Below is an article we wish to share.
It is written by one of Dynamic Syndications loyal clients,
Mr Stephen Koukoulas.
Stephen is one of Australia’s most recognisable economists. Stephen's article is in relation to the cost of owning a 10% share in a racehorse.
Before taking the opportunity to read the article, the following paragraph is a quick snippet about Stephen:
“There are not many economists with Stephen’s impressive employment history. He has been Senior Economic Advisor to the Australian Prime Minister, Global Head of economic strategy and research at TD Securities in London, was Chief Economist at Citibank in Australia, worked as a senior Treasury official and been the Australian Financial Review’s Economics Analyst and columnist.”
COST OF A DOG VERSUS A RACE HORSE
Mr Stephen Koukoulas
I am often asked by friends about the financial commitment that is involved in the 10 per cent share in a couple of race horses that my wife Meredith and I bought from Dynamic Syndications early in 2012.
After the initial cost of the share, which of course is significant, the ongoing costs are not cheap, but are not quite as onerous as one might think.
Training fees, vets, equine dental work, shoes, spelling fees, transport and the like all add up. There is not a single doubt about that. But from my experience, it is not much more covering the ongoing costs of owning a 10 per cent share in a race horse by Lonhro or Not A Single Doubt, have it trained by either Chris Waller or Gerald Ryan, no less, as it does to own a dog or a cat.
Yes, a dog or a cat !
Even an ordinary pooch that sits by the fire at night or licks your face with unquestioned dedication costs a lot. That furry feline that demands Fancy Feast food, fresh kitty litter and scratches the lounge, is expensive and costs close to the amount needed to cover owning 10 per cent of a race horse.
If you don’t believe me, I did a little financial maths that all dog and cat owners probably know too well when they load up the supermarket trolley with pet food, pay the vet or take dear Fido and Fluffy to the pet hotel when the humans take holidays.
First the race horse.
While the costs with a horse clearly vary a lot from month to month according to whether they are in work, racing, spelling or somewhere in between, the annual total of all expenses amounts to around $3,500 to $4,000. Recall this is for a 10 per cent share.
Secondly, for the friendly family dog.
The cost is, wait for it, close to $3,000 a year or sometimes a little more if you pamper it, as many people do.
That assessment is based on the following costs.
Food. The tins of meat, the dry crunchy pellets plus an odd treat of a bone adds up to around $4 a day. That’s about $1,500 a year. Then there are the dog hotel fees when you are lucky enough to have a holiday. Assuming 20 days a year away (some people take more holidays than this) at $25 a day, here is another $500.
Then there is the grooming. A mobile dog shampoo and tidy up is at least $50 a pop. Every two months? Another $300 a year.
So at this stage, your lovely pet dog is costing you around $2,300 a year.
The variable and unknown costs are for the vet but inevitably these will be a few hundred dollars a year. Given that it costs around $400 a year for dog insurance and that does not cover 100% of vet bills, let’s go for something like $500 a year.
Now we are pushing $2,800 a year, about $1,000 less ($20 a week) than covering the costs of a 10 per cent share in a quality race horse.
I suppose we can add to that the cost of a collar, leash, treats, bowls, flea powder, blankets, the amortised cost of the kennel and the like and $3,000 a year is looking a fair guess. The costs for a cat are about the same - trust me.
One critical difference between a pet dog or cat and a racehorse, is that a dog or cat cannot earn any money. A racehorse just might.
Mr Stephen Koukoulas - Part-owner of DEFINE - a recent winner at Warwick Farm for Chris Waller
Using my Dynamic Syndications example as a guide, around 90 per cent of the horses they have syndicated have earned prize money. The average is around $71,000, although it must be acknowledged that a couple of horse Reward For Effort, He’s No Pie Eater, Atomic Force have been hugely successful which boosts this average and some have not been financially viable, to be sure, but around three-quarters of horse syndicated by Dynamic Syndications have earned more than $50,000 over their career in today’s dollar terms.
Recall that for a 10 per cent share, those prize money numbers are divided by 10. If the horse races for say 5 years, and is around the average, you get back around $1,000 a year, making the net cost $2,500 to $3,000 a year. In this case, it is cheaper than a dog or cat and when the horse is finished at the track, there is residual value for stud duties or as a brood mare.
I love pets. They bring companionship and love for the whole family.
Mr Stephen Koukoulas (3rd from left - wearing Sports Coat with his mother beside him) after his horse DEFINE won recently at Warwick Farm
But I can assure you when you have a winner at the race track, even on a Wednesday at Warwick Farm, the exhilaration beats the joy of your dog fetching the stick or slobbering on your face. Having a share in a horse that is beaten by the proverbial bees sting by a horse running in the Spring carnival down in Melbourne also has its rewards as you hope that big things could be down the track for your colt of filly.
After the capital cost of buying the 10 per cent share, and that can range from a few thousand dollars to say $20,000 depending on the breeding and sales price of course, it is exciting to be involved in the racing industry and chatting to the likes of Chris Waller, Gerald Ryan, Tim Clark, Nash Rawiller and the likes in the enclosure before and after the race.
Mr Stephen Koukoulas is standing beside Adam Watt listening intently to jockey Tim Clark after the win on Define
Recent changes in the rules allow for syndicates to offer 5 per cent shares in horses, so the initial outlay plus running costs of having this smaller share are obviously halved.
Mr Stephen Koukoulas (far right) enjoying his experience despite the rain in the "Theater of the Horse" at Randwick
Love you dog and cat, but the cost of a share of a race horse is not as extreme as most people think and the rewards can be fantastic.