Patria Investments Limited

Hello, and thank you for standing by. Welcome to Petria's 4th quarter 2023 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask the question during this session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. I will now like to hand the conference over to your host, Josh Wood, head of shareholders relations. Sir, you may begin.

Thank you. Good morning, everyone, and welcome to Petria's 4th quarter 2023 earnings call. Speaking on the call are our chief executive officer, Alex Seig, our chief financial officer, Anna Russo, and our chief corporate development officer, Marco DiPolito. And we're also joined by our chief economist, Luis Fernando Lopez, for the Q&A session. This morning, we issued a press release and earnings presentation detailing our results for the quarter, which you can find posted on our investor relations website or on Form 6K filed with the Securities and Exchange Commission. Any forward-looking statements made on this call are uncertain, do not guarantee future performance, and undue reliance should not be placed on them. Petria assumes no obligation and does not intend to update any such forward-looking statements. Such statements are based on current management expectations and involve inherent risks, including those discussed in the risk factor section of our latest Form 20F annual report. Also note that no statements made on this call constitute an offer to sell or a solicitation of an offer to purchase an interest in any Petria fund. As a foreign private issuer, Petria reports financial results using International Financial Reporting Standards, or IFRS, as opposed to US GAAP. Additionally, we will report and refer to certain non-GAAP industry measures, which should not be considered in isolation from or as a substitute for measures prepared in accordance with IFRS. Reconciliations of these measures to the most comparable IFRS measures are included in our earnings presentation. On headline metrics for the quarter, Petria generated distributable earnings of $70.5 million, or 47 cents per share, for 4T23. We declared a quarterly dividend of 39.9 cents per share, equating to 85% of distributable earnings per share and payable on March 8th to shareholders of record as of February 22nd. With that, I'll now turn the call over to Alex.

Thank you, Josh, and good morning, everyone. 2023 marked

Petria's third year as a public company, and I'm very pleased with the performance we delivered in the fourth quarter and the full year. We generated $47 million of fee-related earnings in Q423, bringing our full year 2023 FRE to $148 million with an FRE margin of 60%. This is up 14% from 2022, driven mostly by organic growth. Performance-related earnings for Q423 were $27 million driven mostly by Infrastructure Fund 3, and we finished the full year 2023 with $47 million of PRE. With strong performance in both earnings streams, we delivered more than $70 million of distributable earnings, or 47 cents per share, for 4Q23, bringing distributable earnings for the full year 2023 to $188 million, or $1.26 per share. That translates to EPS growth of 26% year over year for our shareholders, and the resulting $1.07 in dividends equates to a yield of .7% based on our share price at the beginning of 2023. This was also our first year on the path to deliver the multi-year targets shared at our 2022 Investor Day, which look out through 2025. We aim to grow fee-related earnings from $130 million in 2022 to more than $200 million in 2025, equating to an annualized growth rate of approximately 15% or more. Given our performance in 2023, our organic growth initiatives and the additional earnings power embedded in our pending M&A transactions, I'm confident in our path to meet this target. While it's challenging to guide you on PRE in a given quarter or year, we said we could generate $180 million of performance fee realizations between our Investor Day and the end of 2025. Including the amount realized in the fourth quarter of 2022, we have now delivered more than $66 million of PRE since the Investor Day, putting us right on pace to deliver this target as well. In terms of growing the platform, we also set targets for total AUM to reach $50 billion and fee-earning AUM to reach $35 billion by the end of 2025. And to achieve that, we estimated a need for at least $20 billion of capital formation from a combination of organic fundraising and M&A between 2022 and 2025. Starting from a base of $24 billion of total AUM and $18 billion of fee-earning AUM in the beginning of 2022, over the last two years, we have had organic inflows of nearly $8 billion and added nearly $3 billion of additional inflows from acquisitions that have already closed to our fee-earning AUM base. As you know, we have also recently signed two significant M&A transactions, which we expect to close during 2024. And based on existing AUM levels, we expect these transactions to add more than $10 billion of additional fee-earning AUM to the platform. When you put that all together, combined with our goal to raise around $5 billion of gross organic inflows again this year, we believe that by the end of 2024, by the end of this year, we should have already achieved the $20 billion of capital formation and $35 billion of fee-earning AUM a year earlier than expected. We are not only growing, we are growing with quality by adding stable and sticky AUM. Our permanent capital AUM is expected to grow to near 20% of total fee-earning AUM with the closing of pending M&A. With over 70% of fee-earning AUM continuing to be denominated in hard currency. Seeing this progress and the meaningful evolution of our platform, we expect to host another Investor Day event late this year to share our vision for the next phase of growth. Now, looking at some highlights and updates across the platform for the quarter of the year. Organic inflows to total AUM were $1.4 billion in Q4 and $4.8 billion for the year, counting additional $175 million of commitments that were approved in December and closed in January. Our fundraising for the year really showcases the power of diversity and reinforces why it's such an important aspect of Patrisse's growth. Our latest flagship infrastructure Vintage raised more than $1 billion in 2023 with more than $400 million in the fourth quarter. Our credit, real estate, public equities and advisory verticals each contributed $700 to $800 million of gross inflows with some notable highlights. We secured more than $200 million in 4Q23 for our infrastructure private credit fund. Our Pan-LATAM, large cap and small cap public equity strategies raised combined gross inflows of more than $740 million. The VBI real estate platform had a fantastic year with broad inflows across the product offering totally more than $750 million. And while the industry has seen a major slowdown in private equity fundraising, we are quite optimistic that our flagship private equity funds extension through the end of 2024 will allow us to significantly add to the capital we have already raised to reach over $2 billion. For us to sustain strong inflows, we have to always continue to perform to our clients. And I'm very pleased with the strong returns our strategies are delivering. We saw particularly strong performance in the fourth quarter with more than $1.1 billion in positive valuation impact driving full year 2023 appreciation to more than $1.9 billion. Leading the charge here was strong performance in some of our larger publicly traded positions in the private equity platform like Lavoro, our agriculture inputs distributor, SmartFit, our low cost gym chain, and Ultrapar, our gas station network company. This drawdown fund appreciation has driven our net accrued performance fees to $541 million, up more than 15% from the prior quarter and 13% from one year ago, even after the realization of $47 million of PRE in 2023. The strategies in our public equity vertical also generated strong gains with Penn Latam strategies yielding nearly 29% in US dollars and Chilean equity strategies yielding more than 18% in local currency for the full year. The performance of our credit strategies was also notable with our Latam High-Yield Fund, which is dollar denominated, yielding 14% in 2023, while the local currency fund yielded nearly 30% in US dollars for the year. We have continued to stress that returning capital to our investors has also been a key focus in 2023, and our divestment activity in the drawdown funds continue to gain momentum. We closed sales transactions for ODATA, our data center business, and Entrevias, one of our toll roads in Brazil, in our infrastructure Fund 3, which delivered more than $1.5 billion of proceeds to invest and pushed this fund through the performance fee realization hurdle to generate much of our PRE in 2023. We also announced the sale of Delis, our food distribution platform, as well as block sales in publicly traded positions, which secured more than $600 million of additional proceeds. In total, we realized more than $2.5 billion across the platform for our limited partners during 2023. Finally, I want to take a moment to highlight some new initiatives that are moving forward here in early 2024. We have been very active on the M&A front in 2023, but I want to also give equal attention to some of the great things we are doing organically to grow our platform. First, we are nearing the end of the year. We are now in the formal lounge of our first infrastructure private credit fund, which is something we have been diligently working towards over the course of 2023. We believe this is a major opportunity to grow our private credit offering while leveraging our extensive experience and deal flow access in the infrastructure space. We have a very long dated 50-year term structure, making it effectively permanent capital for our platform. As noted earlier, we formally secured more than $200 million in initial commitments for this fund in Q4, anchored by multilateral agencies, and now have commitments taking us up to $350 million. Second, we are also announcing the start of a new platform within our infrastructure practice. Patreon has a long and successful track record in the energy sector, being one of the largest investors in solar, wind, small hydro, and solar energy. We

are also working to develop natural

gas and transmission assets. Overall, Patreon has historically committed $2.3 billion in the sector over the past 18 years, representing more than $5 billion of overall CAPEX. In connection with the remarkable growth of the energy-free market in Brazil, we are excited to announce the launch of our energy trading platform, which will build on Patreon's historical expertise in this area. As energy supply volume continues on migration from the regulated market, the Brazilian free market is expected to grow from just over 30 billion reais, approximately $6 billion, in 2023, to around 70 billion reais, approximately $12 billion, by 2028. Within this backdrop, we believe there's a compelling opportunity in a very fragmented, independent trading space. This initiative will be developed in first Q24 in partnership with a talented team with an outstanding track record, alongside Patria's team. It will be funded with an initial contribution of 100 million reais, approximately $20 million, from Patria's balance sheet, with up to 50 million reais, approximately $10 million, of value at risk. We expect this new strategy to be a positive contributor to Patria's earnings, with limited impact in the first few years. But with attractive margins and exciting growth potential over time. After establishing a track record of success, we believe we would also progress into an asset management strategy with third-party capital and a relevant contributor in our infrastructure vertical. We expect to provide more details in coming quarters, as this initiative takes shape. To finish here, I'm very pleased with Patria's performance in 2023, and our growth path. And I'm very proud of what we have accomplished in the three short years since our IPO. Our platform has significantly expanded beyond two successful flagship strategies, private equity and infrastructure, to provide a diversified client offering across major asset classes, adding scale and expertise in credit, real estate and public equity. This expansion turned a limited offering of less than 10 products into a versatile menu of more than 30 products to serve a range of client profiles and needs. We extended our geographic presence in the region in both investment expertise and distribution capability through new partnerships in Chile and Colombia. Through this expansion and diversification, our fee-earning AUM has grown from approximately $8 billion at our IPO to a pro forma of more than $34 billion today, including pending M&A. In turn, we have grown our fee-related earnings from less than $60 million in 2020 to nearly $150 million in 2023, with more growth embedded as we progress towards our 2025 target of over $200 million. And importantly, through this growth, I believe we have maintained the high standards of investment performance that is valued and demanded by our clients. And this always remains the key to our growth over the long term. Let me now turn to Marco for an update on corporate development, and then Anna to walk through the numbers. And I'll be back for some final thoughts. Marco, over to you.

Thank you, Alex, and good morning, everyone. It was indeed a very active year for Patria on M&A Thron. And

since

the IPO, we have now signed or closed on six acquisition transactions as part of our strategy to expand the platform and grow our earnings capacity. Industry consolidation seems to be the newest hot topic in the sector, but this is certainly nothing new to Patria. As we've made in organic growth, that's key part of our strategy over the last three years. Through Moneda, we acquired scaled credit and public equity platforms, along with the key leadership talent, as well as geographic expertise and distribution relationships in Chile. We also added depth and versatility on the private equity vertical through the acquisition of teams focused on growth equity with Camarupin and venture capital with the case of EGOT. In real estate, we acquired 50% of VBI real estate, with an option to acquire the remaining stake to anchor our presence in Brazil. And recently in the fourth quarter, 2023, we were able to act on a very attractive opportunity to acquire credit to ace real estate. Also recently in the fourth quarter, we finally agreed to acquire the private equity solutions business from Aberdeen. Once closed, this transaction will launch a new vertical for Patria called global private market solutions, which adds fast growing secondaries and coin basing strategies. And we'll enhance our ability to offer diversified global alternatives exposure to our clients. In addition to the acquisitions in the Colombian market, we have joined forces with Moneda Colombo in a venture that will anchor our real estate presence in the country, and also tap into a massive distribution network to provide a range of locally focused alternatives products to Colombian investors. As substantial as our M&A activity has been, it's worth noting that transactions closed in 2023 contributed effectively only $2 million in FRE in the year. Likewise, the major M&A transactions signed in 2023 will also have only partial year impact in 2024, depending on closing timing. We continue to feel good about the process with the private equity solutions business we are acquiring from Aberdeen on track to close in the first half of the year. We also feel comfortable with the process on credit suiz real estate, which is slightly more complex as we will go through a fund level shareholder approval process in each REIT vehicle, following standard regulatory approvals. All in all, we expect to begin 2025 with these acquisitions fully on board and fully contributing to reaching our earnings targets. With two sizable pending transactions, 2024 will be an important year of consolidation and integration as we close the deals. However, we do remain active and we'll continue to have an opportunistic mindset to achieve our platform growth conditions through M&A. I will now turn the floor to Anna to go through the results in more details.

Thank you, Marco. Batra delivered a strong quarter and a solid year with significant growth of our main KPI and we remain a consistent path to reach our 2025 targets. Our fourth quarter 23 distributor earnings of $70.5 million were up 32% from Q4 2022 and adding to our year to date results we reach a full year 2022 DE of $187.8 million, up 28% compared to prior year. Our resilient management fee revenues were 64.7 million in Q4 2023, rising 18% compared to Q4 2022 and 245.6 million for the full year 2023, up 11% compared to 2022. This growth was supported by our latest flagship private equity and infrastructure funds as well as the expansion of our real estate platform. Total operating expenses including personal and administrative expenses, total 18.9 million in Q4 2023, down 5 million compared to Q4 2022. This decrease is given mainly by the further implementation and expansion of our equity compensation plan at the executive bonus level

already

mentioned last quarter. Integration synergies and outsourcing mailing in IT partly offset by M&A expenses to other increases, inflation and appreciation of the curve. Full year 2023 total operating expenses were $91 million almost flat versus prior year and following the same general drivers of the quarterly comparison. Looking specifically at the personnel expenses, the quarterly average during 2023 was approximately $15 million with the last two quarters of the year impacted by the catch up accrual impact of implementing our equity compensation program. Therefore, the 2023 quarterly average as opposed to the Q4 2023 results is a more reasonable run rate to consider as we enter 2024. Fee related earnings were 46.7 million in the quarter up from 35.3 million in Q4 2022. Full year 2023 FRE reached 147.7 million with a margin of 60% up 14% year over year with a 2.4 percentage point increase in margin. The M&A transactions closed in 2023 contributed effectively about 2 million of FRE in the year, which was mainly Camarbine, Higa and two months of Ban Colombia with the reminder of the growth being organic. We finalized a stronger year with 1 to 2% of our FRE guidance and this result continues to keep us on track to deliver at least 170 million FRE in 2024 as

well

as our 2025 FRE target of the least 200 million bucks. We have also been consistently generating performance rates throughout the last several quarters. During Q4 2023 we generated 26.6 million of performance related earnings driven by a combination of additional net proceeds for infrastructure 2023 and contributions from one of VBI's drawdown funds.

Since our investment

date we have crystallized 66 million out of our 180 million targets throughout 2020 FRE. Net accrual performance rates were up 15% from the prior quarter to reach $541 million even after considering the performance and realization in the fourth quarter with the additional accrual coming mostly from private equity funds appreciation and positive currency impact.

This

current accrual now represents more than $3.6 per share of performance fee inventory. On taxes, our corporate income tax expense in

2023

rose 3.1 million compared to 2022 with the slightly higher expected tax rate driven by a higher mix of performance is subject to local tax rates. So again, highlighting the bottom line, this all led us to a distributed earnings of 187.8 million in 2023, which is an increase of almost 30% versus the prior year. Now a few notable comments on our DE to net income reconciliation. As we close our transaction with Bank Colombia and sign another two acquisitions agreements in the fourth quarter, we incur more M&A related costs which you can also see in the transaction cost line. In regards to the equity base and long-term compensation line, FASA implemented a voluntary compensation bonus code mentioned before on the FRE explanation, which give us the opportunity to execute this to convert 50% of their cash bonus into equity shares, receiving a matching component to this basis in three to five years. This was very well received for our senior level people showing the high long-term commitment and engagement of the team.

The majority

of the types of this P&L line comes from this new program and the remaining relates to previous long-term programs from FATRA and acquired companies, as well as equity-based compensation of partners. And finally, an important clarification of FATRA's dividend payout. In the announcement of our agreement to acquire the Brazilian real estate business loan credit suite back in November, we noted that FATRA will give careful consideration to our optimal cash flow structure as we look into 2024 and beyond, as we use a combination of cash, debt, equity to fund our M&A program. Beginning in Q1 2024, we may elect to retain more than 15% of our performance-related earnings and realize gains from the new energy trading platform, net of a proportional share of corporate taxes, rather than distribute a full 85% as we aim to do with the rest of our distributed earnings stream. We expect to exercise this incremental retention up to an additional $100 million in order to fund M&A obligations and pay down debt. After which point, we will evaluate the appropriate distribution approach for this earnings going forward. To be very clear, we plan to continue to distribute 85% of our stable and recurrent fee-related earnings stream, maintaining our commitment to deliver an attractive payout for our shareholders. I will now turn back to Alex for closing remarks.

Thank you, Ana. As we turn to your questions, I'll just reiterate how pleased I am with our performance in 2023 and over the last three years, and with the tireless contributions from the entire Patrick team to make it happen. From approximately $8 billion of fee-earning AUM at the IPO to more than $34 billion including our pending M&A, I think that this is a remarkable achievement. This is a people business, and we truly have a fantastic group of talented people pushing this company forward. As Ana noted, 2024 will be a transition year to our multi-year growth targets for 2025. We are comfortable in getting the fee-related earnings to at least $170 million in 2024 on the way to more than $200 million in 2025. Considering the growth embedded in our pending transactions, our organic initiatives, I am confident that we will reach both the financial and the AUM targets for 2025. We thank you for your time to listen today and now happy to take your questions.

Thank you. Ladies and gentlemen, as a reminder to ask the question, please press star 1-1 on your telephone and then wait to hear your name announced. To withdraw your question, please press star 1-1 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Craig Seigenthaler with Bank of America, your line is open.

Hi, good morning. Thank you for taking the question. This is Rodrigo Ferreira on the line for Craig. For Private Equity Fund 7 and Infrastructure 5, can you walk us through the size and timing of those raises? You've already closed on about 1.2 billion for PE7 and about 1 billion for INFRA-5. Do you expect consistent fundraising throughout 2024 or a few large closes? And

when should we expect a final close for each of them?

Hi, Rodrigo, this is Alex here. Thanks for your call and thanks for participating. Can you hear me well, right? Yes. Okay, great. Well, Private Equity Fund 7, we are on the way to raise 2 to 2.5 billion. We are at today halfway there, halfway the 2.5. We are a bit... I think the latest number is a billion dollar in Navy or something like that. We didn't have any closings beginning this year. We have another process open in Brazil. As you know, when we come raising Brazil, it's a very locked in fundraising process. So we should be fundraising in the next 30, 45 days. Something to do for investors where we expect another $1,500 million from coming from there and then follow on raising this to 2 to 2.5 billion, which is the guideline that we gave. Late last year, we continued the same. We're also fundraising the

reason to Latin America. We know we should push close to the end in

addition to fundraising. And then from there, from 1.5 to 2 billion, we have from the second quarter to the last quarter of the year, three quarters ago, which we feel confident that we can do. I also mentioned that we have a lot of funding extended the fundraising period for this fund to the end of this year. The fundraising period was gonna end in the second quarter. We extended until the end of 24. As fundraising, you're taking more time than usual for most funds, private equity fund seven being one of them, as already mentioned in previous calls. So we extended the LPs that are already in the fund, agreed with this fundraising extension period. On infrastructure fund five, I'm sorry, we are over a billion as of beginning of January. We have some commitments that were approved in the investment committees of some LPs late last year. And some of them were signed late last year. One significant commitment was signed at the beginning of this year. So it pushes us to over a billion. And more or less the same process that I described for infrastructure for private equity fund seven, infrastructure fund five, have significant fundraisings to be done in Brazil, Chile and Columbia this year, more in the first half of the year. And then we continue fundraising with ex-FATAM investors. We still feel very positive that we can reach two to two and a half billion dollar number closer to the 2.5. So those two together will be around 4.5 billion two to 2.5 from private equity fund seven, two to 2.5 to infrastructure fund five. And again, I see a good demand for infrastructure. So with a higher probability of reaching the 2.5 there, number that I mentioned. So infrastructure fund five, as we started raising last year, we didn't ask for an extension. The extension normally of this fund is a normal fundraising period, which ends in the end of this year. If they are one or two investors that are still working on our data room at the end of this year, I think we can ask for an extension there. I don't think it's gonna be necessary, but it is possibly common for these kinds of fundraisings. Hopefully I answered your question, Jose, that was it, right? Fundraising for info five and fundraising for private equity seven,

right? Yeah, thank you so much for the color. That was super helpful. For my follow-up, you had guided before that you expected two to two and a half billion of realizations in, I think 2024 and the beginning of 2025. Do you expect this to be concentrated towards a certain part of the calendar year? And can you remind us which funds should be accounting for most of these realizations?

Yeah, unfortunately it's very hard for me to give you an exact quarter for realizations. I joke with my team that M&A should not be mergers and acquisitions, sometimes should be called misery and anguish, right? It's selling a company a quarter here, a quarter there. On the buy side and the sell side, right? And on the sell side specifically, which are realizations that you asked for my guidances, we will continue, we have a very strong and we will continue with a very strong divestment agenda. As you can see, since the IPO in early 2021, we have been delivering, first was private equity fund three that gave us a very important for 2021 performance fees that added to our distributed learnings and then came private equity fund five, beginning of 2022 and then came infrastructure fund three and well, you know the whole story. So today, as of today, infrastructure fund three still have some important assets to be sold and we are in the process of selling them and we're beginning to sell assets of infrastructure fund four. There are some great assets there. You know the strategy, I don't wanna be repetitive here or redundant with you. It is a win the concession strategy, right? Win the concession, we build the assets, we call the risking and then we sell the assets once it's operational. Several assets of our infrastructure fund four went operational last year. We have a solar panel farm that is now fully operational. So for us ready to be sold, a thermal power plant already also operational as of end of last year. So all of these assets that once they are operational, we put them for sale. Also when we manage store roads, the first two to four years of the concession, we have big capex investments and then we have more of a maintenance capex year five onwards for the next 25 years and generalizing. So there are some toll roads that we are in the five years into the concession that we want. So they're also ready to be sold as we did with one of the toll roads of our infrastructure from three last year. Tribe Elective Fund five and four, five and six, we're selling assets of these three funds. So we did sign the sale of an asset of Private Equity Fund four beginning of this year. So we haven't closed yet. So we didn't announce it, but we signed the sale of one of the assets of Private Equity Fund four. And we are on a very active agenda in selling assets of these three funds. So adding all of this, which are a lot of digestments if you notice, there's over 15 companies being divested or the dig as we speak, because we're adding, again, assets from infrastructure fund three and four, assets from Private Equity Fund four, five and six. So adding all these assets, there are over 15 assets being sold from these funds. So again, I think it's very hard for us to give a specific quarter, sometimes even year for our performance year realizations. However, the $180 million that we guided in our backstage end of 22, we feel comfortable that we'll deliver. We already delivered on 66. So we have to deliver another 110, 114, which we are confident that we can between this year and next year. Thank you.

Great, thank you very much, Alex. No, thank you.

Thank you. Please stand by for our next question. Our next question comes from the line of Ricardo Butchbegal with DTG Pactual. Your line is open.

Good morning, guys. I have two questions here on my side. First, I wanted to get an update from your perspective in terms of net inflows near liquid strategies. I wanted to particularly to get a sense in the interest from Chilean investors, particularly in equity and credit already during the beginning of the year. If you guys have seen more than that, given the insight, the company should progressively improve throughout the following quarters. And for my second question, and more for the previous one, I want you to get an sense in terms of how close is the PFAN 5 and PFAN 4 from the hurdle rate and after it will hit the hurdle, it will start paying performance. Thank you.

Okay. Thank you very much again for your question. This is Alex again, and please team compliment here my answer. On the public equity and public debt funds that you asked, we had 2022 net outflows. I think we mentioned in previous quarters about 2022. As we went into 2023, and the perspective of better macro conditions in the US, in Latin America, specifically in Chile, we started seeing our redentions dry out. And then in the second, third, and fourth quarter of 2023, we saw thoughts of net inflows. And as I think I was mentioning in the earlier call, each one of these families of strategies, public credit and public equity, each one of them with over $750 million of inflows. So we were extremely pleased. Of course, not only the macro situation improved, but the performance of the funds were extremely positive, beating benchmarks in most of them during 2023. I gave some of the numbers during the call, but an extreme peace and really no groundbreaking performance. Our high yield Latin fund with now 14, 15% net returns, our small cap and large cap lifetime strategy for public equity between 20 and 30% returns and small cap Chile, the same. So extremely positive returns. Of course, the macro situation that benefit the inflows plus the performance of the fund, both of them working together for this kind of inflows that I mentioned over $750 million for each of these strategies, the whole vertical of public equities. And in addition, the whole vertical of public debt, public credit. We go into 2024 with the same view as 23. We continue seeing very small redemptions. As you know, these redemptions are programmed so we can actually see them ahead of time. As investors have to place their redemptions ahead of the redemption date. So we have a looking forward kind of view and they are very small. Some of the funds close to none and we have inflows coming in and we see inflows coming in also from international investors, not only Chilean institutional investors and Colombian and Peruvian institutional investors that were the bulk of the investors of these two strategies. We see international X.com investors coming in also to the strategy. Some of them as mentioned, they did redeem in 2022. We had some specific issues with the our UK investors. As you know, the UK went through a big guilt crisis in 21, 22 and some of our institutional investors then had to redeem money from all of their liquid funds into the hours. 23 things returned to normal and they start then investing again in funds like ours, including ours. So we see net inflows from the international investors X.com in 23 and we see already good perspectives in 24. So we have very good numbers for the first quarter to be honest. So did I answer your questions? Did I miss anything here? I'm sorry.

No, this first part of the question was very clear. I'm not sure if you can discuss that, but if you could get an sense in terms of the, how close we are in terms of the hurdle for PFAN 5 and 4?

No, fantastic. No, I was, yeah, I was gonna answer the second part. I just wanted to make sure that the first part was

a good answer for you.

No, no, great. Well, the second part of your question, we are already in the catch up phase for our infrastructure fund three and we are far from the catch up phase for infrastructure fund four. Now we haven't started selling the assets yet. As you know, we have European carry, so we have to give all the principal back plus the hurdle before we actually go into performancy modes and we're far because we haven't started digesting assets from the infrastructure fund four. I mentioned that we are on the process of selling, but we have not signed and closed any of those deals. For private equity, we sold a significant asset from private equity fund five, a food distribution company that pushes our DPI, distributable paid in capital for private equity fund five. We are, if we sell one of two assets of that fund, we will reach the performance level, be it a healthcare company that is the loss of fund five, be it the agricultural inputs company that we listed in NASDAQ and, or our participation in a gym club, smart fit as you know, if we sell one of those three assets because of the significant size of these assets inside our fund five, it pushes us very close to our giving back the principle, getting into the performance level. We are now considering selling these assets, two of them already listed. So it's more considering follow-ons. I think we still have a hard IPO market ahead of us, at least for the next couple of quarters, maybe in the second half of this year, things get better for IPOs, but we have a significant interesting market already going on for follow-ons. We did several follow-ons for two of our portfolio companies in 23, one from Infrastructure Fund 3 actually, either VIAs, Waterways, a company, and we also did a follow-on for our healthcare company, the Gym Chain, Smart Fit in 23. So we will continue doing that in 24, and we see an interesting market for additional follow-ons. So I hope I answered your question. Infrastructure Fund 3 already there, Infrastructure Fund 4 far from there, and Private Equity Fund 5, depending on the mosaic of divestments here, we can reach that performance fee mode this year or next year, most probably next year, but we don't actually depend much for the performance fee realization target that we have for this year on Private Equity Fund 5.

Hi, this is Marco. Can I compliment something, Ricardo, that may be helpful for your question and the way you're building up the model. We have about 540 million of net unrealized performance fee, and out of this amount, 234 from Private Equity Fund 5, 169 for Private Equity Fund 4, and 110 from Infrastructure Fund 3. If you tie this number to the previous information that Alex gave of 66 million that have been already returned and contrast that with the three-year target of 180, so if you take from this 180, the 66, the 110 that is visible on Infrastructure 3 alone would be enough for us to meet the target for the three years. So as much as, of course, we're paying a lot of attention to Private Equity 5 and Private Equity 6 and all the considerations that Alex posed, which we still have to return the money before we get into the catch-up, Infrastructure 3 alone, which is already in a catch-up phase will be sufficient to satisfy the three-year target that we set on our tax day in 2022.

Thank you, Marco. Great compliment there. Great, thank you. Thank you both.

Thank you. Please stand by for our next question. Our next question comes from the line of Tito Lobatob with Goldman Sachs. Your line is open.

Hi, good morning. Thank you for the call and taking my question. Questions on the management fee evolution in the quarter. Just to, you know, we had very strong growth in the fee-earning AUM, although the management fees did not grow as fast, just to understand if there was anything in particular, why they didn't grow as fast as the fee-earning AUM in the quarter, and also incentive fees were also a little bit lower, so, you know, kind of led you to being slightly below your FRE guidance for the year, just to think going forward, and any downside risks on the guidance that you've given, for, you know, the 170 for next year, 200 in FRE for 2025. Thank you.

Oh, thank you, Tito, and thanks for the question and participating here in our call. There are sometimes some -to-quarter movements on expenses, and I also can turn to Ana or CFO to explain better, so sometimes I think it's better to see the whole year. As we know, we did some acquisitions. We had some synergies in place. Sometimes we do run the synergies in one, they appear in our numbers in one quarter versus the other, because in one quarter we had extra costs because we were running two teams, and then we don't have to have two teams. We synergize to one team, and that shows in the other quarter, so it might have -to-quarter kind of variances, but I'm very confident on the level of expenses that we are running today looking forward, which is the second point of your question, that we will be able to deliver the $170 million of FRE and over 200 million for 2024 and over $200 million of FRE for 2025. In addition to the expense streams that you actually saw for 2022, there are additional synergies coming into 2024, even more so when we hopefully add the two pending M&As. Again, to give you an idea, in some cases, we think that we can run the businesses with a lot higher FRE. We mentioned a couple of earnings calls ago that our real estate investment trust business through VBI or through Credit Suisse, they were running at 30, 40% FRE margins. We can definitely push that up to our kind of margins. The same for our average income calls out global private market solutions business, a 30% margin business, I think we can push that up as well. That will come over time. It doesn't happen again from one day to the next. That's why during 24, we call this more of a transition year because we don't know when these big deals are gonna close. Again, they've already signed. And so a quarter over the next things might move a little bit, but we walk into 25 with a very strong numbers as I try to show this earnings call with the organic income of this year that I projected to be $5 billion. We get into 25 with a $38 billion of FRE earning AUM. You do the math there with our average management fee, you see what kind of revenues you go in to in 25. Then depending on the margin that you apply there, you can see that over the $200 million is possible the chances of us fitting that number increased with every that we have done. So I think we're in a good place as of today, of course, we have to continue to work very hard and deliver, but I think we're in a good place. I think the chances of us hitting the numbers went up over the last quarters. And do you wanna compliment on anything about the expenses?

I think as I mentioned during the first part, I think it's a good base for us to consider for Elise for the first quarters of the year is our average that we have done in the beginning of 2023 since the fourth quarter had some catch up or one-timers. So we talk about our personal expense being around 15 million and always expenses are, we are preparing and doing synergies. And I think the run rate that we have for between Q3 and Q4 are a base for when you look into 2024. There is a consolidation and integration and next year that we expect to continue in this path.

Yeah, and Tito, this is Josh, just one other quick point on your point around fee earning AUM growing a little bit faster than management fees. There's a timing impact to that in some cases. And just to give an example to take Alex's point just a bit further is that the partnership that we closed with Bank Columbia near the end of the quarter, you had a new real estate vehicle come in bringing about $1.3 billion of fee earning AUM, but we did not get a full quarters worth of revenue impact for that. You'll see that as we go into 2024. So some of that is a timing impact just based on how the fee earning AUM flows in, which is obviously in full versus the revenue not being fully loaded until the next quarter.

All right, that's helpful. Thank you for clarifying that. And just on the incentives fees, they were also lower than they were last year. Any color you can provide on that?

Well, there I think it has to do with some of the benchmarks and of course our funds performed very well as I mentioned last year, the benchmarks also did well. Of course, we beat the benchmarks that we had. That's why we had incentive fees. But -a-vis the benchmark, I think 2022 was a good year and slightly better years we came in from 2021 also with the low benchmarks and we did hit for some accounts. We had different SMAs and for some accounts, the way that you count the benchmark, whatever, in 2022 we did a little better. It's not much difference there, but it is an SMA by SMA. And again, in some SMAs, even though the absolute numbers for the performance in 2022, they were a little lower. For some of the SMAs, we were beating the benchmark more than we did this year. And that generates them more incentive fees. And Anna, please let me hear if I did not mention anything important.

I think that's completely clear in our incentive fee this year, it was really concentrated on our credit vertical. So I just wanna highlight that. And there is this concentration this year, opposite from last year, which happened in the two verticals, credit and public debt.

Okay, great, thank you, Alex, Anna and Josh. Thank you, Chitra.

Thank you. Please stand by for our next question. Our next question comes from the line of William Barrajar with ITI BBA, your line is open.

Good morning, Alex, Marco, everyone. Thanks for the presentation and the space for questions. So the first one you commented briefly regarding the possibility to reach the 35 billion GAUM one year earlier, so ends of 2024. My question here is regarding the overall management fee rates. Do you expect any changes here or should maintain at the .2% that we see currently? And my second question is related to expenses. So could you go through the dynamics of personal expenses and the new shared base compensation programs in this quarter? I guess I would like to understand how much of the 12 million in equity compensation would be translated into personal expenses if this program was not in place. Anna mentioned during the call that 60% of cash bonus could be converted into shares. So I guess is this the only adjustment then or is there any other dynamics here?

Okay, well on the program itself, I can just wanna say a couple words and then turn over the floor to Anna here. Let me explain in more detail. It is a compensation program that is in addition to other programs that we have. And what we wanted to do here is put up a program that is voluntary. It's not an obligation. Any of our partners and managing directors, they can opt to this program or not. If they opt to the program, whatever, up to 50% of the bonus that this person commits to the program, we will match the same number of dollars in purchase shares. In order for this person to be eligible to the program, this person has to vest these shares and it's best a year, in year three, a year, in year four, a year, in year five. So first of all, it's in addition to everything that we have. Secondly, it has a lot to do with the retention. I think we are a people business and retaining people in this business is extremely important. We already had significant carry programs, right? Which is normal of our business distributing part of the performance fees to employees. As you know, we call this our carry program. I also wanted to give the senior executives shares of the listed company. We really haven't done that since the IPO. We introduced this program now. So a senior employee, a senior executive at Bakfair will have carry and now this program that I just mentioned. Of course, it's a retention because the person has to stay in order to be able to obtain the program. We have this program already going on, even as a private company. Of course, we will readdress the program as a public company and we had annual valuations that we would buy and sell shares from partners and managing directors. More or less the same mechanics that I just described, but instead of having a public valuation, we had a private valuation, someone come in and actually do the valuation once a year for us. And that was a valuation that we traded shares between us and paid bonuses in shares to the senior executives. So similar mechanics, of course different now that we are this company and it works a lot in retention. Ana, do you wanna give some more detail on the program itself, please?

Now, let me just give me a first, a whole overview about that. And I think first of all, I think we are all in the company. I'm very really happy for the launch of that. And the acceptance that we have across the company. I think this program is consistent with our industry and peers. And as Alex mentioned is retaining, but also attract the talents to the company as we move. And this program was launched in 2023. We worked that to support our engagement and long-term commitment for the team. And we are able to spend that as we grow, as we have new M&A. So this is actually could be spendable and it's a very strong program. As Alex mentioned, this is a volunteer that includes our partners and mainly partners at MDs. And this gives the opportunity for these people to direct part of their cash or 50% of the cash bonds that as mentioned before into this program and to have a matching component at that. And this is a program that it will be offer going forward because this is part of now of our normal program. And as evolved actually when we launched in Q3 as mentioned in previous quarter, has actually had a really great acceptance across. And that's why you see that in Q4, there was a much complete catch up of that in terms of the program and how we accounted for. So when you mentioned about the 12.4 million and I could say that when you look into that in terms of this matching program, that we complete account for this line in the fourth quarter is account about 70% of that is related to this matching program that we are

considering. So I don't know if that help you to understand the program.

Yeah, if I can also compliment this, we designed this at the IPO to be honest. And we already had in Bevid that we were gonna give this out over the last three years after the IPO. So it's a program that was already written. We was already there in our perspectives that we were gonna give out up to, the prospectus says up to 5% that we can actually give out in employee compensation. We haven't even reached half of that number yet, whatever, it's very, very small number that we had. But yes, it's something that we have already incorporated in our numbers since 21, 22, 23. And we knew that we were gonna actually effectively do this in the end of 23.

So

it was already a plan thing and already talked to our partners for a while now for the last two, three years that we have been designing and talking to them about this program. What was the second part of your question again? I'm sorry, that was the first part.

Yes, the second part was very clear. Thank you for the answers. And the first part was just regarding the management fee rates as you reach your target of 35 billion.

Yeah, I'm sorry about that. I should have answered. Well, as you can see in one of the pages of the presentation is 1.2, the number that you just mentioned. As we do close on the two M&As, I think that they have slightly lower effective management fees than the 1.2. The number going forward is between 1.1 and 1.15. Anna, can you correct me if that number is correct,

please? Yeah, Alex, this is Josh. I think if you do the math, we gave some basic economics on the effective fee rates and the fee earning AUM that we're bringing in on the two pending M&As. And I think if you do just the simple math based on our current blended rate and the blended rates implied by the economics that we gave, you'll get to a number that's between 1.0 and 1.1.

All

right, that is great. Thank you for the answer.

Can I just add, when you do your assessment, of course, and building up into the model, the new acquisitions are bringing permanent capital and fee paying AUM that is actually charged on NAV. So this is in terms of quality, visibility, and resilience is very high quality. And just consider that when you think about the model.

Of course, we'll do.

Thank you. Please stand by

for our next question. We have

a follow-up question from the line of Craig Sigenthaler with Bank of America. Your line is open.

Alessandre, Marco, hope you're both doing well. This is Craig, so thanks for taking our follow-up.

Hey, Craig, how are you? Good, good.

I'm good, good to hear from you guys. So my follow-up is on M&A. And you've been very active over the last couple of years with expansions in different geographies and products. Moneda, JV with Bank of Columbia, VBI. But how do you think about existing capacity on the balance sheet and with your currency, the stock today to do more deals? And I think you've been eyeing Mexico for a while. Maybe provide us a quick update on your thoughts on expanding into Mexico.

Marco, do you want to start that? As you're running corporate development there?

Yeah, yeah, I'll kick off your new compliment. So remember what we always say when we think about acquisitions, we're buying products, channel and distribution. So every time I start my answers with this because it's really part of our strategy. So proud of doing six acquisitions and adding credit. Real estate meaningfully now, GPMF. I'll start with your second piece of your question. Mexico, it continues to be a priority, continues to be a target. So the explanation is mostly on execution. We were not able to find the right asset to start, but we continue to be very excited. We think it's not only a very important geography and very complimentary to the platform, but also a great opportunity with everything that's going on down there. Regarding the first part of your question, how we're gonna fund our expansion. What we've been doing with our acquisitions is funding in a mix between cash and equity, retaining a couple of our flexibilities. So there's flexibility relative to when this cash is coming out. Most of the acquisitions have been structured with seller's financing. So giving us time to generate the cash to pay for the acquisition. And in certain circumstances, we can opt between paying in cash or in equity at our favor, of course. So all that to give flexibility for us to be nimble when we design the strategy, we design the payment. We do have, in the later quarter of, last quarter, we announced one way to fund our acquisition, which is retaining part of the performance fees. I think we will let that very clear, and I'll repeat here, just for the sake of clarity, we're not touching on the FRE. We may selectively retain part of the performance fee in order to fund any cash necessities on the short term. So these tactical movements may occur in order to address the funding needs in the best way possible. And I'll defer to Anna to talk a little bit more about our cashflow. We do remain active in acquisitions. We mentioned in this call that this is gonna be an important year of consolidation because we have two large pending M&As to be closed. The Aberdeen business by end of the first half, and Credit Suisse business, most likely by the end of this year, given the complexities of, or in the particularities of the closing of this transaction. So not a lot of FRE coming through this year, but very solid FRE coming for next year. As a reminder, when we announced the Aberdeen transaction and the Credit Suisse transaction, we gave some guidances for you to work on how much this will bring into the platform. For the Aberdeen business, what we announced is a 7.8 billion fee-paying A1 deal, where the average fee is between 50 and 60 bits, so the average management fee, which will equate to a margin between 30 and 40%. And for the Credit Suisse deal, what we announced is a 2.4 billion at the time of the closing with a 70 bit as a management fee and around 50% of FRE contribution. Hopefully I answered your question.

Now, if I can compliment Marco, I think going back to 2019, 2020, and one of the main reasons of why the IPO was in 2021, Greg, I think we saw this consolidation coming into place. I think we were kind of first movers with some of

some few

of our peers, and then we see some of our peers moving into this consolidation mode. You know the names of the major players in the industry buying, as Marco said, products, blind channel, buying geographic expertise. So I think we, a little humbleness here, but we were a little bit ahead of the peer group in that sense, very important, consolidating the Latin American market and catering to our Latin clients, and also catering to our international clients that wanna come into LACAM. So we have a very interesting menu set today of over 30 products that give us this ability to continue growing the platform very healthy and actually very comfortable today that we can actually deliver on the guidance that we gave late 22. So this is no, it was no by strategy, not by chance, not that we're here today, thank God. And I think we've no well-position here. And we wanna continue to do more. I think we have a bigger balance sheet today and a bigger earning stream. And what I saw happening as well, and Marco leading this effort, I think that a lot of general partners approaching us now more than three, four years ago were convinced that the consolidation is at play in our industry and willing to join forces with Patria because of everything that we can do for them on the fundraising side on having a listed stock as a tool to attract talent and retain talent and to give the senior executives of this respective general partner liquidity in the future. So things that we saw a couple of four or five years ago, they're actually happening. And we are getting phone calls now contrary to three, four years ago that we had to call people and explain what we were trying to do. So it's pretty interesting to see that happening. I think we're not the only ones getting calls in the industry because the consolidation is at play, but we're definitely getting called in our part of the world, which is pretty nice to go through this process. Thank you.

Thank you, Alexandre.

Thank you. Ladies and gentlemen, I'm showing no further questions in the queue. I would now like to turn the call back over to Alex for closing remarks.

Well, again, thank you very much for your patience here. And it's the end of the year call, so it's a little longer than usual. So thanks really, really for your patience and dedication to come to the call, participate in the call with your questions. We're so happy to take your questions. It's an honor to take your questions. And again, we feel very good beginning 2024 in a strong pace with the guidance that we already mentioned over the call here a couple of times. Feel free to contact us if with any further questions, and hopefully we'll see each other in person in your conferences. And actually, sooner than later, we're gonna have in the next 60 days another earnings call, and hopefully coming up with good, strong news on 2024. Thanks again for your patience. Thanks for your collaboration, and see you guys in person soon. Thank you, team, as well, and thank you, Operator.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.

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Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Hello, and thank you for standing by. Welcome to Petra's fourth quarter 2023 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask the question during this session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. I will now like to hand the conference over to your host, Josh Wood, head of shareholders relations. Sir, you may begin.

Thank you. Good morning, everyone, and welcome to Petra's fourth quarter 2023 earnings call. Speaking on the call are our chief executive officer, Alex Sige, our chief financial officer, Anna Russo, and our chief corporate development officer, Marco DiPolito. And we're also joined by our chief economist, Luis Fernando Lopez, for the Q&A session. This morning, we issued a press release and earnings presentation, detailing our results for the quarter, which you can find posted on our investor relations website or on form 6K filed with the securities and exchange commission. Any forward-looking statements made on this call are uncertain, do not guarantee future performance, and undue reliance should not be placed on them. Patria assumes no obligation and does not intend to update any such forward-looking statements. Such statements are based on current management expectations and involve inherent risks, including those discussed in the risk factor section of our latest form 20F annual report. Also note that no statements made on this call constitute an offer to sell or a solicitation of an offer to purchase an interest in any Patria fund. As a foreign private issuer, Patria reports financial results using international financial reporting standards, or IFRS, as opposed to US GAAP. Additionally, we will report and refer to certain non-GAAP industry measures, which should not be considered in isolation from or as a substitute for measures prepared in accordance with IFRS. Reconciliations of these measures to the most comparable IFRS measures are included in our earnings presentation. On headline metrics for the quarter, Patria generated distributable earnings of $70.5 million, or 47 cents per share, for 4T23. We declared a quarterly dividend of 39.9 cents per share, equating to 85% of distributable earnings per share, and payable on March 8th to shareholders of record as of February 22nd. With that, I'll now turn the call over to Alex.

Thank you, Josh, and good morning, everyone. 2023 marked

Patria's third year as a public company, and I'm very pleased with the performance we delivered in the fourth quarter and the full year. We generated $47 million of fee-related earnings in Q423, bringing our full year 2023 FRE to $148 million, with an FRE margin of 60%. This is up 14% from 2022, driven mostly by organic growth. Performance-related earnings for Q4 2023 were .7% of $47 million, driven mostly by Infrastructure Fund 3, and we finished the full year 2023 with $47 million of PRE. With strong performance in both earnings streams, we delivered more than $70 million of distributable earnings, or 47 cents per share for 4Q23, bringing distributable earnings for the full year 2023 to $188 million, or $1.26 per share. That translates to EPS growth of 26% year over year for our shareholders, and the resulting $1.07 in dividends equates to a yield of .7% based on our share price at the beginning of 2023. This was also our first year on the path to deliver the multi-year targets shared at our 2022 Investor Day, which look out through 2025. We aim to grow fee-related earnings from $130 million in 2022 to more than $200 million in 2025, equating to an annualized growth rate of approximately 15% or more. Given our performance in 2023, our organic growth initiatives and the additional earnings power embedded in our pending M&A transactions, I'm confident in our path to meet this target. While it's challenging to guide you on PRE in a given quarter or year, we said we could generate $180 million of performance fee realizations between our Investor Day and the end of 2025. Including the amount realized in the fourth quarter of 2022, we have now delivered more than $66 million of PRE since the Investor Day, putting us right on pace to deliver this target as well. In terms of growing the platform, we also set targets for total AUM to reach $50 billion and fee-earning AUM to reach $35 billion by the end of 2025. And to achieve that, we estimated a need for at least $20 billion of capital formation from a combination of organic fundraising and M&A between 2022 and 2025. Starting from a base of $24 billion of total AUM and $18 billion of fee-earning AUM in the beginning of 2022, over the last two years, we have had organic inflows of nearly $8 billion and added nearly $3 billion of additional inflows from acquisitions that have already closed to our fee-earning AUM base. As you know, we have also recently signed two significant M&A transactions, which we expect to close during 2024. And based on existing AUM levels, we expect these transactions to add more than $10 billion of additional fee-earning AUM to the platform. When you put that all together, combined with our goal to raise around $5 billion of gross organic inflows again this year, we believe that by the end of 2024, by the end of this year, we should have already achieved the $20 billion of capital formation and $35 billion of fee-earning AUM a year earlier than expected. We are not only growing, we are growing with quality by adding stable and sticky AUM. Our permanent capital AUM is expected to grow to near 20% of total fee-earning AUM with a closing of pending M&A, with over 70% of fee-earning AUM continuing to be denominated in hard currency. Seeing this progress and the meaningful evolution of our platform, we expect to host another Investor Day event late this year to share our vision for the next phase of growth. Now, looking at some highlights and updates across the platform for the quarter and the year, organic inflows to total AUM were $1.4 billion in Q4 and $4.8 billion for the year, counting additional $175 million of commitments that were approved in December and closed in January. Our fundraising for the year really showcases the power of diversity and reinforces why it's such an important aspect of Patris growth. Our latest flagship infrastructure, Vintage, raised more than $1 billion in 2023 with more than $400 million in the fourth quarter. Our credit, real estate, public equities, and advisory verticals each contributed $700 to $800 million of gross inflows, with some notable highlights. We secured more than $200 million in 4Q23 for our Infrastructure Private Credit Fund. Our Pan-LATAM, large-cap and small-cap public equity strategies raised combined gross inflows of more than $740 million. The VDI real estate platform had a fantastic year with broad inflows across the product offering totaling more than $750 million. And while the industry has seen a major slowdown in private equity fundraising, we are quite optimistic that our flagship private equity funds extension through the end of 2024 will allow us to significantly add to the capital we have already raised to reach over $2 billion. For us to sustain strong inflows, we have to always continue to perform to our clients. And I'm very pleased with the strong returns our strategies are delivering. We saw particularly strong performance in the fourth quarter with more than $1.1 billion in post-evaluation impact, driving full year 2023 appreciation to more than $1.9 billion. Leading the charge here was strong performance in some of our larger publicly traded positions in the private equity platform, like Lavoro, our agriculture inputs distributor, SmartFit, our low cost gym chain, and Ultrapar, our gas station network company. This drawdown fund appreciation has driven our net accrued performance fees to $541 million, up more than 15% from the prior quarter and 13% from one year ago, even after the realization of $47 million of PRE in 2023. The strategies in our public equity vertical also generated strong gains with -Last-Time strategies yielding nearly 29% in US dollars and Chilean equity strategies yielding more than 18% in local currency for the full year. The performance of our credit strategies was also notable with our Latam High Yield Fund, which is dollar denominated, yielding 14% in 2023, while the local currency fund yielded nearly 30% in US dollars for the year. We have continued to stress that returning capital to our investors has also been a key focus in 2023, and our divestment activity in the drawdown funds continue to gain momentum. We closed sales transactions for ODATA, our data center business, and Entrevias, one of our toll roads in Brazil, in our infrastructure fund three, which delivered more than $1.5 billion of proceeds to invest and pushed this fund through the performance fee realization hurdle to generate much of our PRE in 2023. We also announced the sale of Delis, our food distribution platform, as well as block sales in publicly traded positions, which secured more than $600 million of additional proceeds. In total, we realized more than $2.5 billion across the platform for our limited partners during 2023. Finally, I want to take a moment to highlight some new initiatives that are moving forward here in early 2024. We have been very active on the M&A front in 2023, but I want to also give equal attention to some of the great things we are doing organically to grow our platform. First, we are nearing the formal launch of our first infrastructure private credit fund, which is something we have been diligently working towards over the course of 2023. We believe this is a major opportunity to grow our private credit offering while leveraging our extensive experience and deal flow access in the infrastructure space. This fund will have a very long-dated 50-year term structure, making it effectively permanent capital for our platform. As noted earlier, we fully support and formally secured more than $200 million in initial commitments for this fund in Q4, anchored by multilateral agencies, and now have commitments taking us up to $350 million. We see good momentum for this fund to become a meaningful contributor to fees in the next few years. Second, we are also announcing the start of a new platform within our infrastructure practice. Patreon has a long and successful track record in the energy sector, being one of the largest investors in solar, wind, small hydro,

natural

gas, and transmission assets. Overall, Patreon has historically committed $2.3 billion in the sector over the past 18 years, representing more than $5 billion of overall CAPEX. In connection with the remarkable growth of the energy-free market in Brazil, we are excited to announce the launch of our energy trading platform, which will build on Patreon's historical expertise in this area. As energy supply volume continues on migration from the regulated market, the Brazilian free market is expected to grow from just over 30 billion reais, approximately $6 billion, in 2023, to around 70 billion reais, approximately $12 billion, by 2028. Within this backdrop, we believe there's a compelling opportunity in a very fragmented, independent trading space. This initiative will be developed in First Q24 in partnership with a talented team with an outstanding track record, alongside Patreon's team. It will be funded with an initial contribution of 100 million reais, approximately $20 million, from Patreon's balance sheet, with up to 50 million reais, approximately $10 million, of value at risk. We expect this new strategy to be a positive contributor to Patreon's earnings, with limited impact in the first few years, but with attractive margins and exciting growth potential over time. After establishing a track record of success, we believe we would also progress into an asset management strategy with third-party capital and a relevant contributor in our infrastructure vertical. We expect to provide more details in coming quarters as this initiative takes shape. To finish here, I'm very pleased with Patreon's performance in 2023 and our growth path, and I'm very proud of what we have accomplished in the three short years since our IPO. Our platform has significantly expanded beyond two successful flagship strategies, private equity and infrastructure, to provide a diversified client offering across major asset classes, adding scale and expertise in credit, real estate and public equities. This expansion turned a limited offering of less than 10 products into a versatile menu of more than 30 products to serve a range of client profiles and needs. We extended our geographic presence in the region in both investment expertise and distribution capability through new partnerships in Chile and Colombia. Through this expansion and diversification, our fee-earning AUM has grown from approximately $8 billion at our IPO to a pro forma of more than $34 billion today, including pending M&A. In turn, we have grown our fee-related earnings from less than $60 million in 2020 to nearly $150 million in 2023, with more growth embedded as we progress towards our 2025 target of over $200 million. And importantly, through this growth, I believe we have maintained the high standards of investment performance that is valued and demanded by our clients, and this always remains the key to our growth over the long term. Let me now turn to Marco for an update on corporate development, and then Anna to walk through the numbers. And I'll be back for some final thoughts. Marco, over to you.

Thank you, Alex, and good morning, everyone. It was indeed a very active year for Patria on M&A Throne.

And since

the IPO, we have now signed or closed on six acquisition transactions as part of our strategy to expand the platform and grow our earnings capacity. Industry consolidation seems to be the newest hot topic in the sector, but this is certainly nothing new to Patria, as we've made inorganic growth as key part of our strategy over the last three years. Through Moneda, we acquired scaled credit and public equity platforms, along with the key leadership talent, as well as geographic expertise and distribution relationships in Chile. We also added depth and versatility on the private equity vertical through the acquisition of teams focused on growth equity with Camarupin and venture capital with the case of EGA. In real estate, we acquired 50% of VBI real estate with an option to acquire the remaining stake to anchor our presence in Brazil. And recently, in the fourth quarter, 2023, we were able to act on a very attractive opportunity to acquire Crevizo Ace real estate. Also recently, in the fourth quarter, we signed the agreement to acquire the private equity solutions business from Aberdeen. Once closed, this transaction will launch a new vertical for Patria called Global Private Market Solutions, which adds fast growing secondaries and coin basing strategies, and will enhance our ability to offer diversified global alternatives exposure to our clients. In addition to the acquisitions, in the Colombian market, we have joined forces with Monoclon in a venture that will anchor our real estate presence in the country and also tap into a massive distribution network to provide a range of locally focused alternatives products to Colombian investors. As substantial as our M&A activity has been, it's worth noting that transactions closed in 2023 contributed effectively only $2 million in FRE in the year. Likewise, the major M&A transactions signed in 2023 will also have only partial year impact in 2024, depending on closing timing. We continue to feel good about the process with the private equity solutions business we are acquiring from Aberdeen on track to close in the first half of the year. We also feel comfortable with the process on credit suiz real estate, which is slightly more complex as we will go through a fund level shareholder approval process in each REIT vehicle, following standard regulatory approvals. All in all, we expect to begin 2025 with these acquisitions fully on board and fully contributing to reaching our earnings targets. With two sizable pending transactions, 2024 will be an important year of consolidation and integration as we close the deals. However, we do remain active and we'll continue to have an opportunistic mindset to achieve our platform growth conditions through M&A. I will now turn the floor to Ana to go through the results in more details.

Thank you, Marco. Batra delivered a strong quarter and a solid year with significant growth of our main KPIs and we remain a consistent path to reach our 2025 targets. Our fourth quarter 23 distributor earnings of $70.5 million were up 32% from Q4 2022 and adding to our year to date results, we reach a full year 2022 DE of $187.8 million up 28% compared to prior year. Our resilient management fee revenues were 64.7 million in Q4 2023, rising 18% compared to Q4 2022 and 245.6 million for the full year 2023 up 11% compared to 2022. This growth was supported by our latest flagship private equity and infrastructure funds as well as the expansion of our real estate platform. Total operating expenses including personal and administrative expenses total 18.9 million in Q4 2023, down 5 million compared to Q4 2022. This decrease is given mainly by the further implementation and expansion of our equity compensation plan at the executive bonus level

already

mentioned at core. Integration synergies and outsourcing mailing IT partly offset by M&A expenses to other increases, inflation and appreciation of the curve. For year 2023 total operating expenses were $91 million almost flat versus prior year and following the same general driver of the quarterly comparison. Looking specifically at the personal expenses, the quarterly average during 2023 was approximately $15 million with the last two quarters of the year impacted by the catch up accrual impact of implementing our equity compensation program. Therefore the 2023 quarterly average as opposed to the Q4 2023 results is a more reasonable run rate to consider as we enter 2024. Fee related earnings were 46.7 million in the quarter up from 35.3 million in Q4 2022. For year 2023 FRE reached 147.7 million with a margin of 60% of 14% year over year with a 2.4 percentage point increasing margin. The M&A transactions closed in 2023 contributed effectively about 2 million of FRE in the year which was mainly Camarguil, Higa and two months of Ban Colombia with the reminder of the growth being organic. We finalized a stronger year with one to 2% of our FRE guidance and this result continues to keep us on track to deliver at least 170 million FRE in 2024 as

well

as our 2025 FRE target of at least 200 million dollars. We have also been consistently generating performance based around the last several quarters. During Q4 23 we generated 26.6 million of performance related earnings driven by a combination of additional net proceeds for infrastructure from three and contribution from one of the BI drawdown funds.

Since our investment date

we have crystallized 66 million out of our 180 million targets throughout 2025. Net accrual performance were up 15% from the prior quarter to reach 541 million dollars even after considering the performance realization the fourth quarter with the additional accrual coming mostly from private equity funds appreciation and positive currency impact. This current accrual now represents more than $3.6 per share of performance fee inventory. On taxes, our corporate income tax expense in

2023

was 3.1 million compared to 2022 with the slightly higher expected tax rate driven by a higher mix of performance is subject to local tax rates. So again, highlighting the bottom line, this all led us to a distributed earnings of 187.8 million in 2023 which is an increase of almost 30% versus the prior year. Now a few notable comments on our DE to negative income reconciliation. As we close our transaction with Bank Columbia and sign another two acquisitions agreements in the fourth quarter, we incur more M&A related costs which you can also see in the transaction cost line. In regard to the equity base and long-term compensation line, FASTA implemented a voluntary compensation bonus code mentioned before on the FRA explanation which give us the opportunity to execute this to convert 50% of their cash bonus into equity shares receiving a matching component to this basis in three to five years. This was very well received by our senior level people showing the high long-term commitment and engagement of the team.

The majority of

the impact of this P&L line comes from this new program and the remaining relates to previous long-term programs from FATRA and acquired companies as well as equity-based compensation of partners. And finally, an important clarification on FATRA's dividend payout. In the announcement of our agreement to acquire the Brazilian New State Business One Credit Credits, back in November, we noted that FATRA will give careful consideration to our optimal cash and structure as we look into 2024 and beyond as we use a combination of cash, debt, equity to fund our M&A program. Beginning in Q1 2024, we may elect to retain more than 15% of our performance-related earnings and realize gains from the new energy trading platform net of a proportional share of corporate taxes rather than distribute a full 85% as we aim to do with the rest of our distributor earnings stream. We expect to exercise this incremental retention up to an additional $100 million in order to fund M&A obligations and pay down debt. After which point, we will evaluate the appropriate distribution approach for this earnings going forward. To be very clear, we plan to continue to distribute 85% of our stable and recurrent fee-related earnings stream maintaining our commitment to deliver an attractive payout for our shareholders. I will now turn back to Alex for closing remarks.

Thank you, Ana. As we turn to your questions, I'll just reiterate how pleased I am with our performance in 2023 and over the last three years. And with the tireless contributions from the entire Patrick team to make it happen, from approximately $8 billion of fee-earning AUM at the IPO to more than $34 billion, including our pending M&A, I think that this is a remarkable achievement. This is a people business, and we truly have a fantastic group of talented people pushing this company forward. As Ana noted, 2024 will be a transition year to our multi-year growth targets for 2025. We are comfortable in getting the fee-related earnings to at least $170 million in 2024 on the way to more than $200 million in 2025. Considering the growth embedded in our pending transactions, our organic initiatives, I am confident that we will reach both the financial and the AUM targets for 2025. We thank you for your time to listen today, and now happy to take your questions.

Thank you. Ladies and gentlemen, as a reminder to ask the question, please press star 1-1 on your telephone, and then wait to hear your name announced. To withdraw your question, please press star 1-1 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Craig Sigenthaler with Bank of America, your line is open.

Hi, good morning. Thank you for taking the question. This is Rodrigo Ferreira on the line for Craig. For private equity fund seven and infrastructure five, can you walk us through the size and timing of those raises? You've already closed on about 1.2 billion for P7 and about 1 billion for infer five. Do you expect consistent fundraising throughout 2024 or a few large closes?

And when should we expect a final close for each of them?

Hi, Rodrigo, this is Alex here. Thanks for your call and thanks for participating. Can you hear me well, right? Yes. Okay, great. Well, private equity fund seven, we are on the way to raise 2.5 billion. We are at today halfway there, halfway the 2.5, we are a bit... I think the latest number is 2.2 billion maybe or something like that. We didn't have any closings beginning of this year. We have another process open in Brazil. As you know, when we come raising Brazil, it's a very locked in fundraising process. So we should be fundraising in the next 30, 45 days. Something to do for investors for another... We expect another $1,500 million from coming from there and then follow on raising this to 2 to 2.5 billion, which is the guideline that we gave. Late last year, we continued the same. We're also fundraising the

reason to Latin America. We know we should push close to 1 billion

in addition to fundraising. And then from there, from 1.5 to 2 billion, we have from the second quarter to the last quarter of the year, three quarters ago, which we feel... As also mentioned, extended the fundraising period for this fund to the end of this year. The fundraising period was gonna end in the second quarter. We extended until the end of 24. As fundraising, you're taking more time than usual for most funds, private equity fund seven being one of them, as already mentioned in previous calls. So we extended the LPs that are already in the fund, agreed with this fundraising extension period. On infrastructure fund five, we are over a billion as of beginning of January. We have some commitments that were approved in the investment committees of some LPs late last year. And some of them were signed late last year. One significant commitment was signed beginning of this year. So it pushes us to over a billion. And more or less the same process that I have described for infrastructure for private equity fund seven, infrastructure fund five, have significant fundraisings to be done in Brazil, Chile and Columbia this year. So we extended more in the first half of the year. And then we continue fundraising with ex-LATAM investors. We still feel very positive that we can reach the two to two and a half billion dollar number closer to the 2.5. So those two together will be around 4.5 billion, two to 2.5 from private equity fund seven, two to 2.5 to infrastructure fund five. And again, I see a good demand for infrastructure. So with a higher probability of reaching the 2.5 there, the number that I mentioned. So infrastructure fund five, as we started raising last year, we didn't ask for an extension. The extension normally of this fund is a normal fundraising period, which ends in the end of this year. If they are one or two investors that are still working on our data room at the end of this year, I think we can ask for an extension there. I don't think it's gonna be necessary, but it is possible it's common for these kinds of fundraisings. Hopefully I answered your question, that was it, right? Fundraising for info five and fundraising for private equity seven,

right? Yeah, thank you so much for the color. That was super helpful. For my followup, you had guided before that you expected two to 2.5 billion of realizations in I think 2024 and the beginning of 2025. Do you expect this to be concentrated towards a certain part of the calendar year? And can you remind us which funds should be accounting for most of these realizations?

Yeah, unfortunately it's very hard for me to give you an exact quarter for realizations. I joke with my team that M&A should not be mergers and acquisitions. Sometimes it should be called misery and anguish, right? You're selling a company a quarter here, a quarter there. On the buy side and the sell side, right? And on the sell side specifically, which are realizations that you asked for my guidance, we will continue with a, we have a very strong and we will continue with a very strong divestment agenda. As you can see since the IPO in early 2021, we have been delivering, first was private equity fund three that gave us a very important for 2021 performance fees that added to our distributed learnings. And then came private equity fund five, beginning of 2022, and then came infrastructure from three and well, you know the whole story. So today, as of today, infrastructure from three still have some important assets to be sold and we are in the process of selling them. And we're beginning to sell assets of infrastructure from four. There are some great assets there. You know the strategy, I don't wanna be repetitive here or redundant with you. It is a win the concession strategy, right? Win the concession, we build the assets, we call the risking and then we sell the assets once it's operational. Several assets of our infrastructure fund four went operational last year. We have a solar panel farm that is now fully operational. So for us ready to be sold, a thermal power plant already also operational as of end of last year. So all of these assets that once they are operational, we put them for sale. Also when we manage toll roads, the first two to four years of the concession, we have big capex investments and then we have more of a maintenance capex year five onwards for the next 25 years and generalizing. So there are some toll roads that we are in the five years into the concession that we want. So they're also ready to be sold as we did with one of the toll roads of our infrastructure from last year. Private equity fund five and four, five and six, we're selling assets of these three funds. So we did sign the sale of an asset of private equity fund four beginning of this year. So we haven't closed yet. So we didn't announce it, but we signed the sale of one of the assets of private equity fund four. And we are on a very active agenda in selling assets of these three funds. So adding all of this, which are a lot of investments if not a few, there's over 15 companies being divested what the name was we speak because we're adding, again, assets from infrastructure from three and four, assets from private equity fund four, five and six. So adding all these assets, there are over 15 assets being sold from these funds. So again, I think it's very hard for us to give a specific quarter, sometimes even year for our performance year realizations. However, the $180 million that we guided in our tax day end of 22, we feel comfortable that we'll deliver, we already delivered on 66. So we have to deliver another 110, 114, which we are confident that we can between this year and next year. Thank you.

Great, thank you very much, Alex.

No,

thank you.

Thank you. Please stand by for our next question. Our next question comes from the line of Ricardo Butchbegal with DTG Pactual, your line is open.

Good morning, guys. I have two questions here on my side. First, I wanted to get an update from your perspective in terms of netting flows near liquid strategies. I wanted to particularly to get a sense in the interest from Chilean investors, particularly in equity and credit already during the beginning of the year. If you guys have seen more demand given the insight, when should progressively improve throughout the following quarters. And for my second question, is more towards the previous one, I want you to get an sense in terms of how close is the PFAN 5 and PFAN 4 from the hurdle rate and after it will hit the hurdle, it will start paying performance. Thank you.

Thank you very much again for your question. This is Alex again, and please team compliment here my answer. On the public equity and public debt funds that you asked, had a 2022 net outflows, I think we mentioned in previous quarters about 2022. As we went into 2023 and the perspective of better macro conditions in the US, in Latin America, specifically in Chile, we started seeing our redentions dry out. And then in the second, third and fourth quarter of 2023, we saw positive net inflows. And as I think I was mentioning in the earlier call, each one of these families of strategies, public credit and public equity, each one of them with over $750 million of inflows. So we were extremely pleased. Of course, not only the macro situation improved, but the performance of the funds were extremely positive, beating benchmarks in most of them during 2023. I gave some of the numbers during the call, but I'm extremely pleased and really no groundbreaking performance. Our high yield Latin fund with now 14, 15% net returns, our small cap and large cap lifetime strategy for public equities between 20 and 30% returns and small cap Chile, the same, but extremely positive returns. Of course, the macro situation that benefit the inflows plus the performance of the fund, both of them working together for this kind of inflows that I mentioned over $750 million for each of these strategies. The whole vertical of public equities. And in addition, the whole vertical of public debt, public credit. We go into 2024 with the same view as 23, we continue seeing very small redemptions. As you know, these redemptions are programmed so we can actually see them ahead of time as investors have to place their redemptions ahead of the redemption date. So we have a looking forward kind of view and they are very small. Some of the funds close to none and we have inflows coming in and we see inflows coming in also from international investors, not only Chilean institutional investors and Colombian and Peruvian institutional investors that were the bulk of the investors of these two strategies. We see international X.com investors coming in also to the strategy. Some of them, as mentioned, they did redeem in 2022. We had some specific issues with the our UK investors. As you know, the UK went through a big guilt crisis in 21, 22 and some of our institutional investors then had to redeem money from all of their liquid funds including ours, 23 things returned to normal and they start then investing again in funds like ours, including ours. So we see net inflows from the international investors X.com in 23 and we see already good perspectives in 24. So we have very good numbers for the first quarter to be honest. So did I answer your questions? Did I miss anything here? I'm sorry.

No, this first part of the question was very clear. I'm not sure if you can discuss that, but if you could get an sense in terms of the, how close we are in terms of the hurdle for PFAN five and four.

No, fantastic. No, I was, yeah, I was gonna answer the second part. I just wanted to make sure that the first part was.

No,

that was great. No, no, great. Well, the second part of your question, yeah, we are already in the catch up phase for our infrastructure fund three and we are far from the catch up phase for infrastructure fund four. Now we haven't started selling the assets yet. As you know, we have European carry. So we have to give all the principal back plus the hurdle before we actually go into performance in the three modes and we're far because we haven't started digesting assets from the infrastructure fund four. I mentioned that we are on the process of selling, but we have not signed and closed any of those deals. For private equity, we sold a significant asset from private equity fund five, a food distribution company that pushes our DPI, distributable paid in capital for private equity fund five. If we sell one of two assets of that fund, we will reach the performance level, be it a healthcare company that is the last fund five, be it the agricultural inputs company that we listed in NASDAQ and or our participation in a gym club, SmartFit as you know. If we sell one of those three assets because of the significant size of these assets inside our fund five, it pushes us very close to our, giving back the principle, getting into the performance level. We are now considering selling these assets, two of them already listed. So it's more considering follow-ons. I think we still have a hard IPO market ahead of us, at least for the next couple of quarters, maybe in the second half of this year, if things get better for IPOs, but we have a significant interesting market already going on for follow-ons. We did several follow-ons for two of our portfolio companies in 23, one from infrastructure fund three actually, either VIAs, Waterways, a company. And we also did a follow-on for our healthcare company, the GymChain, SmartFit in 23. So we will continue doing that in 24. And we see an interesting market for additional follow-ons. So I hope I answered your question. Infrastructure fund three already there, infrastructure fund four far from there, and project fund five, depending on the mosaic of divestments here, we can reach that performance fee mode this year or next year, most probably next year, but we don't actually depend much for the performance fee realization tax that we have for this year on private equity fund five.

Thank you. This is Marco. Can I compliment something, Hikaru, that may be helpful for your question and the way you're building up the model. We have about 540 million of net unrealized performance fee. And out of this amount, 234 from private equity fund five, 169 for private equity fund four, and 110 from infrastructure fund three. If you tie this number to the previous information that Alex gave of 66 million that have been already returned, and contrast that with the three-year target of 180. So if you take from this 180, the 66, the 110 that is visible on infrastructure three alone would be enough for us to meet the target for the three years. So as much as, of course, we're paying a lot of attention to private equity five and private equity six and all the considerations that Alex posed, which we still have to return the money before we get into the catch-up, infrastructure three alone, which is already in a catch-up phase, will be sufficient to satisfy the three-year target that we set on our tax day in 2022.

Thank you, Marco. Great compliment there. Thank you.

Thank you both.

Thank you. Please stand by for our next question. Our next question comes from the line of Tito Lobatob with Goldman Sachs. Your line is open.

Hi, good morning. Thank you for the call and taking my question. Questions on the management fee evolution in the quarter. Just to, you know, we had a very strong question on growth in the fee earning AUM, although the management fees did not grow as fast, just to understand if there was anything in particular why they didn't grow as fast as the fee earning AUM in the quarter. And also incentive fees were also a little bit lower. So, you know, kind of led you to being slightly below your FRE guidance for the year, just to think going forward, if any downside risks on the guidance that you've given for, you know, the 170 for next year, 200 in FRE for 2025. Thank you.

Oh, thank you Tito. And thanks for the question and participating here in our call. There are sometimes some quarter to quarter movements on expenses and I also can turn to one of our CFO to explain better. So sometimes I think it's better to see the whole year. Now we did some acquisitions, we had some synergies in place. Sometimes we do run the synergies in one, they appear in our numbers in one quarter versus the other. So because in one quarter we had extra costs because we were running two teams and then we don't have to have two teams. We synergize to one team and that shows in the other quarter. So it might have quarter to quarter kind of variances, but I'm very confident on the level of expenses that we are running today looking forward, which is the second point of your question, that we will be able to deliver the $170 million of FRE and over 200 for 2024 and over $200 million of FRE for 2025. In addition to the expense streams that you actually saw for 2022, there are additional synergies that are coming into 2024, even more so when we hopefully add the two pending M&As. Again, to give you an idea, in some cases, we think that we can run the businesses with a lot higher FRE. We mentioned a couple of earnings calls ago that our real estate investment trust business through VBI or through Credit Suisse, they were running at 30, 40% FRE margins. We can definitely push that up to our kind of margins. The same for our average income out, global private market solutions business, a 30% margin business, I think we can push that up as well. That will come over time. It doesn't happen again from one day to the next. That's why during 24, we call this more of a transition year because we don't know when these big deals are gonna close. Again, they've already signed. And so a quarter over the next, things might move a little bit, but we walk into 25 with a very strong numbers. So as I try to show this earnings call with the organic inflows of this year that I projected to be $5 billion, we get into 25 with a $38 billion of the earning AUM. You do the math there with our average management fee, you see what kind of revenues you go in to in 25. Then depending on the margin that you apply there, you can see that over the $200 million is possible the chances of us fitting that number increased with every that we have done. So I think we're in a good place as of today. Of course, we have to continue to work very hard and deliver, but I think we're in a good place. I think the chances of us hitting the numbers went up over the last quarters. And do you wanna compliment on anything about the expenses?

I think as I mentioned during the first part, I think it's a good base for us to consider for at least for the first quarters of the year is our average that we have done in the beginning of 2023 since the fourth quarter had some catch up or one timer. So we talk about our personal expense being around 15 million and all its expenses are, we are preparing and doing synergies. And I think the run rate that we have for between Q3 and Q4 are a base for when we look into 2024. There is a consolidation and integration and next year that we expect to continue in this path.

Yeah, and Tito, this is Josh. Just one other quick point on your point around fee earning AUM growing a little bit faster than management fees. There's a timing impact to that in some cases. And just to give an example to take Alex's point just a bit further is that the partnership that we closed with Bank Columbia near the end of the quarter, you had a new real estate vehicle come in bringing about $1.3 billion of fee earning AUM, but we did not get a full quarters worth of revenue impact for that. You'll see that as we go into 2024. So some of that is a timing impact just based on how the fee earning AUM flows in, which is obviously in full versus the revenue not being fully loaded until the next quarter.

All right, that's helpful. Thank you for clarifying that. And just on the incentives fees, they were also lower than they were last year. Any color you can provide on that?

Well, there I think it has to do with some of the benchmarks and of course our funds performed very well as I mentioned last year, the benchmarks also did well. Of course we beat the benchmarks that we had. That's why we had incentive fees. But -a-vis the benchmark, I think 2022 was a good year and slightly better years we came in from 2021 also with the low benchmarks and we did hit for some accounts, we had different SMAs and for some accounts, the way that you count the benchmark, whatever, in 2022 we did a little better. It's not much difference there, but it is an SMA by SMA. And again, in some SMAs, even though the absolute numbers for the performance in 2022, they were a little lower. For some of the SMAs, we were beating the benchmark more than we did this year. And that generates them more incentive fees. And Anna, please prevent me here if I do not mention anything important.

I think that's completely clear in our incentive fee this year it was really concentrated on our credit vertical. So I just wanna highlight that. And there is this concentration this year, opposite from last year, which happened in the two verticals, credit and public debt.

Okay, great, thank you, Alex, Anna and Josh. Thank you, Chitra.

Thank you. Please stand by for our next question. Our next question comes from the line of William Barajar with ITI BBA, your line is open.

Good morning, Alex, Marco, everyone. Thanks for the presentation and the space for questions. So the first one you commented briefly regarding the possibility to reach the 35 billion VAUM one year earlier, so ends of 2024. My question here is regarding the overall management fee rates. Do you expect any changes here or should maintain at the .2% that we see coming? Apparently. And my second question is related to expenses. So could you go through the dynamics of personal expenses and the new shared base compensation programs in this quarter? I guess I would like to understand how much of the 12 million in equity compensation would be translated into personal expenses if this program was not in place. And I mentioned during the call that 60% of cash bonus could be converted into share. So I guess is this the only adjustment then or is there any other dynamics here?

Okay, well on the program itself, I can just wanna say a couple of words and then turn over the floor to Lana here. Let me explain in more detail. It is a compensation program that is in addition to other programs that we have. And what we wanted to do here is put up a program that is voluntary. It's not an obligation. Any of our partners and managing directors, they can opt to this program or not. If they opt to the program, whatever, up to 50% of the bonus that this person commits to the program, we will match the same number of dollars in Patrick's shares. In order for this person to be eligible to the program, this person has to vest these shares and it's best a year, in year three, a year, in year four, a year, in year five. So first of all, it's in addition to everything that we have. Secondly, it has a lot to do with the retention. I think we are a people business and retaining people in this business is extremely important. We already had significant carry programs, right? Which is normal of our business distributing part of the performance fees to employees. As you know, we call this our carry program. I also wanted to give the senior executives shares of the listed company. We really haven't done that since the IPO. We introduced this program now. So a senior employee, a senior executive at Backfair will have carry and now this program that I just mentioned. Of course, it's a retention because the person has to stay in order to be able to obtain the program. We have this program already going on, even as a private company. Of course, we will readdress the program as a public company and we had annual valuations that we would buy and sell shares from partners and managing directors. More or less the same mechanics that I just described, but instead of having a public valuation, we had a private valuation, someone come in and actually do the valuation once a year for us. And that was a valuation that we traded shares between us and paid bonuses in shares to the senior executives. So similar mechanics, of course different now that we are this company and it works a lot in retention. Ana, do you wanna give some more detail on the program itself, please?

Now, let me just give me a first, a whole overview about that. And I think first of all, I think we are all in the company. I'm very really happy for the launch of that. And the acceptance that we have across the company. I think this program is consistent with our industry and peers. And as Alex mentioned is retaining, but also attract the talents to the company as we move. And this program was launched in 2023. We worked to support our engagement and long-term commitment for the team. And we are able to spend that as we grow, as we have new M&A. So this is actually could be spendable and it's a very strong program. As Alex mentioned, this is a voluntary that includes our partners and mainly partners at MDs. And this gives the opportunity for these people to direct part of their cash or 50% of the cash bonds as mentioned before into this program and to have a matching component at that. And this is a program that it will be offer going forward because this is part of now of our normal program. And as evolved actually when we launched in Q3 as mentioned in previous quarter, has actually had a really great acceptance across. And that's why you see that in Q4, there was a much complete catch up of that in terms of the program and how we accounted for. So when you mentioned about the 12.4 million and I could say that when you look into that in terms of this matching program, that we complete account for this line in the fourth quarter is account about 70% of that is related to this matching program that we are

considering. So I don't know if that help you to understand the program.

Yeah, if I can also compliment this, we designed this at the IPO to be honest. And we already had in Bevid that we were gonna give this out over the last three years after the IPO. So it's a program that was already written. We was already there in our perspectives that we were gonna give out up to, the prospectus says up to 5% that we can actually give out in employee compensation. We haven't even reached half of that number yet, whatever, it's very, very small number that we had. But yes, it's something that we have already incorporated in our numbers since 21, 22, 23. And we knew that we were gonna actually effectively do this in the end of 23.

So

it was already a plan thing and already talked to our partners for a while now for the last two, three years that we have been designing and talking to them about this program. What was the second part of your question again? I'm sorry, that was the first part.

Yes, the second part was very clear. Thank you for the answers. And the first part was just regarding the management fee rates as you reach your target of 35 billion.

Yeah, I'm sorry about that. I should have answered. Well, as you can see in one of the pages of the presentation is 1.2, the number that you just mentioned. As we do close on the two M&As, I think that have slightly lower effective management fees than the 1.2. I think the number going forward is between 1.1 and 1.15. Anna, can you correct me if that number is correct,

please? Yeah, Alex, this is Josh. I think if you do the math, we gave some basic economics on the effective fee rates and the fee earning AUM that we're bringing in on the two pending M&As. And I think if you do just the simple math based on our current blended rate and the blended rates implied by the economics that we gave, you'll get to a number that's between 1.0 and 1.1.

All right, that is great. Thank you for the answer.

Can I just add, when you do your assessment, of course, and building up into the model, the new acquisitions are bringing permanent capital and fee paying AUM that is actually charged on NAV. So this is in terms of quality, visibility, and resilience is very high quality. And just consider that when you think about the model.

Of course, we'll do.

Thank you. Please stand by for our next question. We have a follow-up question from the line of Craig Sygenthaler with Bank of America. Your line is open.

Alessandre, Marco, hope you're both doing well. This is Craig, so thanks for taking our follow-up.

Hey, Craig, how are you? Good, good.

I'm good. Good to hear from you guys. So my follow-up is on M&A. And you've been very active over the last couple of years with expansions in different geographies and products, Moneda, JV with Banco Columbia, VBI. But how do you think about existing capacity on the balance sheet and with your currency, the stock today to do more deals? And I think you've been eyeing Mexico for a while. Maybe provide us a quick update on your thoughts on expanding into Mexico.

Marco, do you want to start that? As you run any corporate development there?

Yeah, yeah, I'll kick off your new compliment. So remember what we always say when we think about acquisitions, we're buying products, channel, and distribution. So every time I start my answers with this because it's really part of our strategy. So proud of doing six acquisitions and adding credit. Real estate meaningfully now, GPMS. I'll start with your second piece of your question. Mexico, it continues to be a priority, continues to be a target. So the explanation is mostly on execution. We were not able to find the right asset to start, but we continue to be very excited. We think it's not only a very important geography and very complimentary to the platform, but also a great opportunity with everything that's going on down there. Regarding the first piece of your, the first part of your question, how are we gonna fund our expansion. What we've been doing with our acquisitions is funding in a mix between cash and equity. Retaining a couple of flexibilities. So there's flexibility relative to when this cash is coming out. Most of the acquisitions have been structured with seller's financing. So giving us time to generate the cash to pay for the acquisition. And in certain circumstances, we can opt between paying in cash or in equity at our favor. Of course, all that to give flexibility for us to be nimble when we design the strategy, we design the payment. We do have, in the later quarter of, last quarter, we announced one way to fund our acquisition, which is retaining part of the performance fees. I think we will let that very clear, and I'll repeat here, just for the sake of clarity, we're not touching on the FRE. We may selectively retain part of the performance fee in order to fund any cash necessities on the short term. So these are no tactical movements may occur in order to address the funding needs in the best way possible. And I'll defer to Anna to talk a little bit more about our cashflow. We do remain active in acquisitions. We mentioned in this call that this is gonna be an important year of consolidation because we have two large pending M&As to be closed. The Aberdeen business by end of the first half, and Credit Suisse business, most likely by the end of this year, given the complexities and the particularities of the closing of this transaction. So not a lot of FRE coming through this year, but very solid FRE coming for next year. As a reminder, when we announced the Aberdeen transaction and the Credit Suisse transaction, we gave some guidances for you to work on how much this will bring into the platform. For the Aberdeen business, what we announced is a 7.8 billion fee-paying A1 deal, where the average fee is between 50 and 60 bits, so the average management fee, which will equate to a margin between 30 and 40%. And for the Credit Suisse deal, what we announced is a 2.4 billion at the time of the closing with a 70 bit as a management fee and around 50% of FRE contribution. Hopefully I answered your question.

If I can compliment Marco, I think going back to 2019, 2020, and one of the main reasons of why the IPO already 2021, Greg, I think we saw this consolidation coming into place. I think we were kind of first movers with some of

some few

of our peers, and then we see some of our peers moving into this now consolidation mode. You know the names of the major players in the industry buying, as Marco said, products, buying channel, buying geographic expertise. So I think we, a little humble here, but we were a little bit ahead of the peer group in that sense, very important, consolidating the Latin American market and catering to our Latin clients and also catering to our international clients that wanna come into our account. So we have a very interesting menu set today of over 30 products that give us this ability to continue growing the platform very healthy and actually very comfortable today that we can actually deliver on the guidance that we gave late 22. So this is no, it was no by strategy, not by chance, not that we're here today, thank God. And I think we've now well positioned here and we wanna continue to do more. I think we have a bigger balance sheet today and a bigger earning stream. And what I saw happening as well, and Marco leading this effort, I think that a lot of general partners approaching us now more than three, four years ago were convinced that the consolidation is at play in our industry and willing to join forces with Patria because of everything that we can do for them on the fundraising side, on having a listed stock as a tool to attract talent and retain talent and to give the senior executives of this respective general partner liquidity in the future. So things that we saw a couple of four or five years ago, they're actually happening and we are getting phone calls now contrary to three, four years ago that we had to call people and explain what we were trying to do. So it's pretty interesting to see that happening. I think we're not the only ones getting calls in the industry because the consolidation is at play, but we're definitely getting called in our part of the world, which is pretty nice to go through this process. Thank you.

Thank you, Alexandre.

Thank you. Ladies and gentlemen, I'm showing no further questions in the queue. I would now like to turn the call back over to Alex for closing remarks.

Well, again, thank you very much for your patience here and it's a end of the year call, so it's a little longer than usual. So thanks really, really for your patience and dedication to come to the call, participate in the call with your questions. We're so happy to take your questions, it's an honor to take your questions. And again, we feel very good beginning 2024 in a strong pace. Now with the guidance that we already mentioned over the call here a couple of times, feel free to contact us with any further questions and hopefully we'll see each other in person in your conferences. And actually sooner than later, we're gonna have in the next 60 days another earnings call and hopefully coming up with good, strong news on 2024. Thanks again for your patience, thanks for your collaboration and see you guys in person soon. Thank you team as well and thank you operator.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.