The Toledano Capital founder explains how niche investments and capital discipline can deliver outsize returns.
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Show Notes:
In this Mission Matters episode, Adam Torres spoke with Rodrigo Medrano, Founder & Managing Partner at Toledano Capital Partners. Rodrigo shares how his firm uncovers high-return deals in sectors, prioritizes principal protection, and navigates the U.S. private markets with a unique global perspective.
Full Unedited Transcript
Hey, I’d like to welcome you to another episode of Mission Matters. My name is Adam Torres, and if you’d like to apply to be a guest in the show, just head on over to mission matters.com and click on Be Our Guest to Apply. All right, so that I have Rodrigo Medrano on the line and he’s founder and managing partner over at Toledano Capital Partners, and this particular interview is part of our. Milken Global conference coverage series where we bring you to the best of those that attended the participants guests, VIPs speakers, panelists, and more. And first thing, first, Rodrigo, welcome to the show. Many thanks, Adam. Good to be here. All right, Raju, so we got a lot to talk about. I definitely want to get into what you’re doing over at to odonnell Partners and also how you navigated moving from, you know, a large Latin American focus fund to raising your own US focus fund.
So we got a lot of talk about here, but before we get into that Milken global conference, one of my favorite events of the year. Tell us about your experience and your connection to the conference. Sure. It was my first time. Oh, congratulations. I’ve heard a lot about it. Congratulations. Oh, that’s awesome.
So I love talking to first time attendees. So gi give me the perspective. Go ahead, please. Indeed. And I, you know, I was actually very surprised and I, left this feedback , with the Milken staff. it was. For a non-Latin America dedicated conference, it had extremely high level of Latin American panelists, you know, the president of Paraguay, the, a lot of their cabinet members, the former president of Ecuador, you had central bankers.
and that time was clearly not the focus, right. So I was really impressed with the caliber of people and domestically in terms of domestic policy. It was. It was really incredible and people have the time to, chat with you. I had the opportunity to chat with, different kinds of people, and I was just surprised at how friendly and available people were.
Yeah, I always find it interesting. So I’ve been going now for three, maybe four years now. I’ve been covering somewhere along those lines, time flies. But when I initially went, I like to, I’ve heard many different like descriptions and from guests, individuals that I interviewed, they, they, I’ve heard it be called to like the Disneyland conference.
I’ve heard it like brain candy, and they’re going from, from a subject matter, subject matter. Many people venture out of their normal everyday silo of if you’re in finance, maybe they were looking into longevity. Or if you’re in longevity, maybe you’re looking at finance or politics or going to explore some other region of the world.
But the benefit, in my opinion, one of the benefits is that you’re getting the information in from like the top sources. It doesn’t matter. You could throw a dart on a dart board and like on the panels and land on something amazing. Like, what do you think? Absolutely. Well, on the same day I got to do a meditation, a guided meditation with Deepak Chopra.
Yeah. And who was interviewed by, his daughter. That was, fairly incredible. I’ve read his books. Mm-hmm. And actually having a guided meditation in a room that was small that was a, a real privilege. And then also getting to, hear, ken Griffith about the American Dream and, and what it really means to keep that alive.
I thought it was, it was extremely special. Yeah, great, great times. And I think yeah, year over year, one of the things that if you choose to go back again, which I highly recommend one of the things you’re gonna notice is when you go year over year, you start to see some of the same people.
You start to get to know people and really, it, it’s a real community. I know it’s hard to imagine for some, when I talk about this thing, but I’m like, you, you, you don’t know until you go for a couple years and then you’re walking through the halls and you’re like, wait a minute. I recognize a lot of people here, like how did that happen, right?
That that’s what happens next. that would be in incredible because the caliber of the people was Yeah. Was impressive. And I, I, I also like, and, and you mentioned this, how broad it was, you know, like they, they incorporate health, mental health more holistic approach to your career besides being extremely in depth and sometimes in some topics like private credit or, you know, emerging markets.
So I, think it was very broad in scope, and , there are times that , I wanted to be in two sessions at the same time. Yep, yep. And, and that just goes to show, I think the caliber of the, attendees. That’s awesome. Well, let’s switch it up a bit here. I do wanna get into Toledano Capital Partners a bit.
So maybe start by telling us a little bit more about, about your firm. Sure. I started my, investment career here in the US and then I went to Europe. I was in the Middle East and I ended up in, Latin America. And what I decided to do was after kind of surveying the investment world all over I think that especially post pandemic, the US is the clear winner in terms of.
Where to invest in, in the private markets. And I decided with the backing of, three family offices to set up Tono Capital Partners to invest only in the US and with a very broad mar with a very broad mandate. And it’s, I fought. Really hard to keep that mandate broad, to be able to do senior credit, first dollar, all the way to growth equity, but with, I would say two principles in mind.
First don’t lose money. And I know that sounds like a tology, but it’s my view on risk return. I don’t do vc, I don’t do anything where principle might be jeopardized. And we invest with a fixed income mentality. So how do I recover my principle first? And then let’s talk about upside. And then second, boring is better.
Know going to places where there’s the market is not as crowded. You have other sexier areas. Where there’s a lot of money chasing it and I just can’t compete. So going, you know, niche, within a niche and, and industries that need capital and are out of favor, that’s where Tono is best.
Hmm. Now in the past, correct me you mentioned that you moved from more, mostly large Latin American focused funds and now you’re more US focused fund. Can you kind of juxtapose those a bit? I’m just curious ’cause I’ve talked to managers on both sides, but like, moving from one to others, like, talk about maybe some of the differences there.
I think that’s interesting. Sure. I mean, I’ve always worked throughout my career in large, you know, multi-billion private equity firms. And I think that being in my own shop, it allows me to be nimble and in many ways, first in where I invest within the capital structure. and that’s something that’s very important because once you find a good company.
You wanna make sure that you become a, a capital solution provider, right? Mm-hmm. You wanna make sure that your mandate can accommodate that company, not the other way around. So once we find a good company, we say, okay, maybe this company needs a preferred or maybe equity or maybe you know, a term loan.
And so , we really are flexible in terms of structuring, but very disciplined in terms of valuation. So mm-hmm. , I think that being smaller allows you to be nimble. But in terms of difference one of the things that I’m always surprised in the US is that for a fund our size we’re looking to deploy per deal anywhere from 50 to 150.
Scale is, hardly ever an issue. You know, the US is so big that scale is not a real problem. You know, we’ve, invested in niche businesses and the market is a billion dollars, so it allows you to, scale up pretty well irrespective of what business it is. Mm-hmm. And that is certainly not the case elsewhere.
Mm-hmm. what are you looking for in terms of like, deals and, just your deal flow? Like, how does that look like for you? Sure. But let me just also give, a little bit because you, you mentioned something that’s very, very interesting the differences between, you know, abroad and in the us.
Mm-hmm. Just so you size the, the, the US market, Mississippi is one of the poorest states in the us. Mm-hmm. It has 1.3 times thereabouts. The GDP per capita in Spain. Mm-hmm. And it’s almost on par with the uk so it’s poor for the US and I think that. That bringing that Latin American mentality of finding places and, niches and not being scared to go where others don’t want to go.
Mm-hmm. The US is full of opportunities. it is a land that’s rich with opportunities and you just have to be willing to do the work. And I think that is extremely exciting. Yeah. I have to agree with that. And so, get further into what doing the work looks like. I wanna hear how does, how, what do you look for in deals?
And tell us a little bit more about the thesis. Sure. We we like to do transactions that give us some, some comfort, some downside protection, either via the business itself or with you know, or, or structuring around it. So we’ve done, you know, in, senior credit in where we learned when we, where we lend to cash flow, but with a, hefty margin, you know, so we don’t take outsized risk, but we try to through structuring beef up returns. And we are we are not ESG restricted, we can go into any industry. So we’ve done stuff that deals that are related in hunting deals that are in the automotive sector, for example. We did a deal for that.
It’s a company that, that does electric jacks for trucks. It’s a very boring, very boring industry. Very boring niche, but it’s a niche that sells. There’s $1.2 billion in jacks for trucks. Wow. Sold in the US every year. Hmm. Who would’ve thought, so how do, how do you find a deal like that? How do you find a deal like that?
Like that’s a good example. How does it, how do you come across in those niche, niche deals? I’m so curious. It’s funny, but the, actually the founder, the engineer behind it is an, Ecuadorian immigrant to the US and he had tried to get funding, get outta here. That’s an amazing story. Continue. I love where this is going, man.
Yeah, so, so like through, I gave a, a, a chat about, you know. Raising capital, selling your business to some latam forum in Miami. And yeah, and I got introduced to him, so I said, Hey, let’s go for lunch. And he started talking about, you know, pressure and electrical engineering way, way over my head. And then he said, you know, our, our main customer is waste management.
And I was like, wait, waste management, the garbage collection company. Yeah. Like, yes. You know, and I love boring businesses like that. So I was like, okay, start all over again. Like from good morning. I want to hear it all over again. And that’s, how we ended up investing in that business. And it’s a, it’s very, very, very interesting business.
Great idea. We have a, now a rep in Europe, so we’re starting to expand. So that, that’s the kind of stuff that, that I like and we’ve structured in a way where we have the patent as a collateral, so we have some downside protection there. And, and, and that’s how I think of the world, you know, as a fixed income investor.
Principle protection first. Mm. And you mentioned earlier, earlier that you were backed by family offices. Is there still room for participation in this fund? Are there other families? Is it only institutional accredited investors? Like how can someone participate? Yes. Most of the times when we do like larger deals, we’re looking at a deal right now that’s gonna be about 150 million in equity.
We will put about a third of the equity and then mm-hmm. Create an SPV to do a deal specific transactions. So we we’re constantly working now with, with other capital providers, both from latam and also from the us I’ve increasingly tried to bring on. Us mostly family offices so I can broaden my LP base and also learn, you know, learn because clearly the, American family offices are, are more advanced than, than some in, in Latin America.
That, that’s for sure. Hmm. Well, Rodrigo we’re, you know, second half of the year is coming up. I’m interested what, what’s next? What’s next for you? What’s next for Toledano? I think that you know, the, interest rate environment even if it interest rates might go down a little bit, it’s still good.
Risk adjusted return to be in credit. We like natural resources, mining. We think that. As the US re industrializes as they spend in infrastructure behind it, there is steel and behind steel there there’s met coal, for example. So I, think that thesis on, on going back to the basics, to, to overlooked industries that have that are correlated.
With broader macro themes like infrastructure, investment, data center investments, all of that, I think there’s, room if you’re creative, if you’re willing to go to places that are not necessarily sexy, that that those things will, they, they present good risk return arbitrage. So we’ll keep investing, we’ll keep on doing what we’re doing, being disciplined in, valuation, and flexible in, in, in structure.
Amazing. Last thing, Rodrigo, if somebody’s listening or watching this, and if they wanna follow up, they want to connect, they wanna learn more, follow the journey, how do they do that? Yeah. Well, I mean, we have our, website, which is toledano cp.com. And you’ll find there the, the email and the, and the corporate office number so they can, they can reach out.
I’m also on LinkedIn Rodrigo Medrano. So I’m happy to connect with, with like-minded investors and, your audience. Fantastic and ity watching. Just so you know. We’ll definitely put some information in the show notes so you can just click on it and head right on over. And speaking of the audience, if this is your first time with Mission Matters and you haven’t done it yet, hit that subscribe or follow button.
This is a daily show. Each and every day we’re bringing you new content, new ideas, and hopefully new inspiration to help you along the way on your journey as well. So again, hit that subscribe or follow button. And Rodrigo, thanks again for coming on the show, Adam. Thank you. Very kind.
