The lure of the long shot

Once the preserve of a princely few, owning a champion is now
within the reach of nearly every punter
(As long as you're not counting on getting your money back)

Globe Investor Magazine, May 22, 2008
By Steve Ladurantaye
Photographs by Rob Macinnis

It is a mild afternoon in early November as the nine newly minted owners of Fiddler's Green gather at Toronto's Woodbine Racetrack to watch the two-year-old run her second race under their purple and silver silks. They congregate on the upper tier of seats an hour and a half before post time, watching the preliminary races with the overly critical eyes of inexperienced owners, offering opinions on everything from the size of horses to the jockeys they think are up to the day's task. Some of the fledgling owners have learned enough to understand, at least theoretically, the kinds of traits that make a horse a winner, like bloodlines and muscle tone.

Fiddler's Green's owners don't fit into any single, neat category: one is a database consultant; one works night shifts at a Shoppers Drug Mart; another is a retired auto worker.

What brings them together here, in the late-autumn sun, is the $10,000 that each person has invested in one of two syndicate programs put together by the Canadian Thoroughbred Horse Society, which makes it possible for small investors to afford a horse.

With a pooled investment of $90,000, the group was able to "claim" an experienced horse like Fiddler's Green for $30,000-a horse that will hopefully start winning for them right away. For another $30,000, the syndicate purchased a younger, untrained yearling that is a longer-term investment; it won't start earning its keep until its second or third year. The money remaining in the group's kitty will be combined with future winnings and set aside to cover operating expenses, such as feeding the animals and bringing them to races.

On this day, this particular syndicate's hopes are riding high. When Fiddler's Green ran her initial race under their banner, just a month ago, they were happily surprised when she ran to a first-place finish, seeding their collective bank account with $16,380. Not a bad introduction to the sport of kings. If she picks up another first today, the syndicate will receive 60% of the $28,000 purse, bringing their month's earnings to a respectable $33,180. A second-place finish will pay out a less-fat 20%, and their take will continue to diminish if she falls further back in the pack. Ultimately, if Fiddler's Green struggles to a fifth, or worse, in a field of 10, this hopeful little syndicate will go home empty-handed, without even recovering the $1,000 it paid out to prepare for the race.

As part of the syndicate program, the group was set up with a mentor to teach them the basics of breaking into the industry. John Hillier, their assigned mentor, has tried to prepare them for the vicissitudes of the track. "I've told all of them that if they go to Florida for a two-week vacation, they'll spend $10,000 and not get any of it back," says Hillier. "This is the same-kiss your money goodbye, because it's gone. I'm going to try as hard as I can to get you your money back, but there are no guarantees."

A former stockbroker who now trades commodities and brokers mortgages, Hillier jumped into horse racing in the early 1990s with a $40,000 investment in horses. His voice is slow and measured as he begins to tell his story, but speeds up as he gets into it. "My first year was a disaster, but the next three years we could do absolutely nothing wrong, and everything we touched turned to gold," he says. He claims to have pocketed six-figure profits during that time, but admits "that's not realistic in the long term. What you really should be looking to do is break even or maybe make a small profit."

As well as preparing this group psychologically, Hillier played a role in readying them for the horse selection process, known as "claiming," which can seem overly speculative to investors who are new to the business. Prior to a claiming race, licenced purchasers write a cheque for a prearranged price-basically the price at which an owner is willing to sell his horse. After the race, both the horse and the money change hands, regardless of how the animal performed that day. Since horses are always a gamble, owners are willing to part with them in return for cash even if the animal has lived up to its potential-and especially if it hasn't. Meanwhile, the purchaser enjoys the instant gratification of owning a horse that can be out on the track in a matter of weeks. "A claiming horse will hopefully return enough to pay the bills," says Hillier. "But every horse in a claiming race has a problem, and your job is to decide if you can overcome the problem."

There's a quiet boom taking place in the horse-racing industry, fuelled largely by the money that people are pouring into slot machines. A portion of these earnings are being used to bankroll larger purses at the track, and Canada now offers some of the richest payouts in the business. Woodbine runs the largest thoroughbred racing operation in Canada and, in the arena of live racing, it's the busiest track in the world. Its purse budget last season was $88.7 million, a 58% increase since 1999, compared with a 16% rise at tracks in the United States over the same period.

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