Player rights, while uncomon in american sports, have become quite popular in the soccer world, where third parties not involved with any teams have begun buying and trading the rights the individual players. Investors can buy all or a portion of a player’s rights, which may allow a smaller or underfunded club to purchase a player it otherwise could not afford. When that player is traded, the investor recevies a proportionate share of the fees involved in the transaction.
Q. So we’ve been talking about the National Championship Game tonight, so staying with the sports theme we can talk about an interesting type of alternative investing that not too many people know about…
A. Right. Not with American football just yet, but in soccer, a whole investment scheme has arisen around owning the rights to individual players. When a player gets transferred from one team to another, there are usually fees paid by the new club to the old club. But a pretty big business has arisen in outside 3d parties to own some of those rights, and to share in gains when the player is transferred.
Q. Sort of the ultimate in fantasy sports! But is this really serious? Do investors actually do this?
A. Yes, they really do. And it actually makes a lot of sense for the second and third tier clubs– they can afford to buy player rights that they otherwise couldn’t afford by having outside investors share in acquisition costs. Then, if the player becomes more valuable over time, the club sells his rights at a higher price, and the investor gets his share.
Q. So where is this popular? How do the governing bodies feel about it?
A. It started in South Africa, then spread to Latin American and Europe. It’s banned in England but popular elsewhere. FIFA says that it doesn’t like the practice, but, so long as the investor doesn’t actually get the ability to veto transfers or be directly involved in a subsequent sale, its OK under current rules and, given how much it actually helps some clubs, my guess is that it’ll be around a while.
Q. And have the investments turned out well?
A. So far, and although the data on it is certainly sparse, the answer seems to be “yes”. A couple of funds have sprung up in Europe, and some HNWs do individual deals, but when young players take off their rights can appreciate by hundreds of percent. So owning a piece of that can work out very well.
Q. But nothing like this here in the US.
A. Absolutely not… yet! But some people do think its bound to be a model for other sports going forward given the increasing costs of staying competititve…