Ownership syndicates the growing force behind horse racing
The corporatisation of horse racing has given the sector the same shape for investors as an ASX float, and has helped drive a boom in ownership syndicates.
The ubiquitous form guide is the document most commonly associated with horse racing.
But a different kind – the product disclosure statement – is behind a proliferation of syndicates in the sector, the number of which has more than doubled in the last decade alone.
The corporatisation of the sector has given it the same shape for investors as an ASX float, and has helped drive a boom. That sets Australia apart from countries, including the UK, where racing is popular but actual ownership of horses is narrow, says Australian Bloodstock’s Jamie Lovett.
“It’s now very hard to encourage participation in England and without the syndications we’d be looking very much like the UK and Europe where it’s only the sheiks and the kings and the queens that get to race,” he says.
Statistics vary from state to state but in NSW, the number of racehorses syndicated has more than doubled since 2010 to 2022, and prize money has jumped 137 per cent to $277m. In Victoria, the number of horses in registered syndicates has risen three times over that period and the prize money has more than doubled to $319m including bonuses.
“It’s all about bringing new people into the industry and it’s not a big expense through a syndicate,” Lovett says. “You can buy 2.5 per cent of the horse and still get 100 per cent of the fun.”
Many of his syndicate owners would agree on the fun front. Australian Bloodstock’s Gold Trip just won the 2022 Melbourne Cup, the second time his agency has taken home the race that stops the nation.
Syndication at all levels – whether it be 10 to 20 share co-ownership arrangements, special purpose corporate structures, or Australian Securities and Investments Commission-registered managed investment schemes with between 1000 to 5000 unit holders in any one horse, or group of horses, – is becoming increasingly popular with retail investors, with key drivers no doubt being the increasing costs of buying, training and racing horses.
Tony Fleiter, a lawyer at Macquarie Legal Practice, acts for thoroughbred studs and racing and stallion syndicators to prepare comprehensive scheme and disclosure documentation, or retail schemes which comply with the Corporations Act.
Fleiter is clearly a passionate racing man himself – and is a director of syndication company Highclere Racing, which won this year’s Caulfield Cup with Durston. He says investing in thoroughbreds is “highly speculative” because some horses simply don’t win races. But he believes it’s appropriately regulated by ASIC and the state racing authorities.
“Whether the syndicator will be successful long term will depend upon the level of success enjoyed by the horses syndicated,” Fleiter says. “Investors will invest where they consider they get the best value for money, whatever the amount of money invested, be it $15,000 to $25,000 for a 1/20th co-ownership interest in a horse, or $100 to $200 for a unit in a 1000 to 5000 unit-trust ownership arrangement.”
Racing NSW chief executive Peter V’landys says there is “no doubt” that syndication is the most popular form of ownership because it can greatly reduce cost and exposure. “And it’s a great way to make new friends. It doesn’t matter if you have 1 per cent or 90 per cent, people still feel the same. They are totally engaged,” V’landys says.
While ownership in horses through a syndicate is booming, there is still no way of tracking which Australian Financial Services Licensee is making the most – or least – amount of money for its shareholders and owners.
Triple Crown Syndications’ Michael Ward says that because Australia’s racehorse ownership rates per capita are so much higher than other countries, there would be a market for a product that tracked the cost of yearlings, their prize money and onselling price.
“I think the public is probably not too aware of the strike rate of success among different buyers,” Ward says.
Ward, of course, backs Triple Crown’s success, and has produced two-time winner of the richest turf race in the world, Sydney’s Everest, with Redzel, and also this year’s third placegetter Mazu. Ward agrees Australia’s unusual love affair with syndicating horses has made it more of an everyman sport, and even thinks syndications may have produced a few love affairs.
“It is a lot more egalitarian here within the Australian market, so everybody’s able to access it, people from all walks of life,” Ward says. “The beauty of the Australian racing scene is that you do meet people from all different backgrounds all brought together by the one common interest, being the horse.”
While not being much of a syndicate man himself, billionaire retailer Gerry Harvey says he believes they are a great Australian equaliser that gives everyone a go at the supposed sport of kings.
“It means that ordinary people who love horse racing can go down to the club and talk about their horse and the interest they have in it – tiny as it is – because they enjoy doing it,” Harvey says.
“It’s like spending money on beer every week or cigarettes, or coffee, or going to a restaurant. We’ve all got different things we enjoy. When I got into horse racing 50 years ago, the ordinary person would never have any chance of owning a horse and now everyone can. It allows people into an industry they would never have been allowed into.”
Harvey expects the January Magic Millions yearling sales to “break all records” and agrees that the syndicate buyers are keeping a strong base to prices.
Darby Racing’s Mark Holland agrees prices will be strong, which means his team have to focus hard to find good mid-priced horses.
“It’s the first sale of the year,” he says. “It’s on the Gold Coast, the weather’s great. Everyone’s excited. We have to really sift through and find what you can because we can’t just pay whatever we want because yeah, you’ve got to have a mind that you have to sell these horses.”
When a syndicator buys a horse through the auction houses, be it Magic Millions or Inglis, they can opt to use their credit lines. They then need to package the horse or horses up into a PDS through someone with an AFSL and take the risk they can sell all of the horse before the three-month credit-free period ends.
One of Darby Racing’s greatest rags to riches success stories is She Will Reign, a $20,000 yearling who won $3.2m, including the Golden Slipper, and was sold for more than $1m as a broodmare the following year. The filly’s syndicate owners included a builder, a housewife, teacher, nurse, three coalminers, and a retiree.
Under the PDS that Darby Racing uses, all decisions must be put to a vote, including in She Will Reign’s case the decision to sell, or it could be a decision to geld a horse or change trainers.
Darby specialises in horses at the mid-price point from $20,000 to $200,000 and Holland says that, combined with the difference of racing a horse as an individual in Sydney, which might cost $75,000 per year, someone with a 2 per cent shareholding will pay on only $1500. “Syndications are just getting stronger and stronger because people can have that full ownership experience of you know, even if they’ve got a small 2 per cent, they think ‘it’s my horse, how’s my horse going’, and it’s just great,” he says.
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