Pro athletes turn to private equity to diversify their investments

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.