Investment manager Ares Management is raising $1.5 billion for a new sports, media and entertainment fund, according to an investor presentation deck reviewed by Sportico.
The Ares Sports Media & Entertainment Finance L.P. fund seeks to invest in both equity and debt of sports leagues, teams and related businesses. The Los Angeles-based manager of $239 billion in client assets has committed $100 million to the new fund, which seeks capital appreciation as well as generation of quarterly income distributions to limited partners, according to the deck, dated June.
“The revenue stream impact due to the pandemic has created highly apparent liquidity concerns for sports leagues and teams in addition to other sports-related operating companies and media businesses that face a growing need for creative private capital solutions,” the investor presentation states. The document also suggests “early anchor investors…may have the opportunity to participate in potential upside through an IPO following the four-year investment period.”
Ares declined to comment through a spokesperson.
Ares has an extensive sports business background both through its investments as well as the expertise of its co-founders: Tony Ressler owns the Atlanta Hawks, and Bennett Rosenthal is a co-owner of Major League Soccer’s LAFC. The company has also brought together an industry advisory board for the new sports fund. According to the deck, the advisory board likely will consist of six individuals: John Skipper, former president of ESPN; Michael Lynton, chairman of Snapchat and an Ares director; Mike Forde, the executive chairman of Sportsology; Grant Hill, a former basketball player and a co-owner of the Hawks; former Yankee first baseman Mark Teixiera; and Greg Penske, CEO of Penske Motor Group. Penske is the brother of Jay Penske, the majority owner of Penske Media, publisher of Sportico.
Two weeks ago, Ares disclosed that its funds have invested $1 billion in sports and related media this year. Based on the deck, it is unclear if those investments were made by the new fund, through other Ares funds or some combination of the two. The deck provides more detail on the disclosed deals, revealing Ares contributed $100 million of a $350 million senior debt facility the San Diego Padres closed on in March, nearly half of 220 million euro Atlético de Madrid raised last quarter, and A$37.5 million of the A$40 million the national governing body of rugby in Australia raised in senior debt in May.
The company says it has looked at more than 50 sports and media deals in the past year worth perhaps $5 billion, as part of framing the investment opportunity for potential investors. The Ares sports fund has partners dedicated to finding opportunities in MLB, NBA, NHL, MLS, the top-flight European soccer leagues, MMA, golf, tennis, auto racing and esports, according to the presentation. Among investments the deck says Ares is considering or may be participating in include another unnamed MLB team seeking $250 million in junior debt, a Serie A squad seeking to raise $200 million through preferred equity, and a team in Eredivisie, the top Dutch soccer league, looking to raise $100 million in senior debt and structured equity.
Ares is among a vanguard of large private equity funds that have begun heartily pursuing sports-related investments in recent years. Arctos Sports Partners has more than $1 billion in assets for sports teams and related investments and has taken a stake in Fenway Sports Group. Blue Owl’s Dyal division has an NBA-specific fund that recently acquired equity in the Phoenix Suns. Luxembourg-based CVC Partners has various rugby investments and has been pursuing minority stakes in NBA teams, and Sixth Street bought a controlling share of Legends Entertainment, the experiential business formed by the Dallas Cowboys and New York Yankees, and also took a stake in the NBA’s San Antonio Spurs.
The Ares presentation says it has executed 73 investments worth more than $4 billion in sports businesses in its 24-year history. The short-term disruption of the pandemic creates opportunities for the next one to two years, the deck says, particularly in acquiring non-controlling equity and preferred equity in businesses. Longer term, the normally stable sports environment has “demonstrated strong historical growth and limited correlation to liquid assets, driven by rising media rights deal values and anchored by stable to growing in-person attendance.” Based on an SEC filing, the Ares Sports, Media & Entertainment Finance fund began raising money for the new fund in December 2020.