Family Offices Entering Sports: A Trend Worth Watching

You’ve probably heard the term “family office” before and that makes sense considering…

40% of family offices have been created in the past decade.

The thing is — most people don’t know what family offices are and what they do…

And these ultra-high-net-worth families are garnering a passion for sports.

Let’s Dive In 👇

What’s a Family Office?

Family offices are private companies for ultra-high-net-worth individuals (UHNWI) whose employees help manage a family’s assets, needs, and wishes.

  • A single-family office is a privately controlled staff employed within or outside a dedicated structure that supports an affluent family with the organization, management, and maintenance.
  • A multi-family office is the same, except that it is a commercially operated organization that supports several affluent families.
graph of a family office

The first American family offices were created in the 1880s by the Rockefeller’s and Vanderbilt’s.

Most family offices have $250M+ in assets.

The main goals of a family office:

  1. grow the assets
  2. estate planning
  3. wealth transfer
  4. philanthropy

Historically, family offices operated discreetly, shielding the wealth of affluent families from the public eye.

That is changing quickly…

As private equity disrupted the public markets in the 1980s — financial advisors say family offices will disrupt the private markets over the next several years.

The Boom of Family Offices

Here are some stats demonstrating the growth of family offices:

  • Family Office Population: 10,000 single-family offices (SFOs) and 5,000 multi-family offices (MFOs) worldwide.
  • Wealth Managed: $10 trillion in assets.
  • Growth Rate: The number of family offices nearly doubled between 2008 and 2018.
  • Asia-Pacific Region: 44% growth between 2017 and 2019.
  • Wealth Transfer: $84 trillion will get transferred from baby boomers to the next generation — the largest wealth transfer in history.
  • Investment Strategies: 60% of family offices have increased their exposure to private equity and venture capital.

Investment Strategy

Wealthy families own many kinds of assets:

  • cash
  • equities
  • real estate
  • fixed income
  • alternative assets

Traditionally family offices focused on passive investing — but we are now seeing a more proactive and direct approach.

This is evidenced by the growing trend of alternative investments, co-investments, and venture capital participation.

family office investment tree
*slightly outdated but a great chart

Family office staff like to work with outside investment experts to develop a well-balanced investment policy across different asset classes.

A handful of athletes are starting to create family offices as well (Lebron James, Serena Williams, Lionel Messi, etc).

Stats show that 68% of family offices have allocated funds to venture capital, reflecting a keen interest in fostering innovation and contributing to the entrepreneurial ecosystem.

And family offices are starting to gain a keen interest in sports…

Family Offices in Sports

Professional sports are becoming more democratized.

Historically, it wasn’t easy to invest in sports — but there are increasing opportunities.

  • ability to buy minority stakes
  • options to sell assets as they mature
  • emerging leagues with promising economic upside

Being involved with sports assets gives families a tangibility that other investments don’t have (and the historical returns are impressive).

CAGR of sports teams

You have to treat sports like any other investment though — it’s not just a trophy asset class.

When you do that you can create sustainability, which comes via multiple revenue streams and increasing opportunities:

  • teams
  • media
  • events
  • leagues
  • software
  • hardware
  • facilities/stadiums
  • and many other verticals

What’s cool about sports…is that it continues to stretch into other categories as innovation improves (drastically increasing the TAM).

Looking Ahead

I was speaking with a prominent individual in youth sports, and he said that taking family office money for their startup created more problems than benefits as there was no speed.

*Family offices are often referred to as “patient capital” because there are no timetables for returning money.

Whereas taking private equity money helped the company go from $10M to $250M in revenue in a few years (along with a massive exit).

sports family office

As family offices become more interested in sports as an asset class — deploying capital to investment experts through VC and PE seems to be a sound strategy.

Sports are innovating fast, the assets require a nuanced understanding, and those who are nimble with ears to the ground will drive the greatest returns.

Exciting times are ahead!

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