True Capital’s FSW Deal Reflects Nashville Athletes’ Booming Wealth

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True Capital Management (TRUE) will announce later this morning the acquisition of FS Wealth Sports & Entertainment (FSW), a Nashville-based wealth management advisory firm. The strategic takeover will give the global financial management firm a physical presence in Nashville’s growing sports market (along with the leadership and team to exploit it). CEO Doug Raetz said he’s also giving TRUE “significantly more capital” for its investment vehicles (FSW has $200 million in assets under management) and 40-50 more athlete and entertainer clients capable of to deliver strategic value to portfolio companies.

JWS review: True Capital Management claims to have developed a “360 degree” financial management solution for professional athletes. Clients can take advantage of family office services (think: day-to-day financial management), wealth management and/or alternative asset management services. TRUE said it had “nearly $2 billion” in assets under management as of April 22.

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Headquarters in San Francisco, True Capital has been looking for M&A targets over the past year. Raetz explained, “As you grow AUM, additional access to investment opportunities arises. Larger check sizes provide the opportunity to invest directly with top-tier target companies rather than going through fund managers or feeder funds. [Going] the direct capitalization table reduces costs and improves performance. »

Adding three or four dozen top athletes and entertainers to the client roster (though FSW does not disclose any client names) can also help the company’s performance. “In this world of influencer marketing, athletes have become attractive brand ambassadors,” Raetz said. “Celebrities can really move the needle for a product or service. [they invest in or mention] on social networks [with their reach and influence].” TRUE currently represents over 300 athletes (including Albert Pujols, Marshawn Lynch and Deandre Ayton).

TRUE will benefit from the assets under management, clientele and team that FSW brings. But Raetz was quick to point out that the FSW partnership will establish a significant presence in Music City for TRUE. “Nashville is becoming one of the hottest markets in the country for sports,” Raetz said. “It’s becoming a hot market for business in general, really booming with a lot of trends, which is attracting people to move there. And it’s a great gateway to the SEC, which is far from us in California. The fact that FSW co-founders Bret Fincher and Chris Stout are qualified to run an office is seen as particularly valuable.

FSW’s connections will allow True Capital to enter the music industry (Fincher specializes in the vertical) and expand relationships within multiple sports categories (see: hockey, golf and coaching). As things stand, TRUE’s strongest relationships are in basketball and baseball (Stout also has a significant soccer presence). The wealth management company intends to remain active on the mergers and acquisitions front. “We’re going to expand into more cities, with more of these types of partnerships,” for the sake of scale, Raetz said.

While this may be the intention of the company, it may not be achievable. Raetz acknowledges that there is a “fairly limited market” for money management specialists focusing exclusively on athletes and entertainers (the number is growing as wealth in sports increases). The CEO called TRUE one of the “two or three best pure-players” on the market (in terms of AUM).

To be clear, the major wire houses (think: Morgan Stanley, UBS) all have sports-focused wealth management divisions. “But it’s such a small part of what they do, and they’re only allowed to invest in Morgan Stanley or their proprietary products and services,” Raetz said.

TRUE is an independent RIA. About half of the company’s assets under management are invested in public markets, with the balance in alternative investments (think: venture capital, private equity, real estate, crypto, private credit, or hedge funds). Its platform offers clients more than 50 private market investment vehicles in which they can invest.

The TRUE-FSW combination reflects athletes’ growing desire to invest in alternative assets. Raetz explained that until four or five years ago, sports stars “didn’t have a big presence in venture capital” (they were heavily invested in more traditional stocks and bonds). That’s partly because RIA wealth management firms weren’t putting “a lot of focus on the venture capital space,” which made it difficult for athletes to navigate opportunities. Of course, they also lacked access to the platforms needed to positively influence investments in private markets.

Although everything has changed over the last half-decade, TRUE has been investing in athlete venture capital since its inception in 2007. “In order to achieve real risk-adjusted returns, investors must turn to private markets “, Raetz said. “Look at the richest investors and the richest endowments on the planet; they invest more than 50% of their assets in alternative investments.

For FSW, the deal is largely about providing more resources and services to customers, especially in private investments. « The REAL Capital [P.E.] is a key part of our growth, and our clients will greatly benefit from additional asset classes,” Stout said.

In January 2020, Cresset Capital ($23 billion AUM) took a minority shareholder position in TRUE, and Raetz said FSW clients will have “full access to Cresset and their expertise in the private equity markets and real estate”.

FSW will also have the ability to leverage a back office with over 50 people who can help serve customers and grow the business. Stout explained that “the growth of the business had [it] jam-packed,” and TRUE’s infrastructure allows for expansion.

Raetz said managing athletes is “very different from working with traditional high-net-worth investors,” due to the learning curve associated with making so much money overnight and the grueling schedule. that the athletes maintain. “We talk to our clients, providing them with financial advice, every day of their lives. An athlete-focused financial management company needs a ton of people, resources, time, and scalability” to deliver effective customer service.

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