After Premier League clubs splashed millions on transfer deadline day, Freddy Barker investigates how HNWs can get a slice of the profits by investing in players
With the likes of Arsenal making £24m on Robin Van Persie’s transfer and Lille making £32m on Eden Hazard’s, HNWs will be intrigued to know that the third-party ownership of football players is an increasingly possible, popular and profitable way of investing funds.
Alex Ferguson and Robin Van Persie
‘It’s about the ownership of a football player’s economic rights,’ says Karish Andrews at Lewis Silkin. ‘Investors – typically football agents, sports management agencies, investment funds or HNWs – acquire interests in the economic rights of players and, in return, are entitled to a percentage of future transfer fees.’
Currently, clubs are bound by FIFA and domestic rules which means, in short, that the practice is prohibited in England and France. But it is prevalent across the rest of Europe, particularly in Spain, Portugal, Italy and Turkey, as seen in high-profile players such as Hulk, Neymar and João Moutinho being subject to the schemes.
‘If it appeals, HNWs typically invest in offshore funds which then finance a SPV to acquire the economic rights,’ says Andrews. ‘The key is for an investment adviser, normally a football agent, to negotiate the agreement with the clubs.
‘The agent will first scout the right players, typically young players who show large potential, and then negotiate the size of the investment and percentage interest to be acquired. For example, if a player is valued at €5m then the agent may seek to invest €2.5m on behalf of the fund and in return receive 50% of any future transfer fee. If the player then does well and his transfer value increases, the fund will make a return when the player is sold.’
Third party ownership is not without risks though. It is still a developing area and FIFA could change the rules at any point, although that seems unlikely given its increasing prevalence in world football.
What’s more, there are huge rewards on offer. It is not unusual for a player’s value to increase 200-300% over a couple of years if he is developing fast and playing regularly in a high profile league (Carlos Tevez and Javier Mascherano are good examples).
The key to success therefore is to scout well and protect the fund in club contracts.
‘Football remains big business and third-party ownership effectively allows investors to play fantasy football,’ says Andrews. ‘For those who want to invest in football but don’t have the money or inclination to buy a club, it provides a much easier and more palatable fix.’
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