Last year, two big Wall Street brokerage houses -- Drexel Burnham Lambert; and Donaldson, Lufkin & Jenrette -- put together an unusual partnership. Bertram R. Firestone, a Virginia racehorse owner and breeder, wanted to sell a substantial interest in his farm's entire crop of two-year-olds, and he approached the two brokers about finding buyers. No trouble, they said, and assembled some 100 well-heeled investors, who kicked in a minimum of $50,000 apiece. The deal -- a limited partnership dubbed Catoctin Thoroughbred Partners I -- raised some $7.5 million. Now Firestone plans to repeat the arrangement for each year's crop of horses.

Other brokers are lining up at the post, too. Advest Inc., a Hartford brokerage firm, is marketing partnerships developed by Centennial Farms Management Co. of Boston. Hilliard-Lyons Bloodstock Inc., a subsidiary of the Kentucky-based brokerage firm J. J. B. Hilliard, W. L. Lyons Inc., is marketing a private placement limited partnership known as Hopeful Racing Partners. And one big Wall Street firm is putting together the largest horse partnership yet assembled to raise capital for two Kentucky breeders. Although Securities and Exchange Commission regulations prevent the company from discussing details of the plan, industry sources say the partnership is shooting for $20 million.

Thus have the packagers and sellers of investments discovered what horse breeders themselves have known for some time: Even investors who don't know a filly from a furlong find something appealing about putting their money into thoroughbred racehorses. In the past, horses that weren't owned by individuals were usually syndicated for sale to a few acquaintances or celebrities in a privately arranged deal. Now, with big brokerage firms getting into the act, an accountant in Albuquerque can own a piece of horseflesh as easily as can a Kentucky colonel. Provided, that is, that he or she is a very successful accountant. Buying into racehorses is not, as one breeder put it, for those who "go through life nursing every nickel." Minimum investments are rarely less than $50,000, and brokerage firms like Drexel and DLJ typically require hefty annual income and net worth qualifications before they will let you buy in.

For those who have the price of admission, the payoffs can be immense. Any horse fan, for example, can recount from memory the story of Seattle Slew. Sold as a yearling in 1975 for only $17,000, he won racing's Triple Crown (the Kentucky Derby, the Preakness, and the Belmont Stakes) in 1977. Then his breeding rights were syndicated and sold to 40 investors for about $12 million, an average investment of around $300,000 each. Recently one of these investors sold his share (without 1984 breeding rights) for $2.9 million. In effect, the sale raised the horse's value to about $116 million.

For every Seattle Slew, of course, there are dozens of nags who never make it out of the paddock. Worse, even the best-looking horses can't guarantee investment results. Devil's Bag, purchased for $325,000 as a yearling, looked for a while like another Slew. The top two-year-old of 1983, he was syndicated for breeding for $36 million before his three-year-old racing season. Then, in March, he lost the Flamingo Stakes in Hialeah, Fla., not only marring his hitherto stellar career but also casting a shadow over his value as a stud.

Both the appeal and the uncertainties of thoroughbred investing reflect the changing nature of horse racing itself. Last year, more than 50 million Americans visited a track, betting a total that exceeded $7 billion. Net purses -- the prizes and stakes shared by the winners' owners -- hit $480 million, up 3.3% from the previous year's total. This year, the figures are likely to climb still higher. On November 10, for example, NBC will telecast live the first Breeders' Cup races, to be run at Hollywood Park in California. Purse money for that day's races alone will total $10 million, and race organizers plan to contribute $10 million more toward increased purse money at other races in the following 12 months.

All that prize money, though, goes to a remarkably small number of horses. According to a study by Killingsworth Associates Inc., a Lexington, Mass. consulting firm, only 354 thoroughbreds brought in more than $100,000 in North American earnings in 1982, and only 11 of these earned more than $500,000. This sharply graded earnings pyramid has created an equally skewed market for yearlings. Each year, the 500 or so top-quality yearlings are sold at two annual auctions: the Keeneland Select Sale in Lexington, Ky., and the Saratoga Select Sale in Saratoga Springs, N.Y. In 1983, the average selling price for horses at these auctions was $393,079, while the average price for yearlings sold elsewhere was $20,590. Betting on a likely winner, in other words, is expensive.

Racehorse partnerships assemble their capital for one of two purposes. Racing-oriented partnerships -- which buy, train, and race thoroughbreds -- hope to earn their money initially through stakes, or prizes, and only later through resyndicating their horses for breeding. They buy yearlings, and stand or fall on the basis of those yearlings' performance. Breeding-oriented partnerships, by contrast, are designed mainly to breed and sell little thoroughbreds. They buy brood mares with good bloodlines, and make their money mainly by selling the mares' offspring.

Racing partnerships are the riskier of the two. "I go out of my way to rub people's noses in the fact that this is a highly speculative business," says W. Cothran "Cot" Campbell, president of Dogwood Farm Inc., in Georgia, who has been putting together racing partnerships for more than 10 years. Campbell's record bears out his assessment. His most successful partnership to date involved the syndication of Proctor, a dappled gray who earned $450,000 for each $21,000 investor share and provided a tax write-off of about $50,000 per investor along the way. Campbell's worst involved four horses who all failed at the track. That partnership cost investors an initial outlay of $26,000 each; in return they got tax write-offs of $23,000 over two years and only a $4,000 cash return.

In theory, breeding partnerships should be more predictable. "Racing is a sport, and breeding is a business," observes T. A. Martin, a former Wall Street investment banker who now owns Kinderhill Farm in Old Chatham, N.Y. Each good brood mare can produce 10 to 15 foals in her lifetime. And since yearlings are bought primarily on the basis of bloodlines, the price each healthy foal brings should be as high or low, relatively speaking, as the mother's.

Campbell, however, argues that among other factors, the rapidly rising prices of horseflesh jeopardize the potential profitability of breeding partnerships. "I don't believe breeding partnerships have much of a future," he says. "The major brokers will pay a lot of money for the creme de la creme, but if a foal from a well-bred brood mare is born with a conformation flaw, the market will be very unforgiving."

In general, if you want to run this investment race, plan on putting your money in over a 15-month period and leaving it there for anywhere from three to five years for a racing partnership or five to seven years for a breeding partnership. Most partnerships of both varieties have definite beginning and ending points, with all assets sold at termination.

Before investing any money, find out about the mechanics of the partnership. Some are "blind pools" -- partnerships that buy horses after the money is raised. If you buy into a blind pool, you are essentially betting that the partnerships' managers can purchase top-quality horses with the capital provided by the investors. Other partnerships are formed to buy horses already owned by the managers. In this case, the experts advise, get one or two already owned by the managers. In this case, the experts advise, get one or two independent appraisals of the horse or horses in question, or ask the manager to provide such an appraisal. Without independent evaluation, you run the risk that the manager has marked the horse's selling price up beyond its value.

Look, too, at how the manager gets paid. While some experts believe that managers should be paid up front for their services, most argue that a good manager should have a stake at risk along with investors -- and shouldn't get paid until the partnership as a whole has made money. "If the promoter is home free when he signs you up," one specialist points out, "you're in trouble." Another smart step is to learn something about the people you will be doing business with. Is the farm -- not the broker -- experienced and successful? Does the deal involve top tier -- and therefore expensive -- horses, or the cheaper but riskier second tier of thoroughbreds? "There's no ticker tape and no Wall Street Journal in this industry," warns William Killingsworth of Killingsworth Associates.

By themselves, the tax advantages of racehorse investing can't make up for the investment's riskiness. The expense of maintaining a horse until it begins to race or until it is sold counts as a loss, and horses can be depreciated over three or five years, depending on their age. But depreciation doesn't begin until a racehorse is in training. Horses, moreover, don't qualify for the 10% investment tax credit, and they must be owned for two years before profits on their sale can count as capital gains. If you are looking just for tax benefits, look elsewhere.

Finally, when and if your broker calls with a horse investment, ask yourself if you really like racing. There are a lot of gambles in the investment world, and thoroughbreds aren't necessarily the most fruitful. What they offer, along with modest chances for big payoffs and limited tax advantages, is the attraction of a glamorous, often dramatic, sport. Racing partnerships in particular offer amenities that other investments can't, such as box seats at the track or even, in some cases, a "free" stay at a luxurious farm like "Cot" Campbell's.

"If you are going to invest," warns Campbell, "you had better love horses. It's a tough way to make money, so the prime reasons to invest should be fun, excitement, and glamour."