Investing In Horses- Is It A Wise Financial Investment?

In centuries past, racehorse ownership was a purely amateur pastime; that is, rich owners developed their horses for bragging rights and a desire to develop the breed, but any money earned was incidental.

There were purses, so horses were able to earn prize money, but most of this money went toward the horse’s expenses. Only very rarely did this money amount to actual profit, thus effectively barring people from owning racehorses unless they had their own separate sources of income.

However, times have changed. Increasingly, Thoroughbred racing has become a profitable industry. Similar to placing a bet at the betting window, people can invest a small sum of money into a horse with reasonable hopes of some sort of return. What are the different forms of racehorse ownership, and how financially risky is each? Can you make horse racing predictions for investments?

Sole Ownership

This is what most people picture when someone mentions “horse ownership.” If you own a horse outright, with no other person, you are the sole owner of that horse. For many years, the vast majority of major racehorses were campaigned by one ownership entity.

If you are the sole owner of a racehorse, that means that you are responsible for all of the horse’s expenses. You pay the trainer, the jockey, the exercise rider, the groom, the veterinarian, the farrier, and anyone else who provides a service for your horse. Of course, you also are entitled to every cent of your horse’s winnings. However, it is important to keep in mind that of the tens of thousands of Thoroughbred foals born every year, only about half of them ever even start in a race, much less win.

There are a few ways to acquire sole ownership of a racehorse. One way is by breeding your own Thoroughbreds. A mare owner generally pays the stallion owner a stud fee for his services and genetic contribution and is able to claim ownership of the resulting foal. This affords the owner the maximum amount of control over his racehorse: he picks the parents, he oversees the mare’s pregnancy, and he is able to have a hand in every aspect of the foal’s life. However, this means that he also must wait at least two years after the foal’s birth to start receiving any kind of return on his investment.

People can also purchase a horse who is further along in their training, or even make a claim on a racehorse during a race.

An owner must weigh the decision in purchasing an older horse- the horse will be able to start earning their keep much more quickly, but they will come with a past and may have a difficult temperament, bad habits, or flaws from early development that would make them more difficult to handle.

Additionally, while there are stories such as that of Maximum Security of horses who raced in claiming races later becoming champions, these are exceedingly rare; most horses who run in the claiming ranks have significantly less talent than horses who run in allowance or stakes races.

Partnership

Owning in partnership is fairly similar to sole ownership, except that you share everything with at least one other entity. This means that you have someone to split the costs of ownership with, so the risk is divided between the entities that comprise the partnership.

If the partnership is equal, then each owner theoretically contributes the same amount of money toward the horse’s care and has the same amount of control over the horse. However, partnerships do not have to be equal, and one entity can hold more shares in the horse than others.

The key to a good partnership is similar to that of any good relationship- the entities involved must be able to communicate with each other and come to decisions together. How these decisions are made for the horse involved should be outlined clearly in writing prior to forming the partnership, and all relevant information about the horse should be communicated quickly, clearly, and effectively.

Microshares

Microshare ownership is a relatively new phenomenon. In this system, the official listed owner of the horse is the microshare group (such as Myracehorse.com, owner of 2024 Preakness winner Seize the Grey), and the owners of the group make most of the controlling decisions.

However, the expenses are covered by hundreds or even thousands of people who pay a small fee to purchase shares that typically amount to about a tenth of a percentage of a horse.

Any profit the horse makes will then be divided among those microshare owners. Special achievements such as a grade I victory will gain the microshare owners a bonus, and the sale, claim, or stud package for each horse will also be dispersed among the microshare owners. There is very little financial risk involved, but all financial rewards are also widely dispersed.

While microshare owners do not generally have control of their horses’ careers, most are able to have access to special perks. These can include tours to visit their horses, inside information on how the horse is progressing, and even a chance to stand in the winners’ circle!