American private equity firm Arctos Sports Partners has reportedly raised a further ‘US$150 million to US$200 million’ in fresh capital as part of its third round of funding.
According to a report by Sportico, which cites ‘people familiar with the matter’ who were not permitted to speak publicly, the company has now raised a total of around US$950 million in its quest to generate funds for acquiring minority stakes in major sports teams.
Investors in the latest round include endowments, pension funds, insurance companies and other large financial institutions, reports Sportico, which notes that Arctos previously disclosed US$421 million in assets to the Securities and Exchange Commission (SEC) seven months ago.
Founded in 2019 with offices in Dallas and New York, Arctos is focused on acquiring passive stakes in professional sports franchises as well as providing liquidity and growth capital to controlling owners.
It is led by co-managing partners Ian Charles, a prominent investor, and David O’Connor, the former chief executive of the Madison Square Garden Company, while it also counts ex-Turner Sports president David Levy (pictured) among its advisors.
Arctos sits among a group of sports-focused investment funds that aim to acquire minority stakes in major league franchises, which have traditionally been unpopular with investors because limited partners typically have no say in how teams are run and generally see smaller returns in the event of a potential sale.
In recent months, Major League Baseball (MLB) and the National Basketball Association (NBA) have both taken steps to allow investment funds to acquire minority stakes in multiple teams, thereby providing existing owners with a means of securing additional liquidity.
Such moves are being made in part because the major leagues are concerned that sky-high franchise valuations are pricing out all but the wealthiest investors. As Sportico notes, team values across the four major North American leagues have grown at a 12 per cent annualised rate since 1991.
By lowering barriers to entry and therefore widening the pool of potential buyers, the leagues are hoping to generate greater competition and, in turn, fuel further rises in team valuations.