Over the last several months, there’s been a common theme throughout many of the alternative investments we’ve explored – invest in what you know.
Wine snobs can dabble in fine wine investing.
For those that like the harder stuff, rare whiskeys represent potential gains.
Fashion-forward thinkers can stay ahead of the crowd in the sneaker markets.
Melomaniacs (music lovers) can leverage their intuition for music royalties.
Today, we’ve finally got something for the sports fanatics – investing in athletes.
For billionaires, that means owning a professional sports team (the ultimate flex).
While that prospect is out of reach for the rest of us, that doesn’t mean we can’t add jocks to our portfolios.
These are the primary ways to invest in athletes that should serve as good starting points for further digging.
A company crushes earnings, raises guidance, increases dividends, and boosts share buybacks.
The stock goes up, naturally.
Performance-based investing in athletes works the same way – your QB scores a touchdown or your tennis star wins a tournament, their value goes up.
Founded by Marc Lore and Alex Rodriguez and backed by Tiger Global, Mojo is an investing platform where you can trade athletes like you would stocks.
Determined by expected career stats and projections, a player’s share price will fluctuate in real-time according to their on-field performance.
The platform currently allows investors to go long and short on over 400 NFL and NCAAF players with plans to expand to all sports and all athletes.
Mojo charges 2% commissions on trading and is state-licensed in New Jersey.
Similar to Mojo, PlayerSX is a virtual online player stock exchange that offers payouts for performance.
Offering daily and season markets, the exchange uses a predictive model algorithm to determine real-time share values for players in the NFL, MLB, and NHL.
PlayerSX is available in all 50 US states.
Simbull + All Sports Market
Both offer the stock-like trading of teams with a TradFi twist not present at Mojo or PlayerSX.
While investors can still earn money via share appreciation (i.e., trading), they also earn payouts (i.e., dividends) every time their team wins.
Investing directly in athletes
While these options above claim to allow for investing in shares of athletes, in reality, they function similarly to the way fantasy sports work.
Investors see a return if the athlete performs well.
For these next options, performance is only a precursor.
Backed by Comcast-NBC, Finlete is a platform for finding and investing in talented young athletes.
Using a team of scouts, the company evaluates promising prospects across the world and then signs them to a future earnings contract.
For example, they might uncover a budding star before they’ve reached the “big time” and offer them $500k in exchange for 10% of their future MLB contract.
Once athletes have been signed, users can choose to invest for their share in the potential future earnings.
Finlete isn’t open for investment yet, but their waitlist is.
Carry brings the angel investing model to the world of golf.
The platform features up-and-coming pros who are working their way up the rankings and connects them with accredited investors to facilitate financial contributions.
In return for the upfront funding, golfers who achieve full status on the top tours (PGA/LPGA) make payments to investors at pre-determined rates and defined durations (as per contractual agreements).
Eventually, Carry aims to enable direct investing in golfers for all market participants.
The blockchain has entered the chat.
Backed by The Sandbox and focusing on tennis, Fantium allows athletes to tokenize part of their prize money, or even career earnings, for sale.
After choosing what percentage to tokenize, athletes mint NFTs that represent ownership in their earnings and sell them directly to investors who can either hold them to participate in the athlete’s financial success or trade them on a secondary NFT market like OpenSea.
Athlete investment funds
We’ve already seen private equity come for your hometeam, but institutional investors have also been wading deeper into sports with athlete-focused funds.
Just like evaluating companies and stocks, analyzing players requires unique knowledge, experience, and skills.
These examples leverage all three.
Big League Advantage
Using a team of experts in machine learning, data science, and predictive statistics, Big League Advantage (BLA) scouts baseball and football prospects.
Having perfected the model after which Finlete above is based, the fund offers players upfront capital for a portion of future contracts.
To date, BLA has signed more than 400 athletes and deployed close to $156 million over two funds, the first of which was responsible for the firm’s biggest score yet – Fernando Tatis – whom the firm snagged in 2017, four years before his $340 million contract with the San Diego Padres.
It is currently seeking to raise $250 million for its third fund.
Chisos Capital Fund III
Chisos is a venture capital firm that invests in people rather than companies.
I don’t mean that in the way cheesy company mission statements mean it, I mean they literally invest in people via CISAs (Convertible Share Income Agreements).
Now, it’s launching a fund focused on athletes.
For deal flow, it will leverage partnerships with scouts, leading sports agents, and marketing agencies to identify promising athletes across all sports—NFL, NBA, MLB, volleyball, tennis, etc.
After signed athletes cross a minimum salary threshold, the fund will receive a designated percentage of their monthly income and provide quarterly cash flow to investors.
Chisos will be raising in Q1.
An early-stage company, EVO is taking a similar approach to investing in athletes.
Employing a range of veteran scouts, former talent agents, VCs, and entrepreneurs, it’s targeting the racing, music, and e-commerce segments to find athletes, celebrities, and influencers whose talent, careers, and marketability exhibit high chances of success.
When these individuals earn money, the fund distributes 5% of revenues received to shareholders.
EVO is not yet open to investors.
As with any asset class, the concept of “past performance is not a guarantee of future results” is front and center when investing in athletes.
An all-star season is great but it does nothing to assure next year’s numbers. Just like companies (more so, even), athlete performance experiences fluctuations—sales dip for a couple of quarters while players go through funks and cold streaks.
There’s also the possibility of injuries and retirements, factors unique to this asset class.
Furthermore, markets for athlete investments are relatively illiquid which can make connecting with a buyer/seller very challenging.
Having said that, investments in athletes represent an asset class largely uncorrelated to traditional markets (i.e., Mike Trout is going to hit roughly the same amount of homeruns whether we’re in a boom or a bust cycle) with the potential for outsized returns (see Fernando Tatis’ contract above).
For portfolios of investors looking to diversify away from stocks, an opportunity is present in jocks.
As with all things investing, DYOR (do your own research)!!
Until next time…