Debenture holders are first in the queue for seats at major sporting events such as test cricket. Photograph: Lee Smith/Action ImagesReports that two Centre Court tickets for the Wimbledon final this year went for £83,000 may have turned your thoughts to buying a debenture as an investment.
Debenture holders are first in the queue for seats at venues, and a good way for sports fans to guarantee a ticket at popular matches whether it's test cricket, rugby internationals, football or tennis majors. Some even pay interest – Hampshire cricket club's debentures for the Ageas Bowl pay a healthy 6% a year on the price paid of £7,500, for example.
And it's not only sporting venues that sell debentures: the first ones were sold by the Royal Albert Hall when it opened back in 1871.
The rules vary slightly from venue to venue but broadly speaking, the purchaser pays a one-off fee, which goes towards the upkeep of the facilities and in return they get either free tickets to all the major events held there or the chance to buy tickets first at face value.
Importantly, if you don't want to use your tickets, you can legitimately sell them on. Which means you can make back some of the money you have spent and maybe even subsidise your own attendance at games.
Most debentures have a short life – typically five or six years – although there are notable exceptions. For example, debentures at the Royal Albert Hall are valid for 999 years. The debenture for one of the largest 10-seater boxes on the Grand Tier at the Royal Albert Hall was on sale five years ago for £1.2m. At the same time an eight-seat box on the Loggia was available at £750,000.
You might have to move fast to snap them up when they go on sale. The All England Lawn Tennis Club released 2,500 debentures for the Centre Court valid for 2011-2015 in the spring of 2009, No 1 Court debentures for 2012 – 2016 were sold two years later. Both of them were available for only six weeks and were "significantly oversubscribed" says the club. There's a waiting list, and existing debenture holders have priority. The next Centre Court issue will be released in spring 2014.
Well, looking at that £83,000 advertised for two Wimbledon Centre Court tickets for the men's final, you'd say yes. But it's not that straightforward: two debentures cost £55,000 – though that does pay for a pair of seats every day of the Championships for five years. Then there's the 10% fee charged to the seller by ticket sites such as Seatwave and Viagogo, which sells on tickets for all sorts of events, not just debentures (buyers pay 15% commission on top).
And finally, it's easy to get carried away with the hype. Viagogo, which had the reported £83,000 tickets, say they were listed on the site for £71,000 and the highest price actually paid for two tickets for this year's men's final was £15,000 including fees.
These sites don't buy or sell the tickets themselves, instead they are a marketplace where sellers can list their tickets for a range of events worldwide at whatever price they like.
Most sites such as Seatwave and Viagogo have a guarantee that the tickets aren't fraudulent and will be delivered in time. If they don't arrive, they promise to find another ticket or refund buyers the money. Auction sites such as eBay are also popular.
There's nothing to stop debenture holders selling them privately or asking the club to sell them on for them.
The most obvious risk is that you can't find a buyer for your unwanted seats. Also, sports clubs can go bust leaving you with worthless debentures. Or if they're struggling to sell them, you could find they're discounted after you've paid full price for them. Darius McDermott of Chelsea Financial Services, says: "Debentures aren't really an investment. For a start they're quite illiquid and could easily fall in price when you try to resell them. You want to have an interest in the sport or art you're supporting with your debenture. Pick your battles carefully."
Unlike most sporting debentures, Wimbledon debentures are listed on Bloomberg as they are traded by a few brokers. This spring, Centre Court debentures were trading between £55,000 and £65,000 each for the latest tranche, which are valid until 2015. At the same time, No 1 Court's were selling for around £15,000.
"They're very thinly traded," says Ben Kumar of Seven Investment Management. "You're taking the risk that there's going to be a demand for them.
"The reward is not as tangible as buying a bond but you should get more enjoyment out of it if you love the sport, which makes it a good investment."
