Investing like an NHL Player
Two years into NHL defenceman Jack Johnson’s $30.5-million contract, he filed for bankruptcy.
The Columbus Blue Jacket player in 2014 said that his money ended up in the wrong hands, blaming his parents for taking out high-interest loans against Johnson’s future earnings.
While Johnson’s bankruptcy stunned many, he isn’t alone in the world of professional sports. Stew Gavin, a retired Toronto Maple Leafs player, launched Gavin Management Group after witnessing how young athletes are taken advantage of as a result of their lack of financial knowledge.
Gavin says about 80 per cent of his clients are hockey players, and the firm handles portfolios of NHL stars like Mitch Marner, Darcy Tucker, James Van Riemsdyk and Mark Giordano.
Professional athletes differ to typical investors, Gavin said, as many of them make a large sum of money in a short period of time – and at a young age.
“The first thing we do with a young player is the education component. With an NHL player’s salary, entry level US$1 million, they come into a lot of cash. We help them learn how to move that cash,” Gavin told BNN in an interview, noting that many of his clients don’t know the difference between stocks and bonds.
Gavin said he prefers to manage portfolios the way that a hockey team might be built – full of diversified players. The strategy of his NHL clients is to play defence in their portfolio, with the goal to preserve capital.
“The mistake is getting into high-risk investments through friends and the guys are gullible and naïve and so they get sold on the opportunity,” Gavin said. “Players want to win, so you really have to temper them to take a gradual learn. And in two, three years they’ll see it actually works.”
Gavin said his NHL player clients are mostly invested in low volatility stocks, yielding low returns.
“Some of these guys will make up to $100 million in their hockey careers. So if they can just save and not lose it and modestly grow it, they’ll be very well set up to transition from hockey into their next stage of life,” Gavin said.
The objective of Gavin’s firm is to make athletes financially independent upon retirement, avoiding work after a hockey career, he said.