Ethos Asset Management Inc. was founded in 2012 in Portugal by Carlos Santos with the goal of launching its own designed trading algorithm – a novel trading intangible asset with considerable value in its prediction/measurement ability and compounding potential. At the time, Ethos licensed the algorithm to big investment funds in exchange for royalties. Carlos states, “When we entered the market in 2014 and 2015, these investment funds were trading around 300 billion USD through this structure. Due to the volatility of the market resulting from the sovereign guarantee crisis in Europe, these investment funds proposed to Ethos to operate in a different structure that could avoid their exposure to the volatility. To achieve this, they sent the funds to Ethos, who traded on their behalf and paid a fixed profit.” He goes on to say that this was extremely beneficial to Ethos since it boosted overall assets to a new level while also allowing Ethos to get higher spreads on securities purchases.
When Carlos Santos was appointed as a relevant advisor for Monetary Policy in Dollars for independent reasons in 2019, the Ethos board of directors decided to modify the company’s course and no longer lease the algorithm or trade on behalf of other parties. Ethos moved on to the next level, in which it solely traded its own money.
Throughout these years, and going back to 2012 for hedging/rebalancing its asset allocation in trading, Ethos has invested 20% of its assets in project financing while keeping the other 80% in trading. Ethos’ projects have mostly concentrated on energy, infrastructure, and the industrial sector in order to achieve this diversification goal. The majority of these have taken place in the private sector, with a minimum ticket size of US$ 50 million.
A Global Service Provider
Ethos is a project financing organization with a worldwide reach. It funds government and privately funded initiatives on every continent and privately funded initiatives. The company invests in projects and helps clients restructure debt. Ethos has created a one-of-a-kind risk modulation strategy that allows them to provide funding on conditions not available in traditional financial markets.
The Ethos business model’s long-term viability and security are built on three distinct financial market innovations:
- Algorithm of trading with unique accuracy and compounding power in the market (source of funds);
- Ethos’s project finance model is based on setting aside funds from the trading piece and not raising capital from normal markets such as banks or funds (this allows Ethos to have a unique opportunity cost and offer prices of finance not available in regular markets); and
- The collateralization structure of the deal through financial guarantees allows Ethos not only to migrate the operational risk and macroeconomic risk to the banking system but also to trigger an indirect return on the project in question.
Ethos’ business structure allows it to have a very strong financial capacity that is both sustainable and unaffected. Ethos’ debt-to-asset ratio is less than 16 percent, while its asset-to-equity ratio is less than 84 percent. This means Ethos is continually trading five times more money than it is investing in project funding.
Ethos added a very strong corporate culture to this financial stability, with Knowledge, Professionalism, Dedication, Excellence, Integrity, and Social Responsibility directing all of the art of Ethos’ acts. Ethos established a unique type of philanthropy as a result of a very strong corporate and social responsibility philosophy.
The strategy addresses market issues such as foundations failing to distribute cash to their objectives and financial firms such as Ethos lacking the time and structure to focus on social responsibility on a daily basis. The Philanthropic Financial Facility (PFF) began as a standard finance facility, but Ethos would convert the financing into a non-repayable grant if the client met its economic and social goals satisfactorily, as shown and certified by an independent audit. Clients that apply for the PFF would go through the same onboarding and approval procedure as other Ethos clients, which means Ethos would evaluate submitted projects in the same manner as it would any other project. The facility would guarantee that only the “correct” use of the funds would qualify to convert the facility to a grant.
Such innovations in the philanthropic world can have a significant impact on society and the economy where Ethos can be present, and this is reflected in the 49 million USD grants awarded by Ethos during the year 2021. Such social responsibility reflects just how trustworthy of a financial service provider Ethos is.
Carlos Santos: The Visionary Behind Ethos
Ethos Asset Management Inc.’s CEO, President, and Founder is Carlos Santos. Carlos devised a system for trading stocks with an intangible value (based on Holt Winters’ double exponential smoothing prediction technique). Using an algorithm and its own funds, Ethos buys and sells fixed income assets and securities through brokerage accounts (sub-accounts in Numis and Oanda) at international investment banks such as HSBC, Barclays, and Credit Suisse. It employs a unique algorithm that maneuvers and issues alerts based on ‘entry and exit positions’ in the commodities, currencies, bonds, futures, and stock markets, both domestically and internationally. Using a risk modulated aggressive strategy, he and his team spread and accumulated profit through compounding. The algorithm allows one unique form to predict and compound earnings.
When the intangible innovation of Carlos Santos is inserted into Ethos’ model of project financing to trade the credit lines triggered by the guarantees in place, Ethos recovers its capital (Pay Back Period) in 7 years and 2 months. As a result of the indirect method, the collateral that secures the credit lines increases, the project’s Internal Rate of Return (IRR) increases, and the Pay Back Period (PB) decreases.
Carlos has a master’s degree in accounting, taxation, and corporate finance from the Lisbon School of Economics and Management (ISEG), as well as a bachelor’s degree in economics. He worked at the Banco de Portugal (BdP), where he held roles in the Statistics Department’s Monetary and Financial Statistics and Centralization of Credit Responsibilities Sections, and created the BdP database’s restructuring in collaboration with other Euro Zone Central Banks.
At the same time, Carlos was also involved in studies at the ISEG on the economic sustainability of several Portuguese service firms. He created financial viability models for geriatric care and implemented management control systems for veterinary clinics. He is still a visiting economics lecturer at the ISEG nowadays.
Carlos has been actively involved in the growth of all of Ethos Group’s firms from its inception, and is directly involved in two of the companies’ business areas: financial trading and project finance.
The quality of his research and applied work has been recognized through Hadarat Global (May 2022) with the award for Leadership and Business Excellence; World’s Leaders (April 2022) with the award for World’s Most Daring CEOs to Watch in 2022, Unified Brainz Group/ Passion Vista with the awards of Who’s Who of the World (2022) and Men Leaders to Look Up (2021); with the award Africa Dubai Honours Award for Excellence and Leadership Prowess (2021) issued by The Leaders Without Borders and The Board of The Royal Private Office of Sheikh Ahmed Bin Faisal Al Qassimi; Ernest & Young Award for Best Economist (2016) and Banco de Portugal Award (2015).
What makes Ethos Exceptional?
Ethos invests in project finance because it is profitable and safer than other investment strategies such as private equity or venture capital. Nonetheless, for Ethos, which hedges/rebalances its asset allocation through trading, these project finance investments are crucial.
Ethos’ efforts have mostly focused on energy, infrastructure, and industry. The majority of these have taken place in the private sector, with a minimum ticket size of US $50 million. Small caps (up to US $49 million) and big caps (above US $50 million) are the types of investments it makes.
Its resources for project financing are earned by trading, and 20% of its assets are put aside for project financing for diversification purposes.
According to Carlos, if the client has liquidity enough (20% to 25% of the amount being sought) and a reliable and portable project, through its unique model, Ethos can provide capital in very competitive conditions with maturity up to 12 years, grace periods up to 3 years and interest rates varying between SOFR add 20 to SOFR add 250 BPs.
A Place of Growth and Empowerment
Ethos has created a culture in which all workers, managers, and members of the Board of Directors feel empowered to take proactive measures to ensure the group complies with all relevant laws, rules, and regulations. Role-modeling and rewarding positive behavior; creating proper governance and reporting structures, suitable rules, instructions, and procedures, as well as continual training and awareness, all contribute to a strong compliance culture.
The Board of Directors and Executive Leadership Team (ELT), with the help of Group Compliance, must play a significant role in establishing and maintaining a solid compliance culture. This can be accomplished in a variety of ways, including:
- Setting and embedding an appropriate risk appetite framework and tolerances, continuously and clearly advocating the components and benefits of a strong compliance culture “tone from the top”.
- Reinforcing “tone from the top” through direct advocacy by employees in a managerial role, “tone from the middle”.
- Maintaining effective incentive and reward practices that reinforce positive conduct.
- Removing barriers to positive conduct (e.g., speaking up, systems and tools, and other workplace hygiene factors).
- Setting clear expectations for compliance through comprehensive requirements in Governing Information, Maintaining effective governance for the oversight and challenge of compliance risks.
- Creating and maintaining effective risk management tools for identifying, prioritizing, managing, and reporting risks.
Ethos culture prioritizes focusing on stakeholders rather than only on shareholders. The previous mindset of focusing just on profit has been replaced with a clear, long-term, sustainable strategic culture that is extremely apparent in the day-to-day operations of the organization.
Ethos must “create wealth for Ethos shareholders, Ethos clients, and their communities” by utilizing their unique risk modulation model.
The Vision
The aim of Ethos, according to Carlos, is to provide one-of-a-kind financial services that are designed and executed with high standards of quality and a commitment to Ethos clients’ success. Ethos is a company that operates with honesty and professionalism. The staff is dedicated to treating its customers with the utmost respect. The team provides better returns to its shareholders by growing capital, generating wealth for its customers and the communities they serve, and recruiting the best people in the industry. Carlos adds that this (goal) can only be realized by a long-term strategy of building wealth for their shareholders, clients, and communities, utilizing their own risk mitigation techniques.
Written by Steve Sanchez.
