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The fund's holdings include sponsors and broadcasters of MLB, NBA, NFL and NHL .
Photo by: GETTY IMAGES |
Companies that sponsor and broadcast sports leagues greatly outperformed the Standard & Poor’s 500 over more than a decade, according to research compiled by the founders of the first exchange traded fund to track these shares.
Since June 2005, shares in companies that sponsor or broadcast the NBA, NFL, NHL or MLB nearly doubled the Standard & Poor’s 500 index, rising 282 percent versus 146 percent, according to the Pro Sports Sponsors Exchange Traded Fund, which began trading last week.
“A company’s affiliation with pro sports leagues gives them access to a dedicated and loyal customer base,” said Nick Fullerton, president of the fund. “This in turn can lead to increased revenues for companies and, if they are containing costs, increased earnings.
“A company like Papa John’s has doubled down on their sports partnership investment,” he said. “They started with pro football and attribute a large portion of their growth to that partnership. Now they are working with pro baseball to continue to capitalize on baseball fans’ loyalty to league partner brands.”
Fullerton and his partner, NBC Sports announcer Jim Kozimor, point out other reasons these companies may outperform: Employees have pride in the association with sports and perform better, and sports affiliation boosts general brand recognition.
Many of these companies are large, and sports is only a small part of their businesses. Take Amazon, which is in the index because of its recent one-year streaming deal with the NFL.
Asked whether that connection is tenuous, Kozimor responded during a lunch last week that sports is likely to become a large part of Amazon’s future business.
Tracking companies that spend in sports is as close to buying into professional sports as small investors will get (the fund is also marketed to money managers). Leagues are not public nor are many teams, though some teams are part of larger public media companies. The Atlanta Braves trade as a Liberty Media tracking stock, and the Green Bay Packers are public but the shares do not trade.
The fund has 66 companies, each equally weighted toward performance. Four times a year the fund will rebalance the companies, based on exiting sponsors and new ones.
To come up with the data since 2005, the fund performed significant research on sponsors in that time, contacting the leagues.
The fund does not track team sponsors, nor sponsors of others leagues such as MLS or sports such as NASCAR and golf. Kozimor said they might in the future create new indexes that track other sports, but for now he and Fullerton are focused on the current fund.
Kozimor came up with the idea for the fund and shared it with his friend Fullerton, a finance executive. At first Fullerton wasn’t sure, but when he ran some of the numbers, he said, he discovered that tracking these companies could allow an investor to outperform the market.
