The summer celebrities jumped headfirst into investing in soccer

Luis García, fund manager at MAPFRE AM

As summer 2024 comes to an end, it’s time to return to the office and readjust to our daily routines. For investment managers, it’s also an opportunity to assess the summer’s headlines and their impact on the sectors most relevant to our portfolios. One of those sectors is sports, where we have been especially active for several years due to its compelling potential for capital growth.

Specifically, in the world of European soccer, we’re shareholders in Germany’s Borussia Dortmund (our top holding in the MAPFRE AM Behavioral Fund) and Holland’s Ajax Amsterdam. One of the most striking trends in this sector during the warmer months has been the surge in celebrities investing in various soccer clubs. Whether top-level athletes, singers, or movie stars, hardly a week has gone by without hearing news about a new personality venturing into this world.

Perhaps some of them have been influenced by the massive success that Ryan Reynolds and Rob McElhenney—two well-known Hollywood actors—are having with their investment in Wrexham AFC. The Welsh club has achieved two consecutive promotions and is getting closer to the dream of reaching the Premier League. Along the way, they have managed to significantly increase their commercial revenue through innovative marketing campaigns, initiatives like summer tours in the United States, and the acclaimed documentary “Welcome to Wrexham,” which has won several Emmy Awards.

This summer, rapper Drake made a notable investment in the Italian club Venezia, likely drawn by the allure of one of Italy’s most beautiful cities. It’s possible that the location was also one of the reasons that led Kevin Durant, NBA superstar and Olympic gold medalist in the recent Olympic Games, to join the group of co-owners of Paris Saint-Germain. And without leaving France, we also learned this summer that Real Madrid’s new star, Kylian Mbappe, acquired a majority stake in Caen, a club closely connected to his childhood and where he took his first steps in the world of soccer. Roots and affection for his hometown team also appear to have influenced singer Ed Sheeran’s decision to become a minority shareholder in Ipswich Town, coinciding with the team's return to the Premier League.

One of the things I find most curious about investing in soccer clubs or other sports teams is that it might be the only market I know of where two entirely different types of buyers coexist. On one hand, there are the “value investors,” with whom we identify. These investors focus on the economic value of the assets, which is determined by their ability to generate future cash flows. On the other hand, there are what we might call “treasure hunters,” who seek emotional value in their acquisitions. These individuals often purchase assets that do not generate cash flow—or may even consume resources—such as paintings or other works of art. They do so simply for the joy of owning them or with the expectation of eventually selling them to another buyer who becomes even more enamored with them.

I am unsure of the specific motivations that led these celebrities to join the wave of investment in European soccer (although I can make an educated guess based on the characteristics of each club). However, what many of them seem to have discovered is the power that new technologies, particularly social media, offer in influencing the financial trajectory of the companies they invest in. By leveraging their personal platforms or networks, they can drive new commercial revenue and significantly impact the success of these businesses.

This is something Ryan Reynolds, whom we mentioned earlier, is mastering. He has already accumulated several successful investments in companies that he has helped grow significantly through his personal brand and image. In fact, another major story from the summer in the world of sports and business has been Cristiano Ronaldo’s rapid ascent to breaking all subscriber records with his new YouTube channel. This could open up a huge opportunity for the companies in which the Portuguese star invests to reach their potential customers.

But it’s not just celebrities who are choosing the world of sports for their investments. In the realm of professional investors, we’ve also witnessed the rise of several thematic investment funds in the United States over the past few months, all focused on this sector. Some of these, such as Arctos Sports Partners or Ares Management, already manage assets exceeding $6 billion. This is partly a result of the rising valuations of American sports franchises in recent years.

In fact, this summer, we also saw a report from the specialized portal Sportico, which, for the first time ever, assigned an economic value of over $10 billion to one of these teams. That team is none other than the NFL’s Dallas Cowboys. The American football league, as recently announced, has finally decided to open the door for private equity funds to become part of the ownership structure of its franchises. Undoubtedly, the return from summer and the upcoming months promise to be exciting for those interested in investing in the sports sector.