When news broke of Fernando Tatis Jr.’s new $340 million contract, Michael Schwimer was on his way to Las Vegas, a fitting destination for a man whose athlete investment fund had just scored its largest payout yet.
A former Philadelphia Phillies pitcher, Schwimer is president and CEO of Big League Advance, a group that gives young prospects upfront cash in exchange for a cut of all their future MLB earnings. The fund has signed contracts with 344 players, none more prominent than Tatis, whose new 14-year extension is among the largest in baseball history.
“This trip was scheduled to be a complete business trip, but now I am certainly going to have at least one celebratory cocktail,” Schwimer said in an interview after landing in Vegas.
Big League Advance inked its deal with Tatis five years ago, when he was playing in Single-A, Schwimer said. The shortstop was part of the fund’s first round of investments, $26 million that was distributed across 77 players.
Though Schwimer declined to say how much the fund provided Tatis or how large its stake is (it’s somewhere between 1% and 10%), he said the company offered more to Tatis than any player before him. If it’s 5%, in the middle of that range, the payday for Big League Advance off of Tatis’ new contract would be $17 million.
A representative for Tatis didn’t immediately respond to requests for comment.
Schwimer formed Big League Advance in 2016 with the belief that he could use data to identify young prospects most likely to make it to baseball’s top tier. The fund has prominent investors, including mutual fund manager Bill Miller, former Goldman Sachs partner Steven Duncker and Marvin Bush, brother of former President George W. Bush. Cleveland Browns executive Paul DePodesta also has an ownership stake, which is in a blind trust.
Schwimer said the Tatis contract is a testament to the team’s predictive model, which showed at the time that Tatis was the second-best minor league player of the past 15 years.
“When we signed him he wasn’t considered a Top 40 prospect,” Schwimer said. “At the time, talking to investors, the amount of money we were offering him was a sizeable portion of our bankroll. But we trusted the model.”
Big League Advance gives cash advances to young prospects in exchange for a cut of their MLB earnings. If the player never makes it the majors, Big League Advance loses its initial stake. If the player becomes one of baseball’s most electrifying young talents, Big League Advance earns a hefty return.
The structure of the deals is simple: The company establishes a set amount for each percentage of MLB earnings the player is willing to give up on the back end. For example, if the company offers a prospect $100,000 for 1%, it is then up to the player to decide if he wants to take $300,000 in exchange for 3%, or $1 million in exchange for 10%.
The income-sharing business is not without its controversy. The MLS players’ union has called such third-party agreements “exploitative.” The MLBPA, which doesn’t represent minor league ballplayers, has expressed fears about conflicts of interest that might arise from these deals.
Big League Advance itself has also been the subject of litigation. In 2018 it was sued by Cleveland Indians prospect Francisco Mejia, who claimed he was taken advantage of in a deal that gave him $360,000 in exchange for 10% of his MLB earnings. Mejia later dropped the lawsuit and apologized.
In total, Big League Advance has invested $156 million into players—that original $26 million round and then a second series of $130 million. Because of the way baseball teams control the early portion of a player’s career, it will be a long time before the company sees the final returns.
“We’ve been living in theoretical land in the five years since we started this, because its takes a while after signing a bunch of A-ball players for them to get to big deals,” Schwimer said. “To see it come to life, it’s a really cool day.”