Why We Invested in a Racehorse
Please meet “Per My Last Email” while he works on his “flying lead change” skills.
As a team focused on alternative investments, we’re always on the lookout for opportunities most people never see. Not because they’re “sexy,” but because they’re often inefficient, misunderstood, and mispriced.
That mindset is baked into Partners + Capital. Our 2025 annual letter wasn’t subtle about it: we prefer cash flow over charisma and structure over stories. And we’re obsessive about downside protection whenever the structure allows for it.
So… why a racehorse?
Because racehorse ownership, done correctly, is one of those rare “niche” corners of the market where (1) access is limited, (2) underwriting is inconsistent, and (3) experience + economics can overlap in a way that’s genuinely compelling. And as a boutique firm, part of our job is creating access for friends and family who want alternatives but don’t have the time (or desire) to source and evaluate the weird stuff.
We don’t fall in love with categories. We fall in love with edges.
Over time, our portfolio evolves, but our framework doesn’t. We look for repeatable edges:
knowing how to source
knowing how to underwrite
knowing how to structure
knowing how to protect downside
knowing when to say “no” quickly
That framework works whether we’re evaluating private credit, real estate, oil & gas or something as nontraditional as a Thoroughbred.
Because in alternatives, the best outcomes aren’t “discovered.” They’re designed.
Racehorse investing is niche… and that’s the point.
Most people never invest in a racehorse for the same reasons they never invest in private credit or mineral rights:
they don’t have the network
they don’t know what questions to ask
they don’t have a trusted operator
they assume it’s either for billionaires or gamblers
That gap creates opportunity.
Racehorse ownership is often poorly accessed and poorly underwritten, which is exactly why it can become interesting for the right buyer with the right process.
We can find dealflow for almost any objective
One advantage of living in alternatives is pattern recognition. Investors typically want some combination of:
income
growth
tax strategy
diversification
non-correlated experiences (yes, experiences matter more than people admit)
Our job is to match the objective to the right structure, not force every investor into the same box.
Racehorse ownership can fit different objectives depending on the specific horse, the plan (racing vs. breeding vs. resale), and the structure (direct ownership vs. syndication vs. managed interest). It’s not a one-size-fits-all asset, so we don’t treat it like one.
The underwriting is real (even if the stories are loud)
Horse racing has plenty of hype. We ignore that.
Our lens is closer to how we look at any operator-driven asset:
Who’s running the program? (trainer + management)
What’s the plan? (timeline, race placement, development path)
What are the controllables vs. variables?
What does “downside protection” look like here? (insurance, budgeting discipline, governance, realistic reserves)
What’s the decision-making process when things go sideways?
Because risk doesn’t disappear. It just changes costumes.
And with horses, the variables are obvious: performance volatility, injury risk, illness, liquidity constraints, and a wide distribution of outcomes. That’s exactly why structure and expectations matter so much.
It’s also an “ownership experience,” not just an allocation
Some investments are purely financial.
Racehorse ownership can be financial and experiential: a real asset, in a real ecosystem, with real people, real barns, real race days, and real stories you don’t have to pretend are interesting.
That matters, especially for investors who already have “the usual” exposures and want something memorable that still has an underwriting backbone.
The tax angle: the “hobby loss rule” (and why it’s not magic)
One unique feature of horse-related activities is how they interact with the IRS “hobby loss” framework (IRC §183), which limits deductions if an activity is not engaged in for profit.
Here’s the relevant nuance:
The IRS generally presumes an activity is for-profit if it shows a profit in at least 3 of the last 5 tax years.
For activities that consist primarily of breeding, showing, training, or racing horses, that safe-harbor window extends to 2 of the last 7 tax years.
That said, two important caveats:
This is a presumption, not a loophole. The IRS can challenge it based on facts and circumstances.
If you don’t meet the safe harbor, it doesn’t automatically become a hobby. It just means the analysis becomes more fact-specific (businesslike operations, recordkeeping, expertise, time/effort, profit intent, etc.).
So yes, horse activities have a unique wrinkle inside the hobby loss framework. But the real takeaway is simpler:
If you’re going to do this, do it like a business. (And talk to your CPA before you do anything aggressive.)
Why we said “yes” to this niche category
We didn’t invest in a racehorse because we wanted to be interesting.
We invested because it fit our philosophy:
a niche market with access constraints
underwriting inconsistency (which creates pricing inefficiency)
the ability to structure participation thoughtfully
and a compelling ownership experience layered on top
In other words: not hype, not narratives, not “maybe someday” math.
If you’re curious how we think about niche alternatives (racehorses included) we’re always happy to walk through the framework, the risks, and what “good structure” actually looks like.