Money ball

Yao learns investment lessons


Mulling over investment opportunities: Yao Ming

When Yao Ming joined the NBA in 2002, the 7-foot-6-inch giant was hyped as a “mobile Great Wall” that towered as a centre but also had touch sweet enough to play shooting guard.

But you can’t have it all in life. Yao’s nine-year NBA career was plagued with injury, eventually leading to his earlier-then-expected retirement in 2011 aged 31. (By comparison, Hakeem Olajuwon, another legendary Houston Rockets centre, retired at 39.)

So Yao is trying out a second career as an investor. China Money, a magazine, already puts his net worth at Rmb3 billion ($490 million) thanks to lucrative NBA contracts and endorsement income. Yao’s fame also makes him a preferred partner for many commercial enterprises looking for instant publicity – for instance, this week the NBA joined with him to open a basketball training school.

Then again, unlike the act of putting a ball through a hoop, Yao is finding life as an investor more of a challenge. Some of his investment returns prove so disappointing that Yao became the butt of netizen jibes about his financial prowess, with many playing on his name sounding like a homonym for “kill” or “be deadly” in Chinese.

One example of a failed investment is music website, launched in 2006 as a joint venture between Yao and Google, providing copyrighted music to download. The National Business Daily said Yao invested nearly $7 million in the start-up but the venture suffered after Google pulled most of its business operations out of China three years ago. has been shut since April his year.

How about basketball, which must be more familiar ground than music for the former player? Surprisingly, the sport could prove the biggest black hole yet in Yao’s portfolio. That’s because he bought the Shanghai Sharks, his former club, in 2009 for about Rmb20 million ($3.28 million). Most of China’s professional sport clubs are loss-makers that get financed by commercial firms (typically real estate developers) for marketing purposes. According to Tencent Sports, the Sharks franchise has been costing Yao a further Rmb20 million every year since 2009.

Speaking at the Boao Forum last year, Yao confessed that many of his personal investments had flopped. He says he continues to receive numerous investment proposals but now picks only those that fall within his “personal interests”.

The NBA star’s portfolio spans restaurants, fitness clubs, technology, red wine, hotels and real estate. (his property punts are the most successful if the mainland media is to be believed). Elsewhere, success has been limited.

“Yao’s investments have been too diversified and most of them are in fields he isn’t familiar with,” the overseas edition of the People’s Daily scoffed. “It isn’t a feasible commercial strategy.”

Since 2011, Yao has tried to sharpen his approach, founding D&F Capital and staffing it with professional managers. The firm has focused on investing in the sports industry and later took over another private equity outfit. The 21CN Business Herald estimates that the two funds now have a combined capital of Rmb6.6 billion.

Lu Hao, Yao’s agent and a senior manager at D&F Capital, told China Money that the new fund has been seeking out quality pre-IPO projects in areas like sports media. The market for sports properties has vast potential, Lu reckons, but reform is required in many parts of the industry. For example, many sports resources are state-controlled. Opaque rules governing the economic rights to stars’ incomes makes it hard for sports marketing agencies to flourish.

Most Chinese athletes are trained by the state from youth and considered as “state-owned assets”. Even when some are good enough to compete professionally overseas, part of their incomes go to the state organisations that helped groom them.

The cut varies from sport to sport. Take tennis, where players who opt out of the state system to turn professional still have to give a percentage of their prize money to the Tennis Sport Management Centre under the General Administration of Sport (8% is the most widely-quoted figure, although the arrangements are said to vary). Some might argue that this is fair enough, given the role that the state has played in supporting sportspeople from their childhood. But as we pointed out in WiC14, not all the players are happy with the terms. One of the most high-profile stars to break away was Li Na, winner of the French Open in 2011. In 2008 the tennis star negotiated a deal to manage her own career. In return she pays a lower share of her winnings to the state, although there has been griping from the sporting authorities that Li hasn’t been paying up.

Li’s decision to strike out on her own looks like a smart financial choice. According to Forbes China, she was the sixth biggest earner among Chinese celebrities last year. With an annual income of Rmb93 million, she has also overtaken the likes of Yao Ming, as well as gold medal hurdler Liu Xiang, as the advertisers’ favourite. Tencent Sports reports that Li is sponsored by at least 13 renowned consumer brands and can expect to earn more in endorsement fees over the remainder of her career.

When she finally retires, perhaps Li should call Yao for a few words of advice on what to do next…

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