Yellow Peril Alert: NBA owners have more than $10 billion invested in China

How worried should we be about ESPN's report that NBA owners have invested over $10B in China?  This is clearly a sizable nominal amount, but how should we react?  Let's perform a back-of-the-envelope assessment to see if this level of exposure to China is cause for the concern that ESPN is clearly intimating.

With the given $10B as the numerator, let's determine the denominator, or total value, for the objective function, starting with the value of the National Basketball Association as asset.  The total value of all NBA franchises is $77.5B, according to Sportico.  Given that the article focuses on NBA owners who may have far greater assets than just their teams, we find that the cumulative net worths of just the ten wealthiest NBA owners is $180.2B, per Sportsbrief.com.  To round out the net worths of the remaining 20 owners, the majority of whom are billionaires, let's use a SWAG of $220B.

By this calculation, $10B accounts for 4.5% of the NBA owners' net worth in aggregate.

Since each owner is a high net worth global investor, let's investigate recommended investment allocation to the Chinese economy.  Let's evaluate three alternatives:

1. By share of total GDP: China is currently the second largest economy in the world, accounting for 18.62% of the total global Gross Domestic Product on a purchase-power-parity basis.  
2. By MSCI ACWI Index: This is MSCI's flagship global equity index that covers approximately 85% of the global investable equity opportunity set.  As of April 2022, China represented 3.47% of the total exposure.
3. Portfolio manager recommendation: In 3Q21, Blackrock recommended allocation to Chinese assets “two to three times” that of diversified global portfolios such as MSCI's index.  This would result in a range of 7-10%.

BlackRock is presently reviewing that call given recent macro circumstance, but 4.5% is well below the previously recommended 7-10% range.  Given that Joe Tsai's stake in Alibaba alone accounts for up to 45% of the $10B, one may even suggest that the owners of the other 29 NBA teams may be underweight in their exposure to the second largest economy in the world. 

The point: While there are certainly complications around specific investments, casting aspersions on the NBA owners’ $10B exposure to China by nominal value alone is jingoistic and devoid of perspective.