Mar 9, 2020 - Economy & Business

Pro athletes turn to private equity to diversify their investments

Illustration: Aïda Amer/Axios

Pro athletes are diversifying into private equity, after years of focusing most of their alternative investment activities on real estate and tech startups.

The state of play: The driving financier is Mark Patricof, who previously led a media and entertainment-focused investment bank that he sold in 2015 to Houlihan Lokey. His inspiration struck several years ago, when co-hosting a "Shark Tank"-like show with former New England Patriots star Rob Gronkowski, in which winning founders received pro athlete endorsements.

  • "I realized that a lot of these athletes had no exposure to private equity, and really didn't understand what it was. It felt like an opportunity," Patricof tells me. "And plenty of companies and private equity firms like being associated with pro athletes."
  • He received financial backing from J.P. Morgan for a co-investment platform, whereby athletes like J.J. Watt, Venus Williams, Victor Oladipo, C.C. Sabathia, and Henrik Lundqvist get the opportunity to participate in deals led by such private equity firms as L Catterton and Providence Equity Partners.
  • Patricof and his team identify co-investment opportunities, and athletes get deal-by-deal participation rights. Patricof's other investors, including JPM, fill up the remaining allocation.

This is the convergence of two trends: Pro athletes becoming more sophisticated about their money, seeking more diversified investment options, and private equity firms trending toward co-investment over syndicate partners.

  • Patricof is one of the first to play at this new apex, but will hardly be the last.

Go deeper

The forgotten firms in the Senate relief bill

Illustration: Sarah Grillo/Axios

The Senate late last night passed a $2.2 trillion safety net for the American people and American businesses. But not all businesses were included. The package left out thousands of small companies owned by private equity firms.

Details: The legislation includes $350 billion in small-business loans for companies with fewer than 500 employees. That's a liberalization of typical SBA rules, which are more industry-specific in terms of employee number and revenue.

Bipartisan push could save private equity-owned small businesses

Illustration: Aïda Amer/Axios

Private equity and venture capital investors now have high-powered bipartisan support in their efforts to expand the types of small businesses eligible for $350 billion in federal loans via the CARES Act.

The intrigue: House Speaker Nancy Pelosi and House Minority Leader Kevin McCarthy, who rarely agree on anything except for the grandeur of California, both want the so-called "affiliation rules" waived.

Corporate America balks at potential strings attached in relief package

Illustration: Sarah Grillo/Axios

Uncle Sam today will become Corporate America's lender of last resort, but it's still unclear if it also will become its activist shareholder.

Driving the news: We're still awaiting full text of the bipartisan deal struck last night between the White House and Senate leaders, including if there will be any straight equity or warrants tied to financial help for affected industries and companies.