How the NFL Became an Alternative Investment

When NFL owners voted in August to begin letting certain private equity firms buy stakes in teams, the move signaled big cash infusions for them.

For financial advisors, it signaled even wider access to the alternative space for accredited investors. A notable advantage: Sports has a low correlation with traditional asset classes.

“Sports is an innovative space. The connections driving a lot of the franchise value for sports organizations are the deals they strike for media rights,” Neil Blundell, managing director and head of investments at CAIS, says in an interview with ThinkAdvisor. “Forty-eight out of the 50 most-watched TV programs in 2023 were sports related.”

The NFL is the last major league to open its gates to private equity ownership, according to Blundell. The league stipulates that a private equity firm may own 3% to 10% of a team, in silent positions without voting power.

The alt space has gained prominence on financial advisors’ radar screens since allowing accredited investors to own such investments. Previously, ownership was limited to qualified purchasers: individuals or institutions with at least $5 million in investable assets.

In the interview with Blundell, whose firm is the leading alternative fintech platform for independent advisors, he argues that alt growth has been driven by “a product renaissance” and that for accredited investors to boost risk-adjusted returns, “the modern portfolio” should be allocated 50/30/20 — the 20% being alts.

Here are highlights of our conversation:

THINKADVISOR: What’s the significance of the NFL’s now allowing private equity firms to invest in its teams?

NEIL BLUNDELL: The entire sports universe has a $500 billion value. The NFL, with the largest franchise value, is the last major league to open up to private equity ownership — potential investment.

Previously, [team ownership] was [limited] to a handful of high-net-worth individuals. So now the ability to access the sports space is really broadening out.

What’s the downside of investing in sports as an alternative investment?

Sports is an innovative space. From a risk and return and diversification perspective, it’s very interesting. But it’s an asset class that’s less liquid. So it can be challenging depending on your liquidity needs.

You have to be willing to take that illiquidity premium, so I’m not sure it’s suitable for every investor.

Many of the sports investments today could be equity interests that have a [minimum holding] period of maybe seven or 10 years. [The NFL’s minimum is six years.]

How do media trends relate to the growth of sports alts?

The connections that are driving a lot of the franchise value for sports organizations are the media deals they strike. So media rights are connected in terms of actual value.

Forty-eight out of the 50 most-watched TV programs in 2023 were sports related. Therefore, when you think about media value and who’s watching TV today, sports has been driving it.

A sports franchise, like the NFL, strikes media deals with the networks for distribution rights.

In some cases, media values connected to the sports franchise can be over 50% of the revenue of the deal.

Overall, what has contributed mostly to the growth of the alts asset class?