What do German sports club Borussia Dortmund (currently home to Norwegian striker Erling Haaland), Dutch club Ajax Amsterdam, and French club Olympique Lyonnais all have in common? They all share an investor. The portfolio of a Spanish mutual fund run by insurance company MAPFRE includes shares in each of these three clubs.

The fund seeks “well-managed” teams and states that the price at which they are currently listed is “very attractive.”

Healthy balance sheets, profit-generating clubs with diversified revenue lines and that know how to move well in the transfer market are the elements that have led the insurer to focus on Borussia, Ajax and Olympique. Its shares in these three clubs will create one of the first financial products available to the general public in Spain that offers the opportunity to invest in soccer.

“Good business, with good margins, low debt and people who manage it impeccably and have the capacity to create value”

The fund is called “MAPFRE Behavioral Fund” because it is based on behavioral economics, a trend that tries to understand the non-rational elements that characterize investors’ decisions in order to identify market opportunities. And one example, according to fund manager Luis García, is soccer.

“If there is one investment that clearly shows the impact of psychology, it’s soccer. Investors shy away from the sport because of this psychological component, or its volatility. But for us, there is one key inefficiency: the value of the clubs is much greater than the price that is reflected by the markets,” pointed out García in an interview with EFE.

When it comes to investing, García looks for companies with a “good business, with good margins, low debt and people who manage it impeccably and have the capacity to create value.” This sport-loving fund manager realized that these same ingredients could apply to soccer executives, after he read a book about Sevilla FC’s sporting director, Ramón “Monchi” Rodríguez.

“Monchi for me is an investor in value, and one of the best in Spain. He is one of the most profitable. I simply started looking at the numbers,” he recalled. Shortly afterward, he presented the idea of including shares in listed clubs in his portfolio to his superiors. “At first they were surprised, but then they gave me their full support,” he adds.

Soccer club shares make up about 10 percent of the composition of this fund, which has 5.5 percent of its portfolio in Borussia shares, 2.5 percent in Ajax and 2 percent in Olympique Lyonnais. It also includes shares in other sports companies—such as the German brand Adidas, the Swedish bicycle helmet company Mips and the Italian gym equipment company Technogym—and 65 percent in other sectors including the automobile company CIE Automotive and Carrefour supermarkets. Any MAPFRE client can invest, starting at 10 euros.

Teams that generate profit and talent

The first team the fund chose was Olympique Lyonnais, an “exceptionally well-run” team with several attractive features: a stadium built in 2016 with the capacity to host events 365 days a year (until the pandemic hit) and also an eye to the future, given that the club has its own audiovisual production company. “And it’s a club that produces some of the biggest stars in Europe. It buys low and sells high. That’s a way of generating value,” he explains.

The investment in Ajax Amsterdam was made based on similar criteria. Ajax has been generating profit and distributing dividends to its shareholders for years, while at the same time exhibiting a great capacity to generate talent that it sells to other clubs. Recently, in the last two seasons alone, we’ve seen cases such as Frenkie de Jong and Sergiño Dest (who moved to Barcelona), Matthijs de Ligt (Juventus), Hakin Ziyech (Chelsea) and Donny van de Beek (Manchester United).

The fund’s latest investment was in Borussia Dortmund, carried out in March of last year, right at the height of the pandemic. “We had been talking to their CFO for a year, but we made the decision in March because their stock had fallen to half the price,” recalls García.

With Haaland becoming a desirable asset on the European stage, the manager recognizes that the share price will increase if the Norwegian player is sold to one of the big clubs who are eager to sign him. But that is not his main concern as an investor.

“It will probably have an impact, but what matters to me is that in the next seven years, rather than producing lots more Haalands, they will be able to produce lots more players to sell to bigger clubs. Before Haaland, there was Ousmane Dembélé (Barcelona) and Christian Pulisic (Chelsea). Now, there’s Jadon Sancho and Gio Reyna… In addition, Youssoufa Moukoko has just made his debut, and shows great promise. What interests me is that they have a repeated process to generate profit,” he adds.

This coming together of business and sports clubs works. In the last year, the fund has offered the second highest return of any equity fund with shares in European companies, at 28.7 percent according to CityWire. These results were achieved “in spite of the clubs,” as the markets continue to punish their valuation due to the impact of the pandemic on their businesses—too much so for García.

“It’s odd that, with how much the stock market has risen in general, clubs are still the same as they were last year. Soccer is undergoing the biggest stress test imaginable and is holding its own. The balance sheets of Borussia and Ajax are relatively healthy,” says the investor.

“As soon as a spanish club gets the courage to go public, others will follow”

Unlike listed companies, when it comes to soccer clubs, an investor has few to choose from: there are just 22 listed clubs in European soccer.

Luis García rules out investing in big clubs such as Italy’s Juventus or the UK’s Manchester United, because they have “more debt.” However, he considers Portugal’s Benfica “interesting,” as it follows a similar model to those already mentioned in terms of its transfer policy, but in this case the problem is a lack of liquidity: there are too few shares on the market to represent a significant investment position.

And what about Spain? “We’re the only country without any listed major league clubs. I think that as soon as a club gets the courage to go public, others will follow, because it makes sense. Perhaps there is a lack of information; going public is perceived as having a negative element… But in fact the opposite is true: when a club is listed, it is more controlled by the regulators, and there’s more liquidity,” he says.

Indeed, Alicante’s Intercity, from the Tercera División (Spain’s third division) has joined the Pre-Market Environment of Bolsas y Mercados Españoles, the company that manages the Spanish stock exchanges. This is a step towards becoming a listed company, with former international player and Atlético de Madrid right-back Juanfran Torres among its investors.

The MAPFRE manager believes that the effort made in recent years by institutions such as UEFA or LaLiga to force clubs to develop economic control mechanisms is the key to why clubs have begun to be a good investment.

There is a tendency to think that soccer is a ruinous and very cyclical business, but it’s not like that. It used to be, but since UEFA’s Financial Fair Play regulations, which are being applied more strictly in Spain with LaLiga, it has gone from being an industry that burns money to one where clubs are financially profitable,” concludes the head of this Spanish fund, a pioneer in investing in soccer clubs.