Arctos' Ian Charles Calls College Sports PE a Disaster

TL;DR: Ian Charles, co-founder of Arctos Partners, said at the Dallas Citizens Council annual meeting that private equity in college athletics is a disaster scenario, D Magazine reported. His firm owns stakes in major pro teams, so the warning comes from inside the industry.

What did Ian Charles actually say?

He called private equity involvement in college sports "the worst idea I've heard in my entire career, and I love private equity," according to D Magazine.

Charles spoke on a panel with outgoing Big 12 commissioner Brett Yormark and SMU athletic director Damon Evans, and the topic was the forces restructuring college sports.

Why does it matter that this came from Arctos?

Arctos is not a critic of the asset class. D Magazine describes it as one of the largest sports-focused investment vehicles in the world, with stakes in the Golden State Warriors, Boston Red Sox, Los Angeles Dodgers, Buffalo Bills, Liverpool F.C. and the Aston Martin F1 Team.

Someone who sells private equity for a living rejects this one use of it. That reads differently from a university professor or a fan group objecting. If you want more on how the firm operates, read our earlier piece on Arctos' stake in the Atlanta Falcons.

What do we know about the college deals?

We have no reporting on the terms of any college private equity deal, so we won't guess at them. What we can compare is the warning from Charles with the rules in the one pro league our sources cover.

Who	Position or rule reported	Source
Ian Charles, Arctos	Called PE in college sports a disaster scenario	D Magazine
NFL	Private-equity funds can own at most 10 percent of a team, as non-voting shares	NBC Sports

The table sets a sponsor's warning about college sports beside a pro league where the limits are written down. We have seen no comparable published limits for college.

What does the return target tell an investor?

D Magazine quotes a speaker at the event, whom its excerpt does not name, saying private equity aims to compound returns of at least 15 to 17 percent "unless you give it a guaranteed return." A target return is what a sponsor hopes to earn, and it says nothing about what a given deal pays.

Downside first: how would you lose money here? College athletics may widen the gap between target and result. A school cannot sell a team the way an owner sells a franchise, and the revenue a fund would share comes from media and conference arrangements it does not control. That is our reading, not something the panel was reported to say. The practical questions are where the cash comes from, who gets paid first, and how long your money is locked up. Read how IRR is calculated and where it flatters before you accept a headline number, and ask for DPI, the cash actually returned.

Can individual investors buy into college sports deals?

Nothing in the reporting we reviewed says they can. These are institutional arrangements between funds and conferences or schools. Angel Investors Network does not sell or allocate securities.

Where sports exposure does reach individuals, it tends to come through funds. So a sports-related fund pitched to you may hold a small, non-voting piece of something, and the fee layers sit on top of that. Our 12-point checklist for evaluating a private equity fund covers sponsor, fees, liquidity and track record, in that order.

Common mistakes when reading a story like this

One executive's quote is not a verdict. Charles gave an opinion on a panel, and it is an informed one, but it is still an opinion.

A college sports stake also doesn't behave like a pro franchise stake. College governance runs on different rules, and we have seen no reporting that says pro-league caps carry over.

Last, people mistake a target return for a result. Ask what past funds actually paid out.

FAQ

What is a target return in private equity? It is the annual return a sponsor aims for, not what investors have received. A quoted 15 to 17 percent target is a hope until realized returns, meaning cash paid back, show it.

How do pro-team stakes differ from college deals? In the NFL, NBC Sports reports the maximum a private-equity fund can own is 10 percent of a team, and funds buy non-voting shares. We have not seen comparable college rules in the reporting.

Can I invest in college sports through private equity? The reporting describes institutional deals, not products open to individuals. Check any offering's eligibility, fees and lockup before you commit, and consult a qualified adviser.

If you are being pitched a sports-related fund, ask the sponsor for its realized returns and fee schedule in writing, then run it through the checklist linked above before you reply. For more independent analysis like this, sign up for the free AIN briefing.

Educational content only. Not investment, tax, or legal advice. Not an offer or solicitation to buy or sell securities. Past performance does not guarantee future results. Private-market investments are illiquid and involve risk of loss, including total loss of capital. Consult qualified advisers. Angel Investors Network is not a broker-dealer or investment adviser.