Niche investments, including some areas of sports, can play an important role in an allocator’s portfolio, according to Ashley Marks, co-founder and co-managing partner of private equity firm Cordillera Investment Partners.
While significant private equity investments from major firms in National Football League teams and international soccer club deals are likely to grab headlines, Marks says many areas in sports are pre-institutional, niche in nature and relatively uncorrelated with the markets, so the firm aims to focus on these areas.
Cordillera’s strategy is to make investments in niche areas with little institutional capital and non-correlated assets. This includes the nooks and crannies of the sports world, as well as investments in music royalties, boat marinas, spirits inventory and intellectual property financing, among others.
“[Sports] hits our two characteristics that we’re looking for,” Marks says. “There’s definitely been capital coming into this space over the past few years, but we still believe that there’s still nooks and crannies within sports that are pretty attractive, and so we are, unlike the bigger sports funds or a lot of the sports funds you see, kind of really focused on these ‘nooks and crannies.’”
Emerging Sports Themes
Cordillera looks at niche sports opportunities in four different buckets. The first is emerging teams and emerging leagues. “That’s where we can essentially provide growth capital to either a league or team that has the potential for exponential growth,” Marks says.
A great example, Marks points out, is pickleball. The firm is also an investor in triathlon leagues and sees other opportunities in cycling and women’s volleyball. Emerging leagues also offer different formats of existing sports: TGL, for example, uses a different format for golf competitions.
Lower-tier professional teams are another theme, because Cordillera can “purchase smaller, less predominant leagues and teams that have significant growth potential,” Marks says.
That growth potential comes through commercialization, either through media and sponsorships, and investments are significantly cheaper, Marks says. Examples include minor league baseball, lower-division European soccer and youth programs.
Women’s sports are the third bucket. Marks notes that interest in women’s sports is increasing, which has resulted in a significant increase in sponsorship dollars and media rights in women’s athletics. Still, it remains a sector with little institutional investment.
“I think there’s a lot of buzz about women’s sports, but if you really look at the number of dollars from investment firms that have gone in, it’s relatively low,” Marks says, noting the sector has powerful tailwinds.
The fund also invests in the ‘picks and shovels’ of the sports world—businesses only tangentially related to sports.
“The consultants around sports investing, the law firms around sports, the brokers around sports—we are spending some time looking in those areas that we think are going to benefit from this kind of beta play in broader sports,” Marks says.
Where Niche Investments Belong
A common theme among sports investors is that asset allocators are viewing the sector with interest, but few are actively investing in it.
“Everyone’s talking about it, but not a lot of people have invested in it on the institutional side,” Marks says.
According to a December 2024 report from Coller Capital, 81% of institutional investors in private equity funds said the risks associated with sports investing are too great, mainly due to the unproven track record of the sector; sports as an investment theme is relatively new.
Marks counters that the uncorrelated returns, compared with other asset classes and sectors, make these niche opportunities attractive.
“If you look at … things that are niche, nascent and are uncorrelated, you can generate very strong risk-adjusted returns that are diversified to a portfolio,” Marks says. “When you put that into your portfolio, we think that you can increase the Sharpe ratio of your overall portfolio and push up the efficient frontier.”
Marks notes that duration risks exist in sports, so investors have to put these investments somewhere in the portfolio where it can take on illiquidity, as many emerging sports investments are not cash flowing, and it takes time for a thesis to come to fruition.
The most natural place for these types of investments would be in a private equity portfolio, even though the sector is uncorrelated to a typical PE portfolio. These investments could fit in a special opportunities portfolio with longer duration, with the ability to hold something longer than a two-to-three-year period.
“We’re really trying to stay differentiated from what the bigger players are doing and where a lot of the traditional sports funds are playing,” Marks says.
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