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Arctos Sports Partners plans to focus on finding more deals in its US home market because of the financial unpredictability of European football, says the co-founder and managing partner of the new Paris Saint-Germain shareholder.
Ian Charles said that while Arctos was open to working with more teams in Europe, the firm was far more likely to invest in the US where there is “no shortage of opportunities” for generating reliable returns from sport.
“We want to invest behind global brands that have the predictability and the durability and resiliency and the dynamics that are commonplace in North American sports assets,” he added. “Finding those outside of North America is difficult.”
The sports specialist firm, which typically targets stakes in individual teams rather than leagues, recently closed its second dedicated sports fund after raising $4.1bn, overshooting its $2.5bn target. About a third of the new fund’s capital has been allocated.
Arctos has recently been active in Europe, having concluded a deal in December to buy up to 12.5 per cent of Qatar-owned football club PSG. The agreement valued the French champions at more than €4bn.
The firm also invested in UK-based motorsport team Aston Martin F1 at a £1bn valuation late last year, and has an indirect shareholding in Liverpool FC and a small stake in Italian side Atalanta.
Charles said that while it would be “fantastic” if Arctos could find more opportunities outside the US with a similar profile to the PSG and Aston Martin deals, he said it would be a “surprise” if the firm made another large European investment in the coming 18-24 months unless it was to help an existing partner expand into the region.
“Our firm’s data advantage, brand advantage, operational advantage . . . is in North America,” he said. “And where private equity firms often run into trouble is when they move outside of their zone of competency.”
European football has become increasingly popular with US investors in recent years, with Americans now owning stakes in dozens of clubs. However, Charles said the European sport model — with promotion and relegation, broadcast money distributed based on league placing, and a small group of dominant teams in each country, made it a less attractive investment proposition.
“Every owner in North America gets paid the same amount from its league, no matter if they’re in first place or last place,” he said, making it “more predictable than just about anything else you can invest in private markets”.
Through both direct and indirect stakes, the firm already has exposure to several baseball teams, including the Boston Red Sox and the Los Angeles Dodgers, as well as a number of basketball franchises, such as 2022 National Basketball Association champions the Golden State Warriors, the Utah Jazz and the Sacramento Kings.
Dallas-based Arctos is one of a small group of professional investors that have been pouring money into sports in recent years. Others include private equity firms RedBird Capital Partners, Ares Management, Silver Lake, Sixth Street and CVC Capital Partners.
While private equity investors are barred from owning teams in the National Football League, the world’s richest sports division, several groups are gearing up for a possible change to the rules.
Last year set a new record for sport-related investment, thanks to a handful of large transactions including the $6bn sale of the Washington Commanders NFL franchise to Apollo co-founder Josh Harris and the deal to combine World Wrestling Entertainment and the Ultimate Fighting Championship.
Charles said the firm’s recent fundraising was a sign of strong appetite among institutional investors, including insurers, pensions funds and family offices, to put money into the sector.
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