Billionaire Todd Boehly's Investment Playbook

Key Concepts

Credit markets, risk assessment, asset management, private credit, senior secured lending, volatility, intellectual property (IP), diversification, asset management business, secondary positions, Dial Fund, fee-related earnings, general partners, carry, structuring capabilities, Saint James (athletic facility), NIL (Name, Image, Likeness), Berkshire Hathaway, Blackstone, Apollo, limited partners, Abu Dhabi, insurance industry, annuities, insuretech, Zinnia, Everly, sports media, immersive experiences, Chelsea FC, Golden Globes, global expansion.

Credit Markets and Risk Assessment

Todd Boehly emphasizes the foundational role of credit in capital markets, highlighting its importance in understanding risk across industries. He views credit and equity as derivatives of an asset's underlying performance. Key points include:

Credit as Foundation: Credit is the underpinning of capital markets, crucial for understanding risk.
Risk Pricing: Determining the necessary return for the risk taken, starting with asset evaluation (potential return, volatility) and pricing the risk accordingly.
Senior Secured Lending: Favors senior secured risk due to its consistent nature, contrasting it with unsecured investment grade risk and high yield bonds, which are more opportunistic.
Historical Returns: Over the past decade (2014-2024), senior secured loans outperformed investment grade and high yield bonds. Investment grade bonds returned 28%, high yield bonds returned 65%, and senior secured loans returned approximately 67-68%.
Private Credit: Boehly considers "private credit" a somewhat misleading term, as senior secured lending has always been a private business. The core question is whether the company's value exceeds its debt.
Lender's Perspective: Being a lender provides a front-row seat to observe companies without full commitment, facilitating learning across various industries.

Navigating Volatility and Identifying Mispriced Assets

Eldridge's strategy involves staying at the top of the capital structure, focusing on good loans to good businesses. Pattern recognition is crucial for identifying mispriced assets.

Quick Action: The firm is structured to move quickly when value is identified.
Synergy: Leveraging the collection of companies within Eldridge (e.g., A24) to enhance due diligence and understanding of opportunities, particularly in media.
Operator Advantage: Bringing in relevant companies like A24 provides operators with something they want, facilitating quicker and more effective diligence.

Growth Strategy and Asset Management Business

Eldridge is building an asset management business, aiming to leverage its scale and expertise to manage third-party money.

Consolidation: Manon Caine Pentagram Stonebriar has been consolidated to create a larger, more diverse credit manager with a sports, media, and entertainment focus.
Investment Opportunities: Identifying strategies with significant scale potential, where Eldridge wants to be a major investor and attract others.

Investment Opportunities: Dial Fund and Structuring Capabilities

Boehly highlights a recent transaction involving a secondary position in Dial Fund three as an example of an attractive investment opportunity.

Dial Fund Investment: Acquisition of a 10% stake in Dial Fund three in partnership with Blue Owl.
Return Elements: The investment offers multiple return streams, including a share of fee-related earnings, general partner balance sheets, and long-dated call options in the form of carry.
Structuring for Risk Mitigation: Eldridge aims to use structure to eliminate the possibility of a below-zero return outcome, prioritizing risk management.
Odds and Structure: Investing is viewed as a game of odds, and structure is used to improve those odds.

Saint James: Athletic Facility and Educational Model

Boehly discusses Saint James, a 550,000 sq ft athletic facility, and its evolving business model.

Facility and Demand: Saint James is positioned as a top-tier athletic facility catering to the insatiable demand for sports activities.
School Launch: The addition of a school addresses the previously uncovered "school day part," creating a comprehensive daily program.
Best-in-Class Ecosystem: The facility attracts top coaches and athletes due to its superior real estate and resources.
Educational Innovation: The school model is being redesigned to reduce traditional classroom hours, allowing students more time for focused practice.
Pipeline: The school also serves as a pipeline for identifying talent.

Scaling Eldridge: Berkshire Hathaway, Blackstone, and Apollo

Boehly outlines the ambition to build a business that combines the compounding nature of Berkshire Hathaway with the scaling capabilities of Blackstone or Apollo.

Balance Sheet Growth: Eldridge's balance sheet has grown from $2 billion to $15 billion over a decade.
Strategy Retuning: The strategies required to grow from $15 billion to $50 billion+ differ from those used to reach $15 billion, necessitating continuous adaptation.
Key Areas: Focus on credit, real estate, and the growing global sports and media sectors.
Liquidity Solutions: Creating liquidity for limited partners and partnering with general partners.

Global Expansion: Abu Dhabi and Saudi Arabia

Eldridge is expanding its presence in the Middle East, with a focus on Abu Dhabi and Saudi Arabia.

Abu Dhabi: The region offers excess capital and a partnership-oriented mindset. Eldridge has established partnerships in student housing, Amman, and Gamma (music label).
Saudi Arabia: Focus on infrastructure development and building an insurance industry. The Saudi government needs to develop its insurance industry to support infrastructure development.
Insurance Companies: Insurance companies are ideal for long-term asset management strategies due to the locked-up nature of funds.

Insurance Industry: Zinnia and Everly

Boehly discusses Eldridge's involvement in the insurance industry through Zinnia and Everly.

Zinnia: The number one insuretech platform, processing 55% of annuities. It provides an end-to-end platform for managing life and annuity policies. Gary Cohn recently joined as Vice Chairman.
Everly: A digital insurance company designed to seamlessly integrate with platforms like SoFi, Robinhood, and eToro.
Under-allocation: The insurance asset class is considered under-allocated.
Insurance Gap: There is a significant insurance gap in America, with many individuals underinsured.
Tax Advantages: Recent IRS rule changes have made insurance policies more attractive for tax deferral and creative financial planning.

Sports Investments: MLB, NBA, and Premier League

Boehly expresses satisfaction with Eldridge's sports investments.

Dodgers: Projected to be the first MLB team to reach $1 billion in revenue. The team is becoming increasingly popular in Asia, particularly Japan and Korea.
Chelsea FC: The team has stabilized after a period of managerial and strategic shifts. The goal for the year was 70 points, and they achieved Champions League qualification with 69 points. They are preparing to play in the Club World Cup.

Sports Media: Immersive Experiences

Boehly envisions the future of sports media involving immersive experiences.

Immersive Technology: The development of technology to allow fans to experience the game firsthand, such as defending a Cole Palmer goal kick.
Repurposing IP: Repurposing intellectual property to create new and engaging experiences.
Access and Experiences: People are increasingly valuing access and experiences over products.

Chelsea FC: Reece James and Leadership

Boehly highlights the importance of Reece James, Chelsea's captain, and his leadership.

Reece James's Significance: James's commitment to the club and his leadership have been crucial to the team's success.
Leadership and Performance: James's assist against Man United was pivotal in securing a crucial win.

Golden Globes: Global Expansion and Luxury

Boehly discusses the expansion and global reach of the Golden Globes under Eldridge's ownership.

Global Diversity: The Golden Globes now has 400 voters from over 90 countries.
Global Opportunities: India and the Middle East are identified as significant market opportunities.
Luxury and Fashion: The Golden Globes represents luxury and fashion, aligning with the development of One Beverly Hills.
Early Innings: Boehly believes the Golden Globes is still in the early stages of its potential.

Conclusion

Todd Boehly's interview highlights his strategic approach to investing, emphasizing risk management, identifying mispriced assets, and leveraging structure to improve odds. He focuses on building businesses with long-term growth potential, diversifying across sectors like credit, real estate, sports, media, and insurance. Global expansion, particularly in the Middle East and Asia, is a key component of his strategy. He also emphasizes the importance of innovation and adapting to changing market dynamics, as seen in his approach to education, sports media, and the insurance industry.