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Asia millionaires fund Europe soccer teams in hunt for yield

Monday, January 9, 2017 - 16:31

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Wealthy Asian investors unwilling to splurge on owning their own European soccer teams are showing their enthusiasm by helping fund the sport.

[HONG KONG] Wealthy Asian investors unwilling to splurge on owning their own European soccer teams are showing their enthusiasm by helping fund the sport.

Sales of football finance notes, backed by television rights of soccer clubs, doubled to US$11 million last month from the amount issued in April, when they were opened to investors in the region, according to data from Swiss-Asia Holding Pte Ltd.

The Singapore-registered firm that operates the investment says total assets in the securities globally stand at US$40 million and will likely reach US$100 million in 2017, after a Champions League club agreed to assign some of its TV rights for the note last month.

Prolonged low interest rates around the world are prompting yield hunters to increasingly diversify into alternative assets over bonds and other traditional securities. Investors in the football notes receive an annual coupon of about 6 per cent for effectively lending money to top soccer clubs, which need the cash flow in advance of lucrative TV deals they sign each year.

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The notes also offer insulation against market shocks as they tend not to fall in line with assets such as equities.

"It's a decent yield in a world where it's in short supply and it's not correlated to the interest rate cycle," said Michael Coleman, a Singapore-based hedge fund manager who made a personal investment last year. "I made a modest allocation for my alternative assets investing portfolio."

PricewaterhouseCoopers estimates sales of liquid alternative mutual funds, an investment category that can include receivables financing such as the football finance notes, will surge to about US$664 billion by 2020 from US$260 billion at the end of 2013.

"Uncorrelated investments are sexy to most people at the moment," said Anthony S Casey, investment manager for football finance notes at Swiss-Asia in Singapore. "If the markets are going south you can always rely on people watching the game and the lucrative television contracts behind that."

Investors' money is pooled to form loans to soccer clubs for operating expenses or to fund signing players. The financing matures at different stages from six months to three years. The notes are listed on the Frankfurt exchange and the minimum investment is US$125,000.

Accredited investors with assets of at least US$2 million are eligible to invest under Singapore rules. For the 2016-19 cycle, the English premier league's television rights deal increased 52 per cent over the previous three year period to US$8.2 billion, according to Swiss-Asia.

Risks would be if one of the companies buying the television rights went bust, according to Mr Coleman.

The securities also highlight how individual investors are filling a gap to finance soccer clubs left by banks constrained by Basel III capital rules that make it more punitive to engage in risky lending.

"Banks are shoring up their capital book and reducing exotic lending to achieve a higher Tier 1 capital ratio," said Mr Casey. "Football finance is classed as exotic, which gives us a chance to step in as an approved funder."

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