Hedge funds that invest in sports betting have proliferated in the investment sector. They are often structured like hedge funds because they are poorly regulated and can charge higher fees.
As the world of sports betting continues to expand thanks to the digital revolution, former asset management professionals bring their skills and knowledge to the world of sports betting.
Sports betting hedge funds finally took off with Centaur Galileo in 2009 and other firms would follow suit. Centaur has successfully achieved a portfolio of more than 500 million dollars, with 50% of the clients in the United States. Most of the clients are in the gaming and entertainment industry, and most of the bets are placed on the horse racing market.
There are many ways to invest in sports betting hedge funds. Some sports betting hedge funds induce investors to invest directly in the hedge fund. Others use a brokerage scheme in which investors invest in stock-based products that mirror the hedge fund’s portfolio.
Investors are increasingly interested in sports betting funds, and that’s because they offer the chance to invest in an asset class that is not correlated with the financial market. This can be interesting in highly volatile stock market situations.
How do they work?
In general terms, the operations of these hedge funds come from the design of a sophisticated mathematical equation. Quantitative analysts (often with PhDs in math or physics) combine complex and varied data with machine learning to create proprietary algorithms. For the quants, everything is data to enter. In fact, most have zero interest in sports. Its main objective is to generate profits.
As a result, sports betting odds are becoming more and more accurate. Odds errors are becoming less frequent. And the differences in odds between different sports betting sites are getting smaller.
Of course, there are still opportunities for smart bettors. But they are getting harder and harder to find. And they require more and more work to find them.
Successful sports betting requires a combination of sports knowledge, mathematical analysis, and patience.. Smart bettors are able to find value opportunities in sports betting odds. And then they have the discipline and patience to take advantage of those opportunities.
Differences between investing and betting
The difference between investing and gambling is not always clear. Both involve risking money for possible financial gain. Some professional players have tried and tested the systems, while some investors are betting without realizing it.
In both investing and betting we have a key principle which is minimize risk and maximize profit.
If we talk about reducing losses, when betting on any pure gambling activity, there are no loss mitigation strategies except money management on the total available. On the contrary, investors have a variety of options to avoid total loss of risk capital. Setting stop loss on your investment is a simple way to avoid undue risk.
If your shares fall 10% below your purchase price, you have the opportunity to sell those shares to someone else and still keep 90% of your risk capital. However, if you bet an amount that a certain team will win a match or tournament, all the capital wagered can be lost.
Bets are conditional on a time-limited event, while an investment in a company can last for several years. With gambling, when the event is over, your opportunity to profit from your bet has come and gone.