NBA owners recently voted to permit sovereign wealth funds, pension funds and university endowments to purchase shares of teams, vastly expanding the league’s pool of potential investors.
Why it matters: NBA ownership, once reserved for uber-rich individuals, is increasingly becoming just one other investment vehicle — albeit a really expensive one.
The backdrop: The NBA became the primary U.S. league to permit private equity funds to take a position in teams — a change designed to offer liquidity options for minority owners and help finance team sales.
- The NHL, MLB and MLS soon followed suit, and funds like Arctos and Dyal have been snatching up shares ever since.
- Last month’s vote, which got here while the Suns are actively up on the market, merely increased the variety of potential investors.
How it really works: Individual funds cannot own greater than a 20% stake in a single team, and franchises cannot have greater than 30% of their total equity held by funds, per Sportico.
- Funds can also’t hold any governance rights with their team. It’s meant to be a passive investment.
- The league will review all potential investments, considering such aspects as human rights records and geopolitical standing.
By the numbers: Making these funds eligible for NBA investment dramatically increases the general capital within the marketplace.
- The world’s 100 biggest pension funds and 100 biggest sovereign wealth funds combined are price over $27 trillion, and university endowments total nearly $700 billion.
- The world’s billionaires are collectively price just $12.7 trillion by comparison, down $400 billion amid the past yr’s economic turmoil.