The Hedge Fund and The Football Club: A Year-Round Pantomime

Crowds hovering below 2,000 are the new normal for Coventry City. Dumped in Northampton for a three-or-is-it-five-year rental deal, the club is a hostage to its owners, the hedge fund SISU Capital. The losses mount to an estimated £2.5 million a year, yet the pantomime continues, with the club’s supporters stuck in the middle of a grim battle over a stadium deal.

SISU’s motives appear transparent. As a fund specialising in ‘distressing’ companies to obtain assets, their behaviour suggests a single-minded goal: get the stadium on the cheap, or else. Any claim to the contrary flies in the face of their actions. This is a group, led by City of London regulator Joy Seppala and including Tony Blair’s former financial advisor Mark Labovitch, that threatened its own supporters’ trust with legal action merely for sharing a link to an investigative article by David Conn.

That litigious nature has created a difficult situation. The club’s CEO, Tim Fisher, holds all the cards, and his declarations that the club needs the ground for its future are compelling when he is, for now, the club’s only voice. Fans are torn, forced to reckon with the reality that the entity they love is currently synonymous with the hedge fund that is taking it to the brink.

An Ownership Free-For-All

Hedge funds in football should not be a thing. Yet the game’s authorities, from the Premier League to the Football League, seem unwilling to ‘discriminate’ against them. It is a bizarre framing of equality, as if the right for a City investment fund to own Rochdale is a civil liberties issue. Football does set limits on other matters. It restricts multiple club interests, as seen when Dave Allen was allowed a pass when he bought Chesterfield while holding shares in Sheffield Wednesday. It bans the third-party ownership of players that is rife in places like Portugal.

So why not on ownership? The ‘Owners and Directors Test’ is a self-declarative joke. Changed from the ‘Fit and Proper’ test, presumably because that term was borrowed from the failed Financial Services Authority, it does little to prevent the problems football faces. It fails to identify specialists in corporate distress whose very business model is predicated on principles that run contrary to the custodianship of a community asset.

While SISU operates, the stadium company ACL, co-owned by the City Council and the Alan Higgs Charity, runs a profitable business without the football club even being there. The charity had to buy the club’s share in the first place after years of financial mismanagement forced the sale of the family silver. Now the Council finds itself trying to negotiate with an incredibly determined opponent whose entire raison d’être is extracting value from a crisis.

The True Villains of the Piece

This entire mess is a failure of regulation.

The villains here are the Football League. Presented with the idea of a fit and proper test around 2002, they dismissed it, apparently worried it would prevent ‘interesting characters’ from being part of the story. Perhaps they considered someone like George Reynolds a positive influence on Darlington. The League is a weak, rudderless body, hamstrung by the fact that the clubs themselves make the rules in their own self-interest. The Football Association remains absent, permitted to intervene only when the League explicitly asks it to.

This is a systemic failure of imagination, a deep-seated inability to face the truth. The game is run by cowards who only respond to those with the biggest legal budgets. Whatever one thinks of SISU’s behaviour, it is exactly what should be expected from a hedge fund. The conduct of the so-called governing bodies, however, is not good enough. This has to change.