Ares spent 18 months marketing for the pool, which raised $3.7 billion, including $2.2 billion of equity commitments and $1.5 billion of anticipated leverage and related transaction vehicles, according to a Sept. 15 statement. 

“We felt there wasn’t anyone out there doing what we are seeking to do,” said Mark Affolter, an Ares partner and co-head of U.S. direct lending. “We’ll be investing up and down the balance sheet.”

Ares has several different businesses. It is one of the biggest private lenders to U.S. and European middle-market companies. It also has a private-equity business that takes controlling stakes and invests in distressed situations, as well as real estate and infrastructure divisions. In 2021, Ares launched a wealth management business that targets high-net-worth retail investors and financial advisors.

Shares of the company, down 8% this year, traded Friday at $74.64, off 2%. 

With its sports, media and entertainment, or SME, fund, managed out of its direct lending business, Ares will seek to invest in European and U.S. soccer clubs, Affolter said. It will also target Major League Baseball, the National Hockey League, rugby, and other sports.

In media and entertainment, Ares will focus on music catalog rights and songwriters; companies that provide lighting, grips, and props to studios across North America; as well as businesses that own media-related assets, he said.

“Our view is that there is incredible growth across these sectors. It’s really driven by valuations ascribed to original content,” Affolter said. 

The firm will provide debt—senior, junior and mezzanine loans—to teams and companies, Affolter said. Ares will also seek to take minority stakes, making preferred and common equity co-investments, he said. (With preferred equity, investors are senior to the common equity, but junior to the debt.)

So far, the fund has done 19 deals, including investments in soccer clubs Atlético de Madrid and Inter Miami CF, the San Diego Padres, and McLaren Racing. About one-fourth of the pool has been invested, the statement said. 

Private-equity firms have been investing in sports teams for years. Executives pointed to the value of live sports content as the draw. The sale of broadcasting and media rights is now the biggest source of revenue for most sports organizations, according to the World Intellectual Property Organization.

The NFL in 2021 signed media rights agreements with

CBS
,
NBC, Fox, ESPN, and

Amazon

that were collectively worth about $110 billion over 11 years, the

New York Times

 reported. Media rights for the sports teams are one example of how the clubs generate recurring revenue streams, including sponsorship revenue, that attract investors, Affolter said.

Streaming has also elevated the value of premium content, with live sports among the most sought after assets. In June,

Apple

 clinched a 10-year deal to stream every live Major League Soccer match.

“We have witnessed significant demand for new and original content among fans, streaming platforms and networks and this has driven sports related businesses to require flexible and scalable capital to help fuel this secular growth,” Affolter said in a statement. 

So far this year, PE firms have made 221 sports investments, valued at $31 billion, as of Sept. 9, according to data from PitchBook. This compares with 440 deals, totaling $58.4 billion, in 2021, which is considered a record-breaking year for mergers. 

Recent deals include CVC Capital Partners $2.4 billion investment in LaLiga, a professional soccer league in Spain, last year. This year, Clearlake Capital and Los Angeles Dodgers part-owner Todd Boehly led a consortium to buy Chelsea F.C. for 2.3 billion pounds ($2.6 billion). Silver Lake in 2022 also upped its stake in Manchester City F.C., becoming its second-largest shareholder, Bloomberg reported. 

Ares, however, is one of the few with a dedicated sports fund.

Dyal Capital, a unit of

Blue Owl Capital

(OWL), has a dedicated pool that makes minority investments in sports teams. Deals include the Phoenix Suns, Sacramento Kings, and the Atlanta Hawks.

There is also Arctos Sports Partners, which makes passive, minority investments in professional sports franchises. Arctos, which raised $2.1 billion with its first fund, has invested in the Golden State Warriors, Tampa Bay Lightning, the Chicago Cubs, and Real Salt Lake. 

Write to Luisa Beltran at luisa.beltran@dowjones.com