Institutional investor interest is accelerating in the realm of sports investing and the Kingdom of Saudi Arabia is playing a pivotal role. Vidrio's attendance at the Bloomberg Power Players event will recap some of the highlights of these discussions across gender equality, private equity allocations in the region, and future growth strategies.
By: Hattan Jabban, Business Development Executive, Vidrio Financial
For those following the developments around Saudi Arabia’s Vision 2030 there’s a lot to unpack on the future diversification plans for the Kingdom and what can become achievable across the land of dreams and hopes. Last month, Vidrio Financial attended the Bloomberg Power Players event in Jeddah, to gain more intelligence on the Kingdom’s expenditures as it relates to sports investing and private equity, against a backdrop of rising interest in the region and how institutional investors are managing through this environment.
Setting the stage:
Over the last few years, Vidrio has seen more interest across Saudi Arabia from outside investors and allocators looking to establish business relationships and partnerships in the region. Fund managers are setting up satellite offices in hopes of attracting sovereign wealth capital in exchange for diversifying the region away from oil as more of the world turns to alternative energy solutions. A recent Forbes article highlighted some of the recent (non-oil) sports-related deals that have been driving this diversification push around the globe originating from this region. A few include:
- LIV Golf's proposed merger with the PGA
- ATP's 5-year partnership
- Investments in the 2027 Asian Cup and 2034 World Cup, along with buying Newcastle United.
Focusing on gender equality:
Following opening remarks from H.R.H Khalid Bin Sultan Al Abdullah Al-Faisal, President of The Saudi Automobile & Motorcycle Federation and Chairman of Saudi Motorsport Company, attention turned to the panel: Formula 1 in Focus - featuring Zak Brown, CEO, McLaren Racing, Susie Wolff, Managing Director, Formula One Academy, which was moderated by Jason Kelly, Chief Correspondent, Bloomberg Originals; Host and Executive Producer, The Deal and Power Players.
The conversation lasted for 30 minutes and focused on the progress of gender equality in the region, which McLaren’s team endorses for their racing teams and has recently included two female drivers in their lineup. The panelists agreed that the region and the sport should do more to further promote diversity while creating pathways for women to excel. In our travels across the Kingdom, Vidrio has connected with several women-led investment firms and family offices. Many have stated that opportunities are growing for women looking to accelerate their careers in institutional investing. These discussions made us think of an interview that Institutional Investor conducted with Sarah Al-Suhaimi, Chairperson of the Board of Directors, Tadawul in 2022. During that Q&A session, Ms. Al-Suhaimi detailed a lack of mentors during her early career years. When we listened to the talks at the event we see direct improvements in how women are rising higher in government agencies and many are starting new small and medium-sized businesses in the Kingdom, as Ms. Al-Suhaimi pointed out.
McKinsey & Company published a study on the level of diversity in global private markets. The report’s findings were positive with overall diversity increasing. In terms of gender diversity, there is still more room for improvement as many opportunities are available for females in non-investing roles, but the numbers drop significantly when moving from operating to C-suite. Full report takeaways can be found on the McKinsey website, but one helpful chart is detailed below.
In conversation with Amanda Staveley:
Amanda Staveley, CEO, PCP Capital Partners; Co-Owner, Newcastle United FC was joined by Giles Turner, Managing Editor, Bloomberg, for the next CEO spotlight conversation, covering sports ownership and management. The high-level overview of this discussion highlighted that the landscape is evolving rapidly and allocators looking to invest will need to pay attention or be met with greater investment risks. Whether the investment is in football, golf, basketball, these investments should no longer be perceived as toys for the wealthy, but viewed as financial assets that will have layers of regulatory changes and rules for investing. Valuations should be measured and go beyond player turn-over, addressing the changing environment in football (soccer to our American readers).
In Amanda’s opinion, having an eye towards innovation and sustainability practices will help the industry, not only in developing talent but understanding better ways to generate revenue growth through broadcasting partnerships, multi-club models and more. From Vidrio’s perspective we’re seeing more allocators actively investigating ways to run or configure “test” portfolio simulations for new types of institutional assets. These test portfolios are valuable, as investors can review and adjust monthly returns, contributions to VaR, tweak portfolio allocations, and review time series or position level risk. As regulations increase and more transparency is required from family offices, sovereign wealth funds, endowments, asset managers, and OCIOs, we believe what-if scenario analysis will become a greater need for allocators looking for sports related angles to institutional investing.
Sports and private equity for allocators:
The growing enthusiasm for sports investing from private equity shops led to the creation of this next panel From Passion to Profit: Sports & Private Equity featuring David O’Connor, Managing Partner, Arctos Partners, Danny Townsend, CEO, SRJ Sports, and moderated by Jason Kelly, Chief Correspondent, Bloomberg Originals; Host and Executive Producer, The Deal and Power Players. Panelists acknowledged the long-standing tradition of wealthy individuals owning sports teams but now a shift is occurring where institutional capital is being leveraged as an up-and-coming asset class. This is due to several factors including:
- Massive global audience – especially around live events.
- Dedicated, loyal fan base – this can contribute to the longevity and value of sports franchises.
- Additional sources of capital growth and liquidity – especially when considering other private market investments where capital can be locked up for 5 years or more.
However, according to the panelists, challenges will continue to exist as more institutional capital flows into this asset class. Panelists concurred that the worth of the teams will depend on their revenue growth, profit, internationalization of their IP, and other factors related to real estate and hospitality near their base of operations. The identification of growth drivers and value creation by institutional investors was an important takeaway from this discussion.
As mentioned in earlier panels, women are taking on a greater role in sports and bringing new audiences and more engagement to the industry. Panelists thought this could also lead to trackable growth drivers for those institutional investors that are interested in this asset class. Prior to the hiring of Stephen Gilmore as the new CIO for CalPERS, former CIO, Nicole Musicco had plans to incorporate more sports vertical investments into the CalPERS portfolio. Time will tell if Stephen continues those plans but CalPERS are not alone in their desire to diversify to other assets like sports teams. In 2023, the parent company of the Washington Capitals and Wizards sold a 5% stake to the Qatar Investment Authority, (QIA).
Vidrio, together with Alternatives Watch, published our 2024 Investor Compendium that examined asset classes in the institutional sector. We think that sports investing will keep growing in infrastructure and real assets, two domains where these areas increased by $3.2 billion and $1.7 billion respectively.
Download more of the intelligence from the 2024 Investor Compendium today.
Although Vidrio clients have not onboarded a sports-only focused portfolio yet, we expect that will occur soon as portfolios further look to diversify and deploy new assets. The Vidrio dashboard can analyze qualitative and quantitative data to explore how these types of allocations can create excess returns.
Footballs impact on growth strategies:
The final panel of the day was titled The Future of Football and featured Carlo Nohra, Chief Operating Officer, Saudi Pro League, Emeric Hudault, Chief Financial Officer, Fosun Sports Group, and was moderated by Vonnie Quinn, Anchor, Bloomberg Television. This panel built on the discussion and massive interest of private equity in sports but turned the focus to sovereign wealth funds.
Saudi’s Public Investment Fund followed the QIA's basketball investments by putting money into four football clubs. Many wondered if these investors would be enough to turn tourism in the future from Europe (and the English Premier League) to a revitalized Saudi Premier League.
For allocators in the audience, this was an important discussion as the panelists set the tone for building an effective growth strategy and weighing that against audience engagement through matchday experiences, ticketing, stadium accessibility, and facility upgrades. Parallels on this discussion could be drawn for further infrastructure goals as it relates to the Kingdom’s larger 2030 plans. By the last count, those plans are estimated at $1 trillion worth of new construction projects including reaching net zero by 2060, building up healthcare infrastructure to ~$67 billion, the rollout of smart cities, and more.
We enjoyed our time at the Bloomberg Power Players event and look forward to future installments of these discussions. It was easy to see with the time that we spent at this event that sports investing will be transformative for Saudi Arabia, through increased tourism, infrastructure development, and the further diversification in energy strategies. Interest is growing from both private investors and institutions, and many believe that this will have a positive impact to the country’s economy and well-being of its people.
