Taking a punt on thoroughbreds

But while many of the horses passing through the ring of the prestigious sale will never recoup their outlay in prizemoney, the multimillionaires that have been buying are not there solely for the enjoyment of watching their horses on the racetrack.

Colts with the best breeding and physical confirmation are always in demand and if one goes on to win a big race it is guaranteed a lucrative second career as a breeding stallion.

After last Saturday's Golden Slipper, winner Sepoy's value soared towards $20 million, while Gai Waterhouse's 2008 Slipper winner, Sebring, was bought for $130,000 as a yearling and then syndicated for almost $30 million.

Among those bidding for the top-end colts yesterday was the Blue Sky Thoroughbred Stallion Fund, which offers investors a unique way to enter the bloodstock industry.

Blue Sky, in a joint venture with one of Australia's biggest breeding names, Arrowfield Stud, has formed an Australian Securities and Investments Commission-registered trust fund to

buy yearlings that the venture hopes will go on to become breeding stallions.

"It's definitely a hit-and-miss business trying to find a horse that will be good enough to go to stud, but from the 18,000 or so foals that are born in Australia each year, we are selecting from a pool of about the 100 best by the time of the sales," says Blue Sky's managing director, Julian Blaxland.

Yesterday, Mr Blaxland bought two horses for this year's fund, spending $500,000 on a son of Redoute's Choice, out of a mare that won the group 1 Oakleigh Plate. The second, purchased for $575,000, was sired by Kentucky Derby winner Street Sense, from the family of Australian champions Private Steer and All Silent.

John Messara, a former Sydney stockbroker who now chairs Arrowfield Stud, home of champion sire Redoute's Choice, said the fund looks to buy two or three horses each year to spread risk.

"It's about applying the most sensible business model to what is, obviously, a high-risk industry," he said.

"There are the happy stories like Flying Spur, which was bought for $160,000 and has generated more than $100 million, and Redoute's Choice, who we paid $10 million for as a top racehorse and has made over $200 million. But you are dealing with Mother Nature and that's always tricky."

While the one horse from the fund's first year ran in last month's Dubai World Cup meeting and is set to race at Royal Ascot, those who invested in the second capital raising have two money-spinners.

The two yearlings purchased, Beneteau and Shrapnel, have won group races and been placed in group 1s, and are guaranteed to stand at stud in the Hunter Valley for between $15,000 and $30,000. Both can expect to cover more than 100 mares in their first breeding seasons.

About 40 per cent of investors have used their superannuation funds, though Mr Blaxland admits this strategy is "not for everyone".