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Hey 👋🏼,

Horses have always had a special place in my life. Growing up close to a town where horse racing was the big event, I couldn’t escape the buzz of race days. Every summer, my dad and I had a little ritual. He’d take me to the track, and I’d get to place exactly one bet. Just one - Dad’s rules.

I still remember the excitement of picking a horse, imagining it would gallop to glory. And the race? It was always at 3:20. Funny how those little details stick with you.

Fast forward to today, and I’ve been exploring the fascinating world of racehorses again - not just as athletes but as investment opportunities. From owning a share in a thoroughbred to reaping the rewards of syndication, there’s a lot to unpack. And while it’s not all roses and trophies, it’s an intriguing blend of sport, passion, and profit.

Let’s dive into what it really means to invest in racehorses and whether it’s worth saddling up for - sorry, couldn't help myself 🫠

In this guide, I'll cover:

• Quick bit of history on horse racing
• Horse racing market in numbers
• How does a horse owner make money?
• How to get startedsome text
  • Racehorse syndicates
  • Fractional horse racing ownership
• Risks of owning a racehorse

Quick bit of history on horse racing

People have been fascinated by racing horses for centuries, with the first organized horse races in North America happening all the way back in 1664 in what’s now New York City.

Back then, it wasn’t all about speed like it is today. Races focused more on stamina. It wasn’t until after the Civil War that things shifted to speed as the main factor. In the early days, races were often “match races,” with just two or three horses going head-to-head. But as the sport grew, fields expanded to include more horses.

Now, owning a racehorse has mostly been a luxury of the wealthy, due to the high costs of caring for and training these animals. But don’t worry, if you’re not rolling in cash, there are ways for smaller investors to get in on the action through fractional ownership.

Historically, many racehorse owners have come from old money or have deep ties to the sport. Take Queen Elizabeth II—she was a massive fan of racing, and the British royal family still owns several horses that compete today. And let’s not forget the royal family in Dubai, who also own horses that have taken the world by storm.

Interestingly, one of the more surprising racehorse owners is Seth Klarman, the founder of The Baupost Group, a Boston-based hedge fund. Klarman made his fortune by investing in undervalued securities and wrote Margin of Safety, which is considered one of the best investment books out there. And now, he’s got a horse named Domestic Product that’s set to race in the 2024 Kentucky Derby!

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Horse Racing Market…in numbers

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The global horse racing market is experiencing significant growth. In 2022, the market size was valued at USD 402.3 Billion and is projected to reach USD 793.9 Billion by 2030, growing at a CAGR of 8.89% during the forecast period.

Key Statistics

• Market size in 2022: USD 402.3 Billion
• Projected market size in 2030: USD 793.9 Billion
• CAGR: 8.89%

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In 2022, North America led the racehorse investing market and looks set to stay on top for the foreseeable future. 

Why? 

Well, it’s partly because of the huge buzz around iconic events like the Kentucky Derby, Belmont Stakes, and Preakness Stakes, which keep people excited and engaged. 

Add to that the growing popularity of online betting platforms, making it easier for anyone to get in on the action, and the expansion of racing facilities across the region, and it’s clear why North America continues to dominate the scene.

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How does a horse owner make money?

So there’s actually quite a few ways they make money…

First, there’s purse money from racing. Prize money, or the purse, is awarded to the top finishers in a race, with about 60% typically going to the winner. For example, in a race with a $10,000 purse, the winner might take home $6,000. However, after paying jockey and trainer fees, the owner’s net profit can be significantly lower.

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The yearly prize pool for horse racing has continued to grow, with the global figure now exceeding $3.5 billion per year. Australia's passion for horse racing is reflected in its prestigious Melbourne Cup, which maintains its status as one of the world's richest horse races. In 2024, the Melbourne Cup will offer a total prize pool of AUD $8 million, with the winner set to receive AUD $4.4 million12. This significantly surpasses the Kentucky Derby's purse, which stood at $3 million in 2023.

Although, just to be clear, most horses don’t win the millions!

Another major income stream comes from stud fees. Successful racehorses can earn substantial amounts once they retire and begin breeding. Top stallions like Tapit or Into Mischief have commanded fees of $300,000 to $700,000 per mating. If their offspring excel on the track or in sales, this can become a highly lucrative venture.

Selling horses is another profitable avenue. Owners can sell horses after a successful racing career or as young prospects. A major race win can dramatically increase a horse's value, making them highly sought after by buyers interested in either racing or breeding.

For those looking to share costs, syndicates are a popular option (and I’ll talk about this a little later). 

Some owners also engage in betting on races, using their insider knowledge to make informed wagers. While this isn’t directly related to ownership profits, it can provide a supplemental income stream.

Lastly, there are tax benefits. Many owners can deduct losses and expenses associated with horse ownership as part of their business operations, helping offset the costs of maintaining their horses.

How much to own a racehorse outright?

Owning a racehorse might sound glamorous, but it comes with some hefty price tags. 

The initial purchase alone can vary widely depending on the horse’s quality. Championship-level thoroughbreds can set you back anywhere from $100,000 to $300,000 - and that’s just the starting point. 

If you’re looking at an average yearling from less selective sales, you might spend around $8,600. But for top-tier horses, prices can easily soar beyond $300,000.

Then there are the ongoing expenses. 

Keeping a racehorse in training typically costs between $45,000 a year in Southern California and $21,500 to $36,700 annually in the U.K. That includes training fees ($2,000 to $3,000 a month), vet care ($200 to $1,500 monthly), and other services like a farrier, dentist, and chiropractor. And don’t forget race entry fees - they can add up fast, especially for high-stakes competitions.

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Horse ownership is a big financial commitment, and while prize money can offset costs, it’s far from guaranteed. So if you’re keen on getting involved without breaking the bank, joining a syndicate or racing club could be a great option!

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How to buy a racehorse

Syndicates are a more accessible way to invest in racehorses

We’ve already established that owning a racehorse outright is a serious financial commitment - most people don’t have hundreds of thousands of dollars just lying around. 

That’s where syndicates come in, offering a more affordable way to get involved in the sport.

A horse racing syndicate is essentially a group investment in a racehorse, where each person owns a percentage stake. Shares typically range from 5-10%, though the exact breakdown depends on the structure and number of members in the group. There’s flexibility here, but the key idea is that costs and risks are shared.

Think of syndicates as a way to de-risk horse ownership. 

Instead of one person covering all the costs of training, care, and management, those expenses are split among the syndicate members. Sure, this also means splitting any winnings, but it’s a far less risky way to get in on the action without going it alone.

If you’re just selling shares to friends and family, it’s pretty straightforward to set up. But if you want to publicly advertise ownership shares, you’ll probably need to get licensed by the appropriate government body.

Typically, a syndicate manager or business takes on the role of overseeing daily operations and handling the investment of funds. This makes it crucial to choose a reputable manager—do your homework. Speak directly with the syndicator, look into the past performance of their horses, and read online reviews. If you’re unsure, you can also check with the government agency responsible for regulating syndicates in your area.

Syndicates aren’t just limited to yearlings or race-ready horses, either. Breeding syndicates for retired stallions are becoming increasingly popular, giving investors another way to get involved in the horse racing world.

What to Think About When Choosing a Racehorse Syndicate

Joining a racehorse syndicate can be an exciting way to get involved in the sport, but picking the right one takes a little homework. Here are a few things to keep in mind:

• Ownership Share: How much of the horse will you own? Your percentage determines how much you’ll pay upfront, your share of any prize money, and how much say you have in decisions.
• Breeding and Background: The horse’s lineage and past performance can make a big difference. A strong pedigree or proven track record might mean higher costs but could also increase the horse’s potential for success.
• Costs and Extras: Make sure you’re clear on the numbers. What’s the initial buy-in? What about ongoing fees? And don’t forget to check if there are perks like stable visits or access to special events.
• Syndicate Reputation: Do a little digging. How experienced are the managers? What’s their track record like? Are the horses well cared for? A trusted syndicate with happy members and healthy horses is always a good sign.

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Fractional Ownership

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Fractional ownership is a more casual and accessible entry point also.

It’s where individuals buy small “micro-shares” of a racehorse, often through platforms like MyRaceHorse.com or the Commonwealth app. 

For instance, MyRaceHorse made headlines when its horse, Authentic, won the 2020 Kentucky Derby, with around 4,000 people holding tiny stakes in the horse. 

Similarly, Commonwealth saw about 400 owners celebrate Mage’s victory at the 2023 Kentucky Derby. 

These platforms let people own a small slice of a racehorse for as little as a few hundred dollars, making it a low-barrier, high-thrill way to dip a toe into horse racing.

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Risks of owning a racehorse

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It probably doesn’t come as much of a surprise, but this type of investment comes with plenty of risks, no matter if your goal is racing, breeding, or pinhooking (buying young horses to sell for a profit).

One big risk is the harsh reality that the horse might simply not be fast enough.

In blunt terms, a slow horse holds little value in the racing world. 

It won’t be competitive on the track, and there’s little market interest in a horse that consistently loses. It’s one of the quickest ways for an owner to see their investment go south.

Even for a promising horse, success is far from guaranteed. Winning races is tough, and the prize money system is heavily skewed toward the top performers. For example, in the 2013/14 season, only 50 out of 30,000 horses earned over $500,000—a mere 0.16%. Meanwhile, 18,000 horses didn’t win a single race, and most earned under $100,000. When you consider the hefty costs of ownership, that kind of payout quickly loses its shine.

Then there’s the unpredictable stuff.

Injuries are common, both in training and on the track, and they can abruptly end a horse’s career—or worse, its life. Veterinary bills can skyrocket, breeding might not go as planned, and studs can become infertile or produce stillborn foals. On top of that, some horses have challenging temperaments, making them difficult to handle or train.

Owning a racehorse can be thrilling, but it’s far from a guaranteed payoff, and the risks shouldn’t be underestimated.

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Thanks for reading 🐴 :)

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Jason

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DISCLAIMER: None of this is financial advice. Finbrain is strictly for educational purposes.

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