Sports-focused private equity firm Arctos Sports Partners has $2.9 billion in assets in its first fund and has made 14 investments, according to a person familiar with the fund’s details.
The updated figure means the Arctos Fund I has more than tripled its assets under management in 2021, based on a regulatory disclosure that the firm ended last year with $866 million in assets. The fund is backed primarily by institutional investors and, given its size, is likely to stop accepting money from new investors soon, according to the person who asked not to be named because the information is private. Among the investments Arctos has made are a minority stake in Fenway Sports Group, parent of the Boston Red Sox, Liverpool FC and Roush Racing, and sizable limited partner equity in the NBA’s Golden State Warriors and Sacramento Kings. The other investments haven’t been disclosed, and it isn’t known how much of the firm’s capital is yet to be invested.
Arctos is one of a number of private equity businesses seeking to buy into professional sports teams given the rapid rise in franchise values. North American sports teams have increased in worth an average of 12% a year since 1991, about 50% faster than the stock market’s annualized growth. The funds that invest through Arctos, such as pension funds and sovereign wealth funds, also find appealing the relative lack of correlation of sports teams values to other asset classes and are willing to lock up capital for long periods of time to participate. Sports team owners like the inclusion of private equity into the ranks of limited partners to replenish the pool of potential buyers, as skyrocketing price tags shrink the number of wealthy individuals who want to buy in. The NBA approved a framework for institutional investor ownership this year. MLB and MLS also permit funds to own stakes in clubs. Arctos has also stated its business strategy is to invest in the NFL, NHL and European soccer clubs, although those two American leagues have yet to amend their ownership structures to permit funds as limited partners.
Arctos was founded in September 2019 by Ian Charles, who helped lead a similar, non-sports strategy at Landmark Partners. The Arctos fund had accumulated $421 million in assets by April 2020 and was managing $866 million by year’s end, according to filings with regulators. Charles is a managing director of the firm along with David “Doc” O’Connor, former CEO of Madison Square Garden, the owner of the New York Knicks and Rangers. Earlier this year, former baseball general manager Theo Epstein joined the company as executive-in-residence, one of 15 senior advisors on staff at the private equity fund now.
Separately from the private equity fund, Arctos is a sponsor of the Arctos Northstar SPAC, which collected a net $317.7 million in proceeds from its February IPO and related fund raising. The SPAC is still seeking a target in the sports, media and entertainment sectors.
A spokesperson for Arctos declined to comment.