Tom Ludt has done a lot in horse racing. He was the president of Vinery, the chairman of the Breeders' Cup and has worked for the Stronach Group. But never has he been involved with a project as ambitious as Phoenix Thoroughbreds, the brainchild of Amer Abdulaziz. Ludt was hired in December to head the U.S. operations for the trail-blazing stable that has emerged in less than two years as a major force on the global racing scene and is spending millions at the sales in order to achieve its goals. Pioneering a new concept, Phoenix is not your traditional stable or partnership. It is actually an investment fund.
Ludt was a recent quest on the Thoroughbred Daily News podcast, brought to you by Taylor Made. Excerpts from that podcast appear below:
TDN: It's well known that investing in Thoroughbreds can be lucrative, but at the same time it's a very risky venture. How hard has it been for the Phoenix team to get people to come on board as investors in something as new, different, and risky as a race horse investment fund?
TL: You're right, it is a very challenging sport. And I don't know if I'd ever call myself an expert, but I think one of the reasons he sought me out was that during my term at Vinery we were quite successful in turning horses around. Now sometimes that's a little bit of luck, but I've always said you earn your luck. And Amer's got a very vast reach–obviously, most of it's European and Mid East-based. It's actually a little bit more challenging for the Americans to get in this fund for tax purposes and that's more of an accountant's answer, but I've listened to the conversations and it is difficult. I faced the same question a lot in my past at Vinery because we did things a little bit different. We made some decisions from the outside that didn't quite make sense to the common horse person, but you have to know the vision. And getting to the point of Phoenix, making an investment fund makes it difficult, but at the same time you just have to be smart. You have to say “no” a lot more than you say “yes.” It's a sport, as we know, where we lose more than we win. But you have to find value, and when you find value and you find returns, you have to capture it. We have had quite a few of those success stories and we're building one right now at the racetrack with that Group 1 win with Advertise (GB) Showcasing {GB}) (in the GI Keeneland Phoenix S). So yes, it's difficult and you can't give out guarantees, but at the same time if you put a good team together, you use a lot of discipline and you take your losses when you have them, you can be successful. That's probably the hardest part that I think people don't understand. Once you purchase a horse, it's kind of like the odds on the tote board. When they break from the gate it's all irrelevant. We have to make decisions and sometimes you have to take your hits right away so that you don't get burned in your overhead all through the month. That's just one of things I think I did very well at Vinery and hopefully I'll continue at Phoenix.
TDN: You said earlier that you're not that involved in the nuts and bolts of the finances, but what is it that you do for Phoenix? What, really, does your job encompass?
TL: Amer put me in charge of the entire equine operations. We're much bigger than people think. We have 150 horses currently in our operation. We have interests in three stallions in Australia and two stallions in the Northern Hemisphere. We've got 25 mares in Australia, we only have eight here in the Northern Hemisphere. We have 47 race horses in the Northern Hemisphere, we have 13 in the Southern Hemisphere and 10 yearlings that become 2-year-olds right now, so we really have 23. My job is to manage that operation, and it can get tricky. It can get challenging with time zones. I deal with our financial operations in London, which is eight hours different than me. Our head office is Dubai, which is 11 hours. And my team in Australia is 17 hours. So I have a challenging job. But what I do is manage our operation from top down and review every invoice. That's probably the most cumbersome thing for a sales guy versus a financial guy, but it keeps you in check with everything that's going on. We're always looking for horses–no different than anybody else. But one of the strengths that we have is we're cash rich. So we can take advantage of that. We're looking at some horses in Argentina right now just because the market is so bad there and we have cash. There a lot of horses that win and get popped out and everybody wants to buy them real quick, and they're a million bucks. And those are the ones we pass on, but we've had some great success stories recently. So my biggest job is to evaluate. I try to use examples for people that aren't in the horse businesses, so one way of looking at it is we're almost, to a degree, trading dollars for dollars. And hopefully we get smart and get lucky. I mean there's success and there's obviously failure, you just have to keep ahead of the game.
TDN: Phoenix is based all over the world. But it appears that we're seeing a shift. Is there now an added emphasis with Phoenix on U.S. racing? And if so, why?
TL: Australia's very lucrative and it's actually very fun. It's just very far. People have probably read about it–the average person in Australia follows horse racing. I think it was one out of every 12 Australian citizens owns a piece of a horse. You can make money racing because their purse structure is so strong. So we do quite well down there. I've made some significant changes since I've taken over and diversified and split up our stuff just because I've always believed in that. So we're dealing with four farms down there for our mares and seven trainers. But it's a very lucrative program down there. You just have to be sharp and you have to have a good team. As far as the Northern Hemisphere, yes, there's been somewhat of a shift partly because I live here and I like America. But we do extremely well in Europe. The challenge in Europe is it is truly a sport of kings because it's very difficult to make money over there on the racing side. Knock on wood, we're doing well. You'll see us continue to buy horses in Europe and bring them over to the States just because as good as it is over there, it's a very small, elite program up there and hard to make money. Anything that we think has a better opportunity over here, we'll shift it over here. I've really only been running the whole operation for probably five months. Selfishly, for me, I want there to be an emphasis on America. Amer agrees and sees it and understands the opportunity over here. So yes, we will continue to grow over here because it's probably the smallest area we're in right now.
TDN: Phoenix has already spent huge amounts of money at the sales. There's also been some change over when it comes to the people picking the horses. So who is doing that now? And how involved are you in that process when it comes to picking out horses at the sales?
TL: Ultimately, every purchase we make is my sign off. So I try to physically be at the sale. We're developing a team. I've changed the program. It's based off of my past and what I believe is the right way. One of my key employees is Dermot Farrington, and he's based in Europe. He spent an enormous amount of time in Australia and I'm bringing him over here for the September sale. He's one of my key guys. I've had a philosophy and I learned it over time. I like to get multiple opinions. I use our trainers–any trainer that trains for us–and I ask for their feedback and I find that to be very successful. Trainers, they all look for different things. The funniest part about the yearling sales is we all look back when a great horse wins at $20,000 and everybody analyzes what happened. Well it just shows you how difficult this game is. I've been very strongly opinionated that you get as many opinions as you can and then you narrow it down. It's just like a filtering system. We do that. We look at the horse, then we look at the pedigree, and then we determine price. Then when the price goes through, sometimes we get aggressive, sometimes we pass. I ultimately make every decision. I learned a lot over the years, but I've also learned that the greatest advice in the world is using multiple people and getting multiple opinions.
TDN: Phoenix bought seven horses at Saratoga for a total of 3.66 million, which is not chump change, yet Amer has been quoted as saying he will be spending “huge” at Keeneland. Is that just his enthusiasm? Or are we going to see some sort of spending spree that is really going to grab everybody's attention?
TL: Obviously, it's his enthusiasm. We will buy a lot, but when you look at the word huge, we are already spending huge amounts of money. I've bought a lot of horses privately over the last few months, and so you have to take that into consideration. As far as dollar value per horse, we believe the sweet spot's $300,000 for these yearlings, but as you know, sometimes you get them cheaper and sometimes you stretch. As far as the budget, I'm not going say that publicly, but we'll buy a lot of horses. But at the end of the day, we're not going to make a splash bigger than we've already made.
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