Patria Investments Limited

there's a clear view that while our industry clearly benefits from the powerful long-term trends in asset allocation, it may face some micro headwinds in the short term. And we are certainly seeing that reflected in sector valuations. As you think about Patria, it's important to consider the backdrop in which we operate. And right now, we think Latin America looks quite compelling compared to most parts of the globe. Turning back to our business, I'll go a little deeper on fundraising and then add some color from our asset class verticals. Fundraising in the quarter included a notable closing of Brazil-based capital for our newest private equity fund. We talked a lot about diversifying our platform and product offering, but this is a great example of our efforts to diversify our distribution channels and further democratize alternatives in the region. This closing of a billion reais focused on the high net worth and qualified retail channel and included more than 7,000 investors with check sizes ranging from more than a million reais all the way down to 10,000 reais. It is a prime example of how we believe we can harness the financial deepening in the region to drive AUM and earnings growth. We targeted $4 billion of fundraising in 2022 across a diverse range of products. And each piece of that target is now well within our site. While our targeted closing dates should get us there in Q4, it is possible that a piece could slip past the end of the year into early 2023. Over 2022 and 2023 together, We are targeting $6 to $7 billion in long-dated closed-end drawdown fund structures. This is coming not just from our two flagship funds, but also from a growing offering of complementary products targeted at both the international and local investor universe, including strategies like growth equity, infrastructure credit, and private credit. And that 6 to 7 billion doesn't include fundraising in our more perpetual strategies that can constantly fundraise, where we have already seen inflows of more than 1.4 billion so far this year. It also doesn't include our permanent capital strategy, where we now have more than $1 billion in AUM across REITs, real estate investment trusts, and core infrastructure products, and expect to add another $1 billion next year through organic fundraising and additional M&A. Now looking at some highlights across the platform. For private equity, in addition to the fund closing, we announced the agreement for Laboro, a leading agricultural inputs retailer in Latin America and the largest in Brazil, to become a U.S. listed public company. This is an important step forward in the divestment process for Fund 5 and a great case study of our success in the agribusiness sector and the execution of a pan-regional consolidation strategy with more than 20 M&A transactions completed to build the company we see today. In infrastructure, we continue to see an accelerating fundraising cycle as we target the first closing of our next flagship fund in the coming months, more than one year ahead of what we anticipated back at the time of our IPO. We also close our second infrastructure core vehicle targeted to local Brazilian investors in Q3. The divestment process continues to move along with some key assets with an expectation to deliver significant realizations to our limited partners in the next few quarters. Credit continues to show strong relative performance despite historically challenging market conditions in the asset class. The high-yield strategy is outperforming its benchmark by an impressive 660 basis points year-to-date with about 90% outperformance attributable to asset selectivity with a yield to maturity of more than 13% at the end of Q3. The local currency strategy is also outperforming its benchmark with a yield to maturity of more than 15%. On a broader basis, these two products are both performing 1,500 to 2,000 basis points better than the world aggregate bond index, which is down 20% year to date. Our public equities platform delivered solid performance in Q3 At that time, equity markets were a clear bright spot relatively to the U.S. and most other world markets. The Chilean small-cap strategy, for example, returned 12% in Q3 and outperformed its benchmark by 370 basis points. And in real estate, BBI raised more than 100 million reais to launch a new REIT, Real Estate Investment Trust, vehicle, focus on credit assets. This continues to be an area where we remain active on the M&A front and believe there is a very replicable permanent capital strategy to be pursued in other key Latin American countries. Let me now turn things over to Marco to give some more details on the numbers. Marco.

Thank you, Alex, and good morning, everyone. Looking first at the P&L results, we generated fee-related earnings of $31.7 million in Q3 2022 and $94.6 million year-to-date, up 46% and 67% respectively from the comparable prior year periods. FRE was in line compared to the second quarter, following a similar pattern in the fee revenues and fee earnings AUM. A few known factors coincided to limit the uplift that we will typically see moving into the second semester of the year. And our trajectory remains on track for our full year guidance. Our second infrastructure fund reached the contractual end of its fund term in June. And the lack of that fee stream offset the additional revenue generated by infrastructure deployment in the first half of the year. Also, as noted, last quarter there is a fee holiday on the first closing of our latest private equity fund, meaning the private equity deployment in the first half, while still fee earnings AUM in nature, is not effectively generating management fees yet. And finally, the outflows from credit in the middle of the year, which have slowed and we believe turned the corner, have resulted in credit fee earnings AUM being lower than we hoped at the beginning of the year. Despite these upsetting factors for management fee growth during the year, fee revenues has remained very stable, demonstrating the stability that makes our fee earnings predictable. In the fourth quarter, we expect to deliver similar management fee revenue. with the addition of the year-end incentive fee crystallization adding to the FRE results. This should allow us to deliver our financial guidance of 50% FRE growth, which we first conveyed exactly one year ago, through an environment where maintaining guidance has proved difficult for many companies. The FRA margin was 57% for both the quarter and year-to-date period, continuing to run on the higher side of our mid-50s guidance, as both personal and administrative expenses have remained relatively consistent with first half level. Net accrued performance fee rose to $428 million, up from $419 million last quarter, and up 23% since the beginning of the year. The quality of our private equity and infrastructure portfolios continues to support significant embedded value for shareholders, and exit processes continue to move forward for several portfolio companies. As we look to the fourth quarter, there remains a possibility of a performance fee realization event, with the outcome now being more binary. It's safer to assume an event that crystallizes in 2023, though we would expect to have clarity by the time we announce our Q4 earnings. Turning to AUM, total AUM was $26.5 billion at September 30, up slightly from the prior quarter, with the inflows in private equity offset by outflows in credit and positive valuation impact offset by currency impact. Total AUM is up 76% from one year ago, reflecting the expansion with Moneda, and up 11% year-to-date. Fee earnings AUM was $18.6 billion at September 30, compared to $18.8 at June 30, with a quarterly change generally driven by the same factors affecting fee revenues that I mentioned a moment ago. The contractual fee turnoff of infrastructure two is the largest driver. And while we also saw some additional net redemptions in credit for the quarter, driven largely by Chilean clients, we're seeing the macro headwinds for those low settles as we enter Q4, following the strong rejection of the proposed new constitution in Chile. I will close with a quick reminder of my upcoming transition to focus my time more fully on PATRA's growth strategy in the coming years as Chief Corporate Development Officer. It has been a privilege to serve as a CFO in these recent years, and I want to assure you that I will continue to be a regular face to PATRA's shareholders from the senior leadership team. Bringing Ana Russo to our management team adds a distinctive set of skills that will take our finance and accounting team to the next level as a public company. In turn, it is going to allow me to best leverage my strengths to achieve our future vision for the growth of the platform. You'll hear a lot more from Ana in the coming quarters. But for now, I will turn to her for just a few quick words. Anna?

Thank you, Marco, and good morning, everyone. It is a pleasure to be here with you on the call today and look forward to meeting you soon in person. I plan to spend this fourth quarter working closely with Marco and the team getting up to speed, and we are off to a great start since my arrival at the beginning of the month. Marco has built a wonderful team, and I'm excited and honored to have the opportunity to step into this leadership role. Obviously, I would defer any business-related questions to Alex and Marco this time. I will turn it back to Alex for the closing words.