A startup hedge fund based in London has turned a novel idea into a profit machine. Rather than pouring investments into traditional markets, the group has decided to use its investor’s funds to bet on sports in the UK. This bold move has, so far, been serving them very well.
The reasoning is simple: sports results are easier (and more fun) to predict than the stock market. So far, the Galileo Managed Sports Fund, which started up back in April, has recruited 20 investors, each contributing $125,000 or more. This money is used to make thousands of sports bets every week, presumably though online sportsbooks in the UK.
The overall trend has been upwards. During the first 19 days of the 2010 World Cup, for example, the group netted an 8.58 per cent increase in its reserves.
Tony Woodhams, the fund’s managing director, has faced criticism from other investors, who see sports betting as gambling, throwing a controversial spin on the whole endeavor. Woodhams tries to put things into perspective by suggest that Wall Street investors are gamblers as well. Woodhams insists that Galileo is not so different than any other hedge fund. In fact, he considers sports betting to be a safer market than the financial sector.
The trick to turning a profit though internet betting in the United Kingdom, he says, is to bet smart. Too many people root for their favorite team, putting their money down based on emotion and bias. Galileo choses its bets based only on statistics and trends, keeping emotion under wraps, and it’s clearly paying off.
Merrill Lynch recently predicted that the global online gambling market will be worth $528 billion per year by 2015. If sports betting hedge funds catch on, however, this number could be a vast underestimate.
Story from Bloomberg Businessweek