NBA Approves Institutional Investors’ Passive Ownership Stakes in Teams

Investors including pension funds, sovereign wealth funds and endowments can own passive stakes in NBA franchises, following a 2020 decision to welcome private equity firms.


The National Basketball Association has approved letting pension funds, sovereign wealth funds and endowments own passive stakes in NBA franchises, continuing to widen the pool of potential investors.

The vote follows a 2020 move by the NBA to allow private equity firms to hold passive ownership stakes. Following that change, Arctos Sports Partners and Dyal Capital Partners established funds to buy minority shares in teams. In 2021, Arctos Sports took a 5% stake in the Golden State Warriors and later raised it to 13%, while Dyal took a reported 6% stake in the Atlanta Hawks in January.

Private equity ownership in sports groups has continued to grow in recent years, as David Rubenstein, co-founder of the Carlyle Group, joked on CNBC in September when asked about his interest in purchasing the Washington Nationals, a Major League Baseball franchise.

 “There’s no doubt that I feel I’m one of the few people in private equity that doesn’t own a sports team,” Rubenstein said. “All my friends bought sports teams and I said, ‘Look, your investors are not going to take you seriously by you diverting your attention to these sports teams.’ But I was wrong. … It’s very difficult to buy a sports team and lose money. Some people have done it, but it’s very rare. In baseball and basketball, you make your money when you sell the team. In the NFL, you make your money all the time, because it’s so profitable.”

Between 2002 and 2021, the average price return for an NBA team was 1,057%, according to estimates from PitchBook Data. Sport franchise valuations have boomed over the past decades; George Steinbrenner famously purchased the New York Yankees from CBS in 1973 for less than $10 million, and the Yankees are now worth about $7 billion, according to Sportico.

In its annual rankings of the most valuable NBA franchises, Forbes reported that the average value of a franchise is $2.86 billion, up 15% from 2021 to 2022.

According to the same report, the Golden State Warriors are currently the highest-value franchise in the NBA, with a valuation of $7 billion. Forbes also estimated the operating income of franchises during the 2021-22 season in its annual data release. The Warriors made a league-high $206 million in income, meaning the team’s estimated valuation is roughly 34 times operating income.

The valuation of NBA teams could head even higher now that institutional investors will be able to invest. The world’s largest 100 asset owners hold a total of $25.7 trillion in assets, according to data recently released by WTW.

While discussing the economics of American professional sports, Rubenstein said, “You’re going to see baseball teams, basketball teams and others combine into one company and, ultimately, those companies will go public.”

Saudi Arabia’s Private Investment Fund, part of the country’s sovereign wealth fund, has recently made forays into professional sports as an investment class, one often described as the country “sportswashing” to improve its reputation. The fund started its own golf league (LIV Golf) to challenge the PGA Tour, invested in Formula 1 as the second-largest owner of its Aston Martin team and purchased a controlling stake in English Premier League soccer team Newcastle United in October 2021.

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