Selecting A Horse Racing Partnership

Horse Racing Partnerships come in many shapes and sizes. So much so, that it is sometimes difficult to discern the differences between competitors. So what does a novice, or even an experienced investor, do once they have decided to invest in a horse racing syndicate? With a multitude of variable choices available, the task of selecting a racing stable can be overwhelming and complex.

Last year, the Green Monkey, a two-year-old colt in training, sold for a record price of sixteen million dollars. Some of the top prices paid can be very discouraging to individual horse investors seeking to get into the racing game. With the inherent risks associated with horse racing, and they are substantial, the concept of participating as a partner in a syndicate has become a popular way to participate in the “Sport of Kings” and minimize risk.

Participation in a horse racing syndicate should primarily be done for entertainment purposes with low financial expectations. The notion that your first racehorse will win the Kentucky Derby is highly unlikely. Your odds of that occurring are about one in forty thousand. Maybe it’s a little better than the odds of winning the lottery, but still very hard to achieve. If your entrance into the racing game is based upon the idea of entertainment and enjoyment, you’re probably in the right frame of mind to get into the business.

Most horse trainers will tell you there is no way to know for sure if a horse will do well in racing – until it actually races. I’ve had horses train great and be huge disappointments in the afternoon. Conversely, I’ve also had horses that have shown little during training become stakes winners. You just never know. Horses range in prices from a few hundred dollars to, like I said earlier, sixteen million dollars. Some studies look at the success of racehorses by price range. Strangely enough, there isn’t that much of a difference – statistically. Your odds of having a better horse if you pay one million dollars is not much better than a horse you bought for one hundred thousand dollars. The difference is minuscule. And that folks, is what allows average people to own great racehorses.

No doubt, racing partnerships are the way to go for the average participant. It allows you entry into the game for a fraction of the cost and it allows you to diversify your risk. Typically, for every three racehorses you purchase, only one will do well. That doesn’t mean that the one successful horse will turn a profit, just that it will be able to compete and come close to breaking even. If you get lucky, you might even make a profit. The last study I recollect concluded that only about seventeen percent of racehorses make a profit. Granted, you can get lucky and do very well financially, but it’s rare.

The cost to acquire and train a horse is substantial, which is another reason why partnerships are the way to participate. If you enter the racing game purchasing one horse and that horse performs poorly, it’s likely to leave a bad taste in your mouth. The key is to diversify by investing in several horses. Sometimes the good ones will carry the bad ones. Also keep in mind that poorly performing racehorses will eventually be retired, reducing your losses and increasing your bottom line. Unless there is a good reason for the poor performance of a racehorse, the partnership should retire the horse and move on. Experience has shown that poorly performing horses, after several attempts at different distances on different surfaces, are unlikely to improve significantly. Get rid of them. It’s sometimes difficult to do when you have invested so much money into the horse, but most of the time you are just throwing away good money after bad.
Some primary things to consider in the selection of a partnership include reputation, cost, and location.

Look to unbiased people who can give you constructive feedback on existing partnerships. Keep in mind, that all partnerships can offer you positive references. That’s useless. Everyone has a few friends and family members who will vouch for them. That’s why I used the word “unbiased”. Hang out at the track and ask a few people who know. Keep in mind that they may have an agenda also, so be careful. Sometimes things like communications may make a difference. How does the managing partner communicate information to the partners and how often? Are they receptive to phone calls and e-mails? Do they answer them promptly? (Probably everyone provides good follow-up/communications before you buy into a partnership, but what about after the sale?) Did they properly inform you of all the risks? Do they utilize a “hard sell” approach? Are they helpful at getting you licensed? Ultimately, you will have to judge for yourself to arrive at a decision.

Do your homework. Ask around and do research on the Internet – it can tell you much about a racing stable. Would you be happy buying one percent of a horse for $1,000 only to later discover that the partnership purchased the horse at a sale for $2,000 a month ago? Research what they paid for the horse. If the horse was ever sold at a public auction, the information is available. View their website and read all the pages. Training costs can also vary substantially from track to track. The bigger, more popular urban tracks can be twice as expensive as the more rural tracks.
Where will your horse be stabled? That will impact both your cost and the opportunity to see it race live. If you live near Belmont Park in New York, you will probably enjoy your investment more if you can see it race live. Admission to the saddling paddock before the race, owner’s box seats, socializing with your other partners, and participating in the winner’s circle photograph are all benefits that are enjoyable for most partners. It’s hard to do if you live in New York and your horse races at Santa Anita (California) or Gulfstream Park (Florida). Keep this in mind when choosing a horse racing partnership.

You may also want to look at the way the managing partner makes a profit off the syndicate. Is it through marked-up prices, management fees, or a combination of both? Some partnerships will syndicate horses at their cost and charge no management fee. Why? Because they will retain a large percentage of a horse and they are just looking just to minimize their risk. Syndicates such as these make their money by having successful racehorses. My syndicate, Dream Team Racing Stable, is just such a syndicate. There is nothing wrong with a syndicate making a profit, but partnerships, where the managing partner’s profit is driven by success on the track, seem the best way to go. Partnerships that collect large monthly management fees are unlikely to retire poorly performing horses, as it is not in their best interest. They will race the horse forever and you will continue to pay and lose money for a long time to come, while the management continues to profit. Choose a syndicate where your best interest is in alignment with the syndicate’s best interest. Partnerships with excessive mark-ups and/or management fees are not in your best interest.

Cheap is not always best. I see all kinds of syndicates that offer horses at really cheap prices and seldom do I ever see those horses succeed on the track. Knowing that it costs about $45,000-$55,000 per year to train a horse (not including acquisition costs) at Belmont, I’d be very leery of partnerships that are offering a horse for sale for less than cost. A horse being offered for sale for $29,900 with all expenses included through the end of the year, well, quite frankly it scares me. Are they trying to recoup some of their investment on an injured horse? If not, what are they doing to cut costs? What part of the horse’s care and feeding program is being reduced? No matter how they do it, it’s not in the best interest of the horse or yourself.

Bigger is not always better. Bigger outfits spend substantial money on advertising and marketing. You see their advertisements on the horse racing television stations all the time and their marketing is brilliant. They have the nicest websites and the nicest brochures. Don’t be fooled. You need to look underneath the make-up to see what’s really there. And besides, who pays for all that shine and gloss? You do, in the prices, you pay to participate.

Claiming partnerships are becoming more and more popular. They allow you entry into the game at a very low price with a horse that is currently racing. Keep in mind that when you claim a horse, you may be claiming someone else’s problem and now their problem is your problem. I’ve seen horses claimed that were completely broken down and totally incapable of ever racing again. When you claim a horse, you do so at your own risk without the ability to vet or inspect the horse close-up. It is very, very risky. If a horse is running in a cheap claimer there is a reason why. Keep this in mind. I have never participated in a claiming partnership and have never offered one. I doubt I ever will.

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