Rooting for the Home Team

It looks like the Kings are headed to Seattle.

Hedge-fund billionaire Steve Hansen and Microsoft CEO Steve Ballmer have teamed up to purchase a majority stake in the Sacramento Kings, the NBA franchise that moved to Sacramento from Kansas City in the ‘80s. The deal values the franchise at $525 million; it’s widely expected that the new owners will apply for permission to move the team to Seattle. Seattle has been without an NBA franchise since the SuperSonics moved to Oklahoma City in 2008.

It’s inevitable that hedge-fund managers should become involved in professional sports team ownership. The Detroit Pistons, the Philadelphia ‘76ers, and the Boston Celtics in basketball; the New York Mets, the Milwaukee Brewers, the Tampa Bay Rays in baseball–all have hedge-fund related owners. Sports teams are a conspicuous display of wealth, and most of these managers haven’t been too shy about showing the world how successful they’ve been. Team ownership is the closest thing we have to royalty in America.

But I suspect the main reason hedgies have been buying up sports teams is that they’re good investments. The combination of a dedicated local market, media-rights, and merchandising creates steady, positive free cash-flow. Apart from some high-profile bankruptcies–almost always brought about by owner shenanigans—professional sports teams almost always make lots of money. And if the team can get a fancy stadium paid for by their customers’ taxes, that’s a bonus.

But moving a team from a city of 470 thousand to one of 620 thousand—with a growing high-tech economy and which already supports valuable baseball and football franchises–should be a layup.

Douglas R. Tengdin, CFA

Chief Investment Officer

By |2013-01-23T10:34:28+00:00January 23rd, 2013|Global Market Update|0 Comments

About the Author:

Mr. Tengdin is the Chief Investment Officer at Charter Trust Company and author of “The Global Market Update”. The audio version of each post can be heard on radio stations throughout New England every weekday. Mr. Tengdin graduated from Dartmouth College, Magna Cum Laude. He received his Master of Arts from Trinity Divinity School, Magna Cum Laude and received his Chartered Financial Analyst (CFA) designation in 1992. Mr. Tengdin has been managing investment portfolios for over 30 years, working for Bank of Boston, State Street Global Advisors, Citibank – Tunisia, and Banknorth Group. Throughout his career, Mr. Tengdin has emphasized helping clients manage their financial risks in difficult environments where they can profit from investing in diverse assets in diverse settings. - Leave a comment if you have any questions—I read them all! - And Follow me on Twitter @GlobalMarketUpd

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