Abstract
Attaining and maintaining alpha has driven investors to pursue new and innovative means of
generating above average returns and / or protecting portfolios from economic downturns. The
shift into alternative assets through traditional investment vehicles has allowed investors to
invest in virtually anything that remunerates. The growth and monetisation of football and sport
in general has made it a marketing and branding colossus in the financial realm. This study
investigates the characteristics of publicly listed football clubs concerning the nature of their
risk and return, as well as their capabilities as investment instruments. An analysis of the returns
for each of the respective clubs was done as well as a back-test of the returns for indices that
were constructed. The standard deviation and volatility of these individual and indexed returns
were then used to explore the risk profile of the clubs as investment instruments. The study
then explored the capabilities of football clubs as hedging and diversification tools, and how
they may fit into an investor’s investment objectives. This included an investigation into who
might find ownership in football clubs advantageous; and what they may bring to a portfolio
in terms of return, risk, and diversification. The findings firstly show that football clubs have
the capability of producing significant positive returns, and historically some clubs have beaten
the broad market index over the mid- to long-term. The risk associated with each club is
different and varies due to the variable nature of the stock’s free float and trading volume.
Secondly, the study noted that due to the variable nature of the returns and volatility, it is
possible to model an index in different ways to satisfy different investment objectives. Indices
may be modelled that prefer low correlation to the overall market, or ones that seek substantial
returns more specifically. Lastly, the study found that the clubs individually, and the indices as
a whole, have a very low correlation of returns with each other; a broad market index; the gold
spot price; European inflation index; and a European real estate index. This establishes the
point that they are useful tools for hedging and diversifying the returns of a portfolio.