Sixth Street — which manages more than $70 billion — is betting big on sports teams and live events

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“It’s very difficult to buy a sports team and lose money,” Carlyle Co-Founder David Rubenstein recently said in an interview for a CNBC podcast. 

Historically, that purported upside has only been enjoyed by the wealthiest of the wealthy. But most major U.S. sport leagues have – just within the last few years – modified ownership rules to allow for private-equity firms to have minority stakes. Major League Baseball was the first to open its coffers to private-investment funds in 2019; a slew of other leagues followed, including the National Basketball Association, Major League Soccer and the National Hockey League. 

Since the start of 2019, more than $120 billion in private equity and venture capital funds have been funneled into the sports industry, according to PitchBook. A big participant in that is Sixth Street Partners, a $74 billion behemoth, known historically for its direct lending and growth prowess, and has been making big inroads in the sports world in recent years, with several billion dollars’ worth of investments. 

The firm recently co-founded Bay FC, part of the National Women’s Soccer League, alongside several retired players, as well as Sheryl Sandberg. Sixth Street also made investments in FC Barcelona’s LaLiga TV broadcasting rights and a majority investment in Legends, a sports and entertainment experiences company. In June 2021, Sixth Street led a strategic investment with Michael Dell in the San Antonio Spurs basketball team. Last year, the firm also invested in legendary Spanish soccer club Real Madrid.

Alan Waxman, the CEO and co-founder of the firm, spoke exclusively for the Delivering Alpha Newsletter – in his first-ever TV interview – about the firm’s vision in what’s become an increasingly crowded sector. He said technology streaming, and social media are changing the team-fan dynamic. 

“Instead of just interacting with your fans in that local market, it’s opened the floodgates on being able to interact with your customers around the world,” he said. 

Waxman said that 10 years from now, fans will be able to put on a headset from their couch and be virtually transported to a game across the world. 

Historically, investing in the sports space has paid off. Between 2002 and 2021, the average price return for stakes in NFL, MLB and NBA surpassed the S&P 500, with the NHL slightly trailing, according to PitchBook. But the research firm notes that “returns will likely be lower than the prevailing 20-year period. 

And even though minority stakes are typically sold at a discount – due to lack of control – that gap may be narrowing as more and more institutional firms raise dedicated funds for sports. That competition is likely to drive up prices. 

So how does that change the dynamic about whether or not someone can lose money investing in sports? 

Waxman says, in any investment, one has to protect themselves from even the most unlikely scenario. For example, no one saw COVID coming. 

“So would I go so far as to say that you can’t lose money in sports? For a normal investor, I wouldn’t say that,” Waxman said. “What I can say is the way Sixth Street thinks about things, we’re typically able to create opportunities and customized solutions that work for whatever that particular sports team is looking for, but also in a way that protects our investors’ capital.”