As horse racing fans around the world get ready to watch the 148th running of the Kentucky Derby on May 7, many millions of dollars will once again be wagered on the horses to win, place or show. While gambling is woven into the history of horse racing, it’s not the only way to profit off thoroughbreds.
Investing in and owning racehorses is an extremely risky endeavor, but one that can hold riches for the few that are successful. Major races pay out significant sums in prize money and successful horses can have breeding value long after they’re done racing. But the costs associated with racing a horse or owning a stable are significant.
Here’s what you should know about investing in racehorses.
The history of investing in horse racing
People have been racing horses long before they started drinking mint juleps and wearing giant hats while sitting in “millionaire’s row.” Our collective fascination with horse racing dates back centuries, with the first organized horse races in North America said to have taken place in 1664 in what is now New York City.
In those early days, races focused on a horse’s stamina instead of its speed as they do today. It wasn’t until after the Civil War that races shifted to highlight the speed of the animals. Early races also tended to be match races, which took place between just two or at most three horses. As the sport grew, race fields expanded to include a larger number of horses.
Owning a racehorse has mostly been an activity of the wealthy due to the significant costs associated with housing and training the horses, but there are some options for smaller investors looking to make a fractional investment in a horse.
Most racehorse owners have significant wealth or come from families with long histories in the sport. Queen Elizabeth II and members of the British royal family are huge fans of horse racing and own several horses that compete. Similarly, members of Dubai’s royal family also own horses that have won many races all over the world.
One racehorse owner who got his start investing in more traditional assets is Seth Klarman, founder of The Baupost Group, a hedge fund based in Boston. Klarman generated his wealth by investing in undervalued securities and even wrote a book called Margin of Safety that is considered one of the best investment books of all time. Klarman’s horse, Cloud Computing, won the 2017 Preakness Stakes, one of the Triple Crown races.
Buying a racehorse
Racehorses are typically bought at public auctions before they’ve run in any races at all, according to Stroud Coleman …….
Source: https://www.bankrate.com/investing/how-to-invest-in-racehorse/