Derby Trail Forums - A kinder, gentler Horse Hedge Fund?

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Originally Posted by Scav

It is becuase it is a hot word, that is all. The word Hedge Fund elludes things like success/power/largeness, but all it really is, is a high level partnership

Correct.

Quote:

Originally Posted by Cannon Shell

I think that it is hard to believe that people with the kind of money needed to invest in something like this would actually do so. First of all it cant possibly show a profit because there simply isnt enough money available to win. Stud fees are in decline (which they need to be) and therefore the pot of gold at the end of the rainbow is going to be smaller. Before you think about saying Big Brown, remember that the deal made his 'value' worth $50 million, the actual amount of cash that they got was far less than that. As a matter of fact his loss as well as some of the recent big money, early retirement studs not performing at high levels makes me think that the price of stallions outside of the ones Darley wants is going down.

The other factor that will be hard to understand is the ego factor. Not of the trainers but of the owners. If you put up $5 million bucks with an individual trainer the owner will not only be the main client for the trainer, he will get a lot of leeway and certainly some say in what goes on. With a fund like this although these guys will surely do everything possible to keep them happy, you are just another investor.

The key element to me of the whole IEAH deal was they were investing money in an equine hospital accross the street from Belmont. That can be a revenue generator right from the start and is a solid asset. If these guys start buying yearlings this year they cant possibly hope to make any signifigant money until 2011. Insurance, training bills, etc are going to be substanial especially when you consider that they will be acquiring stock in 2009 and 2010 that will be adding to expenses and not generating any revenue. Unless they come up with the next big thing, they will be really in deep.

The other factor is how do the state commissions deal with this? What if Lukas has a horse in the Derby for a seperate owner and Zito has a hedge fund horse. Isnt Lukas a part owner in Zito's horse because he is involved with the fund? What if the fund horse is undefeated and sheikh Mo said he will give them 100 million if he wins the derby? What a position that puts Lukas in, especially if he has the 2nd choice who happens to be a gelding.

Personally I think one of the negatives of this game is people coming into the sport expecting to make money. Sure everybody says that it is so hard but many of these guys have been very successful in business and believe that they are smarter than everybody else. If a fund like this fails, which I think it will, I just worry that the negative backlash will make it even harder to attract new investors especially in troubling economic times.

I always knew you were smarter than you looked :p
VERY well stated.