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NBA Courts Investment by Sovereign Wealth, Pension Funds

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The National Basketball Association is able to play ball with sovereign wealth, pension, and endowment funds, provided these investors pass the cash.

The NBA’s owners recently voted to permit the increasingly flush institutions to purchase relatively small, passive stakes within the league’s teams, the sports business publication Sportico reported Thursday. The league had previously authorized investments by private equity funds.

The brand new entrants will operate under similar terms, under which minority investments are approved by the league on a case-by-case basis and do not allow funds to have a say in how the business is managed. Private equity funds can own not more than 20% of a single team, and no team can sell greater than 30% to any combination of such investors.

Key Takeaways

  • NBA owners have voted to let sovereign wealth funds, pensions, and endowments buy minority stakes in league teams.
  • The league already permits private equity stakes, limiting them to twenty% for anyone fund and 30% in total per team.
  • The NBA is following the cash as fund flows into alternative investments soar.
  • Selling team stakes to some sovereign wealth funds risks controversy over the countries’ human rights records.

NBA team stakes are amongst alternative investments which have been all the craze: The asset class was valued at $13 trillion at the top of 2021 and is predicted to succeed in $23 trillion by 2026. Portfolio allocations to alternative investments by state and native public pension funds reached 34% this 12 months, from 9% in 2001, by one estimate.

Because alternative investments have traditionally had less correlation with those in the general public stock and bond markets, they’ve reduced the volatility of portfolio returns.

NBA teams, like North American sports franchises typically, have a very glitzy recent performance record as investments. Team values have increased five-fold over a decade, pushing the estimated value of the typical NBA team to almost $2.6 billion.

The league’s increasingly lucrative long-term television contracts insulate it from the results of economic downturns.

The NBA’s popularity also increases the chance that minority investments in its teams could be utilized by sovereign wealth funds to legitimize repression by the governments that run them. The English Premier League drew criticism last 12 months after it let Saudi Arabia’s Public Investment Fund acquire 80% of the Newcastle United soccer club.

Manchester City in the identical league is owned by the investment group of the Abu Dhabi royal family within the United Arab Emirates (UAE). Qatar’s sovereign wealth fund has owned the French soccer club Paris Saint-Germain since 2011 and is now marketing a minority stake within the team.

NBA commissioner Adam Silver sidestepped concern about UAE’s human rights record and anti-LGBTQ laws in announcing NBA exhibition games within the country earlier this 12 months.

The NBA also became enmeshed in political controversy in China. The league’s games were banned from Chinese TV for nearly three years after an executive at an NBA team tweeted support for Hong Kong protesters demanding democracy.

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