NWSL issues ownership rules for private equity and sovereign wealth fund investment

The GIST: NWSL owners rolled out new rules last week about how private equity (PE) funds can invest in multiple teams. The policy also excludes sovereign wealth funds from ownership, meaning Saudi Arabia’s Public Investment Fund (PIF) and other state-owned investment funds will be unable to buy NWSL stakes as the league grows. Interesting…

The details: According to the new guidelines, no PE fund can own passive minority stakes in more than three NWSL teams, and a single fund can only hold between 5% and 20% of a club’s equity. Clubs themselves are also restricted — no team can have more than 30% of its total equity owned by multiple PE funds.

• These rules are only applicable to PE funds investing in multiple teams, while investment in a single team does not face such restrictions. This is important in the case of teams like Bay FC, which is majority-owned by prominent PE fund Sixth Street. Rules don’t apply.

The examples: No PE fund currently meets the three-team limit, but two have had multiple investments. Arctos Partners owned passive equity stakes in the Utah Royals and Portland Thorns until the Thorns sold to the Bhathal family, while Angel City FC co-founder Kara Nortman is a managing partner in the Monarch Collective, the women’s sports–centric firm involved in Boston Unity ownership.

The reasoning: As the NWSL sees rapid expansion and increased interest, it’s being intentional about how it sets out investment parameters. The league clearly wants to protect multiple franchises from being jointly controlled by one overly influential ownership group, which could shift power dynamics and cause conflict.

• But the other preemptive measure is the NWSL’s unique clause prohibiting sovereign wealth funds, which is how wealthy Gulf countries are currently expanding into sports. For now, Saudi Arabia’s PIF cannot invest in the NWSL like it did in Newcastle United, the English Premier League (EPL) team it owns and reportedly compromised with political subterfuge.

Zooming out: Critics of sportswashing have expressed concern about entities like the EPL, NBA, and ATP accepting investments from nations with human rights concerns, and resistance has been notably stronger in women’s sports. The NWSL could set a precedent for women’s sports properties as they are increasingly faced with the sovereign wealth fund dilemma. Don’t pick up the phone.