The world economy is undergoing a turbulent phase owing to the prevailing geopolitical scenario. However, India continues to hold a strong position, for it continues to register a phenomenal growth rate and has the potential for investment in key sectors such as infrastructure, energy, etc. To delve deeper into the same, we spoke with Carlos Santos, an economist and the founder of Ethos Asset Management, a multinational full-service project financing company that recently entered the Indian market with major investment plans. Excerpts from the interview:
What encouraged you to take the entrepreneurial plunge at such an early stage in life?
After completing my bachelor’s, I worked as a Visiting Professor at the University while pursuing my master’s. During my master’s, I was working on a prediction model that would allow one to anticipate the movements of the financial market and its securities. The work was a challenge for the students, wherein they used and developed an algorithm to predict whatever markets desired. Some did car sales, others focused on burgers and I decided to focus on the financial movement of markets.
When I had some preliminary data on the algorithm capacity of prediction, a professor colleague of mine, previously my Professor, saw the results and challenged me to try to go and present this to some investment banks. He was connected to some top-level executives of some investment banks in the USA and Europe, where I shared my presentation and they were interested in buying the algorithm. Despite my colleague Professor via phone trying to incentivize me to sell, I refused to sell, though I said that I would lease the algorithm to plug into their brokerage accounts. That was why I started the first company back in 2012. To lease the algorithm and receive royalties from that.
Tell us about your journey and what led to the inception of Ethos AM.
My journey in the financial world dates back to my academic background, where I studied Economics and then pursued a master’s while at the same time being invited as a Professor at the University. My Masters was in Finance, Accounting for Banking and International Taxation. That led me to develop an econometric work of prediction with an algorithm to anticipate the movements of the financial market. I understood that the market had space to integrate technology for better results. Banks didn’t have an incentive to predict better than what they were doing because they were paid on Assets Under Management, trades, and Loans. To be more accurate, it didn’t bring them any extra return. With that said, I decided to collect data up to 100 years back (when the average of the market goes back 25 years) and some data generated via proxies were based on the fact that didn’t exist in the form of current assets, and that allows us to have more precise results and better returns. With a Professor colleague of mine, we realized that this was remarkable and we tried to place it in the market. Despite the market’s interest in buying, I rejected the belief that such an earlier proposal would mean that a bigger value would be behind what I had in my hands. That was what created Ethos, to receive royalties from the leasing of the trading property algorithm.
Kindly share some details about Ethos AM. Also, tell us about your global presence.
Ethos provides debt financing, with uniquely favorable terms, designed to allow select companies with impactful projects to invest in themselves and fuel their future success. Ethos believes the most impactful projects have both profit and purpose. Because when the right project finds the right model of financing and support, the positive impact can be felt far and wide. First and foremost in the return on investment, but also the jobs created and communities transformed.
As an example of what we do, we can look to Macusa Port which we financed and we continue to finance its development. It is a deep water port in Macusa Mozambique. An area of the globe once severely impacted by the Civil War was people living in the middle of no houses, schools, or even hospitals. We came to finance TML and developed an asset that will generate long-term prosperity for itself and the country representing a potential 20% of the GDP of Mozambique. People will be part of the communities around them and earn a purpose in life, a job, a house, a school for their kids, and health support.
Financing and backing the future of this type of project is what Ethos is about. Today Ethos has offices in Washington and Headquarters in California, offices in Brazil, South Africa, Portugal, the UK, and Turkey. We financed 90 projects across 72 countries, with more than 1.4 Billion USD invested during the last 11 years.
Our priority markets are the USA, Brazil, UK, Turkey, and Mexico but we aim to bring to the top 3 India and Southwest Asia in the following 3 years.
Can you please share your India plans? How strong a pull factor was India’s economic growth?
India is a very attractive market to our Group because, in the last 20 years, no other economic growth has been at par with the same rates of the India Sovereign. Their growth is more than double the average of the world economy in the last 10 years and the population in 2023 makes it the largest demography in the world.
These two factors combined with the fact that industries relevant to the GDP of the country mirror the Investment Policy of Ethos, where Infrastructure, Energy, Agribusiness, Manufacturing, and Information technology assume a relevant position.
In India, we will deploy USD 100 million until the end of the year 2023 and deploy USD 200 million in 2024. In 2027, we plan to take it up to USD 350 million and a cumulative USD 1 Billion up to the end of 5 years.
What prompted you to enter the project finance market?
The project finance is nuclear to rebalance and hedge our portfolio of trading. Our trading activity is a short-term, high-frequency, and volatile return. After understanding the efficient portfolio only, we could have 80% of our assets in trading and 20% should be invested in long-term investments. We started to think about what type of investment could give us such a typology of return.
During the process, a lot of experts said to us that we should invest in US treasuries that in the end would be a secure long-term return to rebalance our trading portfolio. I was always cautious in believing it, as the treasury may be affected in a crisis moment. A couple of months ago, with what we saw in the USA banks we realized that it was correct. And that was a matter of pride too to see that 11 years ago, we started to do project finance because it was the best long-term return that could make our portfolio efficient. At the same time, we were able in such a way to supply one of the largest needs of the world in finance – project finance for the development of long-term prosperous projects.
How do you foresee the global economy under current circumstances?
In the moment to talk about the future we need to be careful because the world economy is facing one of the most challenging moments that we ever faced. After the COVID pandemic and lockdown, one war in Ukraine was followed by truly significant inflation, and a new war is starting in Israel. All these events shall make us alert because inflation which was starting to be controlled after multiple increases in interest rates, can rise again. At the same time, we cannot ignore the world effect that this can have on some relations between countries, with a direct effect on commodity prices.
But as all challenges are opportunities that come through, we see the present as a moment more relevant for private debt investors, who can help the economies to grow, communities to be transformed and jobs to be created. Ethos is ready and excited to take the position of number 1 leader in the global private debt market.
Kindly share the net worth of Ethos AM.
Ethos has 7.5 billion USD of total assets with 1.4 billion USD being invested in projects and 6.1 billion USD in trading. Our equity portion is around 6.9 billion USD and 600 million USD in liabilities.
What are your hobbies? What do you like doing when not working?
I would say that to make Ethos a global company, as of today my life is being Ethos and Ethos my life.
But I love to travel and find new cultures and places. I am lucky that my work gives me such pleasure. I also like to read books about history and economics, which are to me a pleasure.
What thoughts would you like to share with budding entrepreneurs?
Work hard and focus on your goals. Understand that failure is part of the steps to be closer to success. Never stop working.
