sustainability of the sport.