3/27/09

Horse racing, commonly referred to as the “Sport of Kings,” was once a rich man’s game and an impossible investment for the average fan. Racing partnerships make that dream possible by offering shares in quality horses at affordable prices. Different partnerships are offered all over the country on varying levels, making it possible for any person to become involved with claimers and stakes horses alike.

 

One or more successful horsemen manage a partnership and offer their expertise to acquire horses and then sell shares in the purchases to individuals. This way, the high-risk investment of buying a racehorse is spread over a group of people. Because of the number of people involved, both the managing partner and the individual shareholders are able to buy a classier racehorse than they could afford alone.

 

Partnerships have become wildly popular and successful. Horses campaigned by groups have won multiple Breeders’ Cup races. In 2008, Big Brown won the Kentucky Derby and Preakness Stakes. Big Brown was owned by the IEAH Stables partnership. The best partnerships bring in around $2 million in annual earnings.

 

 

The “original racing partnership,” Dogwood Stable, was formed in 1969 under the authority of Cot Campbell, the man who first conjured the idea of sharing the cost of horse ownership amongst a group of interested people. Two years later, Dogwood won its first stakes race in Keeneland’s Alcibiades Stakes. In 1987 the Dogwood-owned racehorse, Inlander, won the Eclipse Award for Champion Steeplechaser. The stable’s best success came in 1990 when Dogwood’s Summer Squall finished second in the Kentucky Derby but won the Preakness Stakes.

 

Team Valor is a successful global operation led by racing expert Barry Irwin. Team Valor has had champion runners in South Africa and Dubai as well as in the United States. The group won the Breeders’ Cup Turf with Prized in 1989. In 1989, Team Valor’s Captain Bodgit came within a neck of winning to finish second in the 1997 Kentucky Derby.  According to its website (http://www.teamvalor.com/), 50% of Team Valor runners have placed in stakes races, and 28% of them have won.

 

Currently, West Point Thoroughbreds is one of the hottest partnerships in racing with Macho Uno, a multiple-graded-stakes winner and with Mr. Fantasy. The later has already been already victorious in 2009 and is expected to be Kentucky Derby candidate. In addition, West Point’s Flashy Bull ran fourth in the 2006 Kentucky Derby, and went on to become one of the group’s four Grade 1 winners.

 

The Northeastern based Renpher Stables began in 2002. Its first starter won by 10 3/4 lengths. By the end of 2003, the organization had amassed 7 wins in 12 starts. Since then, they have maintained around a 20% rate of wins to starts. Our Khrysty, a $25,000 purchase, brought the group its first stakes victory in 2008.

 

Those interested in investing in a partnership should look for a partnership that meets your needs and offers a package you can afford. When buying into a horse, you should expect that you will lose every dollar you invest. With a group such as Renpher Stable, you can purchase shares in a horse for a few hundred dollars. With Dogwood Stables or Team Valor, the investor is going to be paying closer to $12,000 or more.

 

The way partnerships function is that the managing partners go to auctions across the country where they buy young horses. They then offer shares of the horse to investors. Most partnerships buy both two-year-olds and yearlings from the auctions. In Team Valor’s case, the organization buys strictly yearlings, preferring to break and school a horse from the beginning instead of buying a horse that already has training. On the other hand, many people prefer buying a two-year-old that already has timed workouts. This gives investors a general idea of the horse’s speed. In addition to buying horses from auction, Renpher Stable also claims horses, looking for a quick return on a horse already proven on the track.

 

When looking at horses offered by a partnership, some people buy into a single horse, and some have shares in multiple horses. Since a single share in a horse can be $5000 investors may opt to form a Limited Liability Company (LLC) to buy shares collectively and to reduce the individual cost of investing. That LLC may consist of several people. If the horse makes money, they split any profits made off of the share of the horse. Most racing partnerships are willing to sell shares to LLCs.

 

Generally, there are monthly or annual expenses involved. The Little Red Feather racing partnership, which won the Breeders’ Cup Mile in 2004, suggest on their website (http://www.littleredfeather.com/) that it costs a little over $3,000 a month to keep a typical horse in training. That cost is split and billed to each shareholder. The partners are compensated when the horse either earns purses or is sold again.

 

 

Thoroughbred ownership comes with desirable perks, such as free admission to racetracks, seating for the major racing events, and access to the backside of the racetrack where the horses are stabled and the general public is banned. Managing partners encourage the other shareholders to go to the track in the morning and watch the workouts. Losses incurred by racehorse ownership are a tax write-off against income, making a potential loss easier to stomach.

 

Racehorse ownership is a high-risk investment. Unfortunately, many horses never make back their purchase price. Most partnerships do not insure their equines for mortality, so investors must do that on their own, adding to the cost. Shareholders don’t get a say in training and racing the horse. Those decisions are left to the expertise of the trainer and managing partner.

 

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Emily Shields is a regular contributor to Case the Race.  She has written for California Thoroughbred, Churchill Downs media, and international racing magazines.