Luis García Álvarez (Madrid, 1984) was set to become a journalist but ended up studying economics at the Universidad Francisco de Vitoria, majoring in behavioral economics and minoring in financial markets. He has spent almost three years managing the MAPFRE AM Behavioral Fund, which seeks to overcome emotional-related biases among investors to create a stronger and more profitable portfolio. The vehicle has generated profits over 30 percent since its inception, surpassing its benchmark: the Stoxx 600. Around 25 percent of the fund’s 60 million assets are in sports-related companies, including several soccer clubs. Few Spanish fund managers have such a profound knowledge of this industry.

Why are you interested in investing in the world of sports?

There are many cognitive biases that affect investors. The world of sport is a very clear example. Investors have forgotten about the sector because the news has been very negative. Headlines about losses, great signings, financial failures, and the sight of empty stadiums due to the coronavirus all bear great weight. This leads to a loss of perspective on the industry. Teams’ solvency and the economic situation have improved greatly over the last decade, but analysts don’t look at the numbers much.

A good example is what happened this week with the Super League.

Exactly. It’s not up to me to decide which format is appropriate for a European competition. What this failed project does demonstrate is investors’ great interest in European soccer. Especially in the United States. Over there, they see the success story achieved with the professional leagues, the NBA, NFL, etc. and they see that there is a lot of growth potential with professional, more modern management.

The project put a lot of money on the table.

Yes. The winner of the Champions League wins around 140 million euros, whereas they could have made 400 million euros in the Super League. There’s also more money simply for taking part. What’s more, it was more stable revenue, as it involved a closed club. There were also salary caps so that players would not be paid over 55 percent of teams’ revenue, which gave clubs bigger margins.

Why was the proposal such a dismal failure?

In this type of project, it’s important to create a competition that is not only financially sustainable, but also serves fans and consumers. That didn’t happen in this case. The shares of clubs involved in the project, such as Juventus and Manchester United, shot up at the beginning of the week and then fell sharply when the initiative was aborted.

In which clubs does your fund invest?

In Borussia Dortmund, where we have invested 5.5 percent of the fund. We have also invested 2.5 percent in Ajax Amsterdam and 2 percent in Olympique Lyonnais. We started investing in Borussia right at the beginning of the pandemic. We find it very attractive to invest in these medium-sized, well-managed clubs with healthy balance sheets.

What do you look for when investing in a club?

The analysis criteria are actually the same as in any other sector. We are looking for good businesses that can continue to grow and add value to the shareholder. It’s important that they have solid and stable balance sheets, with little debt. I also highly value management teams that act with total ethical integrity and a positive trajectory. It’s also important that revenue is diverse, that revenue doesn’t just comes from TV, but there’s also good ticket sales, sponsorships, good transfer management, etc.

Any examples?

Olympique Lyonnais, although the market doesn’t see it yet. Three years ago, they spent 450 million euros on a new stadium and a new sports complex. 450 million euros. If we deduct debt, its value is now 450 million euros. It’s as if the market assumed that there would never be spectators or events at the stadium. Before the pandemic, it generated 50 million euros a year through ticket sales and events. That’s a gross return of ­11–12 percent. Better than any infrastructure asset. And that’s just one source of revenue, never mind television rights, prizes for winning competitions, marketing.

Are transfers important?

This isn’t a fundamental issue, but we like to invest in clubs that make a net profit on transfers. Olympique Lyonnais earns around 20 million euros net a year through buying and selling players. Ajax and Borussia are also two good examples of teams that sign and train well, then sell to the big teams.

What other companies in the sports sector does the fund invest in?

Out top investment is in the Swedish company MIPS. The company has a unique helmet technology, which provides special protection in multidirectional impacts. We believe they have great potential. They have a very light structure and often subcontract or license their production. We also invest in Technology, an Italian company that designs machines for gyms. One of its great strengths is that it provides all the computer systems that collect data from the machines, which makes it more difficult for gyms to change provider.

Does it make sense for a small investor to take risks on their own behalf in this field?

Sport is widely forgotten in the world of investment. The recommendation for a small-time investor is the same as for any other industry: You must gain a deep understanding of the practice and invest smartly. If you don’t have time, it’s better to hire professional managers and delegate the investment.

Are there more investment opportunities in the United States?

There actually aren’t that many publicly traded franchises. They often belong to private investors or business groups. The Madison Square Garden Sports group, listed on the New York Stock Exchange, owns the New York Knicks basketball team and another ice hockey team. Our partner manager in the United States, Boyar, invests in the group.