Telegraph Business

Helen Dunne - December 2008 - 01/12/2008

LIFE AMID THE SPORT OF KINGS

Having your own racehorse need not be such an expensive business if you join a small group of enthusiasts that shares the costs, writes Helen Dunne

Harry Herbert has racing in his blood. His Father, the late seventh Earl of Carnarvon, was racing manager to The Queen, so it is hardly surprising that, having lived in America and seen the workings of racing syndicates - where small groups of individuals share ownership of horses - Mr Herbert imported the concept on his return in 1987.

Backed by Irish entrepreneur Michael Smurfit and Nick Robinson, the then owner of Pacemaker magazine, Mr Herbert launched a syndicate with twenty shares and four horses. "I thought there would be an appetite for a syndicate that was professionally run and had proper integrity," he says.

"A syndicate is a way of spreading risk. It is a numbers game. If you have enough horses then you increase the probability of winning."

However, five years later, with a recession looming, his backers were reluctant to buy horses. "They said it wasn't the right time but I said it is exactly the right time and launched my own syndicate company. Some of my friends in the syndicate came across with me. I funded it with retained earnings."

Today, jockeys wearing the pale blue jerseys with dark blue armbands with dark blue hats of Highclere Thoroughbred Racing - based in West Woodhay, near Newbury, Berkshire - are successful regulars on the racing circuit. For syndicate members with winning horses, such as model Jodie Kidd who joined in 2006, the rewards are great. But there are downsides too.

"In the event that a horse turns out to be a Dobbin rather than a Nijinsky (one of the most successful thoroughbreds in horseracing history)," says Mr Herbert, the company's managing director, "the price of the initial share for the syndicate is affected."

Investors pay between £10,000 and £35,000 for these, on which Highclere charges a management fee, with between ten and twenty people in each syndicate.

"Highclere only buys yearlings. My brother-in-law, John Warren, who has an incredible ability to spot a talent, will visit all the sales in France, Ireland, Newmarket and America. He will then see about one hundred yearlings a day, perhaps four thousand overall, but we buy between fourteen and sixteen," Mr Herbert says.

Interest from the Middle East and Hong Kong has driven up the price of yearlings in recent times. "We pay an average of 100,000 Guineas (a Guinea is £1.05 with the five pence attributable to sales commission), although some may be cheaper while others are more expensive. We have flexibility."

Funds for the syndicate are traditionally raised in June, ahead of the sales season, which lasts from August to the second week in October. "A syndicate of twenty people might own two or three horses," Mr Herbert says. "If an individual were to buy two horses, it might cost 200,000 Guineas for the horses, then there are the agents' fees, training expenses which could be £30,000 per horse per year, fees to look after the horses, jockey fees and bloodstock fees, insurance and so on."

The share price covers all expenses until the end of the second year, when a smaller additional charge is payable, although if the horse has been successful this can be covered by its winnings, which are distributed at the end of the year.

"We are different from other syndicate groups in that we will sell horses," Mr Herbert says. "And we always try to sell at the right time."

Highclere takes 10% of the sales price of any horse that is selling for more than twice its purchase price. Lake Coniston, which cost 22,000 Guineas as a yearling and was owned by a fifteen man syndicate, was sold after one successful season for stallion duties for £2.4m, while Petrushka, which had cost 110,000 Guineas, was sold for just over $5m seven years ago.

"It shows the system is working," says Mr Herbert, whose business turned over £1.1m last year.