By Genevieve Cua

(SINGAPORE) If you have a passion for football, you can do more than cheer your favourite team. You could invest in a fund that aims to participate in a multi-billion-dollar sport that appears to be fairly immune to economic downturns.

What's more, you could be helping to fund and nurture young Asian talent, whose presence in the European big league is sparse.

The team behind the London Nominees Football Fund believes the talent development aspect of its mandate is part of what would appeal to investors with a passion for football. London Nominees is currently seeking to raise funds in Asia. So far it has attracted commitments of US$10 million from both wealthy individuals and institutions. It aims to raise US$100 million by May.

Says chief executive Andrew Leppard: 'We're seeing a huge amount of interest. Probably 95 per cent of the people we speak to are interested. The challenge is to explain where money is made. People believe football clubs are black holes. But it boils down to management, as much as a business may be managed incorrectly ... There is real profit in football. We have rules and criteria to identify value, and we will not invest if it doesn't meet our criteria.'

He says the fund is 'creating a total system of profiting from football'. 'We're identifying children in small villages who can't afford to play football; raw talent in their bare feet; through to academies in Asia which is an untapped market.

'We nurture and develop those players; we're looking to buy some European clubs to 'carpark' those players to get them to qualify for the English leagues. We can move that talent at a huge profit to the fund, or put those players into clubs that we buy a stake in, with a view to promoting them from championship to premiership.'

The fund expects multiple sources of revenue from stakes in football clubs, branded football academies and franchises. In the offing is an Asian reality TV show, for instance, that is expected to generate revenues from sponsors, advertising and player commercial rights.

London Nominees isn't the only football fund trying for a share of what appears to be a lucrative market. Amid the financial crisis in 2008, banking group Emirates NDB launched the Hero Global Football Fund with a five-year life, and the aim of raising US$100 million. It also set out to recruit young players from Africa, South America and Asia, and aims to sell their image and registration rights to clubs. The Hero Global Football Fund set their investment minimum at US$100,000, compared to US$25,000 for the London Nominees' fund. The latter is lodged for sale to sophisticated investors in Singapore.

But there are also duds. In 1997, Singer & Friedlander launched the UK's only football fund with much fanfare. By 2002, investors had lost 75 per cent of their capital and were switched to a global media and leisure fund.

London Nominees has roped in some stellar names for its investment committee, including Carlos Alberto Torres who captained Brazil to victory in the 1970 World Cup; and Bryan Robson who captained England's National Team 65 times and was named to the English Football Hall of Fame. He is currently manager and coach of Thailand.

On the due diligence process, the fund looks for clubs with real estate value and potential; good attendance of at least 20,000 for house games; management that can be strengthened and improved at minimal cost; and commercial and merchandising income that have not been fully exploited. Minimal debt is also a criterion.

'We look for clubs that are currently poorly managed with real estate value that we can securitise our investment against, so we don't have negative equity. They should have a good fan base, and they haven't maximised the commercial and marketing rights of their merchandise,' says Mr Leppard.

At the outset, the fund expects to generate revenues through secured loans to clubs. It also aims to explore insurance structures; future ticket revenues, for instance, can be realised early as a cash flow advance for a premium. It has to date signed a contract with an Asian regulated football player agent and management company, and is looking to sign a contract with a club in Belgium.

'Our goal is to under-promise and over-deliver on returns. We think investors can expect 8 to 10 per cent between year 1 and 2. After year 2 to 3, when we start to develop talent and bring our ideas to fruition, they can expect double-digit returns, and some of those returns may well surprise investors.'

On talent, Thailand is expected to be a rich source of football star potential. On Singapore's football talent pool, Steve McMahon, adviser to the fund, says: 'The passion is there. But the population is small. That's a major problem.'

The fund is domiciled in Bermuda and charges 2 per cent in annual management fee. It also charges a 20 per cent performance fee with a high water mark. The 'A' share class invests purely in football-related assets and has a two-year lock-up period. The 'B' share class has no lock-up, and is 60 per cent invested in football. The balance is invested in cash and global equities.

European football has posted 'stratospheric' revenue growth, as Deloitte's 2009 Annual Review of Football Finance reports. But profits have been elusive in the English football space.

This article was first published in The Business Times.