Would you like a bank with that football club?

by December 11, 2010

Another view on the merits of foreign investment (Photograph: Shaun Botterill/Getty Images)

It will come as no surprise to avid followers of European football that many of its most illustrious clubs are financially supported today, in part or in whole, by sovereign wealth funds, corporations, and private investors from outside the continent. England’s clubs are particularly good examples of this trend: 100-year-old Chelsea Football Club has been owned (and endlessly subsidized; it’s not a money-maker) for the past seven years by Russian billionaire Roman Abramovich; Aston Villa was sold in 2006 to American Randy Lerner, owner of the Cleveland Browns; Liverpool FC in 2010, to New England Sports Ventures (owners of the Boston Red Sox); Manchester United in 2005, to Tampa Bay Buccaneers owner Malcolm Glazer (yes, American); Portsmouth FC to Hong Kong businessman Balram Chainrai just this year; while Arsenal, the only reliably profitable club in the League, is the subject of a takeover battle between American Stan Kroenke (owner of several U.S. sports franchises including the St. Louis Rams) and Uzbek‑Russian media-industrial oligarch Alisher Usmanov.

Everyone wants a football club of their own, it seems. But what Javier Santiso, professor of economics at Spain’s ESADE Business School, has noticed is that institutional investors who buy into clubs also tend to buy into other companies in the same country. In 2002, the Libyan Investment Authority (LIA), for example, which invests that country’s oil revenues, bought a 5.3% holding in Turin’s Juventus football club (it now owns 7.5%), and since then has also purchased a 2.6% stake in the Italian bank Unicredit and a 2% stake in oil company Eni. Speculates Santiso:

[As] the Italian example demonstrates, it could well be possible that the appeal of national clubs and sports stars produce a greater interest for other assets in a host country. Perhaps this is something to reflect on in the case of Spain, who has just won the World Cup and has top quality clubs, some with absolute worldwide renown: Real Madrid and Barça are ranked as two of the ten most valuable sports brands in the world in the Forbes list. […]

Why not imagine, then, sponsorship of Real by ADIA, one of the largest sovereign wealth funds in the world, located in Abu Dhabi, in the Emirates, and its logo on the club’s shirts? Why not imagine that its rival, Temasek, the sovereign wealth fund of Singapore, does the same with Barça’s shirts? Or the Chinese sovereign wealth funds, SAFE and CIC, the largest of their kind in the world? This could lead to these funds (or other similar ones) also taking a more detailed look at the Ibex 35 companies and thereby helping to draw attention and long-term capital to Spanish multinationals.

Read the rest here.