A new football fund has just been launched. Are you game?
Football is a beautiful game, at least it was until Thierry Henry got his hands on it, but it has generally been a lousy investment.
Yet it still attracts billions from investors seeking the glamour and glory, and now ordinary investors can get a slice of the action for as little as $25,000.
The London Nominees Football Fund, distributed by Business Glass Group, is targeting offshore and South East Asian investors looking for an alternative to traditional equity-based asset classes: English football.
Football Focus
The fund will invest in clubs, players, franchises, merchandising and other football activities, in a bid to tap into the global popularity of English football. It points out that football is now played and followed in 202 countries, with the European football market earning more than 12 billion euros in 2006. Clubs also enjoy a brand loyalty that is second to none.
Fascinatingly, the Football Fund is also looking to identify English Championship clubs with the facilities and the fan base to cash in by getting promotion to the Premiership. It points out that they can expect a £43 million windfall from TV rights and other incomes if it succeeds.
The fund has hired three grizzled old pros to help guide their choice, Peter Reid, Jim Smith and Neil Sillett, and claims to have three teams in its sights. After buying the team, it says it will build the management structure and player base to achieve promotion.
It may not be that easy of course.
High hopes and own goals
Buying a Championship team with designs on the Premiership is hardly the easy path to riches. Here I have to declare an interest.
I'm a Wolves fan. If my portfolio had been as successful as my team over the last 20 years, I'd be a bankrupt Wolves fan.
In May, 1990 multimillionaire Sir Jack Hayward bought the mighty Wolves for £2.1 million. Over the next 17 years, he invested up to £60 million in the ground and players in a bid to restore the club to the Premiership. They managed just one season at the highest level, and were instantly relegated.
In May 2007, Hayward sold the club to businessman Steve Morgan for a nominal £10 fee, plus the promise of £30m investment in the club. That was a marvellous act of footie philanthropy (thanks, Sir Jack!), but it was lousy investing.
The glory game
A lot of money has poured into football, but I've never seen too many people take money out of it, except for the overpaid players and Rupert Murdoch. People who buy football clubs have generally done it for love (or fame, or glory, or something to do on a Saturday) not money.
I can see the thrill of owning a Premiership club if you are, say, a Russian billionaire who can afford to pack his first team and reserves with the world's best footballers, or you are using your business wealth to buy your boyhood team.
But viewing it strictly as an investment opportunity, you really are taking on an excessive amount of risk.
And it is a form of risk the management has little control over. A star forward's fragile metatarsal, a missed penalty or a controversial last minute handball could rob you of your returns in a moment.
He shoots, he scores
The Football Fund isn't pinning all its hopes on a Championship club, it also aims to score financially (geddit?) by identifying young overseas players with the talent to crack the UK or European market, using its grassroots networks across Africa and Latin America. It will also seek exclusive rights to popular Premiership franchises in Asia, and organise profitable football tournaments and events.
I'm most impressed by the plans to tap in the huge popularity of the Premier League in Asia, although I wonder whether this market is already sewn up by the big four clubs themselves.
Aiming high
The fund is domiciled in Bermuda but run out of Hong Kong and Thailand. Minimum investment is $25,000 and the maximum is $1m.
It is targeting a 7% return in the first year, 9% in the second year, and 10-12% in the third year. If it gets lucky with a Championship club -- and remember they haven't bought one yet -- it claims returns could rise to 40% in a single year.
A long shot
London Nominees aren't the first to give football funds a go. In 1997, Singer & Friedlander launched its own Football Fund, looking to cash in on the football boom of the late 1990s. It also called in an old pro, hiring TV pundit Alan Hansen as an adviser, but it was quickly kicked into touch. The fund turned £1,000 into £761 in four years, and was replaced by the S&F Global, Media and Leisure fund in May 2001.
Anybody who invests in this latest risky venture will be hoping they also won't take be heading for an early bath. Because one thing is certain, this isn't a defensive investment.
Editor's note -- the company that runs this fund has just told us that it is currently broadening its investment objectives and is planning a relaunch on 1 February 2010.
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