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Click to listen to the latest episode of The Richards Report featuring Big League Advance CEO Michael Schwimer.
In the last episode of my podcast I spoke with Chris Keane from the Sydney Swans about recruiting in AFL and using data to improve recruiting decisions just like in the book and film Moneyball.
It was one of the most popular episodes that I’ve recorded and this latest episode of the podcast takes Moneyball to the next level: using Moneyball not just to recruit baseball players, but to make it your fund's investment strategy.
I’m speaking with Michael Schwimer, the CEO of Big League Advance.
When I first heard Michael describe his story and his business I was that excited to find out more. It’s certainly not an investment strategy for everyone as it’s high risk/high reward, but it’s a really interesting concept.
Big League Advance is like a venture capital fund, but instead of investing in emerging businesses, they invest in minor league baseball players. They do so by buying a percentage of the player's future earning capacity.
In the US there are 7000 minor league players. Less than 10% will play one game in the professional league, the MLB.
Michael Grew up in Virginia and is a former professional baseball player from Philadelphia who was drafted by the Philadelphia Phillies in 2008. This is when he first saw the opportunity in the market to invest in these players.
He founded BLA when he was just 29 years old. He’s now 32, and to date the company has signed about 134 players with an average payment around US$350,000 (approx AUD$500,000).
Also involved in the business is Paul DePodesta. Australians not familiar with baseball or American football may not recognise Paul’s name but he is a high-profile former general manager of the LA Dodgers. Paul has moved from baseball to American football and is currently the Chief Strategy Officer for the Cleveland Browns. If you’ve seen the movie Moneyball you may remember Jonah Hill's character, who was based on Paul when he was at the Oakland A’s.
Big League Advance invests in players who don't have a high profile, which makes their selection process even more impressive (75% of the players they invest in aren't in the top 300).
The first fund was US$26m (invested across 77 players) and the fund was deployed in 18 months (it closed in Dec 2017). A third of the players from this fund have since played a game with the expectation that this will be eventually be 50%. However, a player needs to play four to five years in the MLB before they provide a return on investment to Big League Advance.
They’re aware that they will lose on 80% of players they invest in, but they aim to make enough from the remaining 20% of players that they receive a significant return for their investors. The first fund has been tracking so well that the latest fund will deploy US$130m.
Big League Advance continues to receive recognition around the world, and is regularly approached by other sports wanting to improve in their analytics and data analysis, in particular soccer federations wanting to prepare for the next world cup and NBA teams looking for an edge over competitors.
Big League Advance diversifies its portfolios over players, teams and positions. It’s certainly a different form of diversification to most traditional investment funds, but it shows the importance of diversification to manage your risks.
At Six Park we diversify clients' portfolios over asset classes such as shares and property, in different geographies and through different fund providers. Click ‘Get Started’ below if you would like to see how Six Park would invest for you.
You can find out more about Michael and Big League Advance here.