Bloodstock

Horse racing has proved remarkably resilient over the last few years despite economic pressures and in the UK, it is the second most watched spectator sport after football.

It is a similar story in other countries as horse racing has become a truly global sport, attracting significant prize money and large attendance figures at suitably high-profile meetings held in places like Dubai and Hong Kong.

To keep this industry thriving, it needs high quality racehorses and there is plenty of healthy competition amongst bloodstock agents to source the best breeding lines and acquire the best horses for their clients.

All this means that bloodstock investment can be an interesting and speculative alternative investment where there is potential for profit as well as the social benefits of owning a racehorse.

Sport of kings

Horse racing has been dubbed the sport of kings and when you look at some of the bloodstock sales prices achieved in the past, it is easy to understand why.

A lot has changed in relation to bloodstock investment in recent years and whilst owning a racehorse still has an element of social aspiration attached to it and is very much the domain of multi-millionaire owners who are looking to build a stable of prized racehorses, some bloodstock investment schemes are much more affordable to the ordinary investor with a more modest amount to spend.

Investing in bloodstock

You would need to clarify with your financial or tax adviser regarding the use of tax-efficient schemes to invest in bloodstock.

There are bloodstock investments available in the UK for example, which take advantage of Enterprise Investment Schemes (EIS) and allow qualified investors to invest tax-efficiently in a portfolio of bloodstock assets.

With scheme like this, you would be entrusting your money with a team of professionals with expertise in the bloodstock industry, to put together a portfolio of horses that it is hoped, would increase in value once they had displayed their ability on the racetrack.

Fluctuating fortunes

In just the same way that betting on horses is a gamble that will one way or the other, racehorse valuations have the capacity for extreme volatility and fluctuating fortunes depending on how good they turn out to be after they have run.

For example, a racehorse could have been purchased for £200,000 and once it has come out of the stalls and run its first race, it could suddenly be worth up to a £1 million or as little as £50,000 depending on how it performs.

Of course, bloodstock investment does not just revolve around racing and investing in broodmares is generally a lot less volatile and allows you the chance to profit from the foals that are bred and subsequently sold as yearlings, before they ever see a racecourse.

How to invest

Direct investment in bloodstock is fraught with dangers for a novice investor with little knowledge of the breeding industry and is not usually advisable.

If you are interested in investing in bloodstock, you might want to consider looking for a suitable investment vehicle that offers you the chance to join other investors in an approved scheme that raises money in order to buy horses on your behalf.

The usual minimum figure for investment is probably going to be around £10,000 and it seems that this is a popular platform for getting involved, as the schemes are often over-subscribed.

Is it right for you?

There are people who make money from investing in horses but you probably have to be a racing enthusiast to get involved in a bloodstock scheme as this is an alternative investment that is viewed as high risk.

The general view is that bloodstock investment should be viewed primarily as a hobby rather than an investment if you have no knowledge of the industry, but there are social benefits to getting involved which may be attractive to you.

The amount you invest should ideally be a small percentage of your total portfolio and you should check all the rules of the scheme regarding exit and further fees, before agreeing to participate.