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NBA opens up team investment to pension and sovereign wealth funds

Any investor would be subject to league review and approval from the board of governors.

2 December 2022 Josh Sim

Getty Images

  • NBA has allowed private equity firms to invest in teams over recent years
  • Maximum equity a franchise can sell to external funds is 30%

The National Basketball Association (NBA) will permit sovereign wealth funds, endowments and pensions to acquire passive stakes in the league’s franchises.

The decision, which was first reported by Sportico, was passed during a recent vote by the NBA’s board of governors. League spokesperson Mike Bass reiterated in a statement to several US media outlets that any investment would still be subject to board approval and league review.

“The NBA board of governors recently decided to allow direct, passive investments in NBA teams by institutional investors,” Bass said. “All such investments are subject to league review and NBA board approval.”

It marks the latest attempt by the NBA to open up team ownership to a wider pool of investors. At the start of 2021, the elite men’s basketball competition became the first of the US major leagues to allow private equity firms to take minority stakes in its clubs.

Dyal Capital Partners now has stakes in three teams, the latest being the Atlanta Hawks, while Arctos Sports Partners has stakes in four franchises, including the Golden State Warriors, Sacremento Kings (Dyal also own a stake in the Kings) and Utah Jazz. San Francisco-based firm Sixth Street also has invested in the San Antonio Spurs, with the deal valuing the franchise at US$1.8 billion.

Currently, private equity firms can acquire up to 20 per cent of a single franchise and are limited to investing in a maximum of five teams. It is unclear at this stage whether pension or sovereign wealth funds will be investing under the same conditions. Meanwhile, the maximum equity an NBA team can sell to external funds remains at 30 per cent.

SportsPro says..

The latest changes from the NBA opens up the pool of prospective owners of its franchises. Last December, the average NBA team was valued at US$2.58 billion by Sportico, with the rising valuations of teams making it more difficult to buy franchise ownership stakes.

Now, it gives minority owners more options if they decide to sell their shares. According to Global SWF, sovereign wealth funds were estimated to hold about US$10.5 trillion as of December 2021, while public pension funds boasted US$21.4 trillion in funds. Some universities also have huge endowments, with US News & World Report reporting that Harvard’s endowment is worth US$53 billion, while Yale’s is valued at US$42 billon.

Yet the NBA will need to consider the risks of opening up the door to sovereign wealth funds associated with autocratic nations, many of which have already been accused of sportswashing elsewhere. The Premier League’s decision to allow Saudi Arabia’s Public Investment Fund (PIF) to acquire Newcastle United, for example, was met with huge criticism given the country’s poor human rights record.

With the NBA hugely popular globally, any approach from a sovereign fund will pose significant questions for the league to wrestle with.

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