Marco Vangelisti left his job as an investment fund manager in 2009, after an eye-opening discovery about the kinds of companies the fund, and its mission-driven clients, were investing in. The first thing he did was to liquidate his Wall Street portfolio and reinvest it in local and sustainable investments. The second thing was to embark on a quest to understand the big picture and the large systems shaping our society—the economic system, the global system of finance and the money and banking system. This inquiry forms the basis of his recent talks. We spoke with Marco about what he’s learned along his journey—and what anyone thinking of local investing should know.
Amy Cortese: You had a lucrative career as an investment manager… what caused you to walk away from that?
Marco Vangelisti: I spent the last six years of my career in finance working for a very well respected investment management firm. I was part of a team managing a $20 billion equity fund investing in emerging markets. We were quantitative managers, meaning that the fund was constructed by a series of algorithms that used statistical models we had built, rather than being the result of stock picking by members of the team. The fund was performing very well and our clients, mostly endowments and foundations including environmental foundations, were very happy with us. I discovered that one of the best performing stocks we owned was a palm oil company in Malaysia that had taken down tens of thousands of acres of rainforest and planted a monocrop of palm oil plants for the international commodity market. Its earnings and therefore the stock price got a big boost that year since the company earned lots of carbon credits for planting trees!
“One of the few investments I made that resulted in a total loss was due to my investing prior to gaining sufficient understanding of the entrepreneur’s character”
I’ve always been a nature lover and a big supporter of the environmental foundations whose money we were managing. When I found out that their money, and therefore my own charitable contributions, were implicated in funding the destruction of the natural habitats those very foundations were created to protect, I realized that the financial system was a very destructive force in the world. The level of opacity and intermediation in the global financial system had concealed until then the disconnect between my personal values and my own livelihood, a cognitive dissonance that, once recognized, made it impossible for me to continue working in the finance industry. That’s what led me to leave a very well paid and rewarding job in the middle of an economic recession in 2009.
AC: What do you look for in a local investment?
MV: Local investing is patient investing. When I invest in a local business, I know I am entering into a long-term relationship with the entrepreneur. We will be traveling companions navigating the ups and downs of building and growing a business for a long time. My first question is, “would I enjoy interacting with this person for years to come?”
The skills and character of the entrepreneur are also key to the success of the business. So the first step for me when considering a local investment is to get to know the entrepreneur. I’m not only looking at her business experience and acumen, but I want to know her character, what motivates her, what values guide her in her life and in the conduct of business.
I have been active with the Slow Money network since 2009, so most of my investments are in food and farming. I’m particularly interested in businesses that represent systemic alternatives to our current economic system and/or that address specific social or environmental problems.
The best example is People’s Community Market (PCM) in West Oakland. I’ve known Brahm Ahmadi, the CEO of PCM, for more than a decade and have developed a deep appreciation for his determination, resilience and commitment to addressing social justice issues. PCM will be a full-service grocery in West Oakland—a food desert in the middle of plenty in the San Francisco Bay Area.
For more information, see our How To Invest Local guide.
The capital raised so far has come mostly from local investors (PCM offered its security through a Direct Public Offering available to California residents) and has no voting rights, but enjoys a preferred dividend of 3%. The capital is at the service of the business and its mission—not the other way around! PCM not only will bring a sorely needed source of fresh produce to the West Oakland residents, but it’s also planning to hire mostly West Oakland residents, a population challenged by very high rates of unemployment. PCM’s common stock will be entirely owned by the people working there so that any economic benefits beyond what is necessary to meet the modest target dividend to investors will accrue to the workers, and therefore to the local community.
AC: Has it been hard to find attractive local deals?
MV: There has been plenty of interesting local investment opportunities in the San Francisco Bay Area. The limiting factor in my case has been the time required for me to get to know the entrepreneur and develop a personal relationship and mutual trust. One of the few investments I made that resulted in a total loss was due to my investing prior to gaining sufficient understanding of the entrepreneur’s character—he simply took the money and ran (actually, simply refused to make any payments or communicate even though his business is still a going concern).
It is time we take a closer look at the very concept of “return”
On the flip side, taking the time to get to know entrepreneurs well turned out to be a wise decision in challenging situations. A few entrepreneurs to whom I lent some money and whose business failed are still committed to eventually make good on their promise to repay – a choice I attribute to the personal relationship we established before my investing.
AC: Tell us about some more of your investments.
MV: Not all my investments are local, but all of them are fully transparent to me—meaning that they are either direct investments I made or, if I invest in a fund, I am able to know all the individual companies in the fund and to assess their alignment with my own personal values.
An example of an ideal investment that represents a systemic alternative to our current economic system is Our Table Cooperative, run by my friend Narendra Varma. It’s a vertically integrated biodynamic farm 15 miles South of Portland, Oregon, managed as a multi-stakeholder cooperative. The farm has a commercial kitchen and a farm shop on site that carries not only farm produce and delicious food prepared on-site, but also locally produced organic and artisanal products. The three main players of the local food system – farm workers, local producers selling at the farm shop, and consumers—can become members of the cooperative, share in its profits and become involved in the governance of the co-op.
About 70% of my investments are Slow Money investments. The remaining are social enterprises, peer-to-peer lending, or investments related to environmental remediation, clean energy or education.
A community can unlock the benefits of local investing only if its investors are able to transcend the strictly financial returns and appreciate the returns local investing offers in terms of local economic vitality and community health. (Continued on next page)