Getting an Edge – Structuring & Managing a Syndicate – The Property Chronicle
Select your region of interest:

Real estate, alternative real assets and other diversions

Getting an Edge – Structuring & Managing a Syndicate

Alternative assets

This is the last of four articles on how to develop an edge in the world of racehorse syndication. Previous articles covered The Trials, Triumphs & Tribulations of Racehorse Syndicates, Finding a System to Beat the Market, and Choosing Your Trainer & Bloodstock Agent. 

David Hill is the ex-Chairman of Warwick Racecourse, and has been the founder and manager of a number of racing syndicates – both successful and unsuccessful – over the last three decades. His previous articles for the Property Chronicle covered the historical financing of British Racecourses. In these troubled times he harks back to syndicate experiences in better days and how potentially to seek a competitive advantage.

The third article touched upon one sector of the racing industry requiring greater regulation – bloodstock auctions. Another area which requires additional governance is that of syndicate management. At the moment anyone can set up a syndicate and handle significant sums of money virtually unregulated. Here I am not talking about a small group of friends – like the Top Brass Syndicate– who get together to share costs and experiences, and where the monies involved are relatively insignificant. Rather I am focusing on syndicates like the Barbury Lions where turnover over the life of one syndicate can reach around £ ½ million.

A recent example of what can occur without regulation is the Supreme Horse Racing Club, an Irish syndicate whose ownership included Kemboy, the winner of the 2019 Punchestown Gold Cup. The syndicate structure took advantage of the fact that most are loss making. None of the 500 Members expected to make a profit until, that is, they struck gold. In winning the Gold Cup worth some E177,000, Members came to expect a dividend. It was not forthcoming. A dispute arose between Members and the sole manager. Horse Racing Ireland (HRI) inquired. The sole manager failed to cooperate with the HRI Enquiry. The result was that the manager was debarred and the syndicate had to be reformed by fresh parties.

The Barbury Lions which, unlike most syndicates is managed on a pro bono basis, limits membership to twenty-five individuals and guards against overselling. When the syndicate is filled Members’ names are published and set in stone. They each pay an upfront sum to cover the costs of purchase and training of three horses – two 2-year olds and a 3-year old – over a two year period. That is the limit of their exposure come what may. Returns are based on race winnings and the resale value of the horses at the end of the period. To date the returns have been between 40-50% of the original investment. For syndicate members there is the benefit of knowing their total liability, and for the syndicate manager the advantage of not having to chase monies on a monthly basis. 

This end of term repayment tends to increase retention. Another factor which influences loyalty is trainer and syndicate management commitment. The four strong Management Committee, which includes trainer Alan King, each have paid for a share in the five iterations of the Barbury Lions. Promoted verbally it demonstrates belief in the horses in the syndicate. It also means there are only another 21 Members to be found!

Regulation does exist but for another purpose. It is through the quarterly VAT returns syndicates are required to make if the tax they pay is to be recovered. It means syndicates need to keep detailed financial records. If turnover per annum is over £80,000 then HMRC demands the employment of electronic accounting systems. This financial requirement could act as a helpful regulatory trigger. It would mean small syndicates avoid red tape but for larger syndicates the required publishing of accounts would shine a light on management’s financial propriety. It might also go some way to justifying the £500 per horse per month that some syndicate managers charge.

In my experience syndicate management is a relatively easy task until aspirations change. Difficulties then arise in meeting members’ differing needs. Take the case of the Royal Ascot Racing Clubwhich runs a syndicate on behalf of some 230 annual Ascot Members. Aspirations were typically limited to the hope that the cost of future racecourse membership might be offset against any Club winnings. This was all fine and dandy until the RARC unexpectedly won the 2005 Derby with Motivator. Suddenly the horse was worth millions as a stallion. There was never any question as to where stud fees should reside – although some Members were no doubt hopeful it would include them – but there was the issue of whether the horse should be retired to stud immediately or carry on running for big prizes. Aspirations had altered – a lively and somewhat heated debate ensued!

Alternative assets

About David Hill

David Hill

David Hill is the ex-Chairman of Warwick, a Jockey Club racecourse, and is the founder and administrator of a series of successful syndicates run on behalf of the trainer Alan King which race under the name of the Barbury Lions.

Articles by David Hill

Subscribe to our print magazine now!