This Is Your Sport Off Drugs

If only baseball would deal with the drug problem instead of cowering in fear

Team directors who spoke out in Hamilton's defense were ultimately fired and replaced.

A new scandal emerged last month, as the Spanish Operación Puerto drugs probe implicated Landis' top two teammates, 2006 Giro d'Italia runner-up Jose Jose Enrique Gutierrez and Colombian star Santiago Botero, both of whom have been suspended. (Though judged on individual results, cycling is a team sport, where a lead rider's lieutenants such as Botero and Gutierrez protect him from the wind, bring him water, and chase down opponents.)

"What we saw is that the team took aggressive action," Kranefuss said, adding that the swift benching of suspect riders made him more comfortable about sponsoring the team.

For Kranefuss, mitigating cycling's ever-present danger of drug crackdowns is similar to the kind of risk-reward analyses that guide ordinary investment decisions.

Savvy investors carefully calculate investments' potential upside. They balance individual risks against a portfolio of dissimilar assets. They hedge against catastrophe with compensatory measures. And they take a long-term view that eventually smooth out unusual bumps in the road.

So it goes with a sponsor seeking to benefit from a sport that lives with the possibility of drug scandal.

For iShares, potential upsides include expanding its business in Europe, where self-service investing is in its toddlerhood when compared with the U.S. Kranefuss likewise hopes to use the sponsorship to elevate the profile of Barclays Global Investors (BGI) at home. Though BGI is one of the world's largest financial services firms, with more than $1.6 trillion under management, few people in the Bay Area have heard of the brand.

In the U.S., cycling spectators tend to be relatively wealthy, meaning there are plenty of doctors, entrepreneurs, and other potential customers who might enjoy hobnobbing at iShares Tour de France hospitality tent.

"The viewer demographics are better on average than golf. It tends to reach a very affluent, well-educated population," Kranefuss says.

In finance, portfolio diversification mitigates financial risk.

In sports sponsorship, diversification spreads around the risk of losing, or scandal.

In that spirit, Barclays Global Investors backs symphony concerts, golf tournaments and other cultural events.

In the world of investment funds, managers take compensatory measures to counterbalance possible loss.

In its bet on cycling, sponsors hedge with contract language insulating financial backers from possible doping scandals.

Since the doping scandals of the late 1990s, team contracts in cycling typically have morals clauses, which call for expelling riders shown to have used performance-enhancing drugs. Rules of the elite Pro Tour, meanwhile, call for banning an athlete found guilty of a doping offense for four years.

Typical sponsorship contracts allow sponsors to cut ties immediately with team managers who allow doping.

"We don't want to be affiliated with someone who, in any way ... casts a negative shadow that people might associate with us," Kranefuss said.

Finally, as a savvy investment manager might, Kranefuss takes a long view of his company's sports sponsorship.

"I was in Europe as all this was unfolding, and was on a plane back to the U.S. that Friday, and landed in San Francisco," Kranefuss said.

By that time, fans had shifted from rooting for suspended stars Jan Ullrich and Ivan Basso to untainted riders such as Landis.

"The world moved on," Kranefuss said. "Now, everybody wants to know who wins the Tour."

That's a contrast to baseball, which hasn't gone nearly as far addressing its drugs problem.

Last week William Sutton of the DeVos Sports Management Program attended the Century 21 Home Run Derby in Pittsburgh and noticed a fan nearby pointing to his bicep, saying the athletes were juiced. I asked Sutton if he thought the sluggers were on steroids.

"Five or 10 years ago, I wouldn't have even thought about it. But now, I don't know," he said.

Is that a problem?

"Certainly. I wish there wasn't the possibility that steroids were diminishing the achievements of people who came before, or people who tried to make it into the game, but couldn't," Sutton said.

Judging from the experience of cycling sponsors such as iShares, perhaps baseball needn't fear making a real effort to deal with its drug problem.

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