The NBA, the first major U.S. league to accept private equity investments in its teams, is expanding the pool of capital sources available to owners, according to multiple people familiar with the decision.
NBA owners recently voted to allow franchises to accept investment from endowments, pension funds and sovereign wealth, said the people, who were granted anonymity because the details are private. The decision, which was made in early November, could pave the way for foreign governments and large U.S. university endowments, such as Harvard’s $42 billion war chest, to buy small, passive stakes in NBA franchises. The league would still approve new investors on a case-by-case basis, the people said, including more stringent due diligence for state-owned firms.
The changes were touted by a handful of league owners, including Ted Leonsis of the Washington Wizards and Larry Tanenbaum of the Toronto Raptors, according to the people. Both the Wizards and Raptors are owned by larger conglomerates that include multiple teams, media and real estate.
When asked about the changes, NBA spokesman Mike Bass confirmed the new rules, adding that “all such investments are subject to league review and NBA Board approval.” A representative for Leonsis’ Monumental Sports & Entertainment (MSE) declined to comment; a representative for Maple Leaf Sports & Entertainment (MLSE) didn’t immediately respond to a request for comment from Tanenbaum.
The new rules are an expansion of the league’s embrace of institutional money. In 2020, the NBA became the first major U.S. league to approve private equity investments—a move soon followed by the NHL, MLB and MLS. The NBA’s original framework allowed PE funds to purchase up to 20% of a single franchise via passive stakes with limited rights, and to buy into a maximum of five teams. No franchise can have more than 30% of its total equity held by funds, and none of those funds can hold governance rights. The new groups of institutional money will be allowed roughly within that same framework, said the people, who were not specific about whether the pension and sovereign wealth funds could also hold equity in multiple teams.
The Ontario Teachers’ Pension Plan was once an investor in MLSE, but no NBA team has taken capital from a pension fund, endowment or sovereign wealth fund under the new rules. The league is likely to treat all new investments as test cases, the people said. That’s particularly true around money from sovereign wealth funds, for which human rights and geopolitical standing may play a role in whether the league ultimately grants approval.
The NHL is expected to also allow these investments, according to two of the people, given the amount of overlap between ownership groups in both leagues. Both MSE and MLSE, for example, hold NBA and NHL franchises, and it would be complicated to exclude individual assets in a broader deal. A representative for the NHL declined to comment on the specifics of the league’s rules around institutional money.
The widening of those rules should further increase NBA-wide franchise valuations, which have appreciated five-fold over the past decade. The average league team is now worth close to $3 billion, which limits the number of people with enough interest and capital to buy into the league. Widening the pool of possible buyers, and giving owners more options should they want to take money off the table, should increase the value of all clubs.
The desire for capital has resulted in a litany of major sports teams on the market—more than $20 billion worth, according to Sportico’s valuations. Franchises currently for sale include the NFL’s Washington Commanders, NBA’s Phoenix Suns, MLB’s Los Angeles Angels, NHL's Ottawa Senators, and English soccer’s Liverpool and Manchester United.
In the past 18 months, a handful of private equity firms have rushed to invest in NBA franchises. Dyal HomeCourt (NYSE: OWL), the fund that originally partnered with the NBA, is known to have invested in the Atlanta Hawks, Phoenix Suns and Sacramento Kings. Arctos Sports Partners’ portfolio includes the Kings, Utah Jazz, Golden State Warriors and Philadelphia 76ers. Sixth Street bought into the San Antonio Spurs.
Several European soccer clubs are owned by sovereign wealth funds, including Paris Saint-Germain (Qatar), Newcastle (Saudi Arabia) and Manchester City (United Arab Emirates). Manchester City’s ownership group, backed by the ruling family of Abu Dhabi, also owns MLS club NYCFC.
(This story has updated the headline.)