Racing uncertainties

Dominic Prince says you’d have to be potty to buy a racehorse as an investment — unless your name happened to be John Magnier or Sheikh Mohammed Al Maktoum

Owning and breeding a thoroughbred racehorse can be a mouth-wateringly profitable enterprise. Sir Percy, winner of last year’s Epsom Derby, cost a piffling 16,000 guineas when he was knocked down to the Pakenham family at auction as a yearling, and costs about the same in training fees each year. To date he has won a little over £1 million in a racing career of just two seasons. Not a bad return on capital, but the risk-reward ratio is huge — and it can safely be said that anyone who buys a racehorse as an investment is potty.

That said, the really big money will come when Sir Percy retires to stud, probably at the end of the 2007 season. At that point he’ll be worth around £6 million — not a huge amount, but then he’s not particularly well bred and in racing breeding counts for everything. Every racehorse owner wants to win the English Derby or at the very least one of the four remaining annual British classic races. It is this overwhelming ambition that has made the business of bloodstock a global affair.

The man who can take credit for creating this market is John Magnier, the son of a Tipperary potato farmer. Magnier is to bloodstock what Bernie Ecclestone is to Formula 1. And as with Formula 1, there is a huge infrastructure behind the horse breeding business: stud farms, trainers, agents, auctioneers and owners, the first four all vying for the patronage of the last.

Families like the Wildensteins, the Niarchoses, the Sangsters and the Rothschilds — and most important of all, the Maktoums, the ruling dynasty of Dubai — queue up for the services of stallions owned or controlled by Magnier.