NBA owners recently voted to allow sovereign wealth funds, pension funds and college endowments to buy team stocks, dramatically expanding the league’s pool of potential investors.
Why is this important: NBA ownership, once reserved for the very wealthy, is increasingly becoming another, albeit very expensive, investment vehicle.
The backdrop: The NBA has become the first U.S. league to allow private equity funds to invest in teams — a change designed to provide liquidity options for minority owners and help fund team sales.
- The NHL, MLB and MLS quickly followed suit, and funds like Arctos and Dyal have since ripped up shares.
- Last month’s vote, which took place as the Suns were actively put up for sale, only increased the number of potential investors.
How it works: Individual funds cannot own more than 20% of a single team’s capital, and franchises cannot own more than 30% of their total capital held by funds, according to Sportico.
- Funds also cannot hold governance rights with their team. It’s supposed to be a passive investment.
- The league will review all potential investments, taking into account factors such as human rights record and geopolitical standing.
By the numbers: Making these funds eligible for NBA investments significantly increases the overall capital in the market.
- The world’s 100 largest pension funds and 100 largest sovereign wealth funds combined are worth more than $27 trillion, and university endowments total nearly $700 billion.
- The world’s billionaires are collectively worth just $12.7 trillion by comparison, down from $400 billion amid last year’s economic turmoil.