Peter Mallouk, a billionaire wealth advisor and CEO of Creative Planning, recently acquired a majority stake in Major League Soccer’s Sporting Kansas City for about $700 million. Despite this high-profile purchase and owning a stake in the Kansas City Royals, Mallouk admits his preference remains investing in stocks rather than sports teams. He highlights that the NBA’s Los Angeles Lakers, sold at a $10 billion valuation last year, yielded a compound annualized return of 11.5% over 46 years, which is actually lower than the 12.4% annual return achieved by the S&P 500 in the same period, underscoring that sports team ownership may not outperform traditional equity investments.

Mallouk, whose firm Creative Planning manages over $700 billion in assets, stresses that owning sports teams is a distinct asset class compared to typical stocks or private equity, and often attracts investors motivated by passion or status rather than pure financial gain. He recommends clients prioritize traditional private equity investments before considering sports teams, given the higher fees, less diversification, and the need for a different investment mindset. Mallouk advises sticking with established private equity firms like TPG, Apollo, Arctos, and RedBird if investing in sports to access better deals and credibility.

The sports franchise market is booming due to skyrocketing media rights deals, with the NBA securing a $76 billion TV agreement and the NFL guaranteed $125.5 billion in broadcasting revenue over a decade. These lucrative deals fuel rapid team valuation growth, with major league franchises now valued at approximately 10 times their annual revenue compared to 2.9 times in 2000. Private equity firms have also entered college sports investing to tap into these revenue streams, but Mallouk warns about potential long-term downsides as conferences trade future media rights and revenues to remain competitive.

Mallouk’s purchase of Sporting Kansas City is more a labor of love than a purely financial move, driven by his Kansas City roots and affection for the sport. The club currently has one of the league’s lowest payrolls and poor recent performance, but Mallouk is prepared to increase spending to improve results. While owning sports teams may not beat stock market returns over time, the appeal of owning a “trophy asset” persists among billionaires who value the status and unique rewards that come with sports ownership, even as the broader financial wisdom for investors remains cautious.