Melbourne Cup: Preferment to win, financial analysts predict

Other "live chances" include Criterion, Fame Game, Who Shot The Barman and Hartnell.

The investment house's "quants" spend most of their time sifting through economic and market data in order to identify investment opportunities, but have somehow – somehow – made the massive leap from finance to gambling.

Just to make clear that investing and punting on the nags are worlds apart, here is BT IM's head of fixed income Vimal Gor:

"It's pretty much the same thing."

Right.

"If you have a bunch of assets it's about judging the odds of one performing against the other," Gor continues. "I'm firmly of the view that if you have a process you can manage any type of assets, whether that's foreign exchange, fixed interest or horses."

So now that we have that cleared up, let's turn back to how his team of highly skilled analysts – led by their resident horse expert and sometime cash portfolio manager, Steve Campbell – came up with the Cup predictions.

The first step was to cut the "ideas that have no money-making potential". There are three factors that pretty much consign a horse to the loser's circle. If a nag hasn't raced in Australia in the past three months, it's out. (For the racing historians, Vintage Crop in 1993 remains the only horse to have won the Cup without having a start in Australia in the three months prior.) That gets rid of six of the 24.

Next are the odds. Horses priced above $21 "have a disproportionately lower chance of winning than their odds would suggest", the wonks say.

Finally, a horse must have finished at least in fourth position at its most recent start – unless it was the Cox Plate, which has provided four of the last 10 winners and is run over 2040 metres, well short of the 3200 metres of the Cup.

That process of elimination leaves Preferment, Trip To Paris, Criterion, Almoonqith and The United States.

But investment is a qualitative as well as a quantitative game. To this end, the analysts assess the 24 horses with these factors in mind: barrier position (barriers five to 14 the best); handicap, in both absolute (favours better performed horse) and relative (too confusing to summarise) terms; form (pretty self explanatory); and the trainer and jockey.

BT's analysts then overlay these findings with their own judgement and experience – the art as opposed to the science of investing/gambling (What? More similarities?) – to come up with Preferment, Trip To Paris, Criterion, Fame Game and Who Shot The Barman.

So, all in all:

• Best Bet: Preferment
• Best each way bet: Trip To Paris
• Best trifecta: Preferment, Trip To Paris for 1st, include Fame Game, Who Shot The Barman, Criterion and Hartnell for 2nd and 3rd
• Best roughie: Hartnell

But what about that other big event tomorrow - the Reserve Bank of Australia's interest rate decision?

"We think there is a very good chance that the RBA cuts tomorrow," says Gor. "If you really want to get bang for your buck, then the RBA to cut into Preferment/Trip To Paris quinella at $105 looks good value."

For the record, markets are pricing in a 44 per cent chance of a cut to 1.75 per cent on Tuesday afternoon, according to Citi.

Just as a final word, Gor can't help but contrast horse racing and central bank policy making.

"If a horse lets you down, it's off to the knackers yard," he muses. "In the central banking world if you make a hash of it you can always rely on the autobiography book tour - have you seen Ben Bernanke is on his at the moment?"

Maybe the worlds of high finance and horse racing are quite different after all.