NASCAR move to ban sovereign wealth funds after investment firm concerns

The NASCAR Cup Series is hotter than it’s been in years thanks to the overall growing profile of motorsport — but as private equity firms look to invest in the sport, NASCAR may be moving to place greater boundaries.

NASCAR is in the process of negotiating a new charter agreement with teams — effectively, NASCAR’s version of Formula 1’s Concorde Agreement. This new agreement may very well ban sovereign wealth funds like Saudi Arabia’s Public Investment Fund.

NASCAR’s new charter investment rules

In the NASCAR Cup Series, a “charter” serves as a way to generate financial wealth for a car beyond its physical assets; in exchange, those cars are granted guaranteed slots on the starting grid, as well as guaranteed revenue. Non-charter teams may have to compete for the final slots on the starting grid.

In recent years, charters have sold for as much as $40 million, making them valuable assets for both the teams themselves and the sponsors or investors who may be interested in moving the team forward.

NASCAR is currently in negotiations with chartered car owners to develop a new charter agreement — and according to Adam Stern of Sports Business Journal , that new agreement could include a ban on sovereign wealth funds.

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At the moment, multiple NASCAR teams have announced charter buy-ins from private equity firms or other investors. For example, Trackhouse Entertainment Group, which runs the Trackhouse Racing team, announced a deal with the Avenue Sports Fund, which resulted in a significant minority stake in TEG for ASF.

Trackhouse isn’t the only organization that has been eyeing up buy-ins, resulting in NASCAR’s desire to craft a set of rules dictating what those private equity buy-ins should look like, and how much control any private equity firm could purchase.

But Sports Business Journal is the first in announcing that NASCAR is currently considering a ban on sovereign wealth funds.

Sovereign wealth funds (SWFs) are state-owned investment firms; money in these funds has been generated by the state government. These sovereign wealth funds can be used to pay off a country’s debt, invest in domestic industries, or provide social services for the country’s personnel.

One of the largest SWFs in the world is the Public Investment Fund (PIF), Saudi Arabia’s sovereign wealth fund. While most of the fund’s activities take place in the country of Saudi Arabia itself, the PIF has made notable purchases of foreign assets like Premier League football club Newcastle United.

The PIF also established LIV Golf, a rival organization to the PGA Tour, and has invested heavily in the Qiddiya megaproject that will include a new Formula 1 race track.

These sporting investments have drawn heavy criticism for perpetuating “sportswashing” — where certain countries utilize exciting sporting projects in order to mask ongoing human rights issues within that country.

Though NASCAR is currently interested in expanding its horizons in order to race outside of American borders, as well as in attracting international talent, it does seem interested in insulting the sport against possible foreign investment that could result in an undue political influence over the series.

As Sports Business Journal reports, however, conversations around charters are still ongoing, which means this potential ban on sovereign wealth funds is not yet finalized.

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