While Kelly went with an all-in strategy on the Zoustar filly, it is much more common to see investors spread their risk across several horses. This allows them to look to capitalise on the opportunity in the market while mitigating the impacts of injury, mishap or bad x-rays, which may impact a horse’s saleability as a yearling, or even the chances of it getting to sale at all.
In many ways, pinhooking can be a rollercoaster, with fluctuations in fortune, but Mee said keeping that long-term view and sticking to the plan is key to success.
“I worked for a ready to run guy called Eddie Woods in Florida and he told me that 25 per cent of them won’t work out, whether it be bad x-rays or that they don’t grow out, 50 per cent, you might get your margin, your 10 to 20 per cent upside after cost, and 25 per cent, you’ll hit the home run with,” he said.
“I’ve found that to be true, whether it be buying foals, or buying yearlings for ready to run or even buying mares in foal to sell those foals later on. It holds true in all those sectors in the market.”
The entire pinhooking process may be subject to market fluctuations and fashion, but the one aspect pinhooker does have control of is what horses they buy, who they buy them off and how much they pay for them. That, for Mee, is crucial.
So too is having the right farm to then raise the horses from that foal to yearling stage and take them to sale. In terms of what they sell for as a yearling, that is largely up to the market.
The statistics since 2013 across the main three Australasian yearling sales tell us that while pinhooking has been profitable, the margins can be thin. Of the 1,096 horses sold as pinhooks through the premier books at Magic Millions, Inglis Easter and New Zealand Bloodstock since 2013, the average return on initial investment is $63,000.
When you factor in $30,000 of pinhooking costs, that takes that average profit to $33,000, or 27 per cent of the average price of those horses ($114,000). The median of those figures tell us that half of those 1,096 horses were traded either at a loss or at a profit of less than $50,000.
It’s also worth noting those figures don’t count the horses that were offered as pinhooks and were passed in, or the ones that didn’t make it to sale at all.
“If you can get that 25 per cent on your investment, then it’s a very good year.” Mee said. “When you compare it to investing in other asset classes, it can be a good return.”
But managing clients’ expectations and their investment is another major part of the role for an agent like Mee.
“It’s about what your appetite for risk is,” he said. “You learn from experience, you need to keep an inner circle. Getting new clients involved can be problematic, you need to have people that can trust and understand it.
“As an agent I’m obligated to tell them the risks. But it is about trust and I take spending other people’s money very seriously.”
ANALYSIS | Wild horses can’t stop another Gold Coast spending spree