Investment Philosophy
What is our philosophy?
At Asymmetrica, we structure impact investments with asymmetric return characteristics. Our priority is to create a “floor”, i.e. generating steady returns and thus a basis for stable cash flows. Next is the pursuit of superior returns, i.e., returns with disproportionately good risk-reward profiles - asymmetric payoffs.
Investment principles
Our investments are consistent with the Austrian business cycle theory.
1. High Return on Invested Capital (ROIC):
We aim to invest in assets that have the ability at taking investment amount and transforming them into earnings.
2. The investment is robust against changes in interest rates:
We look for assets which their profitability is not dependent on the artificially low-interest rates of central banks. The agricultural projects that we realize should remain profitable and productive well above their cost of capital, irrespective of a rise or fall in interest rate affected by the central bank.
3. Asymmetric upside potential:
Most people believe that there is a proportional relationship between risk and return. Asymmetrica specializes in finding high returns backed by real assets with a low probability of permanent loss of capital. Avocado orchards and regions with the necessary water to grow them are scarce. We believe that owning scarce assets in a world of limited resources grants a superior investment opportunity.
4. Superior cash flows:
Cash flows provide a stable way of determining expected returns. Over a 7-year horizon, Avocado Orchards in Mexico have historically provided an earning yield of approx 25% p.a.
5. Buying assets at a price below their intrinsic value:
We look for investment opportunities, ignored by the market. We specialize in areas where markets are inefficient and capital is scarce in our case agriculture in Emerging Markets.
6. Niche Growth markets with specific, idiosyncratic risks:
We exclusively invest in growing markets where the fundamentals are robust, and the risks are uncorrelated.
7. Unfair advantage reflected in high margins:
Margins of avocado orchards are protected by high barriers to enter the market. It takes four years until a farm gets its first crop and 15 years until it reaches its maximum production. The places that can grow avocados are limited, and the demand is worldwide. For example the average EBITDA margin of an avocado plantation is 65% this is significantly higher than the 12.64% EBITA Margin of the SP500 (S&P 500 Profitability by quarter, Gross, Operating and Net Margin from 4 Q 2023 (csimarket.com)
“Probable things fail to happen and improbable things happen all the time.
That's one of the most important things you can know about investment risk. ”
― Howard Marks