True Capital Management (TRUE) will later this morning announce the acquisition of FS Wealth Sports & Entertainment (FSW), a Nashville-based boutique wealth advisory firm. The strategic takeover will give the global financial management firm a physical presence in the fast-growing Nashville sports market (along with the leadership and team needed to operate it). CEO Doug Raetz said it also gives TRUE “significantly more capital” for its investment vehicles (FSW has $200 million AUM) and 40-50 more athlete and entertainer clients capable of offering strategic value to portfolio companies.
JWS’ Take: True Capital Management says it has built a “360 degree” financial management solution for professional athletes. Clients can take advantage of family office (think: day-to-day financial management), wealth management and/or alternative asset investment management services. TRUE reported having “close to $2 billion” worth of assets under management as of April ’22.
Headquartered in San Francisco, True Capital has sought M&A targets over the last year. Raetz explained, “As you grow AUM, additional access to investment opportunities comes along. Bigger check sizes lead to the opportunity to invest directly with top name target companies rather than going through fund managers or feeder funds. [Going] direct to cap table leads to lower fees and greater performance.”
Adding three or four dozen high-profile athletes and entertainers to the client list (though FSW wouldn’t release any client names) can help firm performance, too. “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 media [with their reach and influence].” TRUE currently represents more than 300 athletes (including Albert Pujols, Marshawn Lynch and Deandre Ayton).
TRUE will benefit from the assets under management, client base and team that FSW brings. But Raetz was also quick to point out the FSW partnership will establish a meaningful presence in the Music City for TRUE. “Nashville is becoming one of the hottest markets in the country for sports,” Raetz said. “It is becoming a hot market for business in general, really booming with lots of trends, which is attracting people to move there. And it is a great gateway to the SEC, which is a far reach from us in California.” The fact that FSW co-founders Bret Fincher and Chris Stout are qualified to lead an office is viewed as particularly valuable.
FSW’s connections will enable True Capital to get into the music business (Fincher specializes in the vertical) and to broaden relationships within several sports categories (see: hockey, golf and coaching). As it stands, TRUE’s strongest relationships are in basketball and baseball (Stout has a meaningful presence in football, too). The wealth management firm plans to remain active on the M&A front. “We are going to expand into more cities, with more of these types of partnerships,” in the pursuit of scale, Raetz said.
While that may be the company’s intent, it may not be feasible. Raetz acknowledges there is a “fairly limited market” for financial management specialists focusing exclusively on athletes and entertainers (the number is growing as the wealth in sports increases). The CEO called TRUE one of the “top two or three pure-plays” in 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 minimal 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. Roughly half of the assets the company has under management are invested in the public markets, with the balance in alternative investments (think: venture, private equity, real estate, crypto, private credit or hedge funds). Its platform provides clients with more than 50 private market investment vehicles in which they can invest.
The TRUE-FSW tie-up reflects athletes’ increasing desire to invest in alternative assets. Raetz explained that up until four or five years ago, sports stars “did not have a large presence in venture capital” (they were largely invested in more traditional stocks and bonds). That is in part because RIA wealth management firms were not placing “a huge focus on the venture capital space,” which made it hard for athletes to navigate opportunities. Of course, they did not have access to the platforms needed to positively influence private market investments, either.
While that has all changed over the last half decade, TRUE has been doing athlete venture investing since its 2007 inception. “In order to achieve real risk-adjusted returns, investors must look to the private markets,” Raetz said. “Look at the wealthiest investors and wealthiest endowments on the planet; they are investing more than 50% of their assets in alternative investments.”
For FSW, the deal is largely about providing more resources and services to clients—particularly in private investments. “TRUE Capital’s [P.E.] division is a key component to our growth, and our clients will benefit greatly from additional asset classes,” Stout said.
Back in January of 2020, Cresset Capital ($23 billion AUM) took a minority shareholder position in TRUE, and Raetz said FSW clients will gain “full access to Cresset and their expertise in the private equity and real estate markets.”
FSW will also have the ability to leverage a back office with 50-plus people who can help service clients and scale the business. Stout explained the firm’s “growth had [it] bursting at the seams,” and TRUE’s infrastructure allows for expansion.
Raetz said athlete management is “very different than working with traditional high-net worth investors,” because of the learning curve associated with coming into so much money overnight, and the grueling schedule athletes maintain. “We talk to our clients, providing financial advice, every single day of their lives. An athlete-focused financial management company needs a ton of people, resources, time and scalability” to do client service effectively.