I wouldn't bet on it
When Archie da Silva sounds a caution in the area of buying horses, the casual investor would be wise to listen. 'People who go into it, go into it for the love of it, rather than the profit,' says da Silva, who owns Hong Kong's most successful horse, Silent Witness. 'It is rather difficult to make any money from it.'
But although da Silva does not think the margins are good, the pursuit is hugely popular in Hong Kong. There is no horse breeding here, so all horses must be imported. Last month 1,065 applicants competed for a horse import permit for 2012-13. But only a lucky 340 were selected in a random lottery overseen by the Jockey Club.
The tight regulation by the club makes the horse-racing scene in Hong Kong unlike that anywhere else in the world. Elsewhere, all you have to do is turn up at an auction with money in your pocket, buy your horse and take it home. In other big horse-racing countries such as Australia and Ireland, it's common for groups of friends to chip in and form a syndicate to buy a horse.
But in Hong Kong, it is a select club. To be a racehorse owner here, you must first be a member of the Jockey Club for at least 12 months.
To join as a racing member costs HK$68,000 with monthly fees of HK$420, and to become a full member costs HK$400,000 with monthly fees of HK$1,200. To get a chance to buy a horse, the Jockey Club also requires that you have HK$1 million in the bank.
So why are people so willing to pay high premiums and wait so long to get a piece of the action?
'Because they are true fans of racing, people who just love it,' says David Price, the horse trader who bought Silent Witness as a yearling before he went on to become the world's top-ranked sprinter from 2003 to 2005.
'I know people around town who have missed out on getting permits and are disappointed,' says Price. 'There are other people who apply for the prestige side of it. They can use the racetrack as a place to entertain guests.'
Racing your own horse is something that appeals to all avid horse-racing fans. But it's not an easy thing to achieve. 'Anybody can go racing and become a member of the Jockey Club,' says Michael Caddy, an owner of 10 racehorses in Hong Kong. 'But to get a horse is a matter of luck.' Caddy had owned horses in Britain, but after relocating to Hong Kong he had to wait years before he was able to get some here.
The difficulty in acquiring a permit means people value the ownership of horses in Hong Kong more than elsewhere, says da Silva.
The racehorse population of Hong Kong is 1,535. 'Hong Kong simply cannot provide enough racing for more horses,' says Jason Leung, managing director at Legends Bloodstock, an agency that imports horses for buyers. Last year, there were 83 race meetings at the Sha Tin and Happy Valley race courses, and 767 races.
Some of the imported horses are yearlings that come here to train and are then sold at the yearly Hong Kong International Sale as two-year-olds. But buying any horse comes with risks: an animal may simply not like the Hong Kong climate or the hard, fast tracks here.
'If you buy an unraced horse, it's going to be comparatively cheap compared to a horse that's got racing form already,' says Caddy. The cost can vary from HK$1 million to HK$8 million to buy a proven horse that has raced and won.
Not every horse owner uses an agent. Caddy doesn't. 'The more you know about horses, the cheaper the costs,' says Caddy, who adds that as he chooses his own horses, it has become a relatively cheap hobby. But if you know nothing about horses, Caddy advises you to buy through a trainer or an agent.
Even after you have your horse, the monthly expenses can add up. Costs can run to anything from HK$35,000 to HK$45,000 to cover training, race entry fees, feed and veterinary bills.
But the payback if you have a winning horse can be huge. The highest-rated horses compete for HK$20 million in prize money.
Winnings are distributed to the top five finishers: 57 per cent for first, 22 per cent for second, followed by 11.5, 6 and 3.5 per cent. Deducting jockey, trainer and stable staff fees, owners will receive 70 per cent of the winnings for first place and 75 per cent if the horse places. So if your horse wins a race with prize money of HK$20 million, as an owner you will take home nearly HK$8 million.
A combination of good buying, a good jockey and trainer, and the right conditions, can bring great results. Silent Witness was bought for HK$39,000 as a yearling as he had a modest pedigree. Trained by Tony Cruz and jockeyed by Felix Coetzee, he went on to win almost HK$62.5 million in prize money over 29 races between 2002 and 2007.
He could have earned many more millions if he had gone to stud, which is where the real money lies for investors. Unfortunately for da Silva, Silent Witness was gelded due to his bulkiness before anyone had recognised his potential.
Not every horse is a Silent Witness. If your horse fails to perform after five races, you have the option to retire it and send it back to its country of origin and buy a new one. Or you can keep racing it, and if it still fails to show results it will be lowered in class until it is forced to retire by the Jockey Club.
'If you have a horse that doesn't perform, it's best to retire him,' says da Silva.
'Everyone is very pleased to win money, but it's not the major issue. If I didn't have a Silent Witness, I certainly would have come out at a loss or, at best, have broken even.'