Jody Thelander founded the compensation data and consulting firm J. Thelander about 30 years ago, providing comprehensive data on private capital markets. She talked with Crain Currency about compensation trends at family offices and how they’re competing for top talent.
What are the trends you’re seeing in family office compensation?
[Family offices] are putting in more formality around carried interest because they want to attract and retain the people who can be successful on investments.
How does that play out?
So the carried interest is typically structured like an 80/20 split — 80% from the limited partners and 20% from the general partners. But in this case, the family office is the LP, so they still have to set up a pool, although it may be adjusted down. Because the family office is not raising capital, a 20% pool may be too much. They also likely don’t have to contribute capital for their carried interest, since the family doesn’t want that. But they still want a long-term incentive that ties investment success to compensation.
That's what we're seeing. It’s all about the competition for talent. You’ve got to make sure that if you want good people, you also have to compete with compensation and sweeten the pot a little bit.
In our latest survey, we looked at the percentage of partners who received carried interest at family offices and venture capital firms. (See chart below.)
Did that not used to be the case?
In the past, for nonfamily members, it was probably a base salary and some kind of bonus that was likely some kind of discretionary cash bonus. Now there’s much more formality in family offices.
When you say formality, what does that mean in terms of hiring and compensation?
More formality around the structure of compensation using different levers — base pay, target bonus and total cash. If there’s a target bonus or a bonus structure, especially for midlevel and junior employees, they want clarity on how they will receive it. Senior people are accustomed to profit distribution or portfolio company success. If they don’t have carried interest, they expect some form of equity distribution.
At the admin and midlevel, such as accounting and finance, employees want to ensure that any bonus they are eligible for is merit-based and clearly defined.
When it comes to family offices competing for talent with hedge funds and venture capital firms, how is that playing out?
I think they're getting more competitive, the good ones are getting more competitive — and especially the family offices that have come from some kind of success that is not generational, that's been successful because they've been innovative. They understand that they want their teams to be focused on the long-term success as well.
What are the advantages they have versus those other types of firms?
At a conference yesterday, it came up that emerging funds are having a hard time raising capital. And the larger funds are raising capital because the LPs really trust them, but it's been a much longer time frame to increase the dollars that they put to work; and family offices don't have to go out and do that with multiple LPs. Fundraising is less of a burden because it’s not always top of mind. Usually in the venture firms, you raise one fund, and then you're thinking about the next fund. When you talk about fundraising in the road shows, it's a very time-consuming process, and there's lots of pressure. Family offices don't have the same pressure for the funds.
I’ve heard from family office executives that it can be hard to move on to other firms outside of that sector. What are you seeing?
I’m not involved in hiring, but our data does show how long it takes to progress from one job to the next job. Are you in a job for two years or three years or four years until you progress to the next title? For good people, it's taking them less time to progress, and they're making more money at each job. That shows that even in a more challenging market, the good people are still extremely valuable.
Public markets offer a winning play for frustrated sports investors
By RYAN J. BYRNE
The headlines scream of missed opportunities for investors as high-return deals are executed in private sports franchise transactions. For family offices and ultra-high-net-worth investors, frustrations may mount. Gaining exposure to this asset class has been rather difficult despite vast resources, as many of the lucrative deals are executed in private. But there is a way for individual investors to participate in this exciting growth asset class.
The public markets offer investors a way to gain exposure to professional sports teams. Further, meaningful inefficiencies are at work in the public market, much to the benefit of the individual investor. While private valuations soar, public market valuations for the same properties sell at a discount, offering a strategic entry point for investors.
The convergence of a transformed media landscape and the unwavering global loyalty of sports fans has fueled remarkable returns for private sports owners, often surpassing traditional benchmarks like the S&P 500. Technological advancements and increased connectivity have unlocked novel revenue streams beyond traditional ticketing and broadcast rights, further propelling the sector's growth.
In a fragmented media environment, sports remain a powerful aggregator of live audiences, a prized asset for broadcasters and advertisers. The unparalleled viewership of sports, consistently dominating live-TV ratings, attracts premium advertising dollars. The internet has broken down geographical barriers, transforming once-local fan bases into global communities and drawing new players like Amazon, Apple and Netflix into sports broadcasting. These tech giants, seeking to monetize vast user bases, are willing to pay top dollar for media rights.
Institutional investors — private equity firms, pension funds, sovereign wealth funds and ultra-high-net-worth individuals — have recognized this potential, driving up valuations. Unfortunately, direct ownership of premier sports franchises remains a high-barrier game, as most teams are privately owned and therefore only available to a handful of large institutions and ultra-wealthy individuals. However, public markets provide overlooked opportunities. These listed companies trade at attractive valuations and offer diverse investment opportunities.
Consider Manchester United (NYSE: MANU), one of the largest sports franchises in the world. In February 2024, a 25% stake in the club was acquired by Sir Jim Ratcliffe at $33 per share. Yet the current market price for MANU stands at $14.50, presenting a potential entry point for investors.
This valuation disparity is not isolated. Madison Square Garden Sports Corp. (NYSE: MSGS), which encompasses the New York Knicks and New York Rangers, illustrates a similar discount. CNBC places the combined value of these franchises at $11 billion ($7.5 billion Knicks, $3.5 billion Rangers), while the current MSGS market capitalization hovers around $4.8 billion, representing a discount exceeding 50%. Many other publicly traded teams offer similar valuation discounts.
These public market valuations offer an entry point reminiscent of private franchise acquisitions a decade ago. This divergence presents a strategic opportunity to acquire premium assets at a discount to private valuations. Beyond fundamental value, we anticipate continued growth driven by escalating media rights deals, enhanced operational efficiencies and expanding monetization avenues.
Professional sports boast a significant proportion of contractually secured revenue, ensuring predictable cash flows and resilience against economic fluctuations. Deeply rooted fan loyalty further stabilizes revenue through season ticket renewals and premium experiences. Additionally, increasing global investor interest in sports assets provides a long-term tailwind, as more capital seeks access to a traditionally illiquid asset class.
Public markets also provide access to sports assets outside of teams, offering diversification opportunities. Formula One (Nasdaq: FWONA) and the Ultimate Fighting Championship (UFC), through TKO Group Holdings (NYSE: TKO), exemplify this, allowing investors to capitalize on the growth of rapidly expanding sports properties. These organizations operate as near-monopolies, offering durable competitive advantages and making them attractive long-term investments.
The publicly traded sports properties are often premier, globally recognized assets. Prestige plays a crucial role in long-term value, as storied franchises command global fan bases, premium sponsorships and generational brand equity. Given the choice, most investors would gravitate toward icons like the New York Yankees, Dallas Cowboys or other globally significant brands. Their prestige, coupled with sustained media and sponsorship growth, solidifies their status as superior long-term investments. Publicly traded companies offer access to premium brands, which allows investors to build a portfolio of high-quality sports properties.
Regulatory shifts and the growing institutionalization of sports are enhancing operational efficiency, governance and financial performance, further increasing the appeal of these assets. Meanwhile, emerging revenue streams — such as immersive fan experiences, VIP ticket packages and other hospitality efforts — are expanding monetization opportunities, positioning franchises for sustained long-term growth.
In summary, public markets offer a unique opportunity to invest in premium sports assets at a significant discount to private valuations. With rising media rights revenues, expanding global fan engagement and resilient business models, these assets present strong upside potential while relying less on overall economic growth than other industries with similar return profiles.
For investors seeking exposure to sports as an asset class, the game is far from over — it’s still in the early innings.