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Martial lore – The idea of ‘paying for hope’ is not confined to the world of football

04/09/2015

Andrew Evans

Andrew Evans

Fund Manager, Equity Value

The £36m – potentially rising to £58m – Manchester United paid for teenage striker Anthony Martial as football’s transfer window closed on 1 September has been called many things since. The line that caught our eye on The Value Perspective, however, came from the CIES Football Observatory – last heard from here in Costa benefit analysis II – which characterised it as a payment for “future hope”. 

In the context of a 19-year-old who scored 11 goals in 49 appearances for previous club Monaco – and the fourth time United have stumped up £25m or more for a teenager – it seems a nicely diplomatic description. In the context of a financial outlay that may or may not pay off over time, however, it obviously invites some comparisons with the world of stockmarket investing. 

Peruse, for example, this list of football’s 10 most expensive teenagers and you would be hard-pushed to argue that paying for hope invariably works out for football clubs. Antonio Cassano, say, may have done better at Roma if he had been more in control of his temper, Milan’s Alexandre Pato was perhaps a little too keen on nightclubs, Barcelona have signed far more talented players than Javier Saviola … 

Of course, the biggest reason why football clubs are now prepared to pay tens of millions of pounds for the uncertainty of potential rather than proven talent is because of the huge sums of money that continue to pour into the sport through television and sponsorship, supplemented by a small but significant collection of oligarchs, sheikhs and other billionaires. 

Again there are stockmarket parallels here, with the injections of liquidity provided by the quantitative easing programmes of, among others, the US Federal Reserve and the European Central Bank casting Janet Yellen and Mario Draghi in the roles of, say, Rupert Murdoch and Roman Abramovich. We have covered the resulting inflation of asset valuations in articles such as CAPE of good hope

There is that word again – a coincidence that time but investment is hardly short of instances of people paying for hope, especially when there is so much money sloshing around markets. That money always flows somewhere and it tends to flow to hope. Here on The Value Perspective we are now seeing many expensive businesses – certain tech valuations leap to mind here – on which a lot of hope is pinned. 

It may be a parallel too far to point out that 2001 and 2006/7 – the years that feature most heavily in that list of football’s most expensive teenagers – were also previous stockmarket highs but, like Manchester United with Anthony Martial, investors in these ‘hopeful’ businesses will now have their fingers crossed they have picked a Wayne Rooney rather than an Anderson.

Author

Andrew Evans

Andrew Evans

Fund Manager, Equity Value

I joined Schroders in 2015 as a member of the Value Investment team. Prior to joining Schroders I was responsible for the UK research process at Threadneedle. I began my investment career in 2001 at Dresdner Kleinwort as a Pan-European transport analyst. 

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