NWSL Creates Private Equity Fund Policy – With Limitations

NWSL Creates New Private Equity Fund Policy but Stops Short of Allowing Sovereign Wealth Funds


With the 2024 season set to begin for the National Women’s Soccer League (NWSL), the league and its fans have much to be excited about. From new television partnerships and revamped jerseys for each of its teams to three new expansion teams set to join the league, the offseason for the NWSL has featured a lot of new and exciting developments.

Last week, the NWSL codified its ownership rules for private equity funds investing in multiple teams, indicating that the league is still taking a cautious approach to certain types of institutional investors (e.g., sovereign wealth funds and pension funds) joining its ownership ranks.

In Depth

The NWSL has become one of the fastest growing professional sports leagues in the United States. While other professional leagues watched the valuations of their teams increase steadily over recent years, the valuations of the NWSL’s teams have skyrocketed. In 2020, the fee for an NWSL expansion team cost between $2 million and $5 million. Three years later, Sportico valued those same expansion teams – the San Diego Wave FC and Angel City FC – at $90 million and $180 million, respectively. Like other professional sports leagues in the US, the rapid growth of team valuations in the NWSL comes, in part, from investments by private equity funds.

For most of the history of professional sports teams in the US, team ownership has been limited to ultra-wealthy individuals. However, in the last few years, professional sports leagues in the US, including the National Basketball Association (NBA), the Women’s National Basketball Association, Major League Baseball (MLB), Major League Soccer (MLS), the National Hockey League (NHL) and the NWSL, modified their league rules to allow private equity funds to hold passive minority stakes in their teams. Unlike these other leagues, the NWSL allows a private equity fund to own a majority ownership in a team. For example, Sixth Street Partners owns a majority stake of Bay FC.

The newly codified rules, as reported by Sportico, limit private equity funds with investments in multiple teams to owning minority stakes in no more than three NWSL teams at the same time, restrict a single fund’s minority investment in any team to be between 5% to 20% of that team’s equity and allow no more than 30% of a team’s total equity to be held by minority private equity investors, consistent with the maximum ownership permitted for private equity investors in the other major US sports leagues (except for the MLB, which caps a single fund’s ownership in a team at 15% if the fund has other MLB investments).

The new NWSL rules will only apply to private equity funds, and the same passive minority ownership rights will not extend to similar types of institutional capital, such as sovereign wealth funds and pension funds. However, the NWSL did not completely reject the idea, leaving the door open for the NWSL Board of Governors to potentially approve such an investment in the future.

The NHL currently permits investment by sovereign wealth funds and pension funds under its private equity investment policy. In late 2022, the NBA, which also permits investments by private equity funds, adopted a special policy for investments by “institutional investors” that includes sovereign wealth funds and pension funds. The MLB adopted a policy in 2019 to allow ownership by “investment funds,” without a clear distinction between sovereign wealth funds and private equity funds and has since taken on significant private equity investment. Other leagues, such as the MLS and the National Football League, are considering allowing similar investments from sovereign wealth funds.