There is serious money at play from horse breeding. At Tattersalls, the largest bloodstock auction house in Europe, trading last year hit a record £260 million (HK$3.4 billion). The average sale price was £55,625, a 55 per cent rise over the average price obtained in 2000.

The auctions are international events and reflect growing global interest in horse racing. In recent years, three quarters of the buyers were from outside Britain. Last year the racing media reported new bidders from Turkey, Libya, Ukraine, India and the first syndicate from China attending Tattersalls auctions.

"There is lots of international money flowing into bloodstock, particularly into British bloodstock," said Windmill Bloodstock Investments director Alex Henderson, who co-founded the company in 2010. "There is always going to be demand from high net worth individuals at the high end of the market. There are only a limited number of Usain Bolts in the horse world, and everyone is trying to buy one," he said in reference to the six-time Olympic gold medallist sprinter from Jamaica.

However, the British foal crop has been flat or falling in recent years. According to the British Bloodstock Association, there is a 20-year average of 5,300 foals born in Britain. In the past five years, partly due to the financial crisis, which hit investment interest, the average fell to 4,815.

Good breeding is vital in a sport that can trace a horse's bloodline back to the 17th century. It was then that British horse owners started cross-breeding native mares with three imported stallions: Darley Arabian, Godolphin Arabian and Byerley Turk. The progeny of these three stallions formed the beginning of a thoroughbred tradition that procreated and grew to include the horses now galloping past the stands at Happy Valley and Sha Tin.

Breeding, or putting a horse "out to stud", is an important factor in the economics of owning a racehorse, as the top ones can command high fees in retirement.

In February, Windmill Bloodstock mated one of its horses, a top rated two-year-old filly named Roz, with Oasis Dream for a stud fee of £85,000. Oasis Dream has sired a succession of highly regarded progeny, says the Tattersalls Sales Book.

Last year Oasis Dream's top rated yearling, a horse aged between one and two years old, sold for £1.15 million.

The fund's strategy is to match two premium bloodlines and sell mares "in foal", meaning while pregnant, for a healthy premium. "We will be selling the hope value of the unborn foal. The mares we put to a very high-end stallion who is appropriate to her bloodline, her confirmation and her background," Henderson said.

It's a quick turnaround, but the goal is to return investors' money within two years. The fund targets a 25 per cent annualised return.

"It's not buying one-twentieth of a horse or buying as a foal. It's a neat hybrid," said Hong Kong investment banker David Biller. "You are de-risking the investment somewhat, and you are not taking massive principal risk."

Biller invested a six-figure amount (US dollars) in Windmill Bloodstock.

While good bloodlines are important, the consummation of two champion thoroughbreds does not guarantee a Derby winner. "You may have an Einstein who's a genius, but he may not pass that genius factor down to his offspring," said Archie da Silva, a Hong Kong businessman and owner of the internationally acclaimed horse Silent Witness.

Da Silva bought Silent Witness in Australia, but had him gelded before his potential was fully appreciated. Trainers believe gelding makes stallions easier to manage and makes them more manoeuvrable at high speed. Silent Witness retired to Australia in 2007.

For most owners, racing is more a passion than an investment. A horse would need to win at least six races to cover its cost, said da Silva.

In Hong Kong, the first recorded horse race at Happy Valley took place in 1846. The Hong Kong Jockey Club was founded in 1884. Club members can apply to own a horse by entering a lottery. Lucky winners can then import a horse. The club limits the number of horses available for racing, and breeding is not allowed because of limited land and facilities.

Windmill Bloodstock owns three mares: Bewitchment, bought for £105,000, and Shanya, for €48,000 (HK$508,000), according to public sales data. The horses all stable at Kirtlington Stud near Oxford and are managed by Henderson's business partner, Charlie Budgett, who represents the third generation in his family to breed thoroughbreds.

The mating process is clinically planned. A vet decides the most fertile time, specific to within half a day, for the conjugation to take place. At the appointed time, stable hands hold the mare steady to help ensure its hind legs do not kick out and damage the stallion. Preserving the monetary value of both horses is paramount.

Mating takes place on a "no foal, no fee" basis, and Henderson says the horses are insured in case of injury or death. In the future Henderson may expand the fund's mandate and buy stallions capable of mating with 150 mares a year.

Alfred Fung is interested in the diversification aspect of the investment and likens it to a venture capital project.

"The criteria in my mind are more on the qualitative side than the quantitative," said Fung, who sees it as a chance to learn about racing. "Knowledge is something that I look for. I have no knowledge about horses."

Fung invested HK$1.5 million out of his family's HK$500 million investment fund, which he oversees as chief executive of asset management firm HT Capital. As a member of the Jockey Club, Fung says he talks about investing among friends and is now submitting his name into the club lottery in the hope of buying a horse.

"A lot of gamblers in Hong Kong don't know about bloodlines," he said. "I think this can give us a deeper perspective on the horse racing industry."