Arctos set to close largest first-time PE fund

The firm, which counts Madison Square Garden Company's former CEO as a co-founder, takes passive stakes in sports franchises.

Arctos Sports Partners is close to closing the largest-ever first-time private equity fund in a sign that investor appetite for sports investments continues apace.

The Dallas-headquartered firm has collected $2.9 billion for Arctos Sports Partners Fund I, with a final close due in the coming weeks, according to two sources familiar with the matter. The fund came to market in 2019 with a target of $1.8 billion, according to PEI data.

PEI understands that Arctos has already made more than 14 investments, including acquiring stakes in NBA basketball teams Golden State Warriors and Sacramento Kings. It has also invested in Fenway Sports Group, the owner of Liverpool football club.

Limited partners in the fund include New Mexico Educational Retirement Board and Employees Retirement System of Texas, which committed $35 million and $40 million respectively, according to PEI data. Goldman Sachs Asset Management‘s GP interests business, the Petershill Funds, is an anchor investor.

Arctos declined to comment on fundraising.

The fund would be by some distance the largest raised for sports investments and is the largest disclosed debut fund from a new manager, outside of corporate and state-backed vehicles. It edges out secondaries firm Glendower Capital, which collected $2.7 billion for its debut vehicle in 2019.

A handful of first-time funds have broken the $3 billion mark. They were set up by corporates, such as Chinese tech giant Baidu, or by state-backed investment firms, according to PEI data.

Arctos was founded in 2019 by Ian Charles, a former partner with secondaries firm Landmark Partners, and David J O’Connor, the former chief executive of Madison Square Garden Company, which owns the New York Knicks basketball team and the New York Rangers hockey team.

The firm takes passive minority stakes in professional franchises and provides liquidity and growth capital to sports franchise owners and governors, according to marketing documents seen by PEI. It writes equity cheques of between $20 million and $400 million and focuses on North American and European sports leagues.

The pandemic has created opportunities for groups such as Arctos, as the collapse of tickets sales increased the liquidity needs of sports franchise owners, PEI reported last year.

According to estimates by PwC, the global live sports industry generated $144 billion in revenue during 2019 with North America accounting for just over half of that total.