Investing in sport horses is a major part of the horse industry with various investment set-ups going from low four figure horses to the highest of levels. It’s not just about the hope or the opportunity of making money, it’s also about supporting professional riders, being passionate about equestrian sport and having a good time at the different events.

There is a common saying that if you want to make millions by investing in horses, then you better start off by being a billionaire in the first place. And to some extent, this is true. It goes without saying that investing in horses for showjumping is naturally a high-risk investment, giving that you are speculating on a living animal. Horses get hurt, go wrong and sometimes just don’t live up to expectations for many different reasons.

There are however many cases in which investments go wrong for reasons that have nothing to do with the horse or luck but are more closely connected to the lack of transparency.

Our firm works with many private owners and professional riders who regularly invest in showjumpers for which we have developed a set of guidelines enabling our clients to not only secure investments but also to create and develop long-term working relationships with professional riders. 

People invest in showjumpers for many reasons going from high level sport, passion for sport horses and the horse industry, professional networking to pure speculation. Being clear about your investment objective is crucial when working with a professional rider and is often source of conflict and litigation when not previously discussed as it often means that the horse that has been purchased is not meant for purpose.

For instance, creating a partnership with a young up-coming rider by buying showjumpers and speculating on a quick return on investment is potentially a source of conflict from the start. The young rider may not have the necessary contacts to be able to resell the horse quickly and may have granted the investor preferential conditions in order to be able to keep the horse longer for competing. 

This discussion will naturally determine the right horse for the investment. 

By nature, investment means purchasing at a certain price and speculating on the added value that can be obtained upon resale, considering costs and expenses. As for any investment, the aim of the game is to find the right balance between costs required to improve the horse and resale price. Due diligence is therefore essential.  

First, you must check the price evaluation. There are two main issues in sport horse investment which can distort value and the expected return. On one hand, horse swaps and exchanges which may be over or under evaluated. On the other hand, the hidden commissions which are not always disclosed to investors.   

Second, ask and check the pre-purchase examination report which must not contain any issue which could block the resale of the horse. There is no doubt that no horse is perfect but while some veterinary issues do not necessarily stop performance with the right rider and the right treatment, some may reduce value of the horse in the event of a resale. 

Thirdly, and this is what the investor is speculating on, sport improvement margin. Margin to improve is relevant to age, market sector and the working relationship between the professional rider and the individual horse, including care and stabling routines. Professional riders promote and improve horses through showing and competing, but the horse must be physically and mentally capable of making the improvement. Judging sport margin improvements is not always easy and many investors rely on the professional rider’s experience and knowledge to make the right decisions. High performance tools also exist for those who want to rely on objective numbers and statistics to make their decision. 

On one hand, you must understand whether you are purchasing all the horse or only a share. This may seem obvious, but it not always made very clear on sales invoices and when shares are exchanged and swapped by other horses. This issue leads back to the price evaluation.

On the other hand, you must understand whether reproduction rights are included in your investment. For stallions, this means that should ask whether you have exclusive rights over the sale of semen, i.e. has semen has been collected and stored by the previous seller who will continue to sell and distribute it even though he is no longer the owner of the horse. For mares, you can also check whether embryos have already been collected from the mare and if the seller aims to pursue sale of the embryos.  

Both investor and professional rider have significant freedom in determining an appropriate and personalised investment set-up which must work for both parties. Investment schemes which are unfair and unbalanced, for instance by asking the professional rider to foot all expenses with little commission on sale, generally end in conflict and litigation. Here are a couple of examples of set-ups that can be used.

First, the simple livery promotion scheme by which the investor pays full livery and promotion expenses and costs for the horse to the professional rider who shall then be paid a commission for finding the buyer. Commission rate should consider the fact that the investor is paying full expenses on the horse. This set-up provides the investor with significant freedom in choosing the professional rider and control over the investment. 

Next, an adjustment of the livery promotion scheme is to share expenses between the investor and the rider. On one side, the investor makes the initial buy-in and on the other side, the professional rider foots all costs of the horse in exchange for the competition wins and a commission on sale. There can be many variations to this scheme. For instance, the professional rider may pays all expenses before recuperating them on the sale of the horse in addition to a commission determined on the basis of the sales price or the added value. People wishing to benefit from this set-up must always determine what happens if the horse is not sold at the term of the contract.

Thirdly, the co-ownership scheme in which the investor and the professional rider both own shares in the horse, therefore sharing expenses and any return on sale. This scheme is generally appropriate when building a partnership with a professional rider or when the horse needs a longer promotion term. While co-ownership means sharing costs and expenses, it also provides the professional rider with the security of being able to keep the horse for competition and career purposes. The counterparty is that the investor is unable to change professional rider in the event of conflict and does not necessarily have any control over the term of the investment period. 

While we completely understand that investments in showjumpers are often based on trust and working relationships between investors and riders, investors should be afraid of asking the right questions and should always be granted transparency. If the rider is not willing to provide an investor with transparency, it is generally better to walk away from the deal. Drawing-up contracts should never be an obstacle to the investment, on the contrary it enables the counterparties to have the right discussions.  

Contracts should always protect both parties in a fair and equitable way by defining interests and obligations, initial investment value and the set-up agreed upon by the investor and the professional rider. The contract term as well as end of term consequences are essential, parties should agree on the estimated cut-off period on which the investor starts to lose money. There should always be an exit clause allowing both the investor and the rider to cut their losses and stop expenses if necessary.

In closing, we strongly believe in including horse well-being guarantees in any equine contract and our investment contracts are no exception. Investors and professional riders should never forget that horses are living animals and that they deserve to live and work in conditions which ensure of their well-being, whether they are performing or not. 

Our welfare clauses are always different but aim to guarantee well-being of the horse during the investment term on the main rationale that horse well-being shall always prevail over sport and speculation. In addition to this, investors and professional riders should guarantee respect of all equine anti-doping regulations, in competing and at home and appropriate retirement options in the event of injury. 

If you are interested in discussing any investment set-ups of more generally any other sort of equine contract, please contact Mrs. Holly Jessopp, Attorney at Law, Schelstraete Equine Law Paris (France).

Holly Jessopp 

Attorney at Law (Paris), Schelstraete Equine Law Paris office 

Holly.jessopp@inscio.fr

Paris - Schelstraete Equine Law