The idea of horse ownership can bring dreams of fame and fortune. After all, who doesn’t want to be in the Winner’s Circle at the Kentucky Derby? However, the fantasy can be much different than the reality. It’s best for people to view racehorse ownership as a fun pastime, first and foremost. Yes, it’s exciting to tell friends and family that you own a racehorse. However, with the volatile nature of the sport, you shouldn’t jump into owning a horse expecting to come out ahead financially. However, Cinderella stories do happen on occasion, sometimes on racing’s biggest stage, but it is a rarity.
Ownership should never be looked at as a way to make money, but rather as a fun pastime that could potentially break even or stand to make a profit. Sometimes a significant profit, if the stars align. However, potentially large pay offs are scarce- there is only one winner of the Kentucky Derby each year, and around 30,000 thoroughbreds are born each year. Though the risks are high, millions of dollars can be made during one horse’s racing career. That can be a life-changing experience for a sole owner or a partnership of owners.
With the global economic change, a niche industry within horse racing has developed with an emphasis on shared ownership or “partnerships.” Owning a racehorse outright can cost an owner upwards of $40,000 per horse per year, excluding the initial purchase price and barring any major medical concerns. Thankfully, with the advent of partnerships and racing syndicates, racehorse ownership has become more affordable and accessible for the layperson.
When purchasing in a partnership, the risk of investment is shared between two or more entities, minimizing both the risk and reward for everyone involved. Though the risk and reward are lessened, this makes it an attractive and more affordable option for both first time and veteran owners. However, most syndicates offer other perks such as owner seating at the racetrack, access to the paddock prior to a race, backside access, and regular updates on your horse. So while the financial rewards are minimized, owners still have access to the special perks that sole owners receive. In addition, everything is usually arranged by the syndicate company.
Syndicate companies are not limited to the lower level of racing and are found at the highest levels of racing. While the initial purchase price of a fraction of a horse will be significantly larger than an actively running a $25,000 claiming horse, a higher- quality horse is more likely to turn a larger financial reward consistently.
A winning horse will earn 60% of the purse offered. The trainer will take out a percentage of that, as will the jockey, leaving the owner with 80% to 50% depending on what is contracted with the trainer. The remaining money is given to the sole owner or distributed to the partnership. The more shares a person owns in a horse, the more money he or she receives when the horse wins. However, that person also carries a higher financial load with regard to the training, farrier, blacksmith, and transportation bills.
If an owner is serious about his or her ownership and wants the best chance of success possible, it is best to purchase smaller shares in multiple horses rather than a single horse or a large amount of shares in one horse. Doing this will spread the risk out across many horses in hopes that at least one of those horses will carry the financial load of the other horses.
So while ownership is a high-risk investment, those who are successful stand to earn great reward. Partnerships help minimize the risk as well as the reward. At the same time, partnerships make horse ownership accessible for the average person. Ownership is an exciting venture with certain privileges offered to make the investment fun, educational, and exciting for all involved.