Business

Family office YardHouse Capital is combining emerging market themes with sustainability

Some might see litter blowing along the beaches of Zanzibar as a problem. Martin Rex Empacher, chief executive of YardHouse Capital views it as an opportunity.

In early December, in partnership with Claus Jørgensen’s YardHouse Family Office, he invested in Zanrec a local waste manager. 

Empacher says: “We are seeking to combine emerging market themes with sustainability through impact investing. And when I talk about impact, I talk about creating jobs. If people don’t have jobs, they can’t buy food. And that means there’s no society.

Its backers include DOB Equity, a Dutch family office started by the Tobé family, which is a serial investor in East African social investment

“A lot of impact investors want to clean the sea or do something to the environment. And that’s fine viewed from the West, with its infrastructure and education.

“But if you live in an emerging economy, with a growing population, you need income for basic needs, education and security. You can only afford to provide the rest, layer by layer when people have jobs. 

“If you are a white guy and think you can save Africa, remember a lot of white guys have already been trying to do that.” 

There’s no doubt Zanrec is a green company, collecting waste from Zanzibar, a prime tourist resort, where 96,000 tonnes of rubbish is dumped every year. Zanrec is paid by hotels to get the waste sorted and recycled and wants to grow its subscriber base. It offers a service to local people. It is investing its capital in trucks and infrastructure. But Empacher likes the way it generates jobs.

In his view, the way forward is to invest in local entrepreneurs with skin in the game. Without their efforts – and the jobs they provide – emerging market countries will continue to struggle, as their populations rise and the West deals with their emigrants.

“How do we solve that? Do we build higher walls around Europe? Or do we take our fiduciary responsibility and invest in companies to create jobs?”

Based on current trends and profitability Empacher believes YardHouse’s 12.9% stake in Zanrec will treble in value in ten years, as it replicates its waste collection service in other regions, paid by other hotels.

Its backers include DOB Equity, a Dutch family office started by the Tobé family, which is a serial investor in East African social investment. 

MTI Investment of Sweden was an earlier backer. It is about to complete an IPO after backing other Tanzanian SMEs in dairy products, affordable housing and beauty applications.

YardHouse is seeking other direct investments. It recently agreed to back a fintech company in Brazil, where it draws on the services of ITC Ventures. It is interested in co-investing in emerging markets and considering starting a fund.

It is also taking advice from Danish adviser MiMa on opportunities for natural resources, where Europe has an interest in developing new businesses in areas like battery power, to avoid becoming too dependent on Chinese monopoly providers.

Yardhouse also invests in emerging market stocks, but Empacher is careful to lay down criteria for his managers to avoid tracking the indices: “There’s this herd mentality within the global investment community with some of it driven by passive investing.”  

Rather than large-cap, Empacher likes his managers to invest in mid-cap stocks, not heavily represented in emerging market indices. This constrains the size of portfolios, but Embacher believes it gives him the chance to take advantage of outperforming stocks.

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