AP Mark Cuban

Five and a half years ago, Dallas Mavericks owner Mark Cuban caused quite a stir when he announced on his blog his intentions to launch a sports betting hedge fund. Cuban argued that betting on sports, due to the amount of information available, was much easier than betting on the stock market.

A year after he floated the idea, Cuban gave it up, due to a whole bunch of obstacles, including the NBA’s bylaws that prohibit those in the league from being involved with gambling. But that didn’t mean the idea would go away forever.

A investment company in London named Centaur has just launched Galileo (link: http://www.centaurgalileo.com/).

Galileo’s managers analyze and trade the betting markets, taking the emotion out of the betting game and putting quantitative analysis in its place.

“We have unique software we’ve written over five years that ensures we purely trade on statistics and probabilities,” said Tony Woodhams, managing director of Centaur. “The process is very clinical, which is our edge.”

Woodhams said that Cuban was right on when he said that the sports market has more inefficiencies than the stock market.

Besides emotion, Woodhams said that the sports market has a lot of mispricing, with some bookmakers that don’t often set the best lines for every game. The market isn’t effected by the economy and there’s no intervention from outside parties like a central bank or a government.

Those who got in on the ground floor of the fund have invested a minimum of $150,000. Woodhams said there are fewer than 20 founding investors, with the goal of growing assets under management to $100 million over the next two years.

Woodhams says the sports hedge fund’s projected rate of return is 15 to 25 percent. That’s after fees, which include a 3 percent management fee and a hefty 30 percent performance fee on net profits.

The fund will be betting on soccer, tennis, cricket, horse racing and golf, with plans to expand to the NFL and baseball over the next year.

As for a specific bet, the fund promises it won’t wager more than five percent of assets under management on any one event.

Woodhams is hoping Galileo can clear the necessary hurdles to open things up to American investors in early 2011.

Update: Mark Cuban, who first brought up this idea, thinks Galileo's setup is interesting. "I think it's great for all sports," Cuban told CNBC.com "If they show great results, people will figure out how they did it, which in turn will make the leagues smarter."

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