The evolution of NBA ownership
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 U.S. 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 can't 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 biggest pension funds and 100 biggest 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 the past year's economic turmoil.