Some of Clearlake Capital Group’s largest investors are growing increasingly concerned about how much time the company’s co-founders are spending on sports investments as they have struggled to complete the fundraising for the private equity firm’s latest flagship fund.
One of Clearlake’s co-founders, Behdad Eghbali, has been spending what some investors described as a disproportionate amount of time on the firm’s investment in Chelsea Football Club in recent months. Now, co-founder Jose E. Feliciano and his wife, Kwanza Jones, are nearing a record US$3.9 billion deal to acquire the San Diego Padres.
That personal investment by Feliciano has set off the latest round of angst among Clearlake’s backers, according to several investors who each manage more than US$30 billion of assets.
Photo: AP
Clearlake has faced misgivings about performance — particularly for its sixth fund. However, the Padres deal was especially concerning for some of the firm’s backers, coming just months after Clearlake told investors it still needs more time to finish raising about US$14 billion for its eighth flagship fund.
For at least one public pension, the Padres deal sealed the decision not to participate in that fundraising. Other investors, who spoke on the condition of anonymity, have held discussions with other Clearlake clients, including members of limited partner advisory committees across multiple funds, about concerns over distractions.
“Jose E. Feliciano and Behdad Eghbali remain fully engaged in leading Clearlake, serving on the investment committee and actively supporting portfolio companies across the platform,” Clearlake said in a statement. “As Clearlake has scaled, the firm has further strengthened its bench of senior, experienced leaders, ensuring continued focus and execution across the business.”
Concern among investors comes at a busy time at Chelsea FC, which a Clearlake-led consortium spent US$3.37 billion to acquire in 2022 from Russian oligarch Roman Abramovich as part of a forced sale. Clearlake owns about 60 percent of the club.
Chelsea reported the Premier League’s largest-ever financial loss at US$350.9 million. The team dismissed head coach Liam Rosenior last week after less than four months in charge.
An executive at one large state pension, which has funded several Clearlake funds, said they felt the private equity firm’s executives were highly engaged in the investment process and knowledgeable about the portfolio. In the case of Chelsea, the person said, it made sense that Clearlake was spending time on the investment given it was in need of a turnaround.
Other investors said that Eghbali is a regular visitor at Chelsea’s Stamford Bridge stadium in London. Clearlake has an office in London, although it is based out of California.
Feliciano is far from the first private equity executive to use the wealth they have accumulated on a sports team. What is concerning to investors was the timing of the proposed deal and the fact that it came at a critical moment for the firm’s fundraising efforts and while Eghbali has been spending an increasing amount of time on the firm’s ownership of Chelsea, the people said.
Another institutional investor, who has known Clearlake for more than a decade, said the firm has a deep bench of talent.
Feliciano and Eghbali formed Clearlake in 2006 with a strategy that allowed them to flip between private equity deals and distressed debt investing based on their view on the economy. Since then, assets under management have swelled to more than US$90 billion.
Many of their early bets were a success — Clearlake’s fourth and fifth funds have already given limited partners back more than the capital they put in and have more assets still to sell. Problems surfaced early in its US$7.1 billion sixth fund, launched in 2020, Bloomberg reported.
Fund six has been able to distribute approximately 25 percent of the capital invested back to its limited partners. The firm has had some success with exits — offloading Concert Golf and Team Tech for roughly 2.5 times what it paid for them, according to a person familiar with the matter, who asked not to be named discussing non-public information.
Clearlake has been seeking capital for its eighth flagship fund since June 2023. After only securing US$13 billion by April last year, Clearlake requested more time to reach its initial target.
By the end of last year, the firm told investors it would double its own commitment to the fund and asked for another extension to finalize the fundraising.
Feliciano is part of a growing class of private equity owners in sports, both personally and via their own firms. The majority of NBA teams have a co-owner with links to asset management.
Similar to Feliciano’s bet on the Padres, 26North founder Josh Harris and Blackstone executive David Blitzer together own the Philadelphia 76ers, New Jersey Devils and Washington Commanders, alongside stakes in Crystal Palace. Platinum Equity’s Tom Gores owns the Detroit Pistons and Ares Management co-founder Tony Ressler owns the Atlanta Hawks.
For Clearlake, the Chelsea deal was not loved by some investors, Bloomberg reported.
With only four matches remaining this season, Chelsea is seven points behind Liverpool for the fifth and final spot required to qualify for the Champions League, meaning it is highly likely the club would miss out on playing in Europe’s most prestigious competition next season.
Failure to qualify for the Champions League for the third time in four seasons would have significant consequences. Not only would it reduce revenue by an estimated US$94 million to US$135 million, but it could lead to the departure of some of the club’s key players this summer.
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