By most financial measures, the NFL is ascendant in U.S. sports.
The league boasts the highest team values on average, the best TV ratings and the most active venture capital arm.
But there’s one aspect where the NFL’s superiority is causing it to lag other North American sports competitors, including MLS: The NFL is just too American, in all likelihood, to appeal to sovereign wealth funds.
“Whatever entities are investing is, in part, so they can bring that back to the [home] market, but American football is unique. The NFL is the least likely area where a wealth fund might invest,” Sovereign Wealth Fund Institute CEO Michael Maduell said in a phone call. “The other sports are much more to their palate. Soccer is almost universal, which is why you see sovereign wealth funds investing in those teams. Golf is everywhere… even baseball to a point, even basketball to a point.”
Whether sovereign wealth funds want to invest in NFL teams is purely academic right now. The league doesn’t allow wealth funds, or institutional investors of any stripe, to own stakes in the teams, related businesses or even their stadiums. But it may not be a parlor game forever: Given the ever-increasing values, finding new owners to bid up team sale prices in the coming years could be an issue.
The average franchise is now worth $5.1 billion, and the pool of rich football fans is pretty shallow. There are only 190 people on the Forbes 400 list who have wealth of at least $5.1 billion, but the realistic number of buyers is probably well smaller than that, given the wealth of the superrich tends to be tied up in the stock of one often illiquid business. That leaves perhaps four dozen or so potential American buyers with enough money to easily buy in—and five of those already own an NFL team.
Meanwhile, the top 100 sovereign wealth funds around the world have $11.9 trillion in assets. Hence the potential appeal of sovereign wealth funds, something NFL commissioner Roger Goodell told CNBC the league would “contemplate.”
But the lack of popularity in playing the sport outside North America means the NFL has one big hurdle. SWFs as a near-universal rule have mandates to invest in ways that benefit domestic people in some manner, such as funding local infrastructure and startups. The NFL also faces a linguistic hurdle to appeal to international buyers, since even countries like Ireland and Australia that also use the term soccer have their own versions of football that necessitate specifying the American brand. “Football—American Football—is, well, American,” said University of Buffalo finance professor Veljko Fotak in an email. “[It’s] a curious choice” for an SWF to invest in.
That leaves one main motivation for SWFs to invest in an NFL team: as an avenue to buy influence in the U.S., according to both Fotak and Maduell. In that case, it may be a non-issue that the NFL doesn’t allow—or find appeal among—SWFs.
“I do not see SWF appetite for sports waning any time soon. But let’s be clear—the trend is driven by Qatar and Saudi Arabia,” Fotak said. “We are not seeing Norway buying sports teams. If you think that players kneeling during the national anthem was controversial in 2016, wait until those same players become employees of the Kingdom of Saudi Arabia.”
Still, the acceptance of institutional money has already been seen in most other sports. The Qatari sovereign wealth fund recently bought a slice of the parent of the NBA’s Wizards, while private equity investors like Ares and Arctos have been actively financing MLB and NHL teams as well as NBA, MLS and many smaller pro leagues.
Future acceptance of private equity limited partners could be the way sovereign wealth money quietly gets into the NFL. “Public pension plans, sovereign wealth funds and endowments are already investing in sports teams through private equity vehicles and are getting exposure,” Maduell said.
Indeed, there appears to be a movement among SWFs outside the Middle East to add more private equity to their portfolios. Norway’s fund, the world’s largest at $1.5 trillion, this spring asked government permission to allow it to invest in private equity. The fund today invests mainly by simply tracking global stock and bond indexes and so already owns small equity stakes in Madison Square Garden Sports and the Atlanta Braves, as well as some bonds of the Superdome in New Orleans. Korea’s $169 billion fund probably directs $11 billion to U.S. private equity, based on various disclosures by the fund. Similarly, Australia’s $175 billion Future Fund has $12 billion in U.S. private equity. Most other SWFs don’t disclose much of their investment mix or strategy, but smaller ones that do, like Ireland’s $16 billion venture-capital style Strategic Investment Fund, appear to dedicate a similar percentage to U.S. PE.
The appeal for SWFs is that private equity isn’t as volatile as the broad stock and bond markets and tends to be a more profitable investment. That’s true even more for sports, which have enjoyed long-term value appreciation that mostly seem insulated from the daily gyrations of the markets. “People play sports no matter what,” Maduell said.
But even among those skeptical that SWFs would find much to like in an NFL franchise, there are still signs that the NFL’s appeal may not be as singularly domestic as they claim. For instance, the SWFI’s next conference of global sovereign wealth money managers is taking place this autumn in Dallas, “at the state-of-the-art headquarters of five-time Super Bowl champions the Dallas Cowboys,” its promotional brochure states.
