Texas Schools Pension to Buy Stake in Sports Investor Velocity Capital
The $56 billion Texas Permanent School Fund backs the three-year-old private-equity firm started by veteran sports investors David Abrams and Arne Rees
The Texas Permanent School Fund is making a long-term bet that private equity can thrive in the booming sports market.
The $56 billion pension system, which manages money on behalf of the state’s schoolteachers and other beneficiaries, plans to take a stake in Velocity Capital Management, a firm founded in 2021 that invests in sports, media and entertainment companies.
The Texas Permanent fund has made an anchor commitment to Velocity Capital’s debut fund, which hasn’t yet closed, and has secured an agreement to negotiate a minority stake in the New York firm, the pension system said. It also will earmark more capital for co-investments, credit and real estate deals within Velocity’s areas of expertise. The pension’s anchor fund commitment totaled $200 million, according to Velocity.
Robert Borden, the chief executive and chief investment officer of Texas Permanent, says sports and entertainment is a promising and still relatively untapped sector, and he believes the partnership with Velocity Capital will allow the pension system to deploy long-term capital in a growing market.
“What I see is a space ripe for institutionalization,” said Borden. “It’s very fragmented, but with the advent of streaming content and certain leagues opening up the possibility of commercial ownership, there is a tremendous amount of opportunity.”
It is relatively unusual for U.S. pension managers to seed young private-equity firms or buy stakes in them, although the broader market for investment in alternative-asset managers is growing quickly. There were 89 investments in alternative asset managers this year through Aug. 1, totaling $21.3 billion and surpassing the sum for all of last year, according to data firm PitchBook.
Borden, who took the top position at Texas Permanent late last year, has a long record of taking direct stakes in companies, going back to his time managing capital for the South Carolina Investment Commission. He believes that pension funds can take advantage of the investment expertise of the firms they work with via partnerships that allow for more co-investment and direct deals. In May, Texas Permanent announced a partnership with quantitative equity manager Intech.
But Borden sees a particularly bright opportunity in sports and entertainment. Sports investment has surged in recent years due to professionalization of college athletics, the legalization of gambling and the proliferation of streaming services, among other factors. In August, the National Football League, the country’s most lucrative sports league, approved a new policy to allow investors such as private equity to own stakes in teams.
Globally, private-equity firms have invested $11.8 billion in sports deals this year through Oct. 18, compared with $9 billion all of last year, PitchBook said.
Velocity Capital was formed by longtime sports investors David Abrams and Arne Rees. Abrams previously was a partner with Apollo Global Management and also a CIO of Harris Blitzer Sports & Entertainment. Rees previously served as U.S. CEO of Sportradar Group and as an executive at sports-broadcasting network ESPN, among other roles.
Abrams says Velocity Capital’s objective is broader than most private-equity investors in the sports sector. The firm doesn’t invest in teams, but wants to find companies where they can work with operators and expand over years, and eventually to create “a multistrategy platform where we are domain experts in the ecosystem,” Abrams said.
Velocity has five portfolio companies, including Parella Motorsports Holdings, which hosts racing events, and Elevate, a marketing consulting firm for sports and entertainment companies. It also backs Camp, a location-based entertainment company.