Arctos Sports Partners Approaching $2.5 Billion with Fund II
Editorial Credit: Conor P. Fitzgerald
A while back I wrote about private equity investments in sports teams, particularly CPS Arctos Sports Fund I. It is one of the biggest investors in major and minor professional sports teams (3 NBA Franchises, 3 NHL Franchises, 2 MLS Franchises, 7 MLB Franchises and 3 teams in European Football). There are also investments in “minor league” franchises in all sports. In fact, during 2021-2022 many billions of dollars were invested in sports franchises, especially European soccer teams, such as AC Milan and Chelsea Football Club.
Arctos closed Fund I in 2021 after raising $2.9 billon. Management made 25 investments, claiming the lead in North American leagues for pursuing sports team ownership opportunities.
Allowing private equity firms to invest in teams is a strategic move by the sports leagues. When there are more investors, demand increases. Since there is a very limited supply of professional sports teams, demand usually exceeds supply. That’s always a cause of inflation (the law of supply and demand), and in this case the reason prices for teams (their value) rise. This helps the team owners, majority and minority, and the private equity firms.
I was fortunate to be allowed to invest in the Fund. And by “allowed” I mean the fund is not traded on the open market, and to be an investor you need the approval of the fund. What my investment in Arctos means is that I’ve taken a small stake in someone else’s small stake in a group of professional sports teams. Taking into account all the teams Arctos has invested in, and the number is impressive, they’ve diversified to reduce any risks to all investors, including me. And because my investment isn’t in the billion-dollar range, I should be able to sell when I wish – hopefully at a nice profit.
Editorial Credit: Raffaele Conti 88
Update: Arctos Sports Fund II
Sequels seem to pay (See Top Gun: Maverick and Avatar: The Way of Water). Arctos Sports Fund I was so successful, the “sequel”, Arctos Sports Fund II, is close to selling out. The new fund was launched in late 2021 with a $2.5 billion target. It is expected to reach that goal in the second quarter of this year.
Arctos has an advantage over other sports investment firms. It is the only one approved for investing in four U.S. major sports leagues: Major League Baseball (MLB), Major League Soccer (MLS), the National Basketball Association (NBA), and the National Hockey League (NHL). And with Fund II, Arctos appears to be planning for fewer deals, compared to Fund I. It’s targeting 15 to 20 investments of $50 million to $500 million. The prior range was $20 million to $400 million.
Will Arctos Sports Partners Fund II be a Winner?
If history is any judge, yes! Arctos Sports Partners Fund I is so far performing strongly. As of September, it was generating a net multiple of 1.51x and a net IRR (internal rate of return) of 86.7%. With a target of $2.5 billion, those figures mean there’ll be plenty of profit to go around.