Apollo (NYSE: APO) is one of the world’s largest private equity funds, with $455 billion assets under management. Executives at the firm have discussed a new fund that would focus on the sports industry—including technology and media—while staying open to taking stakes in professional teams, Sportico has learned from multiple sources.
The people familiar are unclear if the strategy has been abandoned or simply put on the back burner since the asset manager is consumed with more pressing business, such as closing mergers with asset management businesses Athene and Griffin Capital.
“We deny we’re starting a fund,” focused on sports, said Apollo’s Joanna Rose, the global corporate head of communications, in a phone call. “We are always looking at market opportunities.”
Within its other investment funds, Apollo already has some investment in the sports sector, including ownership of Yahoo Sports, which it is reportedly considering merging with potential sports betting partners. In addition, football Hall of Famer and former USC athletic director Lynn Swann is on the Apollo board of directors, as is co-founder Joshua Harris, who is part-owner of the Philadelphia 76ers and New Jersey Devils, among other teams, through Harris Blitzer Sports & Entertainment.
For Apollo, discussions of a sports-focused fund might represent some shift in the firm’s attitude to the sector. In an agreement with Harris disclosed in a Securities & Exchange Commission filing last year, Apollo indicated Harris’ family office didn’t need pre-approval for “any investment in a sports team, franchise, league, organization or substantially related business, because these investments are not considered appropriate investments for the Company’s clients,” according to the document.
Still, Apollo’s discussion of a greater presence in sports isn’t unusual given other private equity firms have focused on sports in recent years, a sector it had largely previously overlooked.
“There are a couple of drivers on why we’ve seen the rise of institutional investors in sports,” said Bain & Company’s David Mortlock in a phone call. Mortlock heads Bain’s sports practice. “One, the leagues themselves have been relaxing ownership restrictions in recent years, which has invited more opportunities to invest in teams, particularly as limited partners. More importantly, there have been some real, fundamental disruptions in sports that create opportunities to rethink the business of sports. There’s real value in building more direct relationships with fans…. [while] monetization of sports has been under real duress with consumers shifting their behaviors towards streaming services that have much lower margin profiles.”
Results appear to have been mixed so far for private equity. One fund, Arctos Sports Partners, raised $2.9 billion in less than two years to make team and sports-related investments. Another fund, Dyal Homecourt, part of Blue Owl Capital (NYSE: OWL), lags its own earlier projections, having raised $200 million of a planned $2 billion to invest solely in NBA franchises. PE firms CVC and Silver Lake have also been active in pursuing global sports opportunities. Silver Lake most recently struck a deal to buy up to 8.6% of New Zealand Rugby, a smaller investment than hoped for after vocal opposition in the country over selling to U.S. institutional investors.
Part of the challenges Apollo and other institutional investors face is that team and league deals bring more complexity than traditional private equity investments. For instance, sports organizations may insist on full disclosure of fund investor identities, as well as place restrictions on owning stakes in certain betting-related businesses and in enterprises representing athletes, among other guardrails.