The Times - UK (2022-04-09)

the times | Saturday April 9 2022 55

The ManifestoBusiness

Q&A

Who is your mentor?

My mum and dad are an

inspiration. They

couldn’t be closer after

50 years together

Which person do you

most admire?

My wife Olivia, who with

our four children give

life great purpose

What was the most

important event in

your working life?

Watching the financial

crisis from one of the

biggest trading floors in

the world in 2008.

Sitting back and waiting

for life to evolve hasn’t

felt like an option since

What does leadership

mean to you?

Being clear in

ambitions. Treating

motivated teams as

you’d expect and want

to be treated yourself

Does money motivate

you?

It’s always part of the

end game, but

ultimately only a

currency with which to

enjoy our short time on

the planet

What is your favourite

television programme?

Any re-run of one of our

horses winning

How do you relax?

A good evening sunset,

pint of Guinness and

excellent company.

Ideally all at the same

time

CV

Age: 46

Education: Eton

College, Southampton

University (geography

and economics)

Career: 1999: equity

sales, Dresdner

Kleinwort; 2007: equity

sales, Bank of America

Merrill Lynch; 2016:

chief executive, Alizeti

Capital; 2019: chief

executive, UK Tote

Group. Also co-owner of

Ladyswood Stud; board

member of Epsom

Downs racecourse

Family: Wife Olivia,

three daughters and a

son

owned by Teoh Ah Khing, founder of

the China Horse Club. The Niarchos

Greek shipping family is in, as are

John Warren, the Queen’s bloodstock

manager; Lord Lloyd-Webber of

Sydmonton, the impresario; Lord

Daresbury, the Greenalls brewing

heir and Aintree chairman; Richard

Thompson, the Hillsdown foods heir

and Cheveley Park stud owner;

Sir Nicholas Soames, the Tory

grandee and grandson of the

original Tote architect;

and Dominic Burke,

who made a fortune

in insurance with

Jardine Lloyd

Thompson and is

now chairman of

Newbury

racecourse.

Hedge fund

managers with

plenty to spare are

well represented,

headed by

Toscafund’s Martin

Hughes and his partner

Johnny de la Hey. Frost holds

a stake of about 3 per cent.

The Tote, he says, “has a huge

amount of history. The reason the

Tote was formed still stands today, an

extraordinary legacy which is very

much underappreciated in today’s

world of wagering.” Indeed, as the

firm under his leadership gears up for

its first fully attended Grand National,

its share of the £12 billion UK betting

market has dwindled to less than

5 per cent, with turnover of about

£500 million. Much of that is with

A

nd the winner of the
Grand National, the
banker, the nap, the dead
cert in the world’s greatest
horse race is... the Tote.
That’s because, unlike the fixed-odds
bookies who could lose millions if the
grey mare Snow Leopardess wins or if
a late big gamble on an Irish horse is
landed, it is the country’s operator of
pool betting, where winning bets
share the money staked by the losing
punters — less up to nearly a fifth of
that cash, which the Tote takes for its
administrative and operational costs.
The surplus is then ploughed back
into racing.
That was the idea, at least, when
Winston Churchill set up the
Horserace Totalisator Board in 1928
as a legal way for people to bet on the
horses and as a state-backed funding
mechanism for the sport. But over the
decades that followed that ideal got
lost. The Tote became an
anachronism. It appeared to be going
the same way as the football pools
and Green Shield stamps, hobbled by
years of underinvestment,
prevarication by successive
governments agonising over if or how
the Tote should be privatised and
then the final indignity of being
flogged off in 2011 to the Done
bookmaker brothers behind Betfred.
Pool betting had become a bit-part,
niche player in the multibillion-
pound gambling market that in any
case was beginning to eat itself: the
mainstream bookies were fighting
over whether they should fund
racing; at the same time, their
inappropriate marketing and online
casino games were fuelling problem
gambling.
Into this setting strode Alex Frost,
not so much an angry young man as
an urbane, Etonian City trader who
in 2016 at the age of 40 could not
work out whether he was more
disgruntled with his job on the
dealing floor or disaffected with what
was happening in racing, the sport
with which he is infatuated. Some
people buy another Ferrari as their
retirement present when they quit the
City; Frost left Merrill Lynch and
bought the Ladyswood Stud in
Wiltshire, where the broodmares
produce tomorrow’s blue-blooded flat
horses and jumpers — but he was
still scratching away at the itch that
the British racing game was in
decline. To the point, he admits, that
his wife Olivia could not put up with
it any more and told him to go and do
something about it.
That led to Alizeti Capital, an
acquisition vehicle that Frost set up
and named after one of his slower
horses. It spawned an extraordinary
consortium, an exclusive club of City
money, landed gentry, a smattering of
aristocracy and international high-
rollers. They ganged together, the
Tote was acquired in 2019 for
£115 million and they became
shareholders.
The group was put together by
Frost and Peter Davies, the

Lansdowne Partners hedge fund king,

via 450 private meetings. The biggest

shareholder, putting up more than

£10 million for his 10 per cent stake, is

Lord Spencer of Alresford, the City

broker and former Conservative Party

treasurer. Another 5 per cent is

‘We don’t believe in casino gambling.

Betting on racing is a game of skill’

Alex Frost believes that

investors are on course

for big wins as the Tote

puts pools back on the

map, Robert Lea writes

oncourse punters. Its share of the

online market is much smaller.

The ferociously competitive

gambling landscape has forced the

Tote to cut its historical guaranteed

winning margin of 19.25 per cent. Its

pledge to at least match the starting

price of a winning horse takes a big

chunk out of the profits, as does a

further commitment to pay 10 per

cent bonuses to winners of its online

customers as it seeks to build a digital

presence. That means the modern

Tote is working off margins of

between 5 per cent and 7 per cent.

It has other commitments: the

10 per cent of gross margin that bet-

takers pay in the industry-wide levy

to fund prize-money; and the Tote’s

new owners have said that they will

pay at least another £50 million over

seven years into the sport.

The Tote is trying to distance itself

from the rest of an industry that

Frost concedes is to blame for the

government gambling review. That

could bring in punter affordability

checks. Or, as the bookies complain,

intrude into people’s personal

finances, killing much of their trade.

Frost insists the Tote is on the right

side of the debate. “We don’t believe

in casino. We genuinely think

[betting on] racing is a game of skill.

It is really frustrating seeing gambling

being portrayed as one [entity]. We

are so far away from alcohol-driven,

3am online casino [gambling]. The

opposite to that is the Tote.”

The shareholders of the new Tote

are not expecting dividends during a

five-year rebuild of the brand. Their

decision to invest, though, was piqued

by the prospect of a greater prize.

Around the world, pool betting is the

vibrant and lucrative norm, from the

Pari Mutuel Urbain in France to the

megapools in Hong Kong.

Frost paints the size of the prize. In

Hong Kong pool betting is worth

$12.5 billion a year — from only 85

days racing at a couple of tracks. For

280 days, the betting-mad Hong

Kong public cannot bet (legally) on

any other racing.

For 17 of the best racing days in

England this summer, Hong Kong

punters and other pools around the

world are wiring into the UK Tote.

Frost says that the expected

increase in the Tote’s

turnover is on the lines

of this: in 2019 about

£19 million was

spent on the Tote

across the five

days of Royal

Ascot; last year

with the advent of

this “World Pool”,

the turnover rose

to £25 million per

day. “We want to

put pool betting back

on the map. Anything

else we are doing is

dwarfed by the significance of

World Pool.”

As for more immediate matters,

Frost can be forgiven for being a little

distracted by the second race at

Aintree today, in which Colonel

Mustard, a gelding that he owns with

Davies, runs.

As for the Grand National itself,

Frost likes Eclair Surf, which has

sneaked in at the bottom of the

weights. Owned by Burke, the

selection has the added benefit of

keeping one of his shareholders sweet.

Alex Frost left his job at Merrill Lynch for the racing world in 2016. For the Grand National today, he likes Eclair Surf, below

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