RedBird spinout Otro targets $500m for sports-focused debut fund

Otro will make operationally oriented control and significant minority investments in sports-related businesses and assets, sources said, targeting dealflow mostly in North America and Western Europe.

Otro Capital, launched by former RedBird Capital Partners executives, is seeking $500 million for an inaugural private equity fund, sources told Buyouts.

The New York emerging manager rolled out Otro Capital Fund I earlier this year, hiring PJT Partners as the placement agent. It is not known if the vehicle has a hard-cap. Otro declined to comment.

Otro was founded in mid-2023 by partners Alec Scheiner, Brent Stehlik, Niraj Shah and Isaac Halyard, all ex-senior professionals at RedBird, a high-profile sports industry investor led by Goldman Sachs veteran Gerry Cardinale.

The new GP will draw on the founders’ experience at RedBird, specializing in investing in sports, media, gaming and entertainment. It will target cash-flow positive assets with substantial intellectual property – especially assets that are under-monetized or under-valued.

Otro will make operationally oriented control and significant minority investments in sports-related businesses and assets, sources said, targeting dealflow globally, but mostly in North America and Western Europe.

As such, the strategy does not appear to be geared to acquiring team stakes in North American leagues sanctioning this activity. For private equity firms approved by Major League Baseball, Major League Soccer, the National Basketball Association and the National Hockey League for investing of this type, the approach is typically passive non-control ownership.

Instead, Otro’s strategy seems closer to that of RedBird, which favors control transactions – evidenced in its 2022 acquisition alongside the New York Yankees of Italian soccer club AC Milan for $1.2 billion.

In fact, an aspect of the emerging manager’s strategy will be to partner with RedBird in select deals, Buyouts previously reported. Last year, the two shops partnered in buying a stake in Alpine Racing, a Formula 1 sportscar team backed by Renault. Maximum Effort Investments, a consortium led by Hollywood actor Ryan Reynolds, also participated.

Otro, RedBird and Maximum Effort invested €200 million ($218 million) for a 24 percent interest in UK-based Alpine, valuing it at $900 million.

Not long after the deal was announced, Otro raised its first capital. A starry group of professional athletes – including Kansas City Chiefs quarterback Patrick Mahomes and tight end Travis Kelce and championship-winning golfer Rory McIlroy – committed to the Alpine investment.

Otro Forest Co-Invest I, a capital-raising vehicle for the Alpine transaction, sources told Buyouts, held roughly $200 million as of March, according to an ADV filing.

Private equity investing in sports deals has intensified since 2021, with unheard-of billions pouring into acquisitions of stakes in teams, leagues, assets (for example, media rights) and multi-asset holding companies. Much of the impetus has come from wealthy team owners lifting bans on outside capital as a way of accessing liquidity and growth financing.

The sports industry’s premium values have drawn big and small GPs alike, including several emerging managers.

Along with Otro, first-timers include Dynasty Equity, formed by Providence Equity Partners founder Jonathan Nelson and PJT Partners founding partner Don Cornwell, and Verance Capital, launched by ex-RedBird operating partner Lyle Ayes.

Otro was this month named one of Buyouts’ “Ten emerging managers to keep an eye on in 2024”.