Forget owning a sports team: Rich people are snapping up race horses for up to $2.4 million, and they’ll probably never get that money back – Finance

• Buyers spent a total of $ 377 million on summer race horses, known as yearlings, to Keeneland September Sale, many hope that they will become a money-making champion.
• 27 horses this year sold for $ 1 million or more, and three sold for more than $ 2 million.
• From equestrian show jumping and polo to horse racing has long been a favorite sport among rich and elite,
• Hounds of a horse can make big profits – 2018 Triple Crown the winner of Justify sells for $ 500,000 a year and now costs $ 75 million, but the chances of success are slim and investments can be risky.

What should a millionaire do if they don’t billions buy their own sports team?

Instead, they spend millions on buying their own race horses.

"There are so many unrest in the possession of purebred horses – this is the closest thing [people] may be related to owning a sports franchise, as it is, “Bob Allison, vice president of racing sales and sales in Keeneland racing in the capital of the horses world of Lexington, Kentucky, told Business Insider.

Allison oversees Keeneland September's annual sale, which trades with one-year-old purebred one-year-old horses. Previously, a 13-day sale produced racehorse champions such as 2018 Triple Crown Winner – both millionaires and billionaires from all over the world flock to the sale in the hope of buying the next champion in making money.

They are so eager for a good purchase that they are ready to throw off seven figures for high-quality horses – 27 horses are being sold for $ 1 million or more this year, 14 from international buyers and 13 from American buyers, said Allison.

Three horses were sold for more than $ 2 million, and the most expensive year old went up by $ 2.4 million – a record worldwide this year. According to Ellison, overall, buyers collected about $ 377 million for nearly 3,000 people.

Allison calls a one-year investment opportunity, but for a long time racing horses have been an expensive hobby of the richest people in the world.

Rich people and their horses are nothing new

Horses have always been a favorite companion among the rich and elite.

Horseback Riding It has long been associated with the royal family, and it is loved by famous descendants of billionaires, Jennifer gates, Jessica springsteen, Eva Jobs and Georgina Bloomberg. Prize horses can cost hundreds of thousands of dollars, and the cost of keeping a horse can easily reach tens of thousands of dollars per month.

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Jennifer Gates, the daughter of Bill Gates, is an elite equestrian sport.

(Shutterstock Rex for EEM)

Polo, known as the “sport of kings,” is often considered a top-class occupation, in which the elite get together to drink cocktails and socialize while watching this sport. Hollywood stars, secular people and designers Veuve Clicquot Polo Classic Every year.

Polo is even collection in Chinawhere Chinese billionaires see it as a new luxury sport.

If his apt name doesn't say that much, Royal ascot five-day race with royal roots and royal guests; This is one of the biggest events in the UK this year.

But this is a race where rich people invest their money. Top of horse racing in USA Kentucky Derby, was a playground for the rich and famous since 1875, attracting thousands of celebrities, politicians and locals.

It is here that some horses from Keeneland September Yearling Sale continue to compete, which have a long list of elite and well-known clients, including John Malone from Liberty Media, the secular Peter Brandt, the famous chef Bobby Flay, the heirs of the Campbell Soup Charlotte Webber and George Strobebridge, as well as the ruling families from the Middle East, among others, according to Ellison.

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Guests in the Kentucky Derby.

(Michael Hickey / Getty)

In fact, Sheikh Mohammed Bin Rashid Al Maktoum, vice president of the United Arab Emirates, bought this year 27 per annum for almost $ 20 million, including seven purchases worth $ 1 million. He is one of the world largest owners of race horsesand he owns huge stable and several racing operations. His brother Sheikh Hamdan also spent more than 12 million dollars on 19 horses.

As Allison says, selling — namely, the prospect of good investment in good fun — creates a unique melting pot of all kinds of people.

Dud or hairpin?

But will these millions of purchases — or even those one-year-olds who sell for only six digits — become those who make money, their buyers dream of them?

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Sheikh Mohammed Bin Rashid Al Maktoum, one of the world's largest horse owners, fell nearly $ 20 million in 2018 at Keeneland September Yearling Sale.

(Phil Cole / Getty Images)

Allison said it really depends on how well they race. For example, Justify was sold for $ 500,000 – after winning the Triple Crown in 2018, it now costs $ 75 million.

But the chances of buying the next Justify are slim. The founder and chief executive officer of Team Valor, based on horses, Barry Irwin said earlier CNBC there is a 90% chance of losing, and that horse racing is a sport with which you should not participate if you do not like it.

"This is a game in which the money invested should be considered as disposable income, ”said also the expert on riders and consultant Tony Kobitts.

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Originally acquired for $ 500,000, Justify now costs $ 75 million after winning the Triple Crown in 2018 in the Kentucky Derby.

(Jamie Squire / Getty Images)

Breeders do their best to care for horses for excellent sales and promising returns, whether through commercial practices or more natural practices. “Some see horses as tomatoes, polish and feed them in a controlled environment,” said Allison. “Others love the horse to be a horse and raise them on the field.

"Whatever method [breeders] this year it turned out that they had a crop that became more mature with a larger mass, and a more sporty collection, ”he added.

In the end, it all comes down to the individual preferences of the buyer. “Some are looking for physical confirmation: how big a horse is, how it looks in a race, how its coat looks, it's muscular,” said Allison. “Others are looking for a horse to run through the grass and sprint, to find out how quickly they can take them to the race track,” he said.

There are, of course, several things that buyers can consider to increase their chances of a better return. Men (foals) cost more than women (fillers like one-year-olds, mares as adults), buying more than one year-old when selling (for example, Sheikh Mohammed) gives another chance to win, and the quality of a quality pedigree can make a difference, whether annual descent comes from an exceptional mare, or an emerging or established sire, ”said Allison.

For example, the former winner of Kentucky Derby American Pharoah first sold its products at the September sale – 47 of them were sold for a total of more than $ 19.5 million for an average of $ 16,702.

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Most likely, the chances of buying a champion in making money, but it's all part of the sport.

(Courtesy of Keeneland Racing)

Age can also make a difference – you can choose to buy a horse with a good racing history, rather than a year, but they are often higher prices, and yearlings have a call for buyers, because they have not yet been in anyone’s hands,

Despite the weak returns, it is worth noting that the number of seven-digit one-year-old races sold at the September sale of floors, more than doubled compared with last year, making it the fourth largest sale in 75-year history.

This is a sign of a strong economy, said Allison, but it is also a sign of better horses — buyers will not pay for a horse because they can afford it.

“There is a high degree of risk,” he said. "This is not for the faint of heart."