Investing in Emerging Markets with Cole Shephard – EP 71

Interview with Cole Shephard

Investing in Emerging Markets with Cole Shephard

The Federal Reserve is printing more money than ever before in history. In fact, 40% of the money in circulation was printed within the last two years! This has led to overpriced assets, overpriced stock markets, and overpriced real estate.

So, when it comes to investing, how exactly do you find good deals? In today’s episode, you’ll learn about one way you can invest in deals with high growth potential!

I’m speaking with Cole Shephard. Cole is the co-founder of Legacy Group, a highly successful alternative asset management firm based in Colombia.

Prior to Legacy Group, he spent eight years providing accounting and advisory services for PricewaterhouseCoopers, which is the second-largest professional services network in the world and is considered one of the Big Four accounting firms.

Cole’s desire to learn led to him working abroad in places like Bermuda and China, where he was able to fast-track his experience. He provided accounting and advisory services for clients participating in global mergers and acquisition activities and managed major transactions with deal sizes into the billions of dollars.

In this episode, Cole shares highlights from his remarkable career and why he eventually decided to quit his job to pursue investing opportunities in developing countries.

BTW, one of those opportunities was starting The Green Coffee Company—a coffee producer that is on track to become the largest producer of coffee in Columbia!​​

You’ll learn all about undervalued markets with huge potential, and why Colombia is one of the best places for lifestyle arbitrage in the world.

Emerging markets have less access to capital, which makes them ripe with opportunities for those willing to venture outside their comfort zone. If this sounds interesting, definitely don’t miss my conversation with Cole Shephard!

Featured on This Episode: Cole Shephard

✅ What he does: Cole currently serves as a Partner of Legacy Group, an alternative asset manager that targets profitable investment opportunities with high social and environmental impact in the U.S. to LATAM. Legacy Group’s mission is to bridge the gap between financial capital and promising investment opportunities with a hope to build a new community of investors, market-leading companies and workers that will leave behind a legacy for generations to come.

💬 Words of wisdom: “What do I really want to do with my life? What am I really doing with time? I think that is the real currency we have to talk about. What am I trying to achieve? I love investing. I love placing money in educated bets and saying ‘I want to see this company succeed for more than just making money at it.’ So, Legacy Group was all about doing things I’m proud of. Legacy is also like a transition of wealth. I don’t want to invest in things and lose all the money or lose the capital so I can’t continue. The goal is to keep doing things that I was proud of. So, when I moved to Colombia, all the entities that I started, everything was under a Legacy kind of name.” – Cole Shephard

🔎 Where to find Cole Shephard: Website | LinkedIn

Key Takeaways with Cole Shephard

• Cole shares his story, from starting work at PwC, to living in multiple countries, to then investing all around the globe.
• Why Bermuda is one of the biggest global hotspots to learn financial investing?
• Moving to Hong Kong to take part in major merger and acquisition deals.
• The benefit of being eager in business and having the willingness to travel and stretch yourself.
• How to take calculated risks and do deals in less developed parts of the world.
• What it looks like to quit a corporate job to begin living and doing deals in countries like Colombia.
• The benefits of living in the “city of eternal spring” (Medellín, Colombia) and how it is one of the best places for lifestyle arbitrage in the world.
• Why Cole created the Legacy Group investment firm, and what “Legacy” truly means to him.
• What to look for when investing in a business.
• Why is private equity and private debt so valuable?
• The rise of alternative assets (Alts) and how to take advantage of them as an investor.
• The Green Coffee Company—a coffee producer that is on track to become the largest producer of coffee in Columbia!​​

Cole Shephard | Should You Invest in Emerging Markets?

Cole Shephard Tweetable

“To me, I'll always place capital in private companies and private deals that have enough scale to be successful.” – Cole Shephard Click To Tweet

Resources

• Legacy Group
• Connect with Cole Shephard on LinkedIn
• Green Coffee Company
• PricewaterhouseCoopers

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Read the Full Transcript with Cole Shephard

Justin Donald: Hey, Cole. Great to have you on the show. Thanks for joining us.

 

Cole Shephard: Thank you, Justin. Happy to be here.

 

Justin Donald: Yeah. You’ve got such a cool background. I love just the way that I have the privilege and opportunity of meeting really fun, really cool people like yourself where it’s kind of like six degrees of Kevin Bacon, if you will. In this case, I’ve got a mutual friend and you happen to be business partners with my friend who’s friends with him. And so, it’s just been great connecting and seeing all the cool things you’re doing in the world. I’m excited to explore your story and your upbringing and kind of where you are today. So, thank you.

 

Cole Shephard: Thank you, Justin. Happy to talk through all those items.

 

Justin Donald: Yeah. So, I mean, one of the things that I love doing on this show is I like talking investing but I also like talking lifestyle. And the whole reason that it’s The Lifestyle Investor is because I really want the lifestyle to lead the investing. And so, you’ve had kind of a cool life. You’ve lived in a bunch of different countries, you’ve worked in a bunch of different countries, you invest in companies all over the globe. I’d love to kind of hear some of your story and where you were. I mean, you worked for a big, huge corporate firm of one of the powerhouses in accounting at PwC and you’ve ventured off into all these different things. And so, I’d love to kind of hear what got you to where you are today as an investor and entrepreneur but you were previously a corporate businessman.

 

Cole Shephard: That’s right. I’ll start you kind of at the beginning. I think I left the U.S. when I was 25. So, I was with PwC. At the time, I was doing audit for many firm, biotechs and venture capitalists, and investment biotechs, really into RVU area of North Carolina. And so, the goal when I moved abroad, my first move was to Bermuda. I was interested in financial services. When I was younger, obviously, I was doing the audits of a venture capital, and I really want to understand how banking works, how asset management works, how insurance works, and really like the kind of theme behind why I’ve lived all over the world, why I’ve invested all over the world really is based on learning and wanting to learn new things. So, when I moved to Bermuda, really it was an odd one because Bermuda is such an expensive place to be but it really wasn’t for money. It was for learning how financial services work, learn how banks function, learn how asset managers function, learn how trust companies function. And then you get kind of almost addicted to learning new things. You have groups of people from all over the world around you, and it’s exciting. You had some of those PwC, for instance. You have some of the smartest people in the world around you at all times. There is no like low non-intelligent person. So, the person sitting next to you can always do high-level transactions, understand complex derivative positions or whatever, and you can have really, really great conversations. You make great friends. From Bermuda, I moved to Hong Kong.

 

Justin Donald: Hey, real quick. Let me interrupt on Bermuda because Bermuda tends to be a place that there’s a lot of financial services, financial engagement, and I think a lot of people that are U.S. born or whatever country you’re born in, I know we’ve got a lot of people in our audience born in the U.S., you kind of think in terms of these lines for the U.S. and these jurisdictions in the U.S. but once you’re outside the U.S. and you’ve got another country, you abide by their jurisdiction and their laws, and there are some different and unique things that you can do. So, I’d love for you to expand a little bit on maybe why Bermuda is such a hub for the financial services industry.

 

Cole Shephard: Well, for Bermuda and Cayman were the two options I was looking at, both British overseas territories. What you have in Cayman today is really what you had in Bermuda maybe like 40 years ago but Cayman’s way more sophisticated. And what I’m talking about is really hedge funds. Hedge funds are more domiciled in private equity funds, tax structures related to asset management. That’s what Cayman really dominates in. They’re good in the trust services industry as well. But where Bermuda really is special in the world right now is insurance. So, most of the market really is related to insurance structures. So, you have some of the largest companies in the world and really some insurance operating out of Bermuda. You can also have incorporated trust companies operating insurance subsidiaries for transfer pricing issues and whatnot. But really, it’s insurance, offshore banking, and asset management that drives that country. There’s tourism as well. For anyone who’s listening that goes to Bermuda, you’re going to be very surprised how expensive it is. It’s probably the most expensive place on Earth like I’ve lived in Hong Kong, I’ve lived in Beijing, which are both really expensive cities, nothing compared to Bermuda. Like, you could go to a grocery store and pay like $8 for a Corona. So, I mean, it is massively costly but, obviously, there’s no income tax.

 

So, us being American, Justin, we have an issue with we’re always going to get taxed wherever we are. But you know, your salary is going to get a nice bump as a result of not that direct pay in New York state tax and the federal tax and municipality tax, and everything like that. So, American-wise, you have a lot of guys that operate over there, largely related to law and related to tax structure. A lot of American expats do that because we use Bermuda mostly for captive insurance and then the expats that live there from elsewhere, we have a lot of guys from the U.K., Australia, South Africa, and really, really smart guys and they make real money. So, really, it’s a great place to be. If you only want to stay on one island, you make a lot of money, you go fishing every weekend. And I really enjoyed my time there.

 

Justin Donald: Yeah. That’s awesome. And it’s interesting to hear you talking about this because I’m currently vetting and auditing a strategy that is domiciled in Bermuda and I have looked at a lot of things in Cayman Islands. And another big jurisdiction a lot of people like for asset protection would be the Cook Islands, although there’s maybe a little bit more of a negative tail attached to that one just based on some court law. But it is interesting that when you get into these other jurisdictions, how there are some protections in place that really bypass a lot of what the U.S. government can and can’t do. And then there’s just opportunity, some loopholes, some unique structures where you can really take advantage of maybe if you live in a place with just much stricter or heavier or higher percentage taxes, you can really be protected in a lot of different ways.

 

Cole Shephard: That’s right. I agree 100%. Whether you’re using trust companies to do asset protection or whether you’re doing transfer pricing to move profits from let’s say onshore U.S. subsidiaries or holding companies into a subsidiary or foreign that’s a segregated entity for a captive insurer. You know, Bermuda and Cayman are two of the most sophisticated in the world. And I would say for U.S. guys, they’re probably the most well-known and most used, and you’ll have a lot of high and legal advisors, accounting advisors, and whatnot that can help you structure what you’re looking to do.

 

Justin Donald: Yeah. And private placement life insurance you’d throw right in there as well for having favorable jurisdiction laws and rules. So, yeah, I mean, there’s just so much like for those that have not gotten out of the borders of their own country, there is so much opportunity, so much unique let’s call it strategizing, massaging to really create some tax-friendly shelters and various different kind of categories. So, cool that you have experience with that and you know a lot about that, Cole. And then I’m also excited to hear about life in China. So, tell us about that.

 

Cole Shephard: Sure. So, when I moved to Hong Kong, I was about 28 years old wanting to learn M&A at the time. That’s the reason I moved. I’ve never been to Hong Kong before. I got my final interview with one of the partners. He’s like,  “Yeah. Cole, you got the job but you got to be here,” I think it was like in a week-and-a-half. So, week-and-a-half I have never been in Asia. Nobody knows nothing in Asia but I wanted to learn, right? So, I drop of a dime and say, “Okay. I’m moving from Bermuda, I’m going to go live in Hong Kong.” So, I get set up in Hong Kong and that’s a regional hub. The team that we get was really tasked with more corporate than private equity. And we would basically assist corporates doing M&A acquisition typically of banks, insurance companies, asset managers. Now, I’ve done skyscrapers and Shenzhen deals. I’ve done gold mine in Xinjiang province in China. But really my background was more in insurance, banking, and asset management, and that gave me the opportunity to really travel a lot. So, most of the time in M&A, you travel with the investment bankers, you travel with the legal advisors, you travel with tax advisors, and more importantly, you travel with clients, right?

 

So, spend a lot of time in South Korea, Thailand, Malaysia. We’ve done deals in Dubai. We’ve done China outbound, where I have to go to Boston and analyze an energy company or to go anywhere. And at that time in your life especially when you’re young, I was willing to go anywhere. I was the first one to say, “We got a deal in Beijing or we have a deal in South Korea. “Who wants to go be on the deal?” and you need to be in China let’s say in 12 hours and you’re in Hong Kong in a meeting, I’d be the first one to raise my hand and say, “Hey, I don’t know anything about Beijing but I’ll go learn everything on the plane.” Like a lot of times, that would be my job. My partner would send me some financial statements and say, “I need you to do like a desktop diligence on a plane. And when you land, you’re going to go talk to the CFO of this insurance company and you’re going to see what we get to.”

 

Justin Donald: Wow. That’s a crash course.

 

Cole Shephard: Oh, it is. I mean, I’ve had found some of my favorite stories. I used to love the partner I work for. He’s a great guy named Chris and I remember one day I was coming to work on a Saturday in Hong Kong and it was a banking deal and he calls me up like 8 a.m. in the morning. He’s like, “Where are you?” I’m like, “Chris, I’m coming to see you.” Of course, I’m coming in the office. He’s like, “No. You’re going to South Korea. We got a new client. We got to take care of this insurance deal.” I was like, “Okay. When am I going?” He’s like, “Oh, you need to be at the airport in like two-and-a-half hours. Secretary’s already made you plane tickets, everything.” And I was like, “Okay. When am I getting back?” And he’s like, “When the deal’s done.” Click.

 

Justin Donald: Wow.

 

Cole Shephard: And so, at that time you could be on the road for a week at a time or it could be two months but it’s a very exciting place to be. I love my time in Hong Kong. I spent about six months in Beijing full-time. Also, a city that I loved. It’s a completely different culture, whether it’s food or learning new things about the history of the world. I wouldn’t trade it for anything. It was a special place in the world to be at the time. And there’s so much going on. It’s incredible. You could soak up 50 basis points of what’s going on, you’d be the smartest guy in the world.

 

Justin Donald: Yeah. That’s just so cool that you got to experience so much of this, Cole, where most people don’t leave the borders of their own country. You’ve lived in multiple different countries for extended periods of time. But you were definitely a corporate guy, right? Like you did what they needed you to do. So, when did you break those chains and kind of go off on your own, start your own company, start Legacy Group, and start doing things your way?

 

Cole Shephard: Sure. I would say I always describe PwC as kind of like my Ph.D. in business, right? So, I had to do grad school for accounting and finance. But you know, PwC was really like writing a dissertation. I was about 31 when I came down to Colombia for the first time and in my story really was I did PwC eight or nine years. That’s when you really need to start making a partner case, whether you’re going to try to be a partner in the firm or you need to go out and do something else. And you know, I was a guy that was willing to go anywhere and really, that’s what I wanted. I wanted emerging markets. I didn’t want to go back to, let’s say, New York City or stay in Hong Kong or go to London, where everything works, right? You go to New York City like things work. You go to Hong Kong, things work. You’re just making the developed world more developed. And a lot of people love it. But for me, I wanted to do something and say, “Look, I want to go somewhere aggressive.” Like, I would be willing to say, “Okay. You want to make me a partner in the firm? I’ll take zero salary. Just give me a cut of what I can do. And if I don’t perform, you don’t pay me anything.” But really, that’s not the way corporates work. That’s not the way, especially accounting firms. They’re a little more conservative than I am. So, at the time, I was looking at taking positions in Southeast Asia and in Latin America. So, I was talking to partners in both regions.

 

You know, I loved at the time, I was doing all my macro analysis. I love Vietnam. I thought the Philippines had a lot of potential. And then I was looking at Colombia and Brazil and Mexico. None of those guys had a dedicated team to run M&A deals for financial services. Everything in those regions was like, for instance, Southeast Asia was run out of Hong Kong. Latin America was run out of New York. Half the guys that work, more than half the guys, probably 90% of the guys that worked in financial services in New York for PwC doing deals, they don’t speak fluent Spanish. So, it’s pretty hard to come in and buy a bank in Mexico or Colombia, or in Brazil if you speak Portuguese. If you can’t speak the local language, it’s going to be a pretty tough gig, right? The United States it’s similar but it’s not the same market. So, I came down to Colombia for my brother’s wedding. He got married in Cartagena. We came down, had a big family party and I was like, “This is pretty cool.” And I went to go check out Medellin. I had a friend of a friend here and I just saw the real estate market and it’s so developed like I was expecting a third world country and it wasn’t a third world country. Colombia, I think with Medellin, I mean, it looks first world, right?

 

And so, there are certain parts that are definitely developing world but certain parts, for instance, where I’m sitting right now, you came into this office right here, I mean, this is developed world office infrastructure, real-world downtown area. And I couldn’t figure it out because I was looking – I had some of my friends check out like bank lending rates and whatnot like arbitrage really high, mortgage rates, hardly any loan penetration. Like, the amount of people using formal bank accounts was like at that time I think it was like only 30%, 40% of people use formal banking. And I was just saying, “This doesn’t make any sense.” So, I came down and I said, “Wait a minute, maybe I should just take more risk.” And so, risk isn’t something I won’t take unnecessary risks but when I came down, I say, “You know what, I think I can do this.” And really, what I was trying to set myself up for with the firm I was working for was to kind of eat what you kill and build something from scratch. And so, and really, what I’m trying to do is start a company within a firm. And so, what I decided and said, “Look, I can take the ultimate risk for business, I would say, is move to a country that you don’t…” At the time, I spoke high school level North Carolina-based Spanish, which means I don’t speak Spanish, right? So, I moved to Medellin and I said to myself, “You know what? Let’s think of that. Even if I lose all my money, what’s the worst that’s going to happen? I’m going to learn Spanish. I’ll know another market. And if I ever want to go back to consulting or do M&A again, I’m going to know the market by the time I lose all my money.”

 

So, I started doing my own deals down here in Colombia, so I got back basically for my brother’s wedding. I spent the next month kind of exiting PwC, setting up corporates here to run companies out of, and then hit the ground running. I went to a language school four hours a day every day at the same time trying to get set up, starting with real estate deals. And then you just kind of go from there.

 

Justin Donald: Yeah, that’s really cool. And I love hearing kind of what got you there because once you experience Colombia, it is just a place unlike any other place. And I feel very blessed that we’ve gotten a chance to spend a lot of time there. In fact, my brother-in-law works for Kimberly-Clark, and one of his jobs is to open up different locations all around the world. And so, he was commissioned to open up a location in Medellin. And so, we came many times at Medellin and just loved it, spent some time at Cartagena. I just love that. It’s just an incredible world. Fell in love with the Coco de Limonadas and just absolutely we’re blown away. The coffee’s incredible. I mean, just the whole nine yards. Parque Geros area is where they live, and it’s just such a nice area. The financial district is really nice. I mean, it’s a really cool city. In fact, one of our mastermind members, Mitch, lives in Medellin and he’s actually organizing a lifestyle investor mastermind trip down there, which is pretty fun.

 

Cole Shephard: Awesome. It’s a great place to be. I mean, for a lifestyle arbitrage, there’s not a lot of places like this in the world, and I’ve been in a lot of places. So, for whether it’s you’re on passive income or you’re just making money and you’re working from here and let’s say you’re making developed world money, you can live really, really well here on what you would think is almost no money coming from the U.S.

 

Justin Donald: Yeah. And like you have very amazing amenities and realities like one of the finest restaurants, and let’s just call it a restaurant experience, a gastronomic experience is there with Cielo, and many would rate it as like literally a top five, top 10 restaurant in the world. And it is incredible. It’s just a neat, full-body, all senses type of dining experience.

 

Cole Shephard: That’s right. I mean, you have some great restaurants in the city. You have tons of cool stuff to do. It’s sunny every day. That’s one thing that, to me, I mean, I was born in upstate New York. I can’t go back to winter again. So, here is the city of Eternal Spring. It’s kind of like the logo or the slogan of the city because it’s always about 70 degrees Fahrenheit. So, if it’s raining, it’s winter. For a day that it’s raining, it’s winter. It doesn’t mean it’s cold, it’s just raining. And that’s your ideal. So, I mean, it’s a great place. And especially if you have, you can run your businesses that say location independent. You don’t have to be on the ground somewhere. It’s a great place to run businesses strong, and I see more and more talent coming in. There’s more and more talented people coming living in Medellin.

 

Justin Donald: Totally. And the weather is so perfect that most people don’t even have air conditioning units or heaters or anything. It’s just like people keep their units open air. It’s just nice. You’re up in the mountains. It’s really cool.

 

Cole Shephard: I agree. I agree. It’s a great place to be. In Colombia, I would say this is definitely my favorite city.

 

Justin Donald: Yeah. That’s awesome. So, were you ever able to kind of start this company under the umbrella of PricewaterhouseCoopers? Or did you have to break off? I mean, at some point you for sure broke off. I’m just curious if you were able to get it started or not.

 

Cole Shephard: No, no. And under PwC, you have a very it’s much more of a corporate structure. I mean, PwC at the time when I was working for it, it was the largest accounting and consulting firm in the world. So, I mean, when I left, they were probably doing low 30 billion a year in revenue, which you got to remember that’s bigger than a lot of your clients. So, you have to work within a structure that works for them. And I work with probably within the most loose team within the M&A and strategy teams. They’re a bit more of a looser with how they operate. It’s not as really, really structured like attacks in accounting advisory and the audit side. But you know me going and saying, “I’ll go to Myanmar,” at the time Myanmar, it just opened up and that was one of the things I talked about with a partner that I work for. He said, “Look, I don’t mind if you just send me to Myanmar and I, in fact, have to sell bookkeeping services to foreign companies starting up, let’s say, subsidiary entities there, I’ll do it. I’ll give it a shot.” But it’s one of those things you are saying, “That’s a little too aggressive.”

 

Justin Donald: So, is that really where Legacy Group started, right? Then you made the decision and move forward and said, “Hey, I’m doing it on my own now. Let’s go.”

 

Cole Shephard: That’s right. The minute that every entity I started from the time I thought of Legacy at the time because I was around, I was in Asian culture and Legacy was really it was twofold. I didn’t know exactly what I was going to be getting myself into but I knew it was going to be around investing and I knew it was going to be around things that I wanted to be proud of. At that time, I had a little bit of money saved up from working at PwC my whole life and I said, “What do I really want to do with my life? What am I really doing with time?” which I think is the real currency we have to talk about. What am I trying to achieve? And I love investing. I love placing money in that let’s say educated bets and say, “I want to see this company succeed for more than me just making money at it.” So, Legacy was I want to do things I’m proud of, which is Legacy and Legacy is also like a transition of wealth. So, I don’t want to invest in things and lose all the money or lose the capital so I can’t continue. The goal is to keep doing things that we’re proud of or that I was proud of. So, when I moved to Colombia, all the entities that I started, everything was under a Legacy kind of name. Every entity I started was under a Legacy kind of umbrella.

 

Justin Donald: Very cool. And then obviously kind of rolled up, you’ve got your parent company but you’re very spread out into a lot of different areas. And it’s funny because you mentioned before that you’re making calculated bets. So, it’s not gambling. When some people invest, it is gambling, right? It’s just like going to Vegas, throwing some money on the roulette wheel, and see what happens. But when you invest the right way, you can gain advantage. You can do that through terms. You can do it through inside knowledge and understanding. You can do it on understanding and predicting future trends. And so, for you, you’ve gotten into real estate and hospitality and agriculture, arts, technology, education. I mean, you’re all over the board. Did it start in just one or how did that work out?

 

Cole Shephard: I’ll take you through kind of the, I guess, it would be the thought process of kind of – I often need to explain why I wanted Southeast Asia and Latin America. You know, at the time, especially Latin America, within my circle of people that I hung out with, they wouldn’t be able to point out Colombia on a map. Even the biggest country, Brazil, people wouldn’t know. So, no one in my world would talk about investing in Latin America. Nobody cared, right? So, I would see guys come down let’s say buy an apartment in Hong Kong and not know if you’re familiar with prices in Hong Kong, Justin, but it’s like I would say like 2,000, 2,500 square foot would be like that’s a normal price in an old town. So, you see guys come down, splash a million bucks on something that would be like a walk-in closet level and they’re doing it one caps at the time. And this was, I moved here in 2015 and so I’d see that say sourced Asia wealth going down to Australia. They would buy houses with their pocket money that’s given by their parents, spend a million bucks, and they’d never lease it, never do anything with it. It’s just like stashing gold in the grass. So, a lot of my kind of thesis was there’s too much capital in the developed world, right? And whether you’re in Asia or you’re in the United States, it’s in sort of concentrated area, same within developed Europe.

 

But within Asia, at the time, we were doing studies about Singapore housing, all the like 40% of the world’s wealth at the time we were predicting was in Singapore due to all the attrition coming out of Switzerland after they went after all the American money of guys that weren’t paying taxes. You know, they stopped. They started doing more heavy KYC and a lot of that moved to Singapore. What we saw is just these massive capital flows and they have to place capital. And I thought to myself, not that I don’t want to compete when I say, “If no one’s down there, I don’t have to invent Facebook. I can do businesses that I understand and I can compete because I’m going to bring in, let’s say, real-world knowledge, some real-world capital, and then let’s see what we can do.” So, in places like Latin America, Southeast Asia I would say is more difficult to compete. And I have peers that operate in Vietnam or Thailand and there’s a lot of capital in those markets. When I first came to Colombia, there was nothing like no one. I mean, if you came down with half a million bucks, you could do real deals. And today, like, for instance, I was watching a podcast with the CEO of SoftBank, Marcelo Claure, and he was talking about the amount of capital of SoftBank is going to put into Latin America. Now, they’re focusing a lot on Brazil and Mexico but they’re talking about deploying 5 billion a year. That would be like the whole last 20 years in a year with one firm.

 

So, what we’ve kind of seen in Latin America is capital has needs to have somewhere to go. And when I started doing businesses, really what I wanted to do is, one, businesses that I understand. So, go back to your original question. If I don’t understand a business like for instance it would be very difficult for me to invest in an AI company because I’m not an AI scientist. I wouldn’t be able to tell you this is good code. This is bad code. Or with things like coffee, I can learn into it. You know, I got into coffee by literally trading containers of coffee on my own dime. I would front trades and create my own trading company. And I did flowers before that. And when you start engaging in the market, you can learn it. And it’s not that coffee’s easier than AI. For me, it is but for certain guys, they might prefer AI. So, when I look at businesses that I want to invest in, the first thing to be always is, do I understand what they’re trying to do and how they make money? And if I can’t say, “Yes, I understand it,” I really want to shy away from it unless it was just something like an immaterial LP investment and that’s to say my partner Adam says, “We should do this,” and I’ll say, “Okay. We should do this but we’re not going to be involved with doing anything with it. We’re not going to be in educating management. I think we don’t have much to educate them on if we don’t know what we’re doing.” But that’s really how I did coffee and real estate, two that I think I was able to get into and understand.

 

Justin Donald: You know, it’s interesting. I just want to comment on something because you talked about how money needs a place to go, Cole, and you’re so right because we have more money than ever in history. You know, the U.S. has printed the most money it’s ever printed. 40% of the money in circulation was just printed or created within the last two years. You’ve got a lot of other countries following this playbook of just printing money. And so, you’ve got money then like, I mean, tons of it. There’s so much money in the system. So, what do you do? Do you invest it back into overpriced assets, overpriced stock markets, overpriced real estate? Or do you go to these other markets like you’re talking about where you can really get a great deal? You buy something for much less than the value of it, especially you might get it for less than the value today but especially once you do some work and you improve it.

 

Cole Shephard: I mean, you led me into the answer. I think you know where I’m going to go. Like, there was an article out by the head of the World Bank I think that came out and was talking about the amount of capital that basically gets trapped by that, say, doing balance sheets that central banks just keep buying liquid bonds. And they pulled up these massive balance sheets. And basically, you’re just redeveloping infrastructure buildings that are really already developed world. And then you’re driving cap rates like way down. And I’m mostly talking about real estate but it happens in every asset class. You could talk about it with public equities. You can talk about it with public debt. You know, a lot of public debt is underwater versus inflation. So, his was the same conclusion I’ve come to and say, “Look, there should be a capital reallocation to SMEs, primarily small, medium-sized entities in emerging markets or developing countries that have less access to capital.” So, I’m seeing more and more that’s a very high level, whether it’s venture capital guys, investment banking guys, whoever, and say we have to start spreading our chips around. To find deals that I would think are interesting in the United States at the moment would be very challenging.

 

So, if you gave me a portfolio of, let’s say, half a billion dollars to deploy in the United States and you say, “Your goal is to get as much alpha as you can,” I don’t know where I would start. If my term sheet said, “You have to invest in the continental United States. You can’t be a holding company if you invest abroad,” that would be tough. You know, I don’t know where I want to place capital. To me, I’ll always place it, if I had the choice, I would always place it in private companies and private deals that have enough scale to be successful. You have a successful management team that have shown success over the years, and they have the opportunity that say for big returns. Like, I’m at a point in my life where I like to invest in companies that I have some control over because I like to see what’s going on. So, here in Colombia, I would be one that I wouldn’t invest 100% of my net worth in an LP position that I didn’t have control over. But you know, me and my partner, Adam, we invest virtually all of our own money in our own deals. So, if something was ever to happen to our LP, I’ll just say, “Look, we’re going to be hurting much more than you guys if anything ever went sour.” You know, if I was at a different stage and then say you’re at a capital allocation phase, you’re not 38 growing businesses and you’ve already done your exit, you have a pool of capital, I would look at whether it’s LP positions.

 

And let’s say your business is not actually running businesses. You know, I look at LPs and private companies. I look at private debt. I think there’s a lot of portfolio additions that you can do. There’s numerous things you can do for tax structuring or get insurance structures that can be exciting, just throw some capital in especially for protecting your family and whatnot in case something dire happens. But really, the two markets that I like are private equities via direct investment and private debt.

 

Justin Donald: Yeah. I’m with you on that. You know, I did a really fun episode on my podcast with an alts specialist named Chris Schelling. And I can’t speak enough about private equity, private debt, and the arbitrage opportunity, the scale opportunity, the protections that you can put in place, and it’s fascinating to me that so many people don’t know about this and that they’re just tied to the public markets, which have had a roller coaster recently since the start of the year. But yesterday, what a roller coaster day. But at the same time, you’ve got some of your most sophisticated investors in the world that are in alternative investments. So, it’s interesting because the education is not going to the masses. Most people, just they’re being conditioned to put their money in the markets, whereas the most successful investors are doing exactly what you just talked about, private equity, private debt.

 

Cole Shephard: Yeah. I mean, my partner, Adam, and I write articles about this from time to time and we write articles about alternative investment. Every trend I’ve seen with, let’s say, mid-level or high-level family offices, ultra-high net worth individuals, their percentage going to alts has increased dramatically in the last two years, dramatically. So, whereas usual, if you had a normally functioning public equity market, public debt market, you didn’t have debt that was underwater, you didn’t have public equities basically on a macro scale that says your average is the highest, some of the highest it’s ever been in the history of public markets, you know, they would only put 10%, 15% of their total portfolio in alts. There was like a lot of the liquidity issues that they have with alts is saying, “Look, I can’t liquidate my position like this if something happens.” But nowadays I’m seeing a lot of these and they’re going up to about 40%. A lot of the family office portfolios and obviously their business is moving money and their business is making money. So, I think that industry, the alts industry in general, is going to grow exponentially if you have public markets behaving the way that they are now.

 

Justin Donald: Yes. Go ahead. Go ahead.

 

Cole Shephard: Well, the main thing to me is that you’re, to touch back on what you said before, Justin, is we have too much capital. There’s too much money in the market and there are so many public companies. There’s a limited pool of public companies. There’s a limited pool of public debt. When you had everything with the same term sheet saying, “You have to check the box,” and everyone checks the same boxes, you’re not going to find arbitrage positions most likely as a single investor. I mean, if you’re not moving real capital amounts to buy, you need to buy 100, 200 basis points of public companies at a time to really get any even a moderate amount of control or moderate amount of arbitrage. I don’t think the average guy can do it. But what I’m seeing now is more like a democracy coming in, especially for, let’s say, the minimum level private banking client. So, if you have a net wealth between, let’s say, a million and $10 million like in the past, like in my past where I look at banking deals, no one in the private banking world cares about that 1 to 10 million. Really, you’re getting what seems to be fancy REITs and you’re getting some fancy mutual funds. No one’s calling you from the private equity firms to do LP subscriptions unless you have a million to throw down on each fund and they want to sell you a family of funds, right? They’re not going to come out and say, “Hey, there’s a health care fund. There is a biotech fund. There is a mining fund and it’s a million per. And if you can’t subscribe multiple open commitment and say, ‘We’re going to invest whatever we want,’ every time I do a capital call, you’d send it or I’m going to sue you.”

 

You know, those guys have always had a very limited product range. They have the same product range. What I would say is a person who’s got $10,000 in the bank, and I’m seeing more and more companies start to try to target that range. So, that, for instance, where Adam and I try to target is really guys like that and say, “We’re looking for private market investments.” They don’t have the capital pool, let’s say, to buy our company. They don’t have $50 million to come out and say, “Look, I want to copy what you guys do, and I have 50 million to throw in that one idea.” They say, “No, but I’ve got 100 to 500 per. I like what you guys are doing.” And this is a unique deal that Goldman or TPG or anyone they can’t sell me. So, when I go and talk to a client, no one besides Cole and Adam can wrap this product because no one else has it. So, they find it valuable.

 

Justin Donald: Yeah. And it’s interesting how you talk about the ultra-high net worth people where 15% is exposed to alternative investments. But if you look at it today, because that was before, you said there’s really been like a shift these last two years. And there are most certainly is because I read all these reports and the vast majority of what I see is over 50% of people’s net worth ultra-high net worth individuals, over 50% of their net worth is in some form of alternative or commercial real estate and private equity, kind of like what we’re talking about, but then also private debt as well. It’s just interesting. And so, another thing that I know that you’re a big fan of is farmland, specifically farmland outside the US, where you can actually get it for a good price. And that may even lead into one of your other investments that you’ve done recently with green coffee companies. So, I’d love to learn more about this. And by the way, shout out to your partner, Adam Jason. Not only is he a guy with two first names just like me, so I loved him immediately but he’s just very impressive, very smart, very interesting. And you guys seem to make an incredible team.

 

Cole Shephard: Thank you. Yeah. I mean, farmland in general, I love the ability to consolidate in scale. What I look at it, when we first started the project, we kind of looked at it like commercial real estate and we’re saying, “Okay. You can build out an asset.” Basically, that’s how you build out a farm. It’s almost like you’re building a hotel and then you have a hospitality operator that yields it out. And when we started, the hypothesis really was when we’re looking at pricing and saying, “Look, I can arbitrage if I buy a lot of farms at one time.” You consolidate infrastructure and you just sell a little bit further down the value chain, you say, “Man, we can get a lot more yield than if we bought a commercial shopping center, for instance.” And so, we had an investor pool that were comfortable with commercial real estate in Colombia, and they wanted exposure to Ag, basically. They didn’t really care which Ag. They just wanted it to be Ag and have a collateralized nature to the balance sheet. Within coffee, when we started, what you’ll see is there’s really not any, let’s say, global companies that operate within coffee. It was just kind of all by itself. It’s really desegregated or segregated to where everyone is a very, very small landholder and there’s a very small number of consolidated groups and no one runs let’s say like an international corporate.

 

And so, once we started operating four years ago, we started saying, “Man, as we scale, this isn’t just a yield and salary cap rate in the future. This is a whole ecosystem play.” And if we can scale to a bit a higher degree, I mean, this is something we can throw on a public market. And so, in the last couple of years, I mean, you see public markets just explode. And as you referred to, Justin, yesterday, I mean, now you’re seeing downward movements and saying, “Hey, our valuations coming back to Earth.” And that’s something I talk about to Adam all the time. If we were in an exit scenario today of a corporate sell versus an IPO, I think I’d be an idiot to say, “Do the IPO,” of the valuations we’re seeing. I don’t know if it’s going to stay like this forever but if it does, I mean, the IPO markets there’s such a high valuation, a lot of that being all these retail investors are just throwing money at something that’s not, let’s say, SEC restricted for them, and it’s very exciting. So, for green coffee, it’s kind of evolved from what I’d say is a commercial real estate play into where we’re trying to be now is I think next year we’re going to be the largest coffee producer in Colombia, the largest consolidated coffee producer. For coffee, it’s number two in the world.

 

Justin Donald: That’s incredible.

 

Cole Shephard: Yeah.

 

Justin Donald: So, you’re already number three right now. You’re the third largest coffee producer in all of Colombia, which is one of the largest coffee-producing regions in the world.

 

Cole Shephard: Yeah. Actually, we thought we were number three but we’re actually number two. We found out.

 

Justin Donald: Even better. That’s awesome.

 

Cole Shephard: One of the ones that we thought were the largest, they’d actually sold all their farms, and they just lease them. So, it’s almost like a WeWork where you’re selling farms. It’s like a selling of plant. So, they don’t have any balance sheet. So, there’s only one that is really just a tiny bit larger than us. And really, if we just develop the land where we, for instance, in December, we double up our land size. It’s about a $5 million acquisition that we did that we do seller financing, we pay it over time. So, it’s pretty attractive. You can still do those kind of things in Colombia, whereas in the U.S. it would be pretty difficult. And when we build that out, I mean, we’ll be for Colombia-wise, we’re a big player. I mean, it’s one where you can get the heads of the coffee union. And we had a big opening event for one of our infrastructure that basically if you take the coffee cherry and then they make coffee from the seed. The processing facilities that we built are world-class. We get the heads of the coffee you need to come present with us. We have the mayor of the town. We had the Head of  Economics Development for the State of Antioquia, which is a state that we operate within. So, it’s a big deal. I mean coffee is kind of the national product in Colombia. So, that one is definitely, to me, it’s the most exciting project that we’re involved with. And obviously, it takes up the most of our time as well, which I think time well spent.

 

Justin Donald: Yeah. And why do you feel that Green Coffee Company is kind of the premier leader? Not just by volume, obviously, you can argue this based on facts but let’s talk about I think your coffee connoisseurs are all about flavor and keeping it pretty systematic but also having it not be too bitter and just all the things that make it a quality brand and products.

 

Cole Shephard: That’s right. I mean, one is elite coffee buyers will always want a portfolio of coffees. One of the most important things, there’s like two ways you can do it. One, you can have really great marketing and then convince people with marketing that their coffee is great and just distract the fact that it’s not. To make great coffee, it really takes production-level guys that are doing proper agricultural techniques. Like, so for instance, we have about five agronomists that work with us, and all they do is coffee. And then you have to have traceability and sustainability practices. So, where in other markets you’re seeing it in certain, let’s say, verticals but in commodities, especially in coffee, you have the consumer driven to say, “I want you doing things the right way. I don’t want to see you exploiting workers. I want to see that say the trade is fair and it’s transparent.” You know, I’m not aware of anyone on a large basis in Colombia that can tell you and say, “Okay. This is a shipment of coffee. These are the lots of our land it came from. This is the exact species it comes from. And by the way, we’re not going to mix them all together.” We know exactly what the quality. We cup basically every lote that comes out and we do quality control. So, I’m the other side, the buyer side of the elite buyer.

 

So, some guys when we trade commodities with guys that are really the high-end buyers, they have what is the equivalent of a sommelier for coffee and it’s called the Q Grader, and they don’t cup and rate coffees and say, “Look, this is a nutty scent. This has a scent of chocolate. That has a scent of spices,” whatever, and then they’ll put in numeric scores. We do that on our end as well. So, we have our own Q graders before we send anything and then before we sell, we’ll match, contrast and compare with the buy side. So, our sell side is doing quality control at a level that I’m not aware of anyone that does it on our levels. So, what we’ve kind of had to do in order to do that because what we do is not normal Colombia. You have to transform a number of processes to get to a level that says this is a global quality and really, you have to change the whole ecosystem of how you operate. The ethos of what you’re doing no longer is, “Hey, we’ve done this forever so we should keep doing it,” to, “What’s going to give us the best product price and what are we proud of at the end?” And I got to attribute a lot of this to our CEO, Boris, really smart guy. And he’s done a great job creating those ecosystems that we’re talking about. Create quality in processes that we can say, hey, it’s not luck that we’re getting great quality coffee. This is engineered from origin.

 

Justin Donald: Yeah. That’s awesome. And, I mean, your facilities are incredible. I mean, I’m really excited to come tour in person, which I’ve talked already with you guys about. But, man, you have such a production and it’s so neat to see and the product is really good.

 

Cole Shephard: Thank you.

 

Justin Donald: I want to say hats off to you on making an incredible transition from being a guy in corporate America to going on your own, going into uncharted territory both literally and figuratively and really kind of making a name for yourself, creating a business, investing in all these different areas and then really helping to grow and scale this incredible coffee company. So, I’d love for you to share where our audience can learn more about you.

 

Cole Shephard: Sure. So, you could find out more about Legacy Group, which is the asset management firm that I’m a partner in at www.Legacy-Group.co and you could see everything that we do. You can see all of our portfolio companies and that would include obviously the coffee company and the tech company that’s right behind me right here.

 

Justin Donald: Very cool. Well, I had the luxury of having a nice little Christmas gift from you guys with some coffee, and I appreciate that and my wife appreciates that and we just think you’re doing some incredible stuff. So, thank you for that and I really appreciate your time. This is an awesome interview and you just drop so much knowledge on everyone. So, I’m just so eager for people to dig into this content here today.

 

Cole Shephard: Perfect. Thank you, Justin. Thanks for having me here. It’s a lot of fun.

 

Justin Donald: Yeah. My pleasure. Well, I’ll leave our session as I always do. So, to my audience, to those watching, to those listening, what is one step you can take today to move towards a life of financial freedom, whatever that step is, but a life of living by design, not by default, a life that’s on your terms, not autopilot, what’s one step you can take today? Thanks. And we’ll catch you next week.

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