Due to the high emotionality, many investors shy away from investing in the sports sector. A Spanish asset manager sees attractive opportunities in this sector in particular and has even increased its investments during the pandemic. Fund manager Luis García explains why he invests in Dortmund and Ajax.
The Spanish asset manager MAPFRE has doubled investments in football clubs in its MAPFRE AM Behavioral (ISIN: LU1860585006) fund from five to ten percent since the corona pandemic and invests in Borussia Dortmund, Ajax Amsterdam and Olympique Lyon, among others. "The pandemic was the worst possible stress scenario for the football industry in Europe. Of course, it has had an impact, but due to UEFA's strict financial control, the scenario is not as bad as it could have been. If the pandemic had occurred ten years ago, it would have been a disaster, and many football clubs would have gone bankrupt. But football clubs are still far below pre-pandemic levels. This means that we see this as a very attractive investment opportunity," luis García, fund manager at asset manager MAPFRE, told Fundview.
The MAPFRE AM Behavioral Fund invests in European equities, focusing on sport as an industry – in particular European football. "We believe that there are very attractive opportunities here that are underestimated by the market. The reason for this undervaluation is due to the high emotionality and the associated scepticism of many investors and analysts," says García.
In the event of defeats in major tournaments, player injuries or a transfer, the reaction of the stock market is very volatile. García therefore points out: "If, for example, a club is eliminated from the Champions League, it can lose eight to ten percent in one day. That's why it's a problem when an investor has only a short time horizon. Our thesis is that the clubs will do well in the long term, which is why we have an investment horizon of five to seven years. Some of the clubs we invest in have a very low level of debt, they pay dividends and are therefore good companies."
Doubling of football investments during the pandemic
25 percent of the fund is invested in European sports, ten percent currently in football clubs. Investments are currently being made in the clubs Borussia Dortmund, Ajax Amsterdam and Olympique Lyon. García explains: "We prefer to invest in clubs that not only make money in the content or real estate business, but that are also able to regularly make a positive net profit by buying talented players cheaply and selling them at a much higher price. Higher revenues will also lead to higher transfer prices in the coming years."
Already in 2011 there was a major upheaval in the football sector, namely the introduction of UEFA's Financial Fair Play (FFP) regulations. García explains: "In that year, European football clubs lost a total of more than 1.7 billion euros, which made it impossible to invest profitably in this industry. From this year on, however, the situation improved significantly, and European football clubs generated a positive net profit of several 100 million euros before the pandemic. That was when you could start thinking about investing and looking for specific opportunities."
García wants to use emotionality as an advantage for himself. "The football news often focuses on the negative, not on the positive developments. This is obviously causing some investors and analysts in this sector to hold back. This is especially the case in Europe. U.S. investors are less emotionally biased and better understand what's going on in the sports business, and are therefore more likely to invest in soccer clubs," García said.