4 minute read
Resolute Bloodstock's John Stewart (centre) at Keeneland in December: he spent 4,800,000gns at Tattersalls and over €1,250,000 at Arqana ITB_January
TED TALKS...
Investing
Big players see thoroughbreds as an alternative investment strategy, writes Ted Voute
WE LEAVE behind a buoyant year at the top of our industry with significant investors jumping in across almost every category buying foals, yearlings and mares, as well as horses and fillies in training.
Amo Racing and Resolute Racing have moved the top end of the market across Europe by 20 per cent – an additional £50,000,000 pushed into the market is all it takes to move it.
Amo’s Kia Joorabchian’s day job dealing with the transfer of leading Premier League players can be a £20,000,000 transaction in one go, so it’s not a dissimilar investment to that of a player being traded from club to club.
John Stewart of Resolute Racing runs an investment fund which typically holds multiple billions of dollars.
Some aspects of thoroughbred ownership do offer protection against inflation but there are several factors to consider “ “
Investing in thoroughbreds is an alternative investment strategy that can provide unique opportunities and challenges.
Some aspects of thoroughbred ownership do offer protection against inflation, but there are several factors to consider that affect whether a thoroughbred investment can be considered inflation-proof, as well as ultimately classified as an “investment”.
Our industry is also one of the few businesses that remains unregulated and it is still easy to move large sums of money around without too much trouble. There is also a bonus of tax concessions, and the possibility of tax-free income on successful racehorses if sold when in training.
Like art, thoroughbreds are a tangible asset, have an intrinsic value and, potentially, can retain their worth.
Successful racehorses can generate significant income through winnings and stud fees, and if the demand for quality horses increases, then their value can appreciate potentially outpacing inflation.
They can return large profits to owners and investors.
The popularity of horseracing can lead to increased demand for successful horses, particularly in established markets such as the US and Europe – the demand drives prices up enhancing value over time
The investment landscape for racehorses lacks the extensive historical performance data that stocks, bonds, and other asset classes provide, and predicting performance can be challenging “ “
For some investors there’s an emotional or cultural connection to horseracing, which can encourage long-term investment, despite the threat of economic fluctuations.
But, having written all that, the market can be highly volatile.
The performance of a horse depends on factors such as avoiding training injuries or having luck in running, all of which can be unpredictable and lead to a variety of outcomes.
The costs associated with owning racehorses can also be substantial. They include training fees, veterinary care, insurance, boarding and other maintenance and management costs.
Such expenses can significantly impact overall profitability
Selling a racehorse may take time and does not always yield the desired return, especially if the horse does not perform as expected on the racecourse.
The market for racehorses is highly specialised, and more so than perhaps the art market.
The investment landscape for racehorses lacks the extensive historical performance data that stocks, bonds, and other asset classes provide, and predicting performance can be challenging without robust market indicators.
Changes in regulations related to horseracing, or shifts in market demand, for instance, due to emerging trends in gambling or shifts in entertainment, can impact investment returns.
Whilst investing in thoroughbred racehorses offers some protection against inflation due to the potential for appreciation in value and earnings, it is not guaranteed and it carries significant risk to the capital
Consulting with industry experts, trainers and experienced owners provides valuable insights.
Many new people attracted to horseracing are no longer hobbyists and demand a potential return from investment. This will make the industry sharper and more accurate, slimming the top end further as the professionals hit the bull’s eye more regularly.
Middle-distance sires the value
AND SO, in this world of big-time investors, how do we make our decisions on stallions for our mares?
I think we need to operate where there is value by choosing stallions who are perhaps underpriced for what they have done, sires such as Make Believe or Australia.
Staying blood is also an area with huge uplift for ownerbreeders with large prize-money available over 1m4f, but with lower investment costs in stud fees.
Classic-distance stallions such as Nathaniel, Teofilo and Camelot are three such options.
Breeding rights are getting a bad rep now, but I think Vandeek is a great option and he is by a proper stallion to boot!
Racing older horses who are already stakes winners can amass terrific prize-money in the winter with a few trainers basing themselves in the Middle East to take advantage of the various festivals on offer.
So my advice this year is to breed staying horses, race them and then travel the world!
