TPO funds – The Pay-Day Loans of the football world?

football-money

Fifa has agreed to ban the third-party ownership (TPO) of players. It’s the practise that allows clubs to buy players wherein the transfer fee is part-funded by an investment company, which then takes a share in the commercial rights of the player, with the desire for that percentage to turn a handsome profit when the player is sold on. In essence, the fund is using the club as a finishing school for a player to gain in experience and ability, thus increasing his value in the transfer market and proportionately having the same effect on their investment. Some see such practices as reasonable, others as the inevitable and insidious continuing encroachment of financial affairs into the world of football.

The practice, already banned in Britain, thanks to the FA’s unusually sensible approach to the matter, will now be made illegal for all clubs under Fifa’s auspices – but not quite yet. The organisation’s president Sepp Blatter has declared that there will be a “transitional period” which may comprise of anything up to four years, before the ban comes into effect. Whether such a moratorium will give sufficient time for the money men behind the funds to reshape their operations remains to be seen, but if there’s any doubt as to whether the practice is counter to the welfare of the game or not, the case of Marcos Rojo’s transfer to Manchester United, serves as a case in point. Whilst there’s nothing to suggest that the Premier League club was anything but scrupulously correct in its dealings in the matter, the president of Sporting Lisbon has described how the whole TPO situation has damaged his club.

Bruno de Carvalho

Bruno de Carvalho

Speaking to the BBC’s World Sporting Show, Bruno de Carvalho described how the club never really wanted to sell the player. “We did not want Rojo to leave. He was an important player for us,” he declared. The Argentine defender moved to Old Trafford this summer for a fee reported to be in the region of £16million. It sounds like a lot of money, and of course it is, but for Sporting the payoff was much less than that, as the TPO fund took their share of the commercial rights being sold on. “The pressure was so big, they (representatives of the TPO fund) started to speak to the clubs and come here to the meetings.” The club thought they were working for United, but in reality they were merely there to ensure that a deal was put together. De Carvlho went on to say that “The directors thought they were people from the clubs because they were speaking in English although they were Portuguese. They believed it was a person from a club but it was a person from the funds.” Some may argue that TPO funds actually are friends to clubs such as Sporting as they allow them to have players at the club that would otherwise be beyond their reach in an escalating transfer market. On the surface of it, there seems some merit in such a view. De Carvlho however, sees it quite differently.

Openly delighted at the Fifa ruling, De Carvlho who took over at the helm of Sporting some 18 months ago explained that, “We don’t know where the money comes from. We don’t know who are the people. The problem is we created a monster, a monster who started to come to football. Without regulations, they don’t help the club. They only give them one, two, three years of surviving but after that they are dead.” The implication of course is that TPO is just Futures Trading in a different sphere. Buying an asset and backing judgement that it will accrue value over time. The key however is that of course, profit can only be realised when that asset is sold at the increased value. The fund trousers the profit, but the club is forced to sell a key element of their team. Unfortunately, when you sign a deal with the devil, it doesn’t come with a ‘sale or return’ clause. De Carvlho went on to say “Fifa understand people all over the world don’t want that menace in football. They are almost in every club right now. They are breeding all over the clubs. Clubs need solutions and there were people who came and said ‘I have the solutions for all your problems’, and they don’t understand they are killing the game.”

Again, some may say that although clubs are losing a prized player, it’s someone they would never have had were it not for the TPO funding, and they too take a chunk of the profit in the deal. That’s true of course, but football clubs are not commodity houses set up to trade in assets, the game they are in is about glory, it isn’t ruled by balance sheets, it’s judged by league tables and trophies. Let De Carvlho elucidate. “If you say the funds are very good for the little teams, let us see where are the players of the funds now? Falcao and Mangala (players recently moved to the Premier League) – where are they? In big clubs. So they are helping who? It’s very simple to see they are not helping the little ones as they are still little. The big ones are bigger. People are very happy to sell a player for £50m, but for the club it is £1m or £2m. And they paid more than that in the salary of one year. Almost all the time you lose money. This is mathematics.”

A couple of simple facts must be remembered of course. Firstly, there is nothing illegal or underhand about the TPO funds. They operate wholly within the laws of the game. Secondly, non-one holds a gun to anyone’s head forcing them to enter into a deal they could easily ignore. It’s an agreement as freely entered into as, let’s say, pay day loans – and there’s the rub. What seems like a good move today, and an ideal way of achieving what you want inevitably comes with a bill attached; and, taking De Carvalho’s comments on board, it always leaves you worse off than when you started out. Money the world over is still wonga.

A recent EPA study has estimated that although across the continent, the penetration of TPO funds is not widespread, in a few particular leagues, it can be ubiquitous. Portugal in particular, in prime position due to its links with South America, and Eastern Europe seem particularly affected. In these leagues it has been estimated that as many as one player in four is part of a TPO deal. It is of course, much worse than the mere numbers can suggest. In such leagues the 25% in question will largely be the best players, simply because they have the best sell on value.

Herrar - Signed for United this summer, after an attempt last year foundered as third-party interests sought to drive as deal through.

Herrara – Signed for United this summer, after an attempt last year foundered as third-party interests sought to drive a deal through.

Back in the summer of 2013, Manchester United were looking to sign Ander Herrera from Athletic Bilbao. At the time there was talk of three ‘gentlemen’ turning up at the Basque club attempting to negotiate the transfer. The Athletic officials assumed they were appointees of the Old Trafford club, but after correspondence, United were quick to declare they had no connection with the club whatsoever, and rapidly backed away from the deal. It transpires that they were representing the TPO fund and were seeking to expedite the deal to realise their profit on the asset. That one backfired; although United returned to Spain to acquire the midfielder this summer, so profit was only delayed, not lost.

At the time to many, it seemed almost a comic situation. Even a short twelve months on however, there now appears to be a much darker side to the manipulations that flourish amid big money transfer speculation. Some would say that football sold its soul for money a good few years ago, and that may well be true. “Greed is good!” declared Gordon Gecko in the film ‘Wall Street.’ The quicker the Fifa ban on TPO comes into effect though, the better for most football fans. Don’t be fooled however, the money men will be back with another scheme pretty soon. The world of finance hasn’t finished with football yet, and probably won’t have until it’s wrung from it the last penny, euro and dollar that it can.

(This All Blue Daze article was originally produced for ‘theaspirer’ website).

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