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    Private equity looks to buy in to college sports

    Private equity and venture capital enterprises such as College Sports Tomorrow, Smash Capital and Collegiate Athletics Solutions are looking to buy in to NCAA sports programs.
    The schools with the most valuable athletic programs sit in the best position to capitalize.
    Football generates roughly 75% of athletic program revenue at typical Power 4 schools, according to people familiar with the economics.

    Donovan Edwards #7 of the Michigan Wolverines hurdles a tackle attempt by Michael Taaffe #16 of the Texas Longhorns during the first half of a college football game at Michigan Stadium on September 07, 2024 in Ann Arbor, Michigan.
    Aaron J. Thornton | Getty Images Sport | Getty Images

    There’s a mad dash for cash in college sports.
    Between multibillion-dollar television deals, the institution of the transfer portal and the escalation of NIL —name, image and likeness — deals for athletes, college athletic programs, particularly football, have never looked more lucrative.

    Now private equity and venture capital enterprises such as College Sports Tomorrow, Smash Capital and Collegiate Athletics Solutions are looking to buy in, and the schools with the most valuable athletic programs sit in the best position to capitalize.
    At the very top of the heap are the schools that excel on the gridiron. According to people familiar with the economics, football generates roughly 75% of athletic program revenue at typical Power 4 schools, which include the ACC, Big Ten, Big 12 and SEC conferences.
    This year’s expanded, 12-team College Football Playoffs kick off Dec. 20. ESPN parent Disney signed a six-year extension in March for the rights to the games through 2031. The deal is worth an average of $1.3 billion annually, more than double the previous deal, according to media reports.
    Given the fact that the SEC dominates the college football ratings, experts CNBC spoke with believe the conference will leapfrog the Big Ten with the richest television deal when its current agreement expires in 2033-34.
    “The SEC is almost a super-conference and, because of its football teams, owns the most valuable content in college sports,” said Irwin Kishner, a partner at the corporate department of Herrick Feinstein and co-chair of its Sports Law Group.

    Private equity, of course, is not a new concept for sports. In North America, Major League Baseball, the National Basketball Association, the National Hockey League and Major League Soccer have permitted private equity firms to own limited partner stakes for several years. The National Football League voted in August to allow select private equity investors to take minority stakes.
    Now the attention is turning to college programs.
    “As a business, college sports, particularly football, is performing well and continuing to grow, which is why investors are looking at the asset class,” said Greg Carey, the global co-head of sports franchise in investment banking at Goldman Sachs.
    Institutional investors such as Collegiate Athletic Solutions — a proposal by RedBird Capital Partners and Weatherford Capital — would provide capital to help grow a school’s athletic revenue. In return, the private equity firms would get a cut.
    There is also the belief that the business acumen from outside investors could drive profits even higher.
    “There’s a big opportunity to drive EBITDA [earnings before interest, taxes, depreciation and amortization] higher in college sports because there are easy ways to maintain quality while reducing expenses,” said Kishner.
    And schools have incentive to bring on outside investors.
    For one, a $2.8 billion settlement between the NCAA and the five largest conferences would award compensation to 14,000 students who were previously prevented from earning endorsement money. A hearing to grant final approval on the deal is scheduled to take place in April, but already schools are planning ahead for it.
    And even among the biggest conferences, a gap in television revenue could cause a big competitive and economic disparity.
    “Schools in the ACC and Big 12, as well as the bottom of the SEC and Big Ten who are generating less local commercial revenue, will have little choice but to take on private capital and operation expertise, or they are all but guaranteed to be left out of the top echelon of competition in the future,” said Jason Belzer, publisher of AthleticDirectorU, who has advised universities on NIL deals and is now doing the same for athletic departments seeking private equity.
    To be sure, the move to private equity is complicated and could still be months off. Florida State has been reportedly working with JPMorgan Chase for about a year trying to raise institutional capital.
    Yet, bankers and attorneys interviewed by CNBC believe private equity will eventually be investing in college athletic programs. More

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    Don’t count on monetary policy to make housing affordable

    WHY IS HOUSING so expensive? Explanations have tended to fall into two camps. One emphasises a gummed-up supply side: a range of restrictions on land use and NIMBY campaigners have stymied housebuilding across the rich world. The other camp focuses on demand: a long-term fall in real interest rates has bid up the prices of all assets. Cheaper credit means more expensive housing. Yet even as interest rates rose across the rich world in the early 2020s, prices barely budged. Why? A range of recent papers suggests that the interaction between fixed supply and changes in demand explains the puzzle. More

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    Why Brazil’s currency is plunging

    THE BRAZILIAN real holds an ignominious title this year: it is the worst-performing major currency, down by more than 20% to a record low of almost 6.3 to the dollar. The situation has grown even uglier over the past week, with the sell-off accelerating despite several interventions by the central bank. More

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    The search for the world’s most efficient charities

    GIVING IS BIG business. In 2023 Americans alone handed $557bn to charities, according to the Giving USA annual report. So identifying which charities are the most efficient in terms of good done per dollar given is important. GiveWell, a charity evaluator, tries to do just this, and currently recommends giving to four worthy organisations. How is this recommendation put together, and how good is it? More

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    Conflict is remaking the Middle East’s economic order

    THE LIQUIDITY crunch could not have come at a worse time. Usually, most of Hizbullah’s budget arrives on a plane in Damascus, the Syrian capital, with the country’s Iranian ambassador. The cash is then transported across the Lebanese border to the Shia militia. But on December 8th, just weeks after Hizbullah stopped fighting with Israel in Lebanon, Bashar al-Assad, Syria’s president and Iran’s ally, was overthrown. Iran evacuated officials and soldiers in Syria. Already financially emaciated, Hizbullah faces rebuilding deprived of its surest cash flow. More

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    Chinese self-driving trucking company pivots to generative AI for video games

    Chinese autonomous trucking company TuSimple has rebranded to CreateAI, with a focus on video games and animation, the company announced Thursday.
    Now, just over two years after CEO Cheng Lu rejoined the company in the role after being pushed out, he expects the business can break even in 2026.
    CreateAI expects to lower the cost of top-tier, so-called triple A game production by 70% in the next five to six years, Cheng said.

    Workers setting up the TuSimple booth for CES 2022 at the Las Vegas Convention Center on Jan. 3, 2022.
    Alex Wong | Getty Images News | Getty Images

    Embattled Chinese autonomous trucking company TuSimple has rebranded to CreateAI, focusing on video games and animation, the company announced Thursday.
    The news comes as GM folded its Cruise robotaxi business this month, and the once-hot sector of self-driving startups has started to weed out stragglers. TuSimple, which straddled the U.S. and China markets, had its own challenges: concerns over vehicle safety, a $189 million settlement of a securities fraud lawsuit and delisting from the Nasdaq in February.

    Now, just over two years after CEO Cheng Lu rejoined the company in the role after being pushed out, he expects the business can break even in 2026.
    That’s thanks to a video game based on the hit martial arts novels by Jin Yong that’s slated to release an initial version that year, Cheng said. He anticipates “several hundred million” in revenue in 2027 when the full version is launched.
    Before the delisting, TuSimple said it lost $500,000 in the first three quarters of 2023, and spent $164.4 million on research and development during that time.
    Company co-founder Mo Chen has a “long history” with the Jin Yong family and started work in 2021 to develop an animated feature based on the stories, Cheng said.

    The company claims its artificial intelligence capabilities in developing autonomous driving software give it a base from which to develop generative AI. That’s the next-level tech powering OpenAI’s ChatGPT, which generates human-like responses to user prompts.

    Along with the CreateAI rebrand, the company debuted its first major AI model called Ruyi, an open-source model for visual work, available via the Hugging Face platform.
    “It’s clear our shareholders see the value in this transformation and want to move forward in this direction,” Cheng said. “Our management team and Board of Directors have received overwhelming support from shareholders at the annual meeting.”
    He said the company plans to increase headcount to around 500 next year, up from 300.

    Cutting production costs by 70%

    While still under the name TuSimple, the company in August announced a partnership with Shanghai Three Body Animation to develop the first animated feature film and video game based on the science fiction novel series “The Three-Body Problem.”
    The company said at the time that it was launching a new business segment to develop generative AI applications for video games and animation.
    CreateAI expects to lower the cost of top-tier, so-called triple A game production by 70% in the next five to six years, Cheng said. He declined to share whether the company was in talks with gaming giant Tencent.
    When asked about the impact of U.S. restrictions, Cheng claimed there were no issues and said the company used a mix of China and non-China cloud computing providers.
    The U.S. under the Biden administration has ramped up limits on Chinese businesses’ access to advanced semiconductors used to power generative AI. More

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    Fed cuts by a quarter point, indicates fewer reductions ahead

    The Federal Open Market Committee cut its overnight borrowing rate to a target range of 4.25%-4.5%, back to the level where it was in December 2022.
    “Today was a closer call but we decided it was the right call,” Chair Jerome Powell said.
    The Fed indicated that it probably would only lower twice more in 2025, according to the closely watched “dot plot” matrix of individual members’ future rate expectations.

    WASHINGTON – The Federal Reserve on Wednesday lowered its key interest rate by a quarter percentage point, the third consecutive reduction and one that came with a cautionary tone about additional cuts in coming years. 
    In a move widely anticipated by markets, the Federal Open Market Committee cut its overnight borrowing rate to a target range of 4.25%-4.5%, back to the level where it was in December 2022 when rates were on the move higher. 

    Though there was little intrigue over the decision itself, the main question had been over what the Fed would signal about its future intentions as inflation holds steadily above target and economic growth is fairly solid, conditions that don’t normally coincide with policy easing. 
    Read what changed in the Fed statement.

    In delivering the 25 basis point cut, the Fed indicated that it probably would only lower twice more in 2025, according to the closely watched “dot plot” matrix of individual members’ future rate expectations. The two cuts indicated slice in half the committee’s intentions when the plot was last updated in September. 
    Assuming quarter-point increments, officials indicated two more reductions in 2026 and another in 2027. Over the longer term, the committee sees the “neutral” funds rate at 3%, 0.1 percentage point higher than the September update as the level has drifted gradually higher this year. 
    “With today’s action, we have lowered our policy rate by a full percentage point from its peak, and our policy stance is now significantly less restrictive,” Chair Jerome Powell said at his post-meeting news conference. “We can therefore be more cautious as we consider further adjustments to our policy rate.”

    “Today was a closer call but we decided it was the right call,” he added.
    Stocks sold off sharply following the Fed announcement, with the Dow Jones Industrial Average closing down more than 1,100 points while Treasury yields soared. Futures pricing pared back the outlook for cuts in 2025, according to the CME Group’s FedWatch measure.
    “We moved pretty quickly to get to here, and I think going forward obviously we’re moving slower,” Powell said.
    For the second consecutive meeting, one FOMC member dissented: Cleveland Fed President Beth Hammack wanted the Fed to maintain the previous rate. Governor Michelle Bowman voted no in November, the first time a governor voted against a rate decision since 2005. 
    The fed funds rate sets what banks charge each other for overnight lending but also influences a variety of consumer debt such as auto loans, credit cards and mortgages. 
    The post-meeting statement changed little except for a tweak regarding the “extent and timing” of further rate changes, a slight language shift from the November meeting. Goldman Sachs said the adjustment was “hinting at a slower pace of rate cuts ahead.”

    Change in economic outlook

    The cut came even though the committee jacked up its projection for full-year 2024 gross domestic product growth to 2.5%, half a percentage point higher than September. However, in the ensuing years the officials expect GDP to slow down to its long-term projection of 1.8%. 
    Other changes to the Summary of Economic Projections saw the committee lower its expected unemployment rate this year to 4.2%, while headline and core inflation according to the Fed’s preferred gauge were pushed higher to respective estimates of 2.4% and 2.8%, slightly higher than the September estimate and above the Fed’s 2% goal. 
    The committee’s decision comes with inflation not only holding above the central bank’s target but also while the economy is projected by the Atlanta Fed to grow at a 3.2% rate in the fourth quarter and the unemployment rate has hovered around 4%. 

    Though those conditions would be most consistent with the Fed hiking or holding rates in place, officials are wary of keeping rates too high and risking an unnecessary slowdown in the economy. Despite macro data to the contrary, a Fed report earlier this month noted that economic growth had only risen “slightly” in recent weeks, with signs of inflation waning and hiring slowing. 
    Moreover, the Fed will have to deal with the impact of fiscal policy under President-elect Donald Trump, who has indicated plans for tariffs, tax cuts and mass deportations that all could be inflationary and complicate the central bank’s job.
    “We need to take our time, not rush and make a very careful assessment, but only when we’ve actually seen what the policies are and how they’ve been implemented,” Powell said of the Trump plans. “We’re just not at that stage.”

    Normalizing policy

    Powell has indicated that the rate cuts are an effort to recalibrate policy as it does not need to be as restrictive under the current conditions. 
    “We think the economy is in [a] really good place. We think policy is in a really good place,” he said Wednesday.
    With Wednesday’s move, the Fed will have cut benchmark rates by a full percentage point since September, a month during which it took the unusual step of lowering by a half point. The Fed generally likes to move up or down in smaller quarter-point increments as its weighs the impact of its actions. 
    Despite the aggressive moves lower, markets have taken the opposite tack. 
    Mortgage rates and Treasury yields both have risen sharply during the period, possibly indicating that markets do not believe the Fed will be able to cut much more. The policy-sensitive 2-year Treasury yield jumped to 4.3%, putting it above the range of the Fed’s rate.
    In related action, the Fed adjusted the rate it pays on its overnight repo facility to the bottom end of the fed funds rate. The so-called ON RPP rate is used as a floor for the funds rate, which had been drifting toward the lower end of the target range.

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    Ukraine is winning the economic war against Russia

    EVERY BUSINESS in Ukraine has a reference point. For Mykhailo Travetsky, a farmer in Pryluky, it was the first six weeks of the all-out invasion. As a Russian column stalled on a nearby highway, his farm became no-man’s land. Locals fought gun battles to keep the Russians off it. Shells whizzed overhead. And Mr Travetsky milked his cows twice a day in body armour, automatic rifle cocked at his side. More