ILLUSTRATION BY LORENZO GORDON, PHOTO BY GETTY IMAGES
NWSL owners have codified new rules to govern private equity funds invested in multiple teams, a policy that also excludes sovereign wealth funds from investing in the league.
Moving forward, no fund will be allowed to own passive minority stakes in more than three NWSL teams, the league told Sportico on Thursday. A single fund can hold anything between 5% and 20% of a club’s equity. No team can have more than 30% of its total equity held by such funds.
The new rules apply solely to private equity funds taking positions in multiple teams—funds invested in a single team have no restrictions. That’s an important distinction given the ownership structure of a few existing clubs. PE giant Sixth Street, for example, owns a majority of expansion team Bay FC.
The new rules also apply specifically to private equity funds, the league said. They do not provide similar rights to other types of institutional capital—including sovereign wealth and pension funds—unless the board approves them in the future. Those types of funds are common investors in many private equity firms.
The changes come as almost every U.S. sports league welcomes a flood of new investments from institutional capital. The NBA, NHL, MLB and MLS have all already laid out their rules, designed to prevent ownership conflicts of interest and any future concerns about competitive advantages and information sharing. The NFL is the one major U.S. league that still prohibits institutional investment of any sort.
There are no funds currently at the three-team NWSL limit, but there has been multi-ownership. Arctos Partners, the most active of the sports-focused PE firms, owned passive equity stakes in both the Utah Royals and the Portland Thorns last year, though it exited the Thorns when the team was sold last month. Kara Nortman, co-founder of Angel City, is also a managing partner in Monarch Collective, a women’s sports-focused PE firm that is part of the group bringing an NWSL expansion team to Boston.
Monarch Collective launched last March with the goal of raising $100 million. The NWSL’s new rules state no owner can have investment in a fund with multiple NWSL team holdings, with the exception of a passive stake of 5% or less of the fund’s capital.
The new rules also state that funds with multiple stakes must have minimum capital commitments of $100 million. It’s unclear how much Monarch has raised so far, or how Nortman’s position might impact that 5% threshold. A representative for Monarch didn’t immediately respond to a request for comment.
The NWSL’s rules are largely similar to those laid out in the past few years by other leagues. The NBA and NHL restrict funds to no more than five teams; it’s four in MLS, and MLB has no limit. A fund can buy stakes up to 20% in the NBA, NHL and MLS; in MLB it’s 15%. The total ownership stake a team can have held by funds is 30% across NBA, NHL, MLB and MLS. There has been at least one sovereign wealth deal in the NBA and NHL.
While the NWSL followed other leagues in codifying rules around private equity ownership, it has led in other ways. The new Bay Area franchise, majority owned—and controlled—by Sixth Street, is a structure that wouldn’t be permitted in any of the five major U.S. men’s leagues.
Speaking on the Sporticast podcast last year, NWSL commissioner Jessica Berman discussed why sports leagues are often wary of these types of transactions, and how the NWSL worked with Sixth Street to establish safeguards around the Bay FC investment. They included guarantees that Sixth Street co-founder/CEO Alan Waxman has the authority to allocate capital from the fund, and a commitment from him to represent the team on the NWSL board.