The City warms up for its match of the day

Have you caught football fever? Patrick Tooher says investors should stick with the top clubs

The vast majority of investment fund launches tend to be met with a blaze of indifference in the financial press. But proof, if any was needed, of football's growing popularity in the City was to be had in full measure last week.

Hordes of hacks gathered at a sports theme bar in London on Thursday to hear Match of the Day pundit Alan Hansen give details of merchant bank Singer & Friedlander's new Football Fund, the first of its kind in this country. The anticipated demand is such that the print-run for application forms has been raised from 200,000 to 1.2 million.

Shares in quoted clubs such as Manchester United, Celtic and Tottenham Hotspur have soared in the past year, largely on the potential cash from pay-per-view television, which could earn Premier League teams anywhere between pounds 750m and pounds 2.5bn a year. That compares with the pounds 670m deal over four years agreed between BSkyB and the Premiership last year.

Indeed, revelations in the Independent that top teams were engaged in talks with BSkyB about the introduction of pay-per-view as early as this year prompted a clutch of clubs to accelerate their flotation plans.

A dozen clubs are listed on the main market or the Alternative Investment Market (AIM), with Newcastle United, Birmingham City and Aston Villa to join soon. The rush last week prompted Ken Bates, the Chelsea chairman, to warn that clubs raising money to buy players was "the stock market road to ruin".

But with the football index of shares showing a 696 per cent rise between 1993-96 - outpacing the stock market by a factor of 10 - potential investors are right to wonder if they have missed out on much of the fun.

There are plenty of reasons to be cautious. Shares in many clubs remain notoriously illiquid. Many offer implausibly wide spreads - the difference between buy and sell prices - and not just those shares traded on a matched bargain basis on Ofex, an over-the-counter market for shares. Moreover, information about them is thin. For example, it is still unclear who ultimately owns Chelsea Village, the quoted vehicle for Chelsea Football Club.

Second, most of the clubs with the really exciting growth prospects are already listed. Liverpool and Arsenal, meanwhile, insist they have no plans to go fully public.

Third, many clubs remain the personal fiefdoms of the second-hand car dealer with the sheepskin coat and slim panatella. Not surprisingly, many of them are badly run. According to the football unit at accountants Deloitte & Touche, in 1995 half the Premier League clubs made a loss after transfer fees.

And last but not least, football is unlike any other business. Whereas most companies can earn decent margins despite competition, there is by definition only one winner of the Premier League or the FA Cup. Worse, teams cannot hide on the football pitch, so results matter.

Or as Howard Wilkinson, the FA's new technical director, so accurately put it the other day after Kevin Keegan resigned as manager of Newcastle: "Money is pouring into the game more quickly than it can be dealt with. Given these rewards, the fear of failure intensifies to an illogical point. We should all remember every time someone wins, someone else must lose."

Slowly but surely, however, football is getting its act together off the field and becoming a more attractive investment proposition in the process.

The game is being transformed by a new breed of professional manager keen to maximise the returns from gate receipts, merchandising, sponsorship and television income for what are, in effect, local monopoly franchises.

For example Caspian, the quoted media group and owner of Leeds United, recently signed former Manchester United finance director Robin Launders, and has assembled a strong team to negotiate pay-per-view deals.

And the problem of illiquidity is being addressed as new financial instruments, such as the Singer & Friedlander fund, allow the risks to be spread. Indeed, the Stock Exchange is already looking to establish a separate football sector following the Newcastle flotation.

But the main reason why sound investment opportunities still exist in football is to do with ownership of exclusive rights to broadcast matches. These rest with the clubs, not the broadcasters, the Premier League, kit sponsors or boot manufacturers.

Pay-per-view, to be introduced to coincide with the launch of digital television, will allow top clubs to exploit this revenue potential, earning top teams like Manchester United "untold riches", according to Greg Dyke, boss of Pearson Television.

Television income is likely to soar again if a European Super League materialises. The spoils will not be shared evenly, of course. A report on pay-per-view's potential by Harris, the market research group, predicted that if armchair fans paid pounds 10 a time, this could earn Manchester United up to pounds 400m a season while less popular clubs such as Coventry might net only pounds 15m.

No doubt the differing earnings potential of the clubs will be reflected in the valuation of their shares. In the meantime, investors should stay with this growth sector by sticking with its quality players.

Unless there are sentimental reasons for that potential package of shares in Scunthorpe, Colchester or Torquay - should they ever float, that is - your wallet should back Manchester Utd, Newcastle or Tottenham.

PROMOTED VIDEO
News
The data shows that the number of “unlawfully” large infant classes has doubled in the last 12 months alone
i100Mike Stuchbery, a teacher in Great Yarmouth, said he received abuse
Arts and Entertainment
The starship in Star Wars: The Force Awakens
filmsThe first glimpse of JJ Abrams' new film has been released online
Sport
Rio Ferdinand returns for QPR
sportRio Ferdinand returns from his three-game suspension today
News
The Speaker of the House will takes his turn as guest editor of the Today programme
arts + ents
News
ebooksNow available in paperback
News
people

Watch the spoof Thanksgiving segment filmed for Live!
Sport
Billy Twelvetrees will start for England against Australia tomorrow with Owen Farrell dropping to the bench
rugbyEngland need a victory against Australia today
Arts and Entertainment
The cover of The Guest Cat – expect to see it everywhere
books
Sport
Tyson Fury poses outside the Imperial War Museum in south London ahead of his fight against Dereck Chisora
boxingAll British heavyweight clash gets underway on Saturday night
News
i100 Charity collates series of videos that show acts of kindness to animals
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Austen Lloyd: Company Secretary

Excellent Package: Austen Lloyd: EAST ANGLIA - SENIOR SOLICITOR LEVEL ROLE** -...

Citifocus Ltd: German Speaking Client Specialist

£Attractive Package: Citifocus Ltd: Prestigious asset management house seeks a...

Citifocus Ltd: Performance & Risk Oversight

£Negotiable: Citifocus Ltd: This is a varied role focusing on the firm's mutua...

h2 Recruit Ltd: Sales Director - SaaS (SME/Channel) - £140,000 OTE

£90000 - £140000 per annum + benefits: h2 Recruit Ltd: Are you a high achievin...

Day In a Page

Homeless Veterans Christmas Appeal: ‘We give them hope. They come to us when no one else can help’

Christmas Appeal

Meet the charity giving homeless veterans hope – and who they turn to when no one else can help
Should doctors and patients learn to plan humane, happier endings rather than trying to prolong life?

Is it always right to try to prolong life?

Most of us would prefer to die in our own beds, with our families beside us. But, as a GP, Margaret McCartney sees too many end their days in a medicalised battle
Thomas Cook's outgoing boss Harriet Green got by on four hours sleep a night - is that what it takes for women to get to the top?

What does it take for women to get to the top?

Thomas Cook's outgoing boss Harriet Green got by on four hours sleep a night and told women they had to do more if they wanted to get on
Christmas jumper craze: Inside the UK factory behind this year's multicultural must-have

Knitting pretty: British Christmas Jumpers

Simmy Richman visits Jack Masters, the company behind this year's multicultural must-have
French chefs have launched a campaign to end violence in kitchens - should British restaurants follow suit?

French chefs campaign against bullying

A group of top chefs signed a manifesto against violence in kitchens following the sacking of a chef at a Paris restaurant for scalding his kitchen assistant with a white-hot spoon
Radio 4 to broadcast 10-hour War and Peace on New Year's Day as Controller warns of cuts

Just what you need on a New Year hangover...

Radio 4 to broadcast 10-hour adaptation of War and Peace on first day of 2015
Cuba set to stage its first US musical in 50 years

Cuba to stage first US musical in 50 years

Claire Allfree finds out if the new production of Rent will hit the right note in Havana
Christmas 2014: 10 best educational toys

Learn and play: 10 best educational toys

Of course you want them to have fun, but even better if they can learn at the same time
Paul Scholes column: I like Brendan Rodgers as a manager but Liverpool seem to be going backwards not forwards this season

Paul Scholes column

I like Brendan Rodgers as a manager but Liverpool seem to be going backwards not forwards this season
Lewis Moody column: Stuart Lancaster has made all the right calls – now England must deliver

Lewis Moody: Lancaster has made all the right calls – now England must deliver

So what must the red-rose do differently? They have to take the points on offer 
Cameron, Miliband and Clegg join forces for Homeless Veterans campaign

Cameron, Miliband and Clegg join forces for Homeless Veterans campaign

It's in all our interests to look after servicemen and women who fall on hard times, say party leaders
Millionaire Sol Campbell wades into wealthy backlash against Labour's mansion tax

Sol Campbell cries foul at Labour's mansion tax

The former England defender joins Myleene Klass, Griff Rhys Jones and Melvyn Bragg in criticising proposals
Nicolas Sarkozy returns: The ex-President is preparing to fight for the leadership of France's main opposition party – but will he win big enough?

Sarkozy returns

The ex-President is preparing to fight for the leadership of France's main opposition party – but will he win big enough?
Is the criticism of Ed Miliband a coded form of anti-Semitism?

Is the criticism of Miliband anti-Semitic?

Attacks on the Labour leader have coalesced around a sense that he is different, weird, a man apart. But is the criticism more sinister?
Ouija boards are the must-have gift this Christmas, fuelled by a schlock horror film

Ouija boards are the must-have festive gift

Simon Usborne explores the appeal - and mysteries - of a century-old parlour game