How Acacia Capital Integrates Environmental Impact into Investment Strategies
FOUNDED
2012
LOCATION
Mexico
FOCUS AREAS
Value investing across asset classes
FOCUS GEOGRAPHIES
Mexico, USA, EU, Latam
What motivated you personally to get started as an investor? Please briefly share your story with us.
It has to go back to a very early stage in my life. I guess I was around six years old, whenever a kid loses his first tooth. When I lost my first tooth, my father, who is also an investor, proposed an interesting deal. Instead of spending the money, he suggested I invest it in the stock market, promising to double whatever I invested. This sparked my interest in investing and entrepreneurship from an early age. I quickly started thinking of ways to earn more money to invest and double my returns.
This arrangement taught me valuable lessons about patience and long-term thinking. My father had strict rules about not touching the investment for X amount of years, which helped me understand the importance of not being impulsive with my investments. This principle of long-term commitment and patience has been crucial in my development as an investor.
Overall, my early introduction to investing, guided by my father’s wisdom and strategies, laid a strong foundation for my passion and approach to investing today.
More specifically, what was your introduction to investing in private markets?
I think you can link both of them together, as from a young age, I was always hustling and exploring various entrepreneurial activities. However, my more formal introduction to investing came when I started studying Economics at university. During that time, I immersed myself in the works of renowned investors like Warren Buffett, George Soros, and Howard Marks, fueled by my interest in reading, inspired by my mother, who is a historian.
My formal education in private markets truly began when I joined Sabino Capital, an investment partnership founded by my now business partner Alejandro. This was my earliest and most impactful schooling in investing. At Sabino Capital, we focused on both private and public investments, viewing them through the same lens of value investing. For us, it has always been about finding value, whether it’s on a Bloomberg terminal or within the dynamics of a private company. This holistic approach has shaped my understanding and strategy in both public and private markets.
We would love to learn more about Acacia’s integration of environmental and social impact into your investment philosophy. What does this impact focus entail?
At Acacia, our integration of environmental and social impact into our investment philosophy is driven by two key principles.
Firstly, it stems from Alejandro’s strong personal commitment on these issues, which has permeated throughout the entire company. Alejandro is deeply engaged both personally and philanthropically in these areas, and this commitment is reflected in our corporate culture.
Secondly, from an investment perspective, we believe that you can do great by doing good. As long-term value investors, we understand that intelligent investing involves considering the broader impact of our investments. History has shown that the most successful and sustainable investments are those that benefit both society and business. We find that aligning with management teams who share our values leads to better collaboration and outcomes. Ultimately, we believe that integrating environmental and social impact into our investment decisions is not only the right thing to do morally but also the smart and correct approach for long-term success.
How does Acacia Capital’s investment philosophy extend to your real estate and hospitality ventures in Mexico? Can you provide a recent example?
A prime example of our commitment to environmental impact is our work with Club de Patos. Originally a hunting lodge, we have transformed it into a conservation lodge. Our program focuses on restoring the mangroves, ensuring the lagoons remain pollution-free, and providing a sanctuary for a great number of mangroves types and fauna. As a result, the area now boasts one of the highest densities of bird species in Mexico.
In our hospitality business, we are developing lodge exploration circuits that offer our guests immersive experiences with Mexican culture and nature, allowing them to connect deeply with the environment and heritage of the region.
Over the years, what have you found to be your biggest challenges as an investor? Are there any that are specific to Mexico?
I began my career in 2006, just before the global financial crisis hit, and later faced another significant challenge with the onset of COVID-19. These periods of market turmoil have been exceptional learning experiences, highlighting the unpredictability of market conditions.
However, I believe the greatest challenge as an investor is dealing with misalignment of principles with management. This issue is particularly critical when everything appears favorable, and there’s a temptation to overlook fundamental discrepancies. This challenge often surpasses market crises because it strikes at the core of an investment’s integrity.
To mitigate this, it’s crucial to establish and adhere to a robust set of principles, both personally and institutionally. A solid framework helps filter out non-fundamental noise and focus on what truly matters. This challenge is even more pronounced in private investments, where management’s ability to raise capital may overshadow fundamental alignment. Without this alignment, investments can drain resources and misdirect efforts, highlighting the importance of ensuring that management teams share your foundational principles.
Which specific industry trends have influenced your recent private investment decisions, considering the rapid changes in the private investing ecosystem and global macroeconomic landscape?
There’s a saying, “Beware of the man of one book,” which is crucial in value investing. We don’t see value investing as a strict set of rules; it’s about common sense and intelligent investing. To stay sharp, reading widely and keeping an open mind is essential.
For technology businesses, traditional metrics like book value don’t apply, as much of their value is intangible. So, our focus is on identifying real value and minimizing risk while maintaining a long-term perspective. This means continually reassessing the value we’ve identified.
We also look for trends that challenge market efficiency. For instance, high-frequency trading and the shift towards passive investing create market inefficiencies—perfect opportunities for value investing. Over the years, we’ve found many overlooked opportunities precisely because of these inefficiencies. Staying open and ready to act on these insights is key.
In conclusion, we’re open to new trends, new information, and new ways of doing business. We continuously evolve our methodology, staying critical and adaptive. This approach helps us assess market changes and their potential impacts, ensuring we can capitalize on profitable opportunities.
What are some of the best investment lessons you’ve learned during your career?
I don’t have one standout lesson. For me, investing is about consistency and surrounding yourself with good people whom you admire. It’s the day-to-day lessons and interactions that shape your approach. While these lessons might not always translate into dramatic anecdotes or big wins, investing, like life, is a continuous journey of learning and growth.
Ultimately, the key takeaway from my experience is the importance of consistency and cultivating relationships with people you trust and respect. These principles have been foundational to my approach.
What’s your favorite non-business interest or hobby?
On weekends, you’ll often find me reading The Economist or Financial Times, or books on economic history. I also enjoy staying active through sports, particularly biking and running, and I’m an avid fan of football.
Please leave us a book recommendation.
The one that I’m currently reading: “The Price of Time” by Edward Chancellor. It’s particularly relevant for investors today, as it delves into the history of interest rates and offers valuable perspectives on our current economic environment.
On a scale of 0 to 10, how optimistic are you about the current market conditions?
It’s complicated to assign a single number because our approach isn’t based on a simplistic bullish or bearish dichotomy. We have a well-educated opinion on the market, largely influenced by economic cycles. Currently, we see the economic cycle as being quite advanced, which makes us more cautious about valuations.
However, we’re not extremely bearish either. We don’t think intelligent investment opportunities are falling from the sky right now, but that doesn’t mean there aren’t any good opportunities. We invest on a case-by-case basis and are seeing many market inefficiencies that present promising opportunities in our portfolio and pipeline.
In summary, our optimism isn’t easily quantifiable with a single number. We are cautiously optimistic, recognizing both the risks and the opportunities in the current market.
