Sept. 29 (Bloomberg) -- Soccer’s ruling body is examining an investment fund set up by former Chelsea Chief Executive Officer Peter Kenyon to see if it violates the sport’s rules, according to a FIFA official who declined to be identified.
The fund, which has invested in the future transfer value of about 15 players, is a venture between Kenyon’s talent-agency employer Creative Artists Agency Inc. and Gestifute SA. Some of the players are managed by Gestifute, which handles Cristiano Ronaldo’s business, Kenyon said.
The arrangement may be a conflict of interest because Gestifute could seek transfers for its clients that give the fund a greater return, according to Jose Maria Gay, a Barcelona University professor who writes an annual report on soccer finance. Kenyon said the fund’s managers are “very conscious” not to influence trades, which would be a breach of FIFA rules.
“We’ve been aware of conflict and we’ve managed that conflict,” Kenyon said in an interview. “I’m confident that we’re operating within the guidelines of the football governing bodies and the financial bodies.”
Los Angeles-based CAA, which represents actors including George Clooney, branched into sports in 2006 and formed a alliance with Porto, Portugal-based Gestifute in 2008. They control the Dublin-based fund, Quality Football Ireland Ltd., through trusts in Jersey for tax reasons, Kenyon said. Quality Sports Jersey GP Ltd. is co-owned by CAA Sports International LLC and Gestifute International Ltd., according to a Feb. 15 filing in Jersey in the English Channel.
‘On the Carry’
Kenyon said that the Jersey filing was for “regulatory” reasons and doesn’t mean Gestifute has joint ownership of the business. Jorge Mendes, Gestifute’s managing director who represents Ronaldo, is paid as an adviser to the fund and his income is based “on the carry,” or when a player is sold, Kenyon said. Mendes said in a statement on his company’s website he doesn’t have the power to make decisions in the venture.
The fund has raised money from more than 20 “high net worth individuals” since last year, Kenyon said, adding the minimum investment is $250,000. Typically, the fund’s managers buy a share in the future transfer rights of a player aged 18 to 23 from a team for $1 million and shares any profit when he is sold to another club.
They acquired the rights of seven players from Sporting Lisbon and at least one from Turkey’s Besiktas, according to team filings. FIFA can ban offending teams from the transfer market, block sales and suspend players and agents should third parties influence transfers.
Mendes faces conflict of interest because he is in a position to influence transfer fees, according to Gay.
“It really raises questions about who is setting the market price,” Gay said.
Mendes brokered Ronaldo’s record $120 million move to Real Madrid from Manchester United in 2009. Gestifute International director Luis Correia declined to comment or make Mendes, his uncle, available for interview.
Mendes’s career shows “he hasn’t made money by moving players on,” Kenyon said. “If you look at his roster, he’s developed players in conjunction with” their clubs, Kenyon added. Ronaldo spent six years at Manchester United before joining Real. The fund doesn’t own a share in Ronaldo’s transfer rights.
The English Premier League banned third-party ownership of transfer rights after it complicated Argentina forward Carlos Tevez’s 2007 move to Manchester United. In Portugal, Turkey and Spain such ownership is becoming more common as banks rein in credit and clubs struggle to raise funds, Gay said.
It’s potentially lucrative: Ronaldo’s fee increased six-fold in the six years through 2009. At the same time, it’s a “high risk” strategy because players get injured or lose form, Gregor Reiter, director of the German players’ agent association, said.
“If you invest in 20 players, for 19 of them you’re probably not going to see any return,” Reiter said in an interview. “Not everyone is Cristiano Ronaldo.”
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