Racehorse investing on the rise as punters try to back a winner
By Nina Hendy
Investors are circling the racehorse industry in the hope of backing a winner, as multimillion-dollar prize payouts lure an increasing number of everyday punters into the sport.
As an investment class, racehorses are in a league of their own. Once reserved for the rich and famous, some figures suggest that one in every 254 Australians own at least a share in the 35,000 racehorses registered in Australia.
Sydney’s Mark Lowe decided to buy a small share in a racehorse 16 years ago. Today he’s in syndications for 24 racehorses.Credit: Steven Siewert
The drawcard is the increasingly big payout. The Melbourne Cup is now the richest handicap event in the world, forking out a total price pool of $8 millionthis year. With a field capacity of 24 horses, first place pays out $4.4 million in cash.
Prize money is distributed to the connections of each horse in the ratio of 85 per cent to the owners, 10 per cent to the trainer and 5 per cent to the jockey, Racenet explains.
Backing a winner
Sydney’s Mark Lowe decided to buy a small share in a racehorse 16 years ago. Until recently, that first horse has still been the best horse he’s ever owned.
“There’s a lot of opportunity to place your horse to an advantage in Australia that there wasn’t 10 years ago,” he says.
‘The prize money these days is so extraordinary, and it doesn’t take long to tell if a horse has talent.’
Racehorse investor Mark Lowe.
The investment paid off, so he bought another share. Today, he is in syndications for 24 racehorses, including a share in four-year-old gelding Ostraka, which was purchased for $150,000 and has won just over $1 million in prize money, recently clinching the Silver Eagle in Randwick last month.
Racenet notes that Ostraka has “above-average ability”, suggesting that backing Ostraka throughout its career would have resulted in a 171 per cent return on investment.
Lowe admits he’s won some and lost some over the years.
“It’s taken me a lot of horses and a lot of money to find another good one, but when you do, they cover a lot of the expenses of the other horses. The prizemoney these days is so extraordinary, and it doesn’t take long to tell if a horse has talent,” he says.
Shares in a racehorse range wildly in price. “I’ve bought for outright for as cheap as $8000 for 100 per cent ownership, and I’ve bought a small share in horses that sell for as much as $550,000. And in some circles, $550,000 is cheap for a racehorse,” Lowe says.
While occasional gambling is considered recreational, horse race winnings are generally tax-exempt. But the gambling activities of professional punters are considered income-producing, and hence a business endeavour that requires you to pay tax.
Blake Shinn riding Ostraka won the Silver Eagle last month.Credit: Getty Images
Best of breed
Across the country, 95 races pay $1 million or more in prizemoney, which is equivalent to a race every 3.8 days.
There are nearly 20,000 races run in Australia a year, and prize money has increased by 45 per cent, paying out more than $885 million in 2022, the most recently published year.
A racehorse can be bought direct from a breeder, from a trainer who has already bought the horse, at auction or from a syndicator selling shares in a horse.
In theory, anyone can own a thoroughbred racehorse, but it is a huge commitment. Care, stabling and training costs to remain competitive are expensive.
Sole ownership of a horse is rare. Instead, owners often form a syndicate to buy shares in a horse, splitting costs among friends. A rise in online platforms allowing you to invest small amounts to part-own a racehorse have opened up the investment class to new punters.
“When you go to the racetrack and your horse wins, it doesn’t matter whether you’ve got 0.5 per cent or 100 per cent ownership in the horse, you get the same enjoyment and exhilaration either way,” Mark Lowe (second from the right) says.Credit:
Unlike investment types such as ETFs or shares, there’s a lot of emotion in owning a racehorse. The cost of stabling, transporting and training has doubled in the past three years due to inflation.
“You can own micro-shares in horses, which keeps the monthly cost of paying bills to a minimum. But when you go to the racetrack and your horse wins, it doesn’t matter whether you’ve got 0.5 per cent or 100 per cent ownership in the horse, you get the same enjoyment and exhilaration either way,” Lowe says.
“If a horse isn’t performing, sometimes we’ve moved horses to other jurisdictions that aren’t as difficult to win. Alternatively, minority shares are easy to sell online.”
But a word of warning.
Australians lose $25 billion a year on legal forms of gambling and are some of the world’s heaviest gamblers per capita in the world. Online gambling is the fastest growing gambling segment, with sports betting the primary grower.
- Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek professional advice that takes into account their own personal circumstances before making any financial decisions.
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