Hedge Fund Fantasy Football

Last week, the WSJ has an article about a Portuguese hedge fund that invests in soccer player in the hopes of profited on transfer fees as the player improves and his club then sells him to a bigger and wealthier club, such as was done with Christiano Ronaldo in whom the fund had an interst. In commenting on this article, Skip Sauer at The Sports Economist indicated a belief that the fund had no real influence on player movement.

While I tend to concur with Skip at this point. I think the existence of the fund allows some Portuguese teams to participate in player development that might not have the resources otherwise, I do think that this model may be the beginning of a trend that could widely impact European soccer. If this trend develops, or if Mr. Goncalves is successful in raising additional funds and expanding to other countries as he desires, then the impact could grow substantially. What I could foresee happening is two separate developments. First, smaller clubs could gain access to capital that could allow them to participate in the transfer market more often as buyers rather than strictly as sellers. Secondly, larger clubs will have even greater access to capital to compete for players and the transfer prices may climb even further. Chelsea may find that it actually has competition for players.

We have already seen hedge funds enter European football on the team side. Malcolm Glazer financed his purchase of Manchester United with money raised from several hedge funds and it's likely that other team purchases in recent years have been backed by funds as well. It is increasing likely that hedge funds, or their managers will be involved in future team sales as well as the financing of existing team operations. European football at the highest level has simply become too expensive to operate without them