Sports: The great forgotten thematic investment?
Sports are probably the most overlooked thematic investment globally. In the catalog of different fund managers, we find funds specialized in robotization, artificial intelligence, population pyramids, etc., but not a trace of sports. This reality is curious, since the sector has both characteristics that generally attract investors (medium-term visibility, ease of business understanding, and competitive advantages) and clear tailwinds for the coming years.
The world of sports ignites the passions of millions of fans all over the world. However, as a form of economic activity, it also generates employment and revenues at levels comparable to those existing in other more conventional industries. The international scope of sports as a form of mass-market entertainment is now a major economic presence, representing around 1.5 to 2 percent of global GDP, 2 percent of Europe’s GDP, and more than 3 percent of Spain’s GDP.
We are also living at a time when socially responsible investments are gaining more and more weight. Without a doubt, sports stand for inclusion, values, solidarity, care for the environment, etc., and, in recent years, they also reflect an interesting improvement in corporate governance standards.
So why aren’t more investors taking positions in sports-related companies? Perhaps behavioral economics offers a good explanation. As many of you may already know, this is the branch of economic science that incorporates teachings and concepts from psychology to better understand how humans make decisions.
In general, it is difficult for human beings to change their opinion on any one aspect. However, stories of change sometimes offer good investment opportunities. Unfortunately, our brain works the opposite way: the closer our connection to a certain situation, the more difficult it is for us to see it in a different light. Perhaps that explains why, given the improvement in the fundamentals of the sports sector in Europe and its striking undervaluation compared to the US, the first investors who have begun to take positions have not been local investors, but investors on the other side of the Atlantic. Will we see a change in the trend?
The Mapfre AM Behavioral Fund, our European equity fund that focuses on the study of market psychology, has for several months been exposed to the sport industry to the extent of around 25 percent of its total assets. It is by far the most important sector in our portfolio.
We are shareholders in companies such as MIPS AB, Technogym, Adidas, The Gym Group and, perhaps most strikingly, three soccer clubs, which account for almost 13 percent of this fund’s portfolio: Borussia Dortmund, Ajax Amsterdam, and Olympique Lyonnais. European soccer has gone from being a place where it was unthinkable to invest in a rational way to representing, in our opinion, an interesting opportunity for those who are willing to leave their preconceptions behind.