Melbourne-based Priomha Capital, which claims to be the “world’s premier sports hedge fund”, wagers on European football, cricket and golf. Founded in 2010, the firm manages about $20m.
Brendan Poots, Priomha’s founder, points out that political and economic shocks have little bearing on sports events, making bets on them the “ultimate uncorrelated asset class”. Sports results should also be recession-proof.
Priomha’s longest-running fund posted a 10.1% return—before fees—in its latest financial year, a period during which an index of global hedge funds compiled by Hedge Fund Research fell by 5.7%. As it hones its algorithms, Priomha hopes for returns of 17% in the medium term—ie, close to the targets aimed for by private-equity investors.
I’m looking at something that may at first appear strange as an investment strategy but that in fact may provide additional diversification for an investor holding a portfolio of stocks and bonds—sports betting.
While different from investing in financial markets, sports betting can still be regarded as an investment, provided that the placed bets follow a sound strategy that takes into account both return and risk. By a similar token, financial investment would turn into gambling when trading doesn’t follow any sound strategy. So what matters is the attitude of the investor, not the subject of the investment.
There is an Australian company – The Priomha Group – which has been offering an investment fund based on sports betting for seven years now. To reinforce its commitment to European rules, they opened a subsidiary fund based in Gibraltar.
The Cloney fund from Priomha has an enviable performance track record. For the period 2010-2017 the fund gained 226.04%, which translates to an annualised return of 18.4%. This performance compares with an annualised return of 4% for the FTSE 100. Such a performance has been achieved on a standard deviation that is close to the standard deviation experienced by the FTSE 100.
The Cloney fund is not exposed to boom-bust economic cycles, to monetary policy, to political cycles, nor to any other events that make for market risk. At the limit, the correlation of sports betting returns (and therefore of the Cloney Fund’s returns) with the market are close to zero, which means investors can reduce risk in their portfolios by allocating some money to an investment vehicle like this one.
Priomha - Wagering On A new Asset Class
Investors looking for alternative alpha have found a unique source for the road ahead. It’s called Priomha Group, an Australian gambling hedge fund that has shown remarkable results during the last seven years.
The fund has returned more than 220% since its inception.
With its headquarters in Australia, the firm opened a second office in Gibraltar — which is a British overseas territory occupying a narrow peninsula of Spain’s southern Mediterranean coast — for tax advantages. Its Gibralter-based firm Cloney Global Investments allowed the company to expand into Europe where sports gambling is more popular.
Where Centaur failed, and where Poots’ shop has shown success, has been in risk management. The firm has a disciplined bank management strategy.
Still, it’s hard to argue against the fact that sports wagering remains an intriguing source of alpha and income year-round.
“Sport is essentially recession-proof and as such it is a good business to be in,” Poots told Investment Europe last year. During the first six years of its operations, his fund has not had a down year.
Poots first notes the usual suspects top the markets for the 2017/18 Barclays Premier League with Manchester City favourite in the betting world at $2.90, followed by Chelsea ($4.70), Manchester United ($4.90). Behind the trio remain three other contenders : Tottenham ($11.00), Arsenal ($13.00) & Liverpool ($16.00).
“Our ratings have Manchester City and Chelsea sharing favouritism at around $3.50. Given the current markets City are not value but we do not want to oppose them… our only BACK (long position) pre-season is Chelsea.
“Manchester United, by our ratings are closer to a $7.00 chance, consequently we have taken a position against them pre-season. Tottenham, Arsenal & Liverpool all look fairly priced,” Poots explains.
The sport hedge fund’s ratings see Newcastle outperforming the two other promoted teams Huddersfield & Brighton and place the Magpies close to mid table at the end of the season. “We are heavily in Newcastle’s corner,” comments Poots.
Priomha Capital’s CEO pinpoints that apart a couple of pre-season positions taken in the Priomha Cloney Multi-Sport strategy, the hedge fund will look to trade the opening six rounds as their own separate competition.
“Manchester United have a relatively easy run to open the season. They are a strong chance to be undefeated. Consequently, given that they are already very popular in the market we can expect them to be trading around $3.00 or lower if they start as we expect. A strong start has been accounted for in our pre-season ratings of Manchester United. We already have exposure to them pre-season. We will increase that exposure should they trade in the $3.00 range by LAYING (short position) them again.”
Why sports investing is the ultimate uncorrelated asset class
Brendan Poots is the founder of sports betting hedge fund, The Priomha Group, who mainly bet on football, cricket, golf and also horse racing and tennis.
Priomha setup shop in Melbourne (Australia) in 2010, and more recently, have expanded with a second location in Gibraltar (Europe). From inception up to the release of this episode, Priomha’s Cloney fund has returned a little over 220%.
From listening to our discussion, you’ll gain great insight to how Brendan runs his operation—from getting investors to buy in, to controlling risk and minimizing the volatility of returns, and how the fund makes money trading sports games.
Topics of discussion include;
1. What makes sports betting an appealing asset class to investors—as well as the inherent risks, and the key benefits of being uncorrelated to financial markets.
2. The typical process of validating betting strategies, how much is discretion used in decision making, and whether a deep understanding of the sport is necessary.
The future of Sports bettors
Brendan Poots, a former professional bookmaker, is the CEO of Priomha Capital, a global sports trading fund with offices in Melbourne, Australia, Las Vegas and Gibraltar. His company issues annual reports and a prospectus, just like any other open-to-the-public hedge fund, and with every trade he makes, he leaves an electronic fingerprint with every bet he makes.
"Every trade we make is traceable, down to time, size and type," Poots said.
"We are hoping that we can continue to pioneer the development of entity wagering," said Poots in a summer email interview with ESPN. "With the BREXIT and the market crashing, as well as the long-term uncertainty that will pervade the global markets, a non-correlated asset class immune to traditional market risks is attractive."
"We analyze data, we build algorithms, we predict what will happen and then we make a trade," said Poots.
Investment Europe: "There will be no Leicester this year"
Brendan Poots, the manager of the Priomha Capital Cloney Multi-sport Investment Fund and its Gibraltar-domiciled version which will start trading on 1 October, says the fund will be taking some positions in the major European football leagues.
In his view, “there will be no Leicester this season in the Premier League”. Priomha Capital’s analysis suggests that Manchester United is a “strong LAY” (short position) as are Liverpool and Tottenham.
“Chelsea, Manchester City and Arsenal will lead the way,” the fund manager believes.
Regarding the US Open that just started, the Australian hedge fund highlights that it is “still evaluating the merits of tennis” because the domination of top players makes it “a troublesome asset class to trade”.
Inside Information: All Blacks (Rugby) Hotel Room Bugged
Betting analyst Brendan Poots believes it would not be out of the ordinary for a gambling syndicate to target a sports team in this way.
"From the gambling perspective there's certainly an advantage to be gained by having more information than the public markets, not dissimilar to the financial markets with insider trading," he said.
Investment Europe: Sporting Bets; A winning strategy from Australia
Gibraltar-based hedge fund Priomha Global has launched a multi-sports strategy investing in sports and events.
The fund, seeking to outperform the FTSE 100 and the Global HFRX indices, is expected to manage over £10m (€12.7m) within 12 to 18 months.
Poots argues trading on sports is absolutely non-correlated. According to him, choosing a multi-sport strategy has ensured low volatility returns when establishing the track-record of the Australian fund.
“Sport is essentially recession-proof and as such it is a good business to be in.”
Poots suggests running a sports-related strategy is no more risky than any other managed fund and even potentially less risky. Why? Because information is very open and transparent in sport compared with that found in the financial markets.
The strategy’s gross return has hit 200% between its inception on 1 January 2010 and 30 April 2016. Maximum drawdown recorded was -6.48% in November 2011.
Regarding upcoming sport events, the manager of the Cloney Global Investments fund estimates June’s Euro 2016 competition will be “highly liquid with over £1bn (€1.27bn) traded over the tournament.”
Australian Financial Review: Priomha Launches European Fund
Australian sports hedge fund Priomha Capital will this week launch a European fund, a move it hopes will soon mean having tens of millions of dollars under management.
Priomha – which has an investment fund that bets on sport on behalf of members, and trades or hedges its bets – will launch Cloney Investments Limited, an open-ended investment company based in Gibraltar.
Priomha mostly bets on English Premier League football – which represents about 26 per cent of its wagering activity – and other football tournaments such as the European Champions League, cricket matches such as the current Twenty20 World Cup, some horse racing and other sports tournaments such as the Australian Open tennis. More than 95 per cent of trades are hedged.
The firm's Australian fund, the Cloney Multi-Sport Investment Fund, returned 11.13 per cent in the year to June 30, 2015 – more than double the 4.97 per cent return for the previous year.
Australian Financial Review: Priomha targets Europe & USA Markets
Australian sports hedge fund Priomha will establish a presence in Gibraltar to attract more European clients.
The company's founder and chief executive Brendan Poots said he wanted to expand offshore to rapidly increase the funds his firm has under management.
Mr Poots said Priomha made a return of 11.5 per cent in the 2015 financial year, easily outdoing the benchmark ASX 200 figure of 1.2 per cent.
Bloomberg Business: Priomha Moving to Europe
Priomha Capital Pty Ltd, an Australian hedge fund manager that bets clients’ money on sports, plans to relocate to Gibraltar by the end of the year to double the A$5 million ($3.9 million) it has under management.
Melbourne-based Priomha’s multisports fund returned an average of 17 percent since 2010 by betting all of the funds as often as twice a month. Priomha uses computer models to wager on English Premier League soccer, as well as cricket, horse racing, golf and tennis.
Priomha looks for value by tracking sports statistics against betting odds before and during matches.
Priomha employs three statisticians to work with traders, and bases as little as 20 percent of decision-making on “qualitative” judgment, such as the effect on a team of the injury of a key player, Poots said. It hedges betting to offset potential losses.
New York Times: Tennis, Data & Trading
Brendan Poots, the chief executive of the Melbourne-based sports investment fund Priomha Capital, said the value of rapid data could be seven figures.
In many ways, tennis is tailored for those modern gamblers who are mathematically inclined.
The amount of money wagered on tennis increased exponentially in the last five years, according to Poots.
Poots noted that an innocuous fourth-round women’s singles match here between No. 28 Flavia Pennetta and No. 9 Angelique Kerber attracted more than $4 million in wagers on the betting site Betfair on the first set alone.
Sports is a mainstream investment opportunity: Priomha is at the forefront
Brendan Poots is the founder and CEO of Priomha Capital, the world’s first fund manager centered on sports and events. The Australian, a keen sportsman himself, has overseen booming returns far in excess of more traditional funds.
Over the last four years we’ve returned +180%. The global hedge fund index since 2010 is up less than 6%, about the same as the Australian stock market. During that time we’ve also had fewer negative months than hedge funds and the ASX.
Importantly our volatility is lower than those of our comparative indices. This is a function of in-play trading: you no longer lose 100% of your stake because it’s not a binary outcome anymore—you can get out and lose “only” 30%, not 100%.
Money management and identifying value are two keys to long-term success.
Bloomberg Business: Tennis Quant's System & Priomha
Priomha wagers about A$100 million ($90.3 million) a year, turning over A$5 million of funds under management about twice a month.
The Melbourne-based fund uses computer models to bet on soccer, cricket, horse racing, golf and tennis.
Priomha takes a more cautious approach because it manages clients’ money, hedging bets to offset potential losses.