Breeders, Place Your Bets

By J.D. Reed

Bloodstock goes blue chip

The 115th meeting of horse racing's venerable summer camp at Saratoga Springs, N.Y., opened earlier this month as regular fans returned to their favorite spa. Once again hotels and restaurants are jammed with people who seem to have leaped straight out of New Yorker cartoons, and the jewel thieves who shadow the wealthy have put in their usual appearance. It would seem that nothing could disturb these genteel August rites.

But whoa! There is one thing. There has always been one thing: money. Even these curried folk can still be awed by the wagering of huge sums. And the bets have never been bigger. They are not made at the race track, however. Now the principal action is the enormous gambles of the Thoroughbred mating game.

The biggest news at Saratoga last week came when Industrialist Henryk de Kwiatkowski announced that his Belmont Stakes winner, Conquistador Cielo, had been syndicated to a group of breeders for $36.4 million, making him the most expensive horse in history. Meanwhile, all week long, a favored few took their reserved seats inside Humphrey S. Finney Pavilion and fascinated onlookers gathered before outdoor monitors to view the auctions of untried yearlings for stratospheric sums. In one wild bidding session, a world-record filly price of $2.1 million was paid for a daughter of The Minstrel. After four tense evenings, traders had ponied up $36.1 million for 204 colts and fillies.

Last month in Kentucky the annual Keeneland Summer Sales, the Academy Awards of equine auctions, did even better. There, 279 yearlings averaged $344,183 apiece, up 32% over last year. One lively colt, son of the extraordinary Nijinsky II, went for an alltime auction record of $4.25 million. Said Kentucky Horse Breeder William O'Neil: "Last year's prices were mind boggling, but this year's are about unbelievable."

But they are not quite inexplicable. Horse breeding, once the sport of kings and nobles, is now the delight of international moguls and financial princes. Well-heeled foreigners, particularly the Arabs, like lavish-spending Sheik Mohammed bin Rashid al Maktun (who bought the record-breaking filly at Saratoga), have brought piles of new money into the enterprise. In addition, Thoroughbreds are tax sheltered and relatively portable collectibles whose value has appreciated not only more than inflation but well beyond most other investments. The Dow Jones index rose a bare 7% in the past 20 years. Prices at sales like Keeneland's have skyrocketed by 2,600%. "From an investment point of view," says New York City Consultant Robert Fierro, "oil and gas are dead. Equipment leasing is dead. Real estate, especially in California, is dead. Thoroughbreds are right where oil was a few years ago." Explains Wayne E. Ries, a Baltimore syndicate manager: "You've got a very interesting situation with horses. Your asset is appreciating all the time. But for tax purposes you can depreciate it."

All these angles, and a good many more, have long been apparent to an Englishman named Robert Sangster, 46, the buyer of the $4.25 million yearling at Keeneland, who last week purchased two fillies and partial interests in two colts at Saratoga for a total of $667,000. More than any other person, Sangster has been the critical player in the current horse fever. Heir to a Liverpool-based soccer betting operation, Sangster has used his winning touch at breeding to go from riches to phenomenal riches. In provident exile on the bucolic Isle of Man, a tax haven in the Irish Sea, he now runs a multimillion-dollar equine empire, Swettenham Stud, from a 100-room mansion called the Nunnery. Though a reticent man in public, he is hardly that at home. His two trophies from the French Arc de Triomphe wins are the centerpieces on twin dining-room tables. The walls of the bright, airy living room are covered with photos of Sangster, his vivacious second wife Susan (former wife of onetime Australian Foreign Minister Andrew Peacock) and, of course, horses. Out across the 90 acres of manicured lawn and woods, however, the real thing is missing. He keeps none there. "Don't like riding," mumbles the great breeder. "Don't know why."

Even so, Sangster has a unique way with horses, one that combines sporting instinct with clerkish fussiness on a corporate scale. He describes it as "horribly businesslike." At the core of his operation is a first-rate staff. Irish Trainer Vincent O'Brien, 65, for instance, is one of those souls who commune with Thoroughbreds somewhere beyond speech. O'Brien's canny ways brought the team its first big season in 1977: the $200,000 stallion The Minstrel won four major European races and was syndicated at $9 million. Pat Hogan is Sangster's "salt of the peat" conformation expert, which means he specializes in assessing the look of a horse. The instinctual Hogan once told Sangster to spend $200,000 on an undistinguished-seeming foal he had spotted in a field. Sangster did, and the filly won three of her first six races. Says Sangster: "The big difference between me and amateur breeders is that I listen. They are retired businessmen used to telling everyone what to do. On my team we listen. It works."

It does indeed, helped considerably by scrupulous attention to detail. Before settling on the still unnamed $4.25 million colt at Keeneland, for instance, Buying Agent Tom Cooper scrutinized the yearling carefully during his spring tour of U.S. farms. O'Brien then spent eight hours alone with the youngster, watching his mannerisms, his sweating cycle, whether he was bothered by crowds. Three vets, including a heart specialist, performed a physical, with full X rays. "Leg Man" Bob Griffin examined a race horse's most important assets. And because the colt's most important assets will change after his racing days. Sangster's wily genealogist, John Magnier, also had to approve. Says Magnier: "It all follows the semen. If you don't have the semen, you don't have the industry."

A horse must still win races to acquire value. But the big payoff is now in the breeding barn. In the '50s a horse who won $1 million in purses was worth $1 million as a stallion. Today a million-dollar winner is worth $20 million at stud. One outstanding example is Northern Dancer, whose offspring Sangster often buys. Almost gelded because of his questionable conformation and rank temperament, the 1964 Kentucky Derby winner is now the world's greatest living superstud: 85 of his progeny (one in five) are stakes winners. His going rate is $300,000, but his 14 get at Keeneland were sold for an average of $888,571 each. The 21-year-old still covers 40 mares each season.

Even with a Northern Dancer in his bloodline, every yearling is a longshot. But Sangster can use his superstars to cover the losers. Moreover, his worldwide sources enable him to place what he delicately calls "the lesser horses" where they bring the best possible fees. One far-out deal: a stud standing in Tasmania.

Investors with less imposing assets can still take a shot at this high stakes venture. New York Agent Peggy Vandervoort has been putting together modest ($25,000 to $125,000 per share) horse-investment deals for years. Says she: "It's smart to pool your resources with a lot of other people. You can get in on eight or nine horses for the price of one." Every small-timer remembers that Triple Crown Winner Seattle Slew was bought by comparative newcomers for $17,500 and syndicated for $12 million. The Thoroughbred market of today, however, resembles the publishing industry: the blockbusters are fine, while the middling books are in trouble. The Wall Street Journal recently checked out 26 horse-investing partnerships formed in 1977-79. Twelve made a profit, nine lost and five broke even after taxes. Says Analyst Fierro: "The bottom of the market collapsed in November; the middle is experiencing some softening. If you don't like horses, don't come in." For those who love the smell of the liniment and the roar of the parimutuel, however, there is no investment that can match the thrill. Consider the dreary alternative: no one ever got to kiss a Krugerrand in the winner's circle.

-- By J.D. Reed.

Reported by Jef McAllister/ Isle of Man and Janice C. Simpson/ Saratoga Springs

With reporting by Jef McAllister, JANICE C. SIMPSON

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