horses now are considered to be exotic assets? there’s money to be made of course, but the investment can also be risky
Alternative investments are exotic assets. From wine, farmlands, livestock to private equity, the list has been increasing over the years, and recently horses have been a part of it.
Betting on horses in a race is not something new. But what about the prospects of owning a winning horse and making money of it during its entire lifecycle, even after it stops racing and retires?
Buying and raising a horse is a costly affair but it has been becoming more accessible for the average fan. Businesses like Myracehorse.com in the US are offering fractional ownerships of racehorses to investors for as less $100 a share, where one gets a share in the race winnings, stud fees, and other revenue streams. The investors also gain access to the Winner’s Circle when the horse races.
While it may seem fascinating at first but the risks associated with the underlying assets, i.e. racehorses are in abundance as well. While a winning horse can increase the value of the prizes, along with fees and other opportunities, an injury to the horse can rapidly erode your investment as well. One way investors are trying to mitigate such volatility is by investing in new-born and not in horses of racing age.
One aspect that makes this an attractive investment is the fact that one could keep earning once a horse retires and is used for breeding the next generation.
Take for example the 2020 Breeder’s Club Classic which was won by a horse named Authentic. Authentic was considered the best 3-year-old horse in the world by experts.
That year over 5000 investors acquired a 12.5% stake in Authentic and while the horse has retired from competing, he will be spending his time at Spendthrift Farm in Lexington where his stud fee, the charge paid by the owner of a female horse for the right for his seed, would be $75,000.
This is expected to rake in money for Authentic’s investors for years to come.