Horse Racing Syndicates Explained
Horse syndication is now the most common way for new owners to get involved in racehorse ownership. A licensed syndicator will sell shares in horses they own, with individuals buying different portions of that horse (2.5%, 5%, or 10% shares being the most popular).
Syndicators need to have an Australian Financial Services License (AFSL) themselves or be an ‘approved promoter’, which means they use somebody else’s license. Both syndicators and approved promoters need to adhere to rules put in place by the Australian Securities and Investment Commission and the racing authority they are approved by.
This guide will walk you through everything you need to know about horse racing syndications.
Why choose a syndicate?
Horseracing is a costly hobby, and thoroughbred syndication is one of the most cost-effective and efficient ways for people to participate in thoroughbred racing with others who share their interests. You’ll be able to converse with your fellow investors about the ups and downs of horse ownership, as well as network and build new friendships.
One of the major benefits of using a licensed horse syndicator is that it provides a simple way for non-experts to get into the racing industry. The syndicate operator will handle many of the day-to-day issues, and keep you up to date with the progress of your horse. This also provides a wonderful opportunity to learn the ins and outs of the racing industry while being guided by seasoned experts.
The advantages will differ between syndicates, but the following are some of the more common benefits:
- Share in any prize money
- Regular scheduled updates on the horse
- Visits to the horse
- Owners privileges when the horse is racing
- A say in the direction of the horse
Syndicators send updates, arrange stable visits, and let you know when your horse is racing.
In many cases, syndicators can help you attain greater access to your trainer. This is due to the fact that syndicators frequently have prior connections with trainers and may be affiliated with multiple horses.
Who’s allowed to syndicate horses?
Anybody can lawfully sell off shares in a racehorse to family and friends. However you cannot promote racehorse shares for sale or act as a professional syndicator without an appropriate license. All professional syndicators must have an Australian Financial Services License (AFSL) or work as an authorised representative of an AFSL holder. The licensing number should be readily available on the syndicator’s website and any racehorse related advertisements they release.
The ‘Australian Securities and Investments Commission’ (ASIC) regulates horse racing syndication, with enforcement handled at the state level by the relevant racing-associated governing body.
Buying from an unlicensed syndicator is a considerable risk. If unsure about whether the person selling racehorse shares has an appropriate license, contact ASIC or your State/Territory Racing Authority who can help clarify this for you.
Becoming a race horse owner and joining a horse racing syndicate
There are numerous syndicates seeking owners, but you should investigate the details of the racehorse syndication before taking the plunge. If you’re thinking about racehorse syndication shares it’s important that you find out all the facts first.
What documents should you expect from a syndicator?
Any syndicated racehorse should come complete with a Product Disclosure Statement (PDS) and required partnership agreement/deed, which should include the following information:
- Information about the horse (pedigree)
- Where it was acquired and at what price or a current valuation
- Overview of fees (including ongoing monthly fees)
- The number of shares available and price per share
- The proposed trainer
- Vet report (fit for syndication letter)
- Payment details
A reputable syndicator, especially one who acts in your best interests, will provide all necessary documentation. It is wise to inquire about and read the product disclosure statement thoroughly before investing in a syndicate.
Approved syndicators are required by their AFSL/permit holder agreement to set up a trust account for each horse. This guarantee’s that all money paid into the trust account when you buy a horse share cannot be used by the syndicator in any other way.
This protects investors who have invested in good faith in a racehorse and has given them a share of the profits. Purchasing through an authorised syndicator allows you to sleep well at night knowing that your money is secure and being put to intended use. The PDS should display bank account information, such as the name of the account. It is up to you as the owner to ensure this is correct.
Understanding of the costs involved
This is where many individuals find themselves caught out, not realising the true financial costs of horse ownership. The following are the primary categories of expenses:
- Initial share price
- Ongoing monthly costs
- Unexpected costs
It’s critical that you understand exactly what you’re getting for your money.
Initial share price
The initial share price varies depending on the syndicator, but it generally includes an acquisition fee, transport, training, pre-training, agistment, vet fees, scope registration, and other associated expenditures.
Remember to evaluate whether the price is fair, and value for money.
Ongoing Monthly Costs
There will be many ongoing costs to race horse ownership. Some of the main costs involved are:
- Agistment fees (stable or paddock)
- Veterinary fees
- Transport fees
- Farrier fees
- Pre-training fees
- Training fees
The amount of money required for continuing expenditures will be determined by the syndicator, and this is another difference between syndicators. The following are some of the many methods syndicators charge:
- A set monthly fee
- On-charging fees
- Some prefer to have their service providers (trainers, etc.) bill owners directly to syndicate owners (meaning multiple bills for the owners)
- A yearly charge that includes everything
- Hold prize money to pay outgoings
Additionally many syndicators levy a management fee, which is generally in keeping with the amount of service provided. The amount of money required for ongoing expenses will be determined by the syndicator.
It all depends on the syndicator, so just make sure you ask.
As with all investments, unforeseen expenditures can arise and be a drain on your wallet. Unexpected expenditures are frequently linked to injuries and sickness, as well as the necessary veterinary care, which can’t be foreseen.
If your horse is selected for a race that requires significant travel or airfare, you may be surprised by additional expenses. The syndicate manager will usually consult the syndication before nominating the horses for these races.
Again make sure you check with your syndicator for details.
What to expect as an Owner?
Naming the horse
Depending on the syndicator, you’ll follow a variety of processes. Inquire what each syndicator’s process is or check the PDS for more information. In most cases, all the owners suggest a name and a vote is taken with majority rules. The availability is checked with the Registrar of Racehorses and approved based on availability.
This is another point that varies from syndicator to syndicator. Some syndicators take a cut of the prize money, while others keep it and distribute after deductions, and others have prize money transferred directly from the relevant racing body to each individual owner or syndicate in the horse. This should be recorded in the PDS or Deed of Sale documents.
Race day benefits
All named shareholders of a licensed syndicator receive a member’s pass, guest pass, and a mounting yard pass, as well as free admission to whichever racecourse your horse is racing at. Syndicate members also gain entry to owners’ rooms where complimentary food and drinks are usually served. Named shareholders of a family and friends syndicate do not receive a mounting yard pass unless they are the syndicate manager, but should expect to receive all other owner privileges.
Updates about your horse
This should be clarified with your syndicator, since each will have a different level of communication. Some syndicates will offer video, audio, and text updates from the trainer and/or jockey as part of their service. Others simply take care of the purchase process; it’s then up to you to contact trainers, as well as other care providers about the horse’s development. Keep in mind that being a shareholder without a dedicated communications professional to handle the horse information is inconvenient in several ways; the trainers and other personnel are frequently busy, and it can be difficult to obtain information about your horse when you need it.
Many individuals choose syndication as a form of ownership since it is simple and inexpensive, but it is important to remember that when you’re part of a large group, your voice may not always carry when it comes to decision making.
Given their varied nature in terms of number of members, managers, and so on, the way racing syndicates function might be quite complicated. It’s critical to do your homework. Understand what questions to ask in order to get the most out of your purchasing so that you don’t regret it.
Is there anything else you’d want to know? We’re always happy to assist.