THE RECENT news concerning Newcastle United’s £ 300 million takeover by the Saudi Arabian Sovereign Wealth Fund has sparked fresh debates around Middle Eastern and Asian interest in European and British football. Football’s legions of followers often get over-excited about the prospect of their club being taken over by a rich benefactor, but knowing your investor is a mandatory element of due diligence when it comes to assessing the credibility and motives of a potential owner.
Sovereign Wealth Funds have around US$ 8 trillion of funds under management, which is more than the hedge fund and private equity communities. Among the new investors in the first decade of the 21st century that brought a different perspective to the game and underlined its globalisation was Qatar Sports Investments (QSI), who bought Paris Saint-Germain. QSI is part of Qatar Investment Authority (QIA), a sovereign wealth fund that has US$ 335 billion of funds under management.
Another Middle Eastern SWF, the Investment Corporation of Dubai, has made its mark on European football. With US$ 210 billion of FUM, they are the owner of Emirates Group, the aviation group that has its name emblazoned on the shirts of some of the continent’s leading clubs: Real Madrid, Arsenal and Paris Saint-Germain to name but three.
The influx of SWF and state-linked money, unlike some takeovers, is not whimsical or ego-driven in any way, says Simon Chadwick, director of Eurasian Sport & Professor of the Eurasian Sport Industry at Emlyon. “The investments made by Qatar and other Middle Eastern states represent strategic decisions based on expert advice and long-term planning on the part of the countries involved.”
Chadwick explains that middle eastern states like Qatar and Saudi Arabia, aware that their national wealth is almost totally dependent on oil and gas, have been preparing for what may be coming over the horizon. While gas reserves will last around 300 years, oil has a 30-year expectancy. “QIA was founded with the objective of diversifying Qatar’s economy, in the knowledge that sooner or later, the oil and gas will run out. Countries like Qatar have a national vision that goes out to 2030 and this includes making investments abroad across many different asset classes,” he says.
This includes sports and, of course, football, which has become a universal language that is closely associated with global politics and is something of a sweet spot by virtue of its popularity and commercial appeal. Manchester City’s owners, for example, have been the catalyst for a number of major projects backed by Abu Dhabi in Manchester itself, including real estate. Similarly, there is a view that Fosun’s investment in Wolverhampton Wanderers was linked to the possibility of business opportunities in the UK’s midlands region.
Football is being used to create political and social networks, such as along the Adriatic coastline where China has been increasing its presence. Investment in football has accompanied this, perhaps as a way to curry favour with the local population. Likewise, when Chinese money poured into Slavia Prague and a brewery, the politicans said China had tapped into two of the things that Czechs held most dear, football and beer!
But Chadwick also highlights another aspect to overseas investment which really encapsulates the current narrative. “The middle east is a notoriously unstable region and Qatar, for example, is moving assets offshore as a way to mitigate risk. The prospect of terrorist groups such as ISIS seizing their wealth is one that terrifies many people.”
Cash rich they may be, but are SWFs good owners? The success of Paris Saint-Germain would suggest they provide the resources needed to win trophies and also to lay the foundations for a multi-faceted, community-focused organisation. The money may be coming from the Middle East, but PSG and Manchester City are both global clubs with social and sporting programmes in operation in many countries. It should also not be forgotten that both have run into Financial Fair Play disputes.
If, as Chadwick suggests, investment in sport is very much in the national interest of countries like Qatar, Saudi Arabia and China, then the investments are strategically placed and therefore, can be seen as more than fleeting indulgences. “The Qataris are committed to promoting healthy lifestyles – they have the highest rate of teenage diabetes – so sport forms part of that initiative. Furthermore, increased visibility in football can improve perception of the region as an accessible place and helps efforts to drive greater social cohesion,” says Chadwick.
PSG have yet to take the UEFA Champions League to Paris, but their domestic dominance shows no sign of easing-up and PSG are able to attract top talent to the French capital – as demonstrated in the signing of star names Neymar and Kylian Mbappe. PSG have also been elevated to one of the world’s top clubs from a financial perspective. PSG is now a marketable asset that has real value should the rumours prove correct that QIA wishes to dispose of the Ligue 1 champions and take their wealth to England.
If that should happen, then it will not just be the football that attracts QIA to Leeds, it could also be the opportunities derived from the creation of a digital business hub in West Yorkshire. Investors may be drawn to the game for the business potential of the broader geographic area, but clubs could also benefit from leveraging the possibilities that can emerge beyond the football stadium.