Horse Racing Partnerships
Types Of Race Horses
Let us consider three classes of horses; Thoroughbreds, Standard-breds and Quarters. Each type of horse, races in very different ways. Quarter Horse races are straight sprints, usually less than 600 yards. They come flying out of the gate and bolt to the finish line. Very little strategy here, just a flat out sprint. If the horse can clear the gate clean and straight tends to do well. These races can be free-for-alls because as they break from the gate, speed is everything, so do not be shocked with the occasional bumber car action.
Thoroughbred Horses also race flat out, the gate opens and the horse runs around the track for a specific distance; ranging from the 4 1/2 furlongs to 1 3/4 miles (and sometimes longer in European, Australian and Japanese races). There is some strategy here because some horses prefer to be in front, while others prefer coming from the back of the pack, running down the leaders.
Standard-bred Horses race in two specific ways; Trotting and Pacing. They are different ways the standard-bred horse gallops. The racing distances are least 1 mile. A gated truck drives in front of the horses as they slowly start either at a trot or at a pace. The gated truck has a gate on each side of the vehicle extending perpendicular that acts like a moving gate. The horses accelerate toward the gate until the gate swing away from the horses. The truck accelerates out of the horses path and the race is on.
Unlike Quarters and Thoroughbreds who are ridden by jockeys sitting in light saddles on the back of the horse, Standard-breds are driven using a cart called a silkie. Standard-bred Racing is often called Harness Racing.
A furlong is 1/8th of a mile. Races below 1 mile are considered sprints. Thoroughbred races are run on Turf, Dirt or Synthetic surfaces. Standard-bred and Quarter Horse races are run on dirt. Each time a horse is entered in a race, the results are reported to organizations like Equibase and stored. Each successive race the horse is entered in, will offer the horse's past performances as part of the program.
Types of Races
It is important to understand that each race has qualifying characteristics. Each horse needs to meet the requirements established for the race. All races are organized into two broad categories: Graded Stakes Races and Non-Graded Stakes Races. Keeping things simple, there is a Graded Stakes Committee that defines the Graded Stakes Races for the entire year. Non-Graded Stakes Races are defined weekly and/or monthly, on a track by track basis. The prize (which is referred to as the purse) for Graded Stakes Races are considerably higher than for Non-Graded Stake Races.
Probably the most well known horse race is the Kentucky Derby. The Derby is the first leg of the Triple Crown. Names like Secretariat, Affirmed and , immediately come to mind. It has been over 25 years since Thoroughbred Horse Racing has celebrated a Triple Crown winner. The Kentucky Derby goes a distance of 1 1/8th miles. Thoroughbred Horses looking to enter this race must be 3 years old and are one of the top 20 earnings horses. The number is 20 because Churchill Downs (the track the Derby is run at) attempts to field 20 horses each year. The Kentucky Derby is a Grade 1 (G1) Stakes Race.
Standard-bred Horses are divided into two groups: Trotters and Pacers. So, a basic requirement is that the standard-bred horse runs the race using the appropriate method or gate (at a Pace or a Trot). For a Trot, the horse runs such that the diagonal legs hit the ground at the same time (right front leg, back left leg). For a Pace, the horse runs such that each side (right legs, then left legs) hit the ground at the same time. If the standard-bred horse 'breaks' the running gate while running the race, the horse must go to the back of the pack and re-establish the gate; this is referred to a 'break'. Races like the Hamiltonian are well-known races for Standard-breds.
Allowance Races, Optional Claiming Races, Maiden Claiming Races are all types of races your horse may qualify to race in (Harness races may be named Opens or Qualifiers). For instance, every horse will run its first race against other horses that have never won a race before. This type of race is known as a 'Maiden Special Weight' (this type of race is further restricted by the age of the horse). This means qualifying horses have never won a race (and must be of a certain age). So when a horse finally reaches a level where the trainer and the owners believe (s)he is ready to race; they enter the horse into this type of race.
Partnerships
All Horse Racing Partnerships operate basically the same way. They manage a race horse the same way a sports management team manages any athlete. There are managers, trainers,administrators, medical personnel and training support people (e.g. grooms, hot-walkers). The easiest way to understand this is to realize that each horse is a business and the success of the business will be based on the strength of the people operating the partnership along with the potential of the horse. So when you plan on joining a partnership, look carefully at the people operating it and their partnership track record. Talk to them, visit their stables, look at all the horses they are managing and the horse's racing performances.
It is not practical to think that every race horse will be successful, so manage your expectations. Look carefully at the management team's track record with the horses they claim or purchase because it is a strong indication of future performances. Remember, they select the horse that is purchased or claimed and it is their expertise and business savvy that will ultimately determine the outcome of the partnership. The amount of money you are investing is not relevant here. Regardless of the amount, you want to make sure the partnership is looking to acquire a horse that has a good chance of succeeding. So understanding their method for selecting a claiming horse is important.
No athlete dreams of playing on a last place team, no horse wants to run a race to come in second. That being said, it is not wise to invest your money in an organization that is not looking to acquire a horse that will win. Just remember, Sham was a great horse, unfortunately, he ran against Secretariat. Suffice to say, Sham made a significant amount of money for his owners. Managing expectations is critical and that is what the Partnership Management must be very good at.
Types Of Partnerships
Basically there are two ways to acquire a race horse; claim the horse at a claiming race (privately purchasing the horse from the owners is essentially the same thing) or purchase a race horse that was bred by a breeding organization. It is important to understand the difference because the costs are very different. When you purchase a race horse by claiming the horse at a claiming race, the horse is already in the business, so to speak. The risks are well defined because the horse has already made it to the track and has past performances.
The other way to acquire a race horse is to purchase it through an auction. Auctions occur several times throughout the year and the purchase price is typically higher than a claiming horse (but not always, it depends on the horse). The greatest risk is with Auction acquisitions. The horse is completely untested and there are no guarantees here. In other words, once you purchased the yearling you will wait at least 1 year before the horse will race, so be prepared to pay for the horse at least 1 year before (s)he will be potentially earning purses.
How A Claiming Partnership Works
Claiming partnerships are the most common partnerships available and the easiest to participate in. A horse can be claimed at any one of the many claiming races that are run daily at all racetracks. So let me be very specific. The partnership you join is organized based on the expectation that it will claim a race horse. The partnership earns money based on where the horse finished in a race, (s)he is entered in. The purse money the horse earns goes to covering the costs of the partnership. The partnership will enter the horse in future races (and these races could include other claiming races) with the expectation that the horse may be claimed by another partnership (if the race is a claiming race). Remember, the horse is not really a pet and if you plan on getting emotionally attached to the horse, then this might not be the best place to invest your money.
The partnership will claim a horse, turn it over to the trainer(s), schedule future races for the horse and expect the horse to win, place or show (the other finishing positions get paid but at substantially lower amounts). Remember the horse needs to be fed, stabled, trained, groomed, exercised and medically checked regularly, and the partnership will pay for these monthly costs. So, make certain you understand all these costs because once you are in the partnership, it is difficult to leave it and you are financially on the hook for the horse.
So your partnership determines that there is a horse they are interested in claiming and the horse is running in a claiming race for a claim price of $20,000. The partnership needs to have the capital to acquire the horse. So the total amount of seed capital includes the cost of the claim (e.g. $20,000), plus the State Sales Taxes (depending on the State), plus any track related fees (depends on the State and Track), plus at least 4 months of maintenance for the horse (this may vary to as high as 7 months), plus a monthly administration fee (this varies, sometimes management takes a percentage of the horse as partial or complete payment; you need to check this before you join the partnership). The cost to maintain a race horse varies but $5000 per month in New York is not uncommon and this will vary depending on the trainer and the State the partnership operates in. So, the partnership will need at least $70,000 to claim a $20,000 Race Horse (and this is a very rough estimate).
So the partnership has entered a claim for a horse. The claim must be entered prior to the race, so it is important that the partnership has carefully evaluated the horse, its past performances, its current medical condition, and have a racing plan for the horse, to name a few areas of concern. The most important aspect to remember about claiming partnerships, is that you want to see the horse entered into races that it can win because the more often the horse finishes in the first three positions, the more likely the horse will be covering his own expenses.
Be practical, you want a partnership that does not have a history of doing frequent cash calls (when the partnership costs exceed the earnings of the horse). It will happen, so just remember, you are responsible for covering the expenses based on the percentage you own of the horse. If you bought a 5% stake in the horse and monthly expenses are $5000 per month you are expected to come up with $250 per month to cover the expenses. Make sure you speak with the managing partners about this because you do not want to be hit with any big surprises. Like any athlete, the horse can get injured, so factor in the potential of an unexpected medical cost. Again, the partnership should factor this into the monthly costs.
I cannot emphasize more loudly, speak with the managing partnership and look carefully at the horse's past performances, especially long lay-offs because it may be an indication of the horse's racing health. Finely tuned athletes perform regularly and with consistent results. Of course, there is no reliable way to predict the future but you can avoid obviously questionable claims.
Philip D. Liquori has been interested in non-standard business opportunities for over 30 years. He manages and maintains several high volume media content websites He has developed several business applications in the financial services, legal and medical software industry.
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