NBA owners recently voted to allow sovereign wealth funds, pension funds and university endowments to buy 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 another investment vehicle — albeit a very expensive one.
The backdrop: The NBA became the first US league to allow private equity funds to invest in teams — a change designed to provide 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 came while the Suns are actively up for sale, merely increased the number of potential investors.
How it works: Individual funds can’t own more than a 20% stake in a single team, and franchises can’t have more than 30% of their total equity held by funds, per Sportico.
- Funds also cannot hold any governance rights with their team. It’s meant to be a passive investment.
- The league will review all potential investments, taking into account such factors as human rights records and geopolitical standing.
By the numbers: Making these funds eligible for NBA investment dramatically increases the overall capital in the marketplace.
- The world’s 100 largest pension funds and 100 largest sovereign wealth funds combined are worth over $27 trillion, and university endowments total nearly $700 billion.
- The world’s billionaires are collectively worth just $12.7 trillion by comparison, down $400 billion amid last year’s economic turmoil.
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