FROM Nenagh in Co Tipperary, William Kennedy breeds and sells flat racing stock under the banner of Stanley Lodge, his property in Cashel owned with business partner John Wall. The first horse they bred turned out to be Bethrah, winner of the Irish 1000 Guineas. From an average of 11 foals each year, the farm has produced eight blacktype horses in the past three years. Stanley Lodge was among the top 10 consignors at the 2021 Goffs November Foal Sale.

William has worked overseas in finance for 25 years and returned to Ireland in 2020. He is more involved with the breeding business now and has strong views on lessons that racing and breeding should take from other industries. He feels that major changes are needed for the bloodstock business to prosper, attract new players and maintain Ireland’s current strong position - and his ideas may not please everyone.

Q: How was the sales year for Stanley Lodge?

A: The foal sales were good. The market was very strong for the right animal, that was obvious in the numbers. Yearlings weren’t great for us but generally we haven’t done well in the yearling sales. I think the yearling market was strong in pockets but it’s a much more difficult market than the foal market, in my opinion. I think you have a higher number of genuine purchasers in the foal market, - much more so than in the yearling market. We, as a business, have therefore intentionally focused on foal sales rather than the yearling sales as our calling card.

Q: So, ideally you would sell all your stock as foals?

A: Ideally but, like every animal, they won’t all be ready as foals by sales time. Some of them will never be ready because they just are not sales horses, or they may have health issues. But ideally if a foal is good to go it will go. If it’s had a small setback or a knock or a cold, or something like that, clearly we won’t go. We’ll wait until the yearling sale. But we generally try and go to where I think there’s a genuine robust competition for stock.

Q: How would you describe the part of the market you are targeting?

A: We try and avoid the bottom level, so we’ll pay a little bit more for the mares going in. The only reason for that is it is a massive numbers game if you are in the lower end. Trying to get into a sale can be difficult, and trying to get buyers see your horse when there’s a hundred like you, it’s not really where we want to be. So we are trying to produce a mid-level to lower-upper-level type. We are trying to produce Book 1 horses but in reality most will be Orby horses and Book 2 horses.

Q: Generally speaking who have your customers been?

A: We’ve probably had the biggest success with end-users. Pinhookers are also very robust to a point. You’d love to be selling to end-users or pinhookers planning on going to Book 1. Unfortunately, sometimes we just don’t have the stock to do it.

Q: You use foal shares as well?

A: Absolutely. As commercial breeders with between 15 and 20 mares, spending a hundred grand or even two hundred grand on each one of those - even if you had the mares - that’s an enormous amount of money and an enormous amount of risk. For those stallions standing at mid- to lower-level fees, we wouldn’t do shares.

Q: How would you explain the strength in the market this year?

A: It would appear that the overseas influence, excluding the Middle East, was much higher. It seemed to be a lot more Americans and Australians buying, and not just horses off the track but even buying foals. I think our top-priced foal went to an Australian purchaser. So there has been an influx of people as Shadwell and Darley had dialled back their spend.

Derek Veitch said in The Irish Field (December 3rd) that the market was surprisingly robust and there were buyers from many places. He also talked about inflation which has probably fed its way through to our market in some respects as well. Because when people see asset prices moving fast sometimes they might play another asset, like the horse market, which they can move around the world very easily. So that may in some respects play into the performance being more positive than we expected.

We’ve just come through the mares’ sales and it is remarkable that the further away you get from putting a saddle on a racehorse the more valuable that commodity is! On the second day at Newmarket, the median was up 75%. I can tell you, as a breeder, if the first foal doesn’t look very nice, doesn’t sell well or doesn’t run well the value of that mare is going to fall incredibly quickly.

To me, looking at it from a commercial perspective, some of the prices were very hard to justify. Clearly if you are buying it for diversifying your broodmare band or going after a new bloodline that’s a different story, but it was just so strong across the board at Newmarket that, as a commercial breeder, it is becoming increasingly difficult to find opportunities.

We’ve been very lucky this year. We have four fillies/mares coming off the track that have achieved blacktype and we will add them to our broodmare band. Trying to buy those in the past month would have been extraordinarily expensive.

Q: Many observers have commented that the strong prices at British sales is hiding malaise in the British racing industry. You used to have horses in training in Britain but don’t anymore, preferring Ireland and France instead. Why?

A: We are commercial breeders and we won’t always sell our horses, so you are going to have to race some of them. If you as a breeder are not willing to race your own stock, then why should somebody else? For many years, going back to the late 1990s, I’ve been involved in horses in the UK but unless you are right at the top end it just doesn’t make sense.

For example, two horses we had training in England over the past four or five years, both of which won three races and were circa 90, didn’t manage to pay for one year’s training fees. That makes absolutely no sense to me whatsoever. So we have moved our horses home or to France, where the prize money is better. It doesn’t mean we won’t have horses in the UK but we need to be very careful what we send.

Q: Couldn’t you have sold those 90-rated horses for six-figure sums to race overseas? Doesn’t British form add value to horses?

A: That is true but if you run well in this country I’d argue you would get a higher value in Ireland. It’s so competitive here that anything that puts its head up in its first two or three races is going to get a good offer. Generally anything that we have run here that’s run well early in its career we have received good offers for them. It’s the same in France at the big tracks at least. Form will sell itself.

Brexit has made it much harder too. Transportation costs have doubled, VAT issues are tedious, which makes life more difficult. ‘Taking back control’ appears to have seriously increased barriers to trade from where I am sitting I don’t think the long-term impact is very obvious at this point for the British voting public but it is painfully obvious for those dealing with it day to day.

Q: What can racing learn from other industries?

In my opinion the business around bloodstock needs to make some big changes in order to weather the coming years and decades. There will be big opportunities in the wake of Brexit and Covid – but also big risks if we don’t continue to attract new players both large and small.

Harnessing technology is something I believe will be key. The opportunities that new technology offers to all corners of the industry should be a major focus of the industry, for example we should, in my view, develop centralised platforms for use by all – small players and large players – for the benefit of all.

Future Irish governments may not be as sympathetic to Irish racing and breeding as past governments have been. We need an industry that is more independent of government yet solid enough to sustain high levels of prize money to be attractive to new and existing owners.

Another major change needs to be greater transparency and better regulation – which comes with inconvenience for the few but major benefits for the many.

The industry needs to attract more new players. New owners, in particular, will likely be looking for new markets in the years post-Brexit and Covid. This is an opportunity that Ireland would be foolish to miss. It would benefit everyone: the entire racing and breeding industry, and all those who are employed within it. But in order to attract new clients and benefit from all the upside that offers, it is incumbent upon all in the industry to ensure that new players believe, legitimately, that they are being fairly treated.

One of the cornerstones of my previous business was treating customers fairly. The same can probably not be currently said of the horse industry. The rules of racing itself are clearly regulated - but regulation of the business around horse racing and breeding is ‘light touch’, to say the least. New owners face the prospect of entering a financially draining sport where their consumer protection consists of nothing more substantive than a new Code of Practice where enforcement and censure are yet to be tested. This is extraordinarily light-touch compared to other industries.

Where trade is unregulated it’s very hard to say what is malpractice and what is not. This makes for uncertainty, and risks alienating the new players.

Some cultural changes are needed – and I know that those words will not go down well in some corners – regarding what is and is not acceptable behaviour. There must, first and foremost, be a major focus on avoiding obvious conflicts of interest wherever possible – and, where conflicts do exist, disclosing them.

Culture takes a long time to change without a firm kick – or, as in most industries of this scale, regulation by means of a carrot and a stick. Thousands and thousands of people within this industry would benefit from improved behaviour by a small minority. I believe it’s incumbent upon our governing body to be more engaged in the regulation of what is and what is not “good practice”.

Q: You are referring to the Bloodstock Industry Code of Practice, which HRI signed up to last August. Is that something you welcomed and do you think it has had any impact?

A: I welcome it but it is only the first step in a long journey. I suppose a question for everyone in bloodstock is: do we believe that we have a problem? Do we have conflicts of interest in the business? Are individuals on both sides of a trade in some capacity? Is it disclosed to relevant parties? If you represent a buyer’s interest you should represent the buyer only. Sales ground chatter would suggest there are often conflicts on trades; has this become culturally accepted? And should we as an industry accept it?

Q: Can you understand why nobody wants to be the first person to put their head over the parapet and say this is happening? Whistleblowers don’t do well in this country, and certainly not in racing.

A: Yes. Breeding, owning and training racehorses is a high-risk business. So you need to protect yourself and protect your business as much as you possibly can. I would assume a lot of people are concerned that if they speak up they may be ostracised by people who feel they are been accused of wrongdoing. So the incentive for them is not there to basically call out what they see as bad practice. It’s a cultural issue and the culture needs to change if we want to attract new owners into this business.

Q: Bloodstock agents are typically painted as the villains of the piece, with reports of some agents asking the seller to ‘look after’ them if they buy the seller’s horse on behalf of a client. In their defence, agents put in hours and hours of work to find the right horse and may feel they deserve more than the standard commission. Is that fair?

A: The business itself is the culprit if it is unable or unwilling to self-regulate and as a result risks destroying itself. This is where the industry needs to help itself a lot more. Agents are just one part of the sum of the bloodstock business: most are doing the best they can in a fairly volatile world. But like all walks of life, there are good and bad bloodstock agents.

If I’m an agent and I’m engaging with you it should be because you are paying me a fair compensation for the job that I’m doing. It shouldn’t be the case that I then need to go and get the other side of this deal in order to finance the work that I did for you. It is impossible to avoid conflicts of interest in every situation but where they are unavoidable they should be disclosed to the relevant parties.

Going back directly to your question, if an agent feels he’s not getting paid enough from his client then it would appear he has the wrong terms of business or the wrong client.

Q: Arqana pays a 5% commission on the purchase price to the bloodstock agent or trainer who has acted as representative for the purchaser. Should that system be introduced in Britain and Ireland?

A: I would welcome anything that offers transparency and clarity for buyers and sellers. As long as the buyer understands that there is a payment being made to the person acting on their behalf and it’s very clear what’s going on. But is it clear that the 5% actually does stop certain people from seeking further compensation from the vendors? I am not sure it is.

Another risk is excessive leverage. The industry must in my view ensure that buyers of stock for resale cannot run up excessive leverage. When people are in a tight spot and need to make deals that is a meal ticket for unscrupulous opportunists. Clearly sales companies have to manage their own credit portfolio but a part of that must be avoiding excessive leverage across the players.

Q: Do you think there was any change in practices on the sales grounds since the Code of Practice was introduced, or is it too early to say?

A: I haven’t had any personal experience of malpractice this year but I couldn’t tell you none is happening.

Q: Would you say that stock you have brought to the sales has not reached its potential price because of your refusal to do what might be termed unorthodox deals outside the ring?

A: I’d put it this way, very good stock find their level but it is interesting to observe that there are a number of people who do not look at our horses.

Q: Let’s move on to stallion selection and stallion fees. What factors do you take into account when arranging matings?

A: Our policy is to first of all find the right physical stallion for the mare. Secondly, we try to pick something that’s going to make a runner because ultimately you are, as a breeder, going to be judged on whether you breed a runners/winners or not. So you are trying to balance the commercial aspect and the racing aspect in making your decision.

Q: Giving your banking background it might be assumed that you must bring a very high level of analysis to breeding or even statistical analysis to your decision making. Do you crunch the numbers as to what works?

A: We look at a stallion’s ratio of winners-to-runners, winners-to-foals, percentage of high-rated horses to runners and what type of mare books are delivering the current results. The number of mares being covered is an important factor and the likely position our mare is on that list in terms of attractiveness. You have to drill down and take personal bias out of the equation.

I like stallions who can get horses with solid minds, horses that are robust and sound and run plenty, run to a high level and horses who really try on the track. Mehmas is the one everyone is talking about at the moment. He’s in fashion. You see his stock trying their hardest to win at whatever level they compete. That’s a trait you want to see coming through in the good stallions. That’s just my perspective and that of my business partner, John Wall.

Q: You brought John and others into the horse business from the world of finance. Did any of your investors walk away from it?

A: Originally five people came in with me. They had nothing to do with racing previously and they knew it was a high-risk part of their investment portfolio. We had a couple of big strikes early and they all made good money out of it. I took the view that as we unlikely to keep getting the big strikes and it would be much harder for those investors to understand the risk/reward in what was at play. John and I wanted to evolve the business and we bought the lads out.

Q: You mentioned you had a bit of luck early on. That was Bethrah, the Irish 1000 Guineas winner?

A: Yes. Bethrah was the first foal for Tullpark, the breeding company we set up. There were six of us in the company at the outset. We sold the mare and kept the sister, the normal thing you would do when you are trying to take some chips off the table.

Then we bred Venus De Milo who raced very successfully at Group 1 level for Aidan O’Brien. Unfortunately she didn’t get her head in front in one of those Group 1s but her dam was a very commercially successful producer for us and she herself produced a further blacktype filly. So early on we had these big-ticket items which was absolutely fantastic. David Cunningham played a huge part in getting us the right pedigrees and establishing Stanley Lodge which is where the main mares all board.

As time passed we’ve tried to get into different families where we thought there was a line or a seam for us to mine but you also need a lot of luck. We were about to dispose of a mare named Paraphernalia and then suddenly she produced three blacktype horses in a row, Camphor, Max Vega and Quickstep Girl.

You cull to be commercial, to try and manage your cashflow, but sometimes you are going to make mistakes culling. A couple of years ago we culled the dam of Elysium and she won two blacktype races since. It is a great game and everyone can get a chance, and fair play to the man who bought the mare from us.

Q: You recently appointed Nick Cope as manager of Stanley Lodge. What’s his background?

A: Nick was recommended to me very highly by a neighbour of mine, James Hanly of Ballyhimikin Stud. For many years James had been telling me that Nick was an up-and-coming star. Nick started with James and also worked in America with Gerry Dilger and with Paul and Marie McCartan in Ballyphilip Stud. He was awarded the gold medal when he completed the Irish National Stud’s Thoroughbred Breeding Course. So he has been though all the top schools, is a very good judge of a horse, understands the business and the market. He has a bright inquiring mind, good outlook, works hard and I think he brings a lot to the table. We’re looking at expanding our boarding operation at the farms. We have over 400 acres and we are only running 20 mares on it.

Q: Is it difficult for stud farms to find good staff?

A: We’re fortunate in having excellent staff. It is about getting good people and building a team spirit, sharing the rewards and trying to constantly improve. It is important to be open minded and take on new ideas and key talent when you find it. We were sorry to see David Cunningham move on from Stanley Lodge recently. A lot of our early success was due to David’s work.

Q: Wishes for the coming years?

A: To breed more good horses and continue to improve the quality of the stock on the farm and increase our boarding operation with a small number of like-minded clients on our farms.