If the strapping chestnut colt Justify wins the Belmont Stakes on Saturday to become just the 13th horse in history to claim horse racing’s Triple Crown, two of the three groups that have an ownership stake in the horse’s breeding rights will be front and center during the celebration.
WinStar Farm, one of North America’s leading Thoroughbred racing and breeding operations, owns 60 percent of Justify’s breeding rights. China Horse Club owns 25 percent. A third group, a secretive entity that holds the remaining 15 percent, will remain out of the spotlight because it vigorously avoids any public attention. It is a company controlled by top employees of billionaire investor George Soros.
Soros’ connection to Justify, which was not previously reported, has garnered little notice in the sport despite the horse’s rousing success in the Kentucky Derby and the Preakness Stakes because his group tries to operate almost invisibly. Several officials, who sit atop one of the biggest owners in stallion equity in the world, declined to comment about Soros’ involvement in horse racing through his fund.
Soros’ investment firm, Soros Fund Management, is behind SF Bloodstock and SF Racing Group, an international breeding and racing operation started in 2008. Executives from the investment firm oversee the breeding and horse ownership businesses. Gavin Murphy, an Australian based in New York who has served as the Soros Fund’s longtime tax counsel, is the manager of SF Bloodstock and SF Racing Group. Christopher Naunton, chief financial officer for the Soros Fund’s family office, is the president of SF Bloodstock and SF Racing Group, corporate filings show. Tom Ryan, an Irishman based in Lexington is the team’s bloodstock agent.
SF, which is also a part-owner of Newgate Farm in Australia, has breeding stock in the United States, Australia, England, Ireland and France. It could not be determined how much money Soros’ firm has committed to the horse racing business.
SF Bloodstock, which according to court filings is owned by SF Agricultural Holdings LLC, employs a for-profit model and focuses on the breeding side of the industry, purchasing stallions, or shares in them, and broodmares while selling yearlings at auction. In 2015, it entered into a three-year partnership with WinStar Farm and China Horse Club that allowed them to spend big while spreading risk at yearling and 2-year-old sales. That is how the group partly acquired Justify and the third-place Kentucky Derby finisher Audible, but it quickly sold its racing rights in those horses to Head of Plains Partners and Starlight Racing.
“To me, and the couple guys that I do this with, it’s more fun to be in the winner’s circle when Justify wins the Derby holding the trophy,” said Sol Kumin, a hedge fund executive who runs Head of Plains. “So you kind of have to pick. If this became my full-time job, which it won’t, I would have a different program, focusing more on the stallion business and breeding. Now we still want to make money, and so far we’ve done well, but it’s hard.”
Just days after Justify’s Preakness victory, chatter began to surface about a $60 million deal with the rival farm Coolmore for his breeding rights. The deal is believed to include a bonus of about $25 million if he were to win the Triple Crown and would allow the partners to retain some shares and lifetime breeding rights in the horse. It was agreed to before the Preakness, people familiar with the deal said.
But Elliott Walden, Winstar’s president and chief executive, said a deal had not yet been completed. The partners might wait until September, when it will have owned Justify for two years, to complete a deal so they become eligible for the lower tax rates associated with capital gains.
Henry Field, head of SF’s Newgate Farm, and Eden Harrington, vice president of China Horse Club, are graduates of the Darley Flying Start program, a management and leadership training program for the industry, and have each worked for Coolmore.
American Pharoah, who in 2015 became the first horse in 37 years to sweep the Triple Crown, stands at Coolmore’s farm in Versailles, Kentucky, in the spring. He then shuttles to its Australian farm for the fall breeding season. In the past couple years in the United States, he was commanding about $200,000 per live foal that stands and nurses. Producing an average of 150 live foals from the breeding season in Kentucky, American Pharoah is racking up more than $35 million in stallion fees there. He commands about $50,000 per live foal in Australia.
WinStar, meanwhile, stands American Pharoah’s sire, Pioneerof the Nile, for $110,000 and will likely add Audible, the Florida Derby winner, to the mix.
Bradley Weisbord, who runs BSW Bloodstock, which manages Kumin’s stable along with several others, said that while a deal had not been completed, from an industry perspective, it made sense.
“Kenny Troutt has always run his WinStar Farm as a business,” he said of the owner of WinStar who made his fortune from a long-distance phone company that used a multilevel marketing approach. “On the flip side, Coolmore has always wanted the best.”
He continued: “Sure, it’s probably a tough decision for him and he’s probably going through it thinking, ‘Do I sell or do I keep him,' but WinStar, SF, China Horse Club, they are traders, and there is a number where it becomes the perfect bloodstock deal, and that is when the buyers and the sellers both walk away with a smile on their face.”
Soros is one of the world’s most successful investors, who might be best-known for his bet in 1992 against the fortunes of the British pound. Soros is said to have made more than $1 billion by shorting the pound — a move that cemented his reputation as one of the shrewdest currency traders.
In recent years, he’s become better known for his support of philanthropic activities and in particular his financial support to liberal and progressive causes. He personally has given tens of billions of dollars to support the work of the Open Society Foundations, which he formed more than 30 years ago to support efforts to promote freedom of expression and human rights in 120 countries.
For decades, Soros was one of the more successful hedge fund managers — investing billions of dollars for wealthy individuals and institutions. Soros’ firm has spawned the careers of a number of other famous investors, but in 2011, he decide to shut down his then 42-year-old hedge fund and convert into a family office to mainly manage money for himself and his family. The move has rendered the investing decisions of the firm, which controls about $26 billion in assets, more opaque than ever as it is no longer answerable to outside investors.
But the fund continues to be active investors in stocks, bonds, commodities and currencies. The firm is also known for making significant private equity style investments and sinking money into more esoteric investment strategies and assets, like distressed sovereign debt, cryptocurrencies like Bitcoin and art.
Soros, now 87, has ceded more and more investment decision-making to the money managers he has hired to run the firm. A year ago, he hired Dawn Fitzpatrick, who had been a top hedge fund manager at UBS Asset Management, to become the firm’s chief investment officer. Murphy joined the Soros firm in 1997 and for a time served as acting chief operating officer.
China Horse Club is also an opaque group that has become a major global player in the sport in just five years despite a ban on wagering in mainland China. That SF is a partner with the club is somewhat surprising.
Soros was an early investor in China, investing $25 million in a stake in China’s Hainan Airlines, a regional carrier in southern China that had the backing of the Hainan government and sought to bring in foreign money in 1995. In the past, Soros has had outspoken views about China that have upset the political leadership. Speaking at the World Economic Forum in 2016, Soros compared China’s economy to the United States’ before the 2008 financial crisis. China’s leaders have also grown wary of the work and money that Soros has spent promoting democracy in politically unstable countries like Hungary.
He will almost certainly not be seen at Belmont Park on Saturday, when all eyes turn to Justify’s bid to become the 13th Triple Crown winner in a sport that has experienced a profound shift in recent years, with a rise in splashy partnerships and an influx of overseas money.
“We’ve had a lot of new people getting involved in the business, buying horses,” said Bob Baffert, the trainer of Justify and American Pharoah, referring specifically to the effect of Pharoah’s Triple Crown achievement. “Prices have gone up and everybody wants quality. You’re getting money from the Middle East, you’re getting it from Europe, China. You know, I think it’s really boosted the business at the top level. Everybody wants to play at that level.”