The Risk Factors of Racing Partnerships

Like any business, there are a number of risks involved in participating in a Thoroughbred racing partnership. They include: [link to subject listing to each bullet-point explanation]

• The Thoroughbred Industry
• Investment Volatility
• Competition
• Operating Risks
• Racing Customs
• Uncertainty of the Thoroughbreds Market

The Thoroughbred Industry – The business of breeding, training and racing Thoroughbreds is a high-risk venture. The success of the race horse partnership depends upon the present and future values of Thoroughbreds as a whole – and in particular, of the partnership's Thoroughbreds. Although a Thoroughbred's future value cannot be predicted, the Thoroughbred market is affected by the current economy, as well the interest levels of Thoroughbred race horse investors. Additionally, the expenses to maintain, caring for, train and race Thoroughbreds can be expected to increase annually, regardless of what happens to the future market prices of Thoroughbreds.

Investment Volatility – The value of a racehorse can fluctuate dramatically throughout the year based on the racehorse's success and physical condition. An injury or a series of poor efforts can reduce the value of any horse sharply.

Competition – The Thoroughbred racing industry is an intensely competitive and highly speculative one. A significant number of the people who bid for and purchase racehorses have substantially greater financial resources than those of the average Thoroughbred owner. Additionally, many business ventures in the Thoroughbred industry do not generate net profits. And because the Thoroughbred horse bloodstock markets are international, smaller owners can be competing against many of the major breeders and dealers in the world for high-quality Thoroughbreds. On the track, the same circumstances obtain. At every level, competition for purse money is fierce, and many highly motivated owners operate on an international scale, with far greater resources to bring to bear than Karakorum .

Operating Risks – As a Thoroughbred owner, there is no guarantee that you will receive an insured racehorse's full purchase price if there is an accident. This is because most insurance policies pay the lower of the policy amount or the current value when the insured casualty occurs.

Racing Customs – Because Thoroughbred horse racing is a sport as well as a business, there are certain industry practices and structures that are not focused on maximizing an owner's profit in the horse. For example, a particular Thoroughbred racehorse bloodline could command substantial prices as a result of the interests of a small group of people. If these individuals eventually lose interest in the bloodline, the value of the race horse's bloodline could be affected.

Uncertainty of the Thoroughbred Market – Owners can use sales of Thoroughbred racehorses at public auction as a measurement of the relative increases or decreases in the value of racehorses, however there is also a dominant private market that does not provide sales statistics.

The value of Thoroughbreds racing will vary at racing venues due to several factors, including purse structure fluctuations due to ownership changes; policy modifications; changes in handle from variations in field size and betting interest; and competition or cooperation with other gambling modes.

If the Thoroughbred racing industry suffers a decline, or if general economic conditions deteriorate, the average sales price in the Thoroughbred horse market may also decline. As a result, a Thoroughbred owner could suffer substantial losses.

Additionally, many of the factors that affect the prices paid for Thoroughbred horses are beyond the owner's control. These factors include purchasers who buy race horses for speculative purposes; foreign investors; the federal income tax treatment of racing and related activities; the rules of The Jockey Club prohibiting artificial insemination; the continuation or expansion of legalized gambling; and the size of Thoroughbred horse racing purses.