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\tPatrick Winters, Bloomberg<\/p>\n
\t46-year old Michael Reichstein quit his job as a vice president at UBS AG\u2019s private-banking unit in Zurich where he advised wealthy clients in countries from Jordan to Lebanon and in 2011 began offering bets on British horse races. Reichstein said his Gibraltar-based service, which mostly places lay bets \u2014 a wager that a horse won\u2019t win \u2014 is unique.<\/p>\n
\t\u201cVery wealthy private clients like the approach, they say it\u2019s not correlating to anything,\u201d said Reichstein, who wore sports trousers and a hoody during the interview and spends afternoons betting his client\u2019s money on losing horses at popular U.K. racetracks such as Kempton Park or Wolverhampton.<\/p>\n
\tHis betting service is one of various emerging business models tied to horse racing that also include funds that buy and sell horses \u2014 offering alternatives to traditional investments such as equities, bonds or even gold, which dropped 28 percent last year. Reichstein, who rises at 5 a.m. to ride one of his six horses, said his bets returned 6 percent last year.<\/p>\n
\tFor horse investors, the market is rallying after a long trough. U.S. thoroughbred sales last year rose above $900 million for the first time since 2008, according to racing industry news and data provider Bloodhorse.com.<\/p>\n
\tRoyal Families<\/p>\n
\tSince investors are returning to racehorses, the market is becoming more attractive to funds, Reichstein said. The Swiss national, who also has investments in property and still does some private banking for his own clients, now plans to set up a thoroughbred trading venture wih two partners.<\/p>\n
\tGrowth in 2013 was \u201ca significant step up,\u201d Jason Singh, a marketing manager at Tattersalls, the world\u2019s oldest throughbred horse auctioneer, said in a phone interview. There hasn\u2019t been \u201cany real growth over the last few years since the global downturn,\u201d he said.<\/p>\n
\tMoney is flowing back into racehorses, known as bloodstock, because of greater interest from buyers such as Qatar\u2019s royal family and improvements in the global economy, Singh said.<\/p>\n
\tAt the same time, ownership is diverse. \u201cYou get royal families to successful businessmen, bankers who got a good bonus to blokes down the pub,\u201d he said.<\/p>\n
\tFor some buyers, it\u2019s also about prestige, said William Sporborg, managing director of Breeding Capital, a Newmarket, U.K.-based fund that sells young thoroughbreds to racing stables.<\/p>\n
\tSocial Climbing<\/p>\n
\t\u201cYou get a lot closer to high society by buying a horse than buying a football club,\u201d said Sporborg, who has raised 12 million pounds ($20 million) to invest in horses in three funds since 2006.<\/p>\n
\tStill, horses have gained value less quickly than equities. The average sale price of a thoroughbred racehorse in U.S. auctions increased 20.7 percent in 2013 from a year earlier to $65,690, according to Bloodhorse.com. That trailed gains made by the S&P 500 index.<\/p>\n
\tOther investors have also been attracted to horses with mixed success.<\/p>\n
\tMichael Iavarone, a former penny stock broker on Wall Street who bought champion racehorse Big Brown, announced plans in 2008 to raise $100 million for a hedge fund to buy and sell racehorses. Iavarone\u2019s International Equine Acquisitions Holdings stables earned as much as $663,362 in races in 2009, excluding horses owned in partnership with other groups. That dropped to just $52,325 in 2012, according to U.S. horse racing database Equibase.com. The fund\u2019s website www.ieah.com is no longer online.<\/p>\n
\tHigh Risk<\/p>\n
\t\u201cThe most high-risk part is that you are dealing with nature,\u201d said Sporborg, whose first fund lost 8 percent as horse values plunged as much as 70 percent during the financial crisis. The second fund was about break even and the third fund is in good shape.<\/p>\n
\tReichstein says investing in race horses and betting on races are two separate business models.<\/p>\n
\tWhile the market for thoroughbred horse trading has a bigger growth potential, because more money is changing hands, it\u2019s more closely tied to global economic developments. Bets aren\u2019t connected to wider economic trends but are more of a niche activity because the volume of wagers per race on markets such as Betfair are limited to about 1 million euros ($1.4 million), Reichstein said.<\/p>\n
\tTight Rules<\/p>\n
\tHis fund manages about 1 million Swiss francs ($1.1 million) and a fund with more than about 3 million francs wouldn\u2019t be able to place bets without distorting the market, he said.<\/p>\n
\tIn contrast, the best horses can return as much as 1 million pounds per year if they win the prestigious races, he said. After their careers, racehorses can also make a lot of money by producing the next generation of champions.<\/p>\n
\tGalileo, a retired champion, commands a fee of about 350,000 euros if a mare studded by him gives birth to a foal, a person familiar with the matter said. Coolmore, the Irish stallion farm which offers Galileo\u2019s services, says the horse\u2019s stud fee is private.<\/p>\n
\tBuoyed by the results so far, Reichstein isn\u2019t planning a return to full-time banking.<\/p>\n
\tHe said he has more freedom to spend time on his passion and he\u2019s not bound to an office or manager, often placing bets in the afternoon from his iPhone. Some of the clients he had at UBS are also investors in his horse-betting fund today.<\/p>\n
\t\u201cHorse trading is like wine trading,\u201d he said. \u201cIt keeps getting bigger.\u201d<\/p>\n
No replies were posted for this topic.<\/p>\n","protected":false},"excerpt":{"rendered":"
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