5/2/2025

speaker
Operator
Conference Call Operator

and thank you for standing by. Welcome to PATRA's first quarter 2025 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 a question during this session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising you your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Rob Lee, Head of Investor Relations. Please go ahead, sir.

speaker
Rob Lee
Head of Investor Relations

Thank you. Good morning, everyone, and welcome to Patria's first quarter 2025 earnings call. Speaking today on the call are our Chief Executive Officer, Alex Saig, and our Chief Financial Officer, Ana Roos, and our Chief Economist, Luis Fernando Lopes, 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 the investor relations section of our website or on form 6K filed with the Securities and Exchange Commission. This call is being webcast and a replay will be available. Before we begin, I'd like to remind everyone that today's call may include forward-looking statements which 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 risks, including those discussed in the risk factors section of our latest form 20F annual report. Also note that no statements 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 would like to remind everyone that we will refer to certain non-IFRS measures which we believe are relevant in assessing the financial performance of the business, but 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. Now, I will turn the call over to Alex. Alex?

speaker
Alex Saig
Chief Executive Officer

Thank you, Rob. And good morning, everyone. 2025 is off to a very exciting start, as fundraising totaled a record $3.2 billion, highlighting the expanded reach of our investment platforms and distribution capabilities, and putting us well on the way to achieving our $6 billion fundraising target for the year. This record fundraising benefited from the signing of several large customized investment accounts and SMA's special manager accounts, emblematic of how we evolved from a product-centric asset manager to becoming a solutions provider for our investors. We also reported first quarter 25 fee-related earnings, or FRE, of $42.6 million, or 27 cents per share, representing 21% and 16% year-over-year growth, respectively, despite rising global uncertainty. Fee-earning AUM grew 6% sequentially and 46% year-over-year. Most notably, we generated over $700 million of organic net inflows into fee-earning AUM in the first quarter 25, reflecting an annualized organic growth rate of over 8.6%. This is an important KPI to monitor over time as it highlights our ability to drive organic revenue and earnings growth independent of M&A and investment returns. As we highlighted at our recent Investor Day on December 9th, our increased diversification and the expansion of our investment and product capabilities is paying off in the form of robust fundraising and profitable net organic growth. In addition, fee-earning AUM growth and management fee revenues benefit from the over 60% proportion of our assets which earn fees based on net asset value and or market value compared to below 10% at the time of our IPO and which provides the opportunity for long-term compounding. All of the above reinforces our confidence in the three-year targets we introduced at the event. Now, let me quickly summarize our first quarter results before we move on to some of the other highlights for the quarter. First, as we just noted, FRE per share of 27 cents in the first quarter 25 rose 16% year-over-year, driven by higher management fees due to higher fee-earning AOM. The sequential decrease of 22% mainly reflects the expected seasonal decline in incentive fees, which totaled $12 million in the fourth quarter 24. Overall, we remain comfortable with our 2025 FRE per share guidance of $1.25 to $1.50, reflecting at the midpoint of the range approximately 20% year-over-year growth. We generated $37 million of distributable earnings in the first quarter of 2025, or $0.23 per share. up 12% year-over-year, driven by strong FRE growth, performance-related earnings were the diminished in the quarter. However, the net accrued performance fee balance of $368 million, or $2.33 per share, rose 15% in the quarter, mainly due to the depreciation of the dollar partially offset by declines in publicly listed portfolio companies within private equity. For perspective and notwithstanding changes in the value of the public holdings in our carrying funds, underlying business trends at our private equity portfolio companies generally remain positive. In local currency terms, EBITDA at our non-public PE portfolio companies rose approximately 15% on average in 2024, as we focus on resilient sectors of the economy, such as agribusiness, food and beverage, and healthcare. Furthermore, Infrastructure 3, with $53 million of net accrued performance fees, remains in catch-up, and we expect it will be the main source of realized performance-related earnings over the year. Assets under management of $46 billion grew 43% year-over-year and over 9% sequentially, with a sequential growth driven by the record quarterly fundraising of $3.2 billion and positive impacts from investment returns and FX. Moving on, fee-earning AUM of $35 billion rose a robust 46% year-over-year and 6% sequentially. There are several important things to keep in mind regarding our fee-earning AUM results. There were no acquisitions in the quarter and net organic inflows in the first quarter 25 were above $700 million, representing an 8.6% annualized organic growth rate. This was our second straight quarter of positive net organic fee-earning AOM growth, and we believe it highlights how our expanded platform is primed to grow organically, supported by the capabilities we have acquired through our M&A activity, in addition to those we have developed internally. As a result, we have built a better and more resilient business. Fee-earning AUM in the quarter also benefited from continued strong investment returns and a positive FX impact. Keep in mind that, as we highlighted at Investor Day, the FRE impact from soft currency FX volatility is modest given that most of our expense base is denominated in local currency, providing a substantial natural hedge. We estimate that for every 10% change in soft currencies, our fee-related earnings impact is approximately 2%. Finally, as we highlighted in the earnings presentation, investment performance remains strong, particularly within credits. It is worth keeping in mind that even though many of our strategies are US dollar or hard currency denominated, local currency returns are increasingly important as, over time, we expect to source more assets from local investors to invest in local strategies. Moving on to fundraising, as I noted at the start of my remarks, we are very excited to report that we raised $3.2 billion in the first quarter of 2025 and $7.4 billion over the last 12 months, both a record for Patria. The quarter's outstanding results highlight the diversified product offering and distribution capabilities of the platform we have been building. Fundraising included a mix of customized investment accounts, SMA special managed accounts, and other fund structures, including drawdown funds, permanent capital listed vehicles, and interval funds, all spread across a variety of asset classes. As of the end of the first quarter 2025, approximately 20% of our fee-earning AUM were in permanent capital vehicles, the growth of which remains a key long-term objective. Drilling down into some of the fundraising highlights for the quarter, we continue to see strong demand from Asian sovereign wealth fund investors, and we closed on approximately $1 billion of commitments from these investors in customized investment accounts and SMAs, special managed accounts, that will be invested in or in conjunction with our current vintage private equity buyout and infrastructure development funds. The quarter amply demonstrated the expertise we have developed in crafting customized solutions for our investors, and we continue to work on additional mandates for these strategies. We hope to have more news to share over the coming quarters. Within GPMS, we raised over $620 million in a new special managed account, in addition to normal course fundraising in our commingled vehicles and other special managed accounts. We also continue to see significant momentum across our credit platform, led by our flagship US dollar high-yield credit fund. Regarding real estate, while high interest rates in Brazil have impacted demand for many of our listed REITs, we see selected opportunities to raise capital on the floor of the exchange through M&A and consolidation, as well as through credit-oriented REIT strategies. It's important to keep in mind that a significant portion of the capital we raised in the quarter is customized accounts, SMAs, and other products will flow into fee-earning AUM as capital is deployed and our current pending fee-earning AUM totals about $3.5 billion. Also, we will earn fees on most of the co-investment capital sourced through the customized accounts and SMAs once deployed. Of course, while we are excited about our robust fundraising this quarter and believe we are comfortably on track to hit our $6 billion target for the year, it is important to note that the first quarter benefited from the closing of several large SMAs and customized accounts that we have been working on for some time. While we continue to work on other customized solutions across the platform, in addition to our normal fundraising, the timing of when large and complex customized investment contracts will close is very difficult to predict. With that, we caution against extrapolating the extraordinary fundraising success in the first quarter across the entire year as a new level of quarterly fundraising. Our efforts to diversify our platform and increase the resiliency of our business could not be timelier considering the highlighted global macro uncertainty and increased volatility that has gripped economies and markets around the world since the proposed imposition of widespread tariffs by the US on its trading partners and uncertainty over future trade and economic policies. Against this backdrop, it's important for investors to understand and appreciate how the region in general and Patria specifically are positioned in these uncertain times. In a nutshell, while it's possible that increased economic uncertainty and volatility could have a dampening impact on investors' willingness to commit capital to new investments in the short run, we believe Latin America is becoming a more attractive destination for capital, even as our locally focused and diversified business model enhances our resilience. While much uncertainty remains and the potential for a global recession creates challenges and headwinds, we believe the region and patria are positioned to weather and indeed possibly thrive in these challenging conditions. Consider that, save for Mexico, where our current exposure is minimal at below 3% of AOM, the region is less exposed to potential tariffs and initially faced lower effective tariffs than other regions. Long term, however, we believe Mexico remains an attractive potential market for expansion. As the trade war between the US, China, and other countries escalates, we believe Latin America as a region is a beneficiary given the region's low level of geopolitical risk and export markets that focus on in-demand agricultural products in addition to both hard and soft commodities. With a population of over 650 million people and a combined GDP of over $6.5 trillion, the region also has large and growing internal markets that provide an attractive export destination for trading partners. As evidence of these attributes, China is already Brazil's largest trading partner and the largest in the region when excluding Mexico. Also, the European Union and Mercosur, a regional consortium of countries including Brazil and Argentina, recently signed a trade agreement after nearly 20 years of negotiation. Spurred on, we believe, by the pending imposition of tariffs and increased uncertainty out of the US. The region's relative attractiveness as a destination for investment can also be seen as it captures a growing market share of foreign direct investments, which the United Nations Trade and Development Organization estimates reached 14.5% in 2023, more than three times the 4% in 1990, which represents the beginning of the data series, making Latin America one of the few regions to record a pickup in market share. From Patra's perspective, as investors in the region, with over 36 years with significant boots on the ground resources, we have extensive experience in dealing with and investing through periods of high interest rates, FX volatility, and economic uncertainty. At the strategy or investment level, our private equity investments are mostly oriented toward domestic consumption markets, not export markets. Infrastructure by its nature is local, and our GPMS solutions business is focused on European and to lesser extent US, middle market PE secondaries, primaries, and co-investments. Direct exposure to export-focused businesses and or investments in the US is minimal. Our position within Latin America as the go-to alternative manager for global investors looking to invest in the region is best evidenced by the customized investment accounts we completed in the first quarter with several Asian sovereign wealth funds. While this interest preceded the recent tariff-induced economic uncertainty We believe recent trade actions by the US have led to early signs of increased interest from Asian, Middle Eastern, and increasingly European investors in our infrastructure and other strategies, including our European solutions business, as investors seek alternative destinations outside the US to deploy capital and earn returns. Also, the potential for the denominator effect to once again rear its head, as well as the prospect for lower DPIs in the global PE industry should also benefit our solutions business, particularly our secondary strategies. Our business is also built to serve local investors and at the local level. We continue to see early signs of increased allocations to alternatives from local investors and institutions that are both under-allocated to alternative strategies and are often required to invest locally and understandably have a home country bias in times of economic stress and uncertainty. Local investors in LATAM accounted for approximately 17% of our fundraising in the first quarter 2025 and over 40% in 2024. And we believe the current uncertainty is also supportive of demand for our European solutions business. Last but not least, economically, Our fee-earning AUM and management fees are very sticky and highly predictable as approximately 20% of our fee-earning AUM are in permanent capital vehicles and approximately 90% in vehicles with no or limited redemption features. At the same time, our FRE has little sensitivity to both currency FX volatility as we mentioned earlier. Pulling this all together, our financial results and strong fundraising provide additional evidence that our strategy to diversify and grow our business both organically and inorganically while also increasing our resilience is paying off in the form of better organic growth and growing FRE. It's been only four years since our IPO, but as we highlighted at our Investor Day, which is available on our website, over that brief period, we have greatly expanded our regional and global investor base and distribution capabilities. And we have significantly diversified our investment strategies and product offering. In addition to consistently achieving or beating virtually all of the objectives we set for ourselves since the time of our IPO, we believe we are off to a strong start to deliver on the new fundraising, fee-related earnings, and other targets we unveiled at our recent Investor Day. Now, let me turn the call over to Anna to review our financial results in more detail. Thank you.

speaker
Ana Roos
Chief Financial Officer

Thank you, Alex, and good morning, everyone. 2025 is off to a very exciting start, and the expanded reach of our investment platforms and product and distribution capabilities helped us raise $3.2 billion in the first quarter, a quarterly record. Strong results in the quarter increases our confidence that we are on track to achieve our 2025 objectives. Let's review our first quarter results. As Alex highlighted earlier, we are very pleased with our fundraising in the quarter and believe we are well on track to achieve our $6 billion target for the year against a backdrop of increased global uncertainty and volatility. Our VAUM rose 46% year-over-year and 6% sequentially to approximately $35 billion. While acquisitions drove most of the year-over-year increase, the strong sequential growth reflects a combination of solid net organic inflows as well as positive contribution from investment, performance, and FX movements due to depreciating U.S. dollars. As a result of the U.S. dollar depreciation in the quarter, fee-earning AUM recouped approximately half of the negative FX impact in the fourth quarter of 2024. More importantly, however, and as we highlighted in prior calls, FX punctuation has limited impact on our FRA. since our expense base provides a substantial hedge against currency movements that may impact our fee-earning AUMs and consequently our fee revenues. As we view at our investor date back on December 9th, based on our current asset class mix, a 10% variance in subcurrencies against the dollar impacts FRE by only about 2%. It's particularly noteworthy that in the quarter, Patros generated approximately $700 million of net inflows into fee AUM for an 8.6% annualized organic growth rate. Since the end of the third quarter of 24, Patros has generated about $1 billion of organic net inflows, highlighting the organic growth potential of our expanded platform. Of note, we reintroduced our pending fee earnings AUM KPIs which highlights that we have almost $3.5 billion of already committed capital that should turn into fee-earning AUM as the capital is deployed. For comparative purposes, this KPI was approximately $2 billion at year-end 2024. This pending fee-earning AUM, combined with our fundraising goals, the 20% of fee-earning AUM that are in permanent capital vehicles And the 35% of fee-earning AUM in drawdown funds with average life of 6.5 years all point to our ability to generate net organic growth over time. Total fee revenue in the first quarter reached $77.3 million, up 28% over the prior year, about a $17 million increase. driven in large part by the full impact of our acquisitions completed in 2024, incremental inflows mainly into credit, partially offset by private equity fraud, which sees charging fees. It is worth mentioning that due to timing of net asset flows into fee-earning AUM, management fee revenues in the first quarter did not reflect the full impact of the quarter's asset growth. First quarter 25 fee revenue decreased 17% versus prior quarter, primarily due to year-end seasonal incentive fees of about $12 million, in addition to retroactive management fees of approximately 2.7 million that were recognized in the fourth quarter, compared to just 0.3 million that were recognized in the first quarter. Excluding the impact of retrofee, management fee revenue was essentially flat sequentially. We currently expect retro fees to be at least $1 million in the second quarter of 2025. Our management fee rate averaged about 96 basis points for the last 12 months. As we review at our investor day, we are steadily diversifying our business and introducing new investment strategies and product structures, which are key drivers of our growth. Consequently, our management fee rate will continue to evolve and we expect our fuel rate over the coming years to trend towards approximately 90 basis points, but can vary substantially from quarter to quarter depending on mix. Moving on, operating expenses, which include personal and G&E expenses, totaling approximately $35 million in this quarter, were up 36% versus Q1 2024, or $9.3 million. About 75% of this increase reflects the impact of acquisitions with the balance driven by continuing investment of our business. The sequential decline reflects a combination of the seasonal effects of both our bonds of personal cost as well as seasonality in G&E expense. Looking ahead, we believe per-score personnel and G&E expenses combined are a good baseline run rate. Putting it all together, PACHA delivered fee-related earnings of $42.6 million a quarter, up 21% versus prior year, with an FRA margin of 55%. We continue to expect the full-year margin to fall within the range of our 58%. to 60% guidance as we grow few revenues and capture incremental expenses synergy from our acquisition. Overall, given the strong start to the year, we remain confident in our fundraising target of $6 billion and our ability to achieve our FRA target of $200 to $225 million. Next, our net financial and other income and expenses. in Q125 total a negative $2.8 million, reflecting mainly interest expense on our credit facilities, partially offset by income generated in our new energy trading platform, TRIA, which contributed about $1.1 million in the quarter. As of the first quarter, net debt totaled approximately $143 million compared to $190 at year-end. Our net debt to FRI ratio was well below one time at the end of the quarter, in line with our long-term guidance. Our affected tax rate in the quarter was 9.2%, an increase of 5.5 percentage points versus the prior quarter, mainly reflecting the impact of performance fees of our Q4-24 tax rate and our mix of jurisdictions. We continue to expect our tax rate to trend towards 10% at the end of our three-year target period in 2027, given our evolving business mix and new platforms located in higher tax jurisdictions. In Q1 2025, we generated $37 million of distributor earnings of almost 17% year-over-year, reflecting higher FRA. partially obsessed by higher net financial interest expense, while the sequential decline reflects the impact of both performance fees and incentive fees of fourth quarter 24 results. First quarter D per share of 23 cents was up 12% versus the prior year on higher FRA, partially obsessed by a higher share count and a slightly higher tax rate and financial income Regarding the share count, we finished the quarter at 158 million shares and continue to expect the share count to average between 158 and 160 million from 2025 through 2027 inclusive share repurchase, which will be focused on offsetting stock-based compensation. Finally, as we announced during our Pax Day, the Board approved for 2025 a quarterly dividend per share of 15 cents. With regards to our share repurchase program, we did not repurchase shares in the quarter, but it remains our intention to repurchase shares over the course of the 2025. Overall, we are very pleased with our first quarter results and the momentum we have built as we continue to diversify and improve the resilience of our business. We believe we are on track to meet our FRE targets for 2025, and we are excited regarding the growth opportunity that lies ahead. Thank you, everyone, for dialing in, and we are now ready to answer your questions.

speaker
Operator
Conference Call Operator

Thank you. As a reminder, to ask a question, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. We ask that you please limit yourself to one question and one follow-up. One moment for our first question. Our first question is going to come from the line of Craig Siegensaller with Bank of America. Your line is open. Please go ahead.

speaker
Craig Siegensaller
Investor (Bank of America)

Good morning, Alex. Hope everyone's doing well. My question is on the macro side. Trade conflicts should be a positive for LATAM in Brazil, encouraging more FDI. How are your portfolios positioned from higher tariffs in the U.S. and some of its largest trade partners, including China?

speaker
Alex Saig
Chief Executive Officer

Thank you, Craig. Nice speaking with you. This is Alex here, and thanks for your presence here in this call. Well, if we break it down, I think most of our investments are Latin-oriented. So within Latin America, our exposure to Mexico is minimum, less than 3%, 1, 2, 3. So most of our exposure, when I say Latin America, is basically South America. And there, I think our investments are pretty much local investments. in sectors that we think are very resilient and locally driven, like healthcare, food and beverage, and on the infrastructure side, it's now very local by nature. toll roads, etc. And our exposure to companies through our credit portfolio, very local as well, as I mentioned, less than 3% in Mexico. And when I go to real estate, it's even more local. It has also to do with the local drivers of the countries like Brazil, like Chile, Colombia, etc. So in general, I think that our exposure to this whole tariff war is relatively low. As you know, the region is in the group of the 10 percent tariffs, which is now the lower end of the spectrum of the tariffs that was imposed by the US. On the other side of this equation here, I definitely think that the region will be benefited if this trade war continues as it is. As you know, it changes every half an hour, but if it continues where the region will be tariffed at the 10 percent level and the other regions of the world with higher tariffs, I think that region will be benefited because it's a huge consumption market, large part of the GDPs of these countries are composed by local consumption, the C of the GDP formula, and these trading partners, our trading partners will look into the region as a place to actually sell their products, China being I think the largest trading partner in the region, excluding Mexico. So and lastly, I think even if the whole tariff debacle goes back to square one, in my humble opinion here, I think this was a credibility shakeup with the current U.S. leadership that I think that investors around the world will look for other places to invest besides the U.S., Now, when we were talking to investors during 2023 and 24, and even the later part of 24, there was a big push towards U.S. investments, U.S. equities and whatever. And when I talk to investors now, I think there's a big push outside of the U.S. And as I mentioned, it's just my personal opinion, even if the tariff tabacle goes back to square one, I think there was a credibility shock here. And investors will look for other places to invest. And Latin America, I think, is a very, very interesting region, low geopolitical risks, et cetera. So three parts of my answer here. Number one, A straight answer to your question, I don't think our portfolio will be negatively affected by the tariffs. Of course, if there's a global recession or whatever, I don't think everything moves in the wrong direction. But as we see it now, I think it's a low-risk portfolio as far as the effects of the tariffs are concerned. Second, I think investors, our region will be benefited because we are in the low-tariff bracket and investors see this very, very large consumption market to sell products into. And lastly, I think investors will invest more in the region. I gave an FDI figure here for 2024. The region represented 14.3% of all the FDI versus 4% in 1990. basically three times more or even more than that in market share. And I think that's going to increase as we look into the near future. Hope I answered your question correctly.

speaker
Craig Siegensaller
Investor (Bank of America)

That was great, Alex. Just for my fault, and we can stick with the trade war topic, but move on to the fundraising front. There has been some news that Chinese institutions will be divesting from U.S. private markets. Could this open the door for Patria if they divert their private markets allocations from U.S. to LATAM and Brazil specifically? We're just curious how your LP meetings and calls have gone since April 2nd.

speaker
Alex Saig
Chief Executive Officer

The answer is yes, and I think this conversation was already happening last year. I think the Chinese investors specifically were already anticipating a potential Mr. Trump winning the election, the U.S. election as president. So they were already taking steps in the direction of reducing their U.S. exposure. And having us sign a billion dollars of SMAs, which is for us a very large amount in the first quarter of 2025 is a reflection of that. And these negotiations were going on during 2024 when Mr. Trump was not the US president yet. So I think it's going to continue to drive in this direction, our conversations conversations after April 2nd really intensified that. We learned from our Asian, and not only Asian, but also Middle Easterners and some European investors, a concern in continuing allocating to U.S. alternative asset managers for geopolitical reasons, going all the way to, no, we might have our accounts frozen and blah, blah, blah, blah, blah. So all the way from a small amount of precaution all the way down to the red zone of what happens if this and this and this. And we are completely out of this, right? And all of our fund structures, they do not flow through the U.S. They flow through other jurisdictions. We are not a U.S. company. We are a Cayman-based company. which has no US jurisdiction influence there, et cetera, et cetera, et cetera. So I think besides being in a part of the world that I think will benefit from this geopolitical confusion and uncertainty, specifically for Patria, we are structured and designed as a non-US company. We were always like that. And I think this will definitely benefit us. in this very uncertain world. And we already had these kind of conversations with our investors after April 2nd. Hope I answered the question.

speaker
Craig Siegensaller
Investor (Bank of America)

Thank you, Alex.

speaker
Operator
Conference Call Operator

Thank you. And one moment as we move on to our next question. Our next question is going to come from the line of Tito Labardo with Goldman Sachs. Your line is open. Please go ahead.

speaker
Tito Labardo
Investor (Goldman Sachs)

Hi, good morning, Alex, Anna, and Rob. Thanks for the call and taking my question. My question also on the fundraising, but I think you mentioned that you didn't really see any impact yet from the noise around tariffs in the first quarter where you saw very good fundraising. But just thinking about the outlook from here, you're already more than halfway to your target of $6 billion for the year. So, I mean... Given this uncertainty with tariffs, potential more interest in LATAM, do you see potential upside to that $6 billion in fundraising for the full year, or is there anything extraordinary in the quarter that maybe is not recurring?

speaker
Alex Saig
Chief Executive Officer

Well, thanks for the question, Tito. It's nice talking to you. Thanks for participating in this call. I will keep me, I think, straight answer to your question, then I'll expand. I think we're keeping the $6 billion target. We had a great first quarter, but I caution 3.2 billion times four. I think that's a very aggressive number. We're keeping the $6 billion target. However, as I see it today, we're a little bit over halfway through, which is a very good position to be in. I feel very comfortable and the team feels very comfortable that we're going to actually hit our $6 billion target, which for us is an amazing number. When we gave out The number, you know, $21 billion for the next three years, six this year, seven next year, eight in 2027 during our investor day, December 9th, 2024. And now $21 billion for us in three years, six billion this year. It's a very, very substantial number given our size. And we already know over $3 billion in the first quarter. And more so, I think we did raise through that $3.2 billion, $700 million in fee-paying AUM in the quarter of net new money. So you see the strategy being paid off. And I'm not even counting the valuation increases in the $700 million. I'm not counting the valuation increases. And we charge on NAV. So we started in 2024 with a net new money of around $380 million for the whole year. And then we have $700 million of net new money in the fee-paying AUM account in the first quarter. So again, no, it's extremely good fundraising, very strong fundraising. I know that April 2nd was after the end of the first quarter. However, I don't think that all of these Asian investors and sovereign funds would have signed all these SMAs with us in the first quarter of 2025 because the whole uncertainty on the tariffs were already there. even though April 2nd was after the end of the quarter. But they would have cautiously said, look, Alex, let me sign this during the second quarter to see what's going to happen. And they didn't. And they didn't actually, if I go back to Craig's question in 2024, stop these conversations. On the contrary, they are actually pushing on these conversations to expose themselves more to LATAM. tiny move on their side is a huge effect for us, right? What is a billion dollars or two billion dollars for these Asian sovereign funds? It's nothing for them. And for us, a billion, two billion, three billion is half of what we have to fundraise for the year, right? So anything that we, and we are the largest alternative asset manager in the region and in my view, Of course, I have a biased view, the most better positioned to take on this additional flow of money in infrastructure, in credit, in private equity, whatever. These two SMAs will drive money into our infrastructure and private equity flagship funds or vintages However, the conversations with these investors are much more broader. As we go into the year, you might be hearing news from us from other kinds of SMAs, like managing assets that they already have on the ground in Latin America, them investing on the credit side. There's so many ideas that is going on. I think the conversation changed dramatically to the better, Tito. Us being there, investing in the region, in Asia for so many years, we opened our office in Hong Kong eight years ago. We opened an office in Dubai actually in in the first investor we had was in our 97 Fund 1 vintage from KIO, the Kuwait Investment Authority. So we've been there in the region. So being there at the right place at the right time and being the largest in the region here in LATAM, we have now been able to maximize those investments and taking advantage of it. And you can see the numbers already there in the first quarter. I think I'm going to stop. We're going to be talking a lot more about this during the rest of 2025, where we're going to be announcing other SMAs and other relationships of this sort. I hope I answered your question.

speaker
Tito Labardo
Investor (Goldman Sachs)

Very helpful, Alex. Thank you. Maybe, I guess, just on the follow-up, conversely, if you look at the fee-related earnings, just analyze it, and even considering some incentive fees in 4Q, you are running a bit below 4Q. the $225 million guidance. So the jump in the fee earning AUM that we saw this quarter, should that already begin to benefit in 2Q? Will that be more for 3Q and 4Q? And along those lines, I mean, do you expect a jump in that fee-related earnings to get closer to the trend to deliver on the guidance for the full year? Thank you.

speaker
Alex Saig
Chief Executive Officer

Yes, I think, yeah, we see everything that you just mentioned. And if I do a straight math here, I think we are right on target to deliver the middle of the guidance. And I think we can do better than that. But just a very simple math. Now, the fee-related earnings for us for the first quarter of 2025 was $42.6 million, as you can see there from our presentation and earnings call. If you just multiply that by four, we get to $170 million. So we're going to do better than that because of everything that you said. The AUM that was raised will turn into fee earnings, et cetera, as we know, invest that capital, blah, blah, blah, but just $42.6 million for the quarter times 417. If we add to that to the same $12 million of incentive fees that we had in 2024, I'm just repeating that, and again, most of that Most of that piece came from our credit strategies and the volatility of whatever in the market favors our credit strategies here, trading our bonds, et cetera. But whatever, I'm keeping the same $12 million of last year. So 170 plus 12, that's 182. If we do raise the $6 billion for the year, now we raised 3.2 in the first quarter, so I think we're very well positioned to raise the six. The six means on average $3 billion a year, right? Six for the whole year. Average of three, even though we jump started with 3.2, but let's say average of three for the whole year. 96 basis points of management fees. So 96 basis of the 6 billion is 28 million. So if I add now to the 182 number 28 million, that's 210 million right in the middle of the 200 and 225. So if I just repeat the first quarter on FRE, which I think, again, we're very strong in doing better. if I have the same incentive fees as last year, and if I raise the six billion average of three billion, and again, I started the year with 3.2, I already get to 210, right, in a simple math. So again, that's why we think I'm here saying that we are reiterating the guidance of 200, 225 GTO. I hope I answered it.

speaker
Tito Labardo
Investor (Goldman Sachs)

Yep, perfect. That's very clear. Thank you, Alex.

speaker
Operator
Conference Call Operator

Thank you. One moment for our next question. Our next question comes from the line of Ricardo with BTG. Your line is open. Please go ahead.

speaker
Ricardo
Investor (BTG)

Good morning, everyone, and thank you for the opportunity of making questions. Could you please provide an update on the integration of all the M&As completed last year, talking about also what parts of the process have been easier or more challenging than expected so far? Thank you very much.

speaker
Alex Saig
Chief Executive Officer

of course Ricardo nice speaking to you and thanks for participating I think we are internally here we're calling 2025 our no integration year and as you know we did then in our three-year guidance give a inorganic guideline but to the tail-ended right now doing acquisitions in 26, 27, and not doing relevant acquisitions, at least in the guidelines for 2025, in order for us during the later part of 24 and in 25 to integrate the business and give us that time to do that. That has been our focus. I think we launched internally what we call a one-patria program. going all the way from the front line to the middle office, the support areas, the back office, et cetera. Right now we're pretty happy that we are on target on the integration. seen any major issues there, any things that actually concerns us. No yellow flags, to be honest. I think we had already designed what we wanted to do on the process side and on the governance side, on the system side. We are implementing, so giving you one example, all of our HR is already under the same system. all our payroll, compensation schemes, valuation, blah, blah, blah. That's all done. And that's, we actually did go through end of the year evaluations of our 800 plus employees, so late 2024. Under the common system, common methodology, we use the nine blocks, we use a one system to do all these evaluations, blah, blah, blah, blah, blah. don't know everything in under our Oracle ERP we use We have everybody already downloaded in our Share compensation program that is a company that manages all of our employees in a global scale Blah blah blah blah blah could go on and on and on so basically done So which is known we are people business, right? So this is the most important part of our business because it is no the majority of our costs, and we have to treat people very well as we are a people business. And then I can go on and on, Ricardo, on the other support areas and back office areas integration, but as I used one example, which was HR, and yes, so I think we see into 2025 where We're already there, but getting to the end of the year with everything fully integrated and ready to go. And I think with that, we do generate synergies. That's why we're also giving the guidance that for the year 2025, we're going to post 58% to 60% FRE margins. And why is that? Because you saw lower margins last year than that. because we are then, with this integration, generating the synergies and being able to push the margins back to the 58% to 60% level that we had in 2023. So we're fine. I think we haven't seen any, again, as I mentioned, any yellow flags up to now, and hopefully we're going to stay that way until the end of the year. I hope I answered your question, but if you have anything specific about integration, I'm happy to be able to answer it.

speaker
Ricardo
Investor (BTG)

I'm very clear. Thank you very much.

speaker
Operator
Conference Call Operator

Thank you. One moment as we move on to our next question. Our next question comes from the line of William Berringer with E2BBA. Your line is open. Please go ahead.

speaker
William Berringer
Investor (E2BBA)

Okay. Thank you. Thank you, everyone. Thank you, Alex, and for the presentation. My question here is regarding the pending fee AUM. You said, you told us during the call. So could you give us an overview of this $3.5 billion, maybe a breakdown, such as what are the strategies that will be allocated and the expected management fee on them? And also, if you could share expectations in terms of timing of these allocations, that would be great.

speaker
Alex Saig
Chief Executive Officer

Okay, thank you very much. Thanks for your question here and thanks for participating in our call. Well, we mentioned there that we have around 3.4, 3.5 billion dollars of pending fee-paying AUM, 3.5 billion of pending fee-paying AUM. I think it's pretty much broken down in most of it into our infrastructure and GPMS verticals. However, this number changes a lot over time. So I'm giving you a picture, not a film, of what happens. So I would, my humble suggestion here, project as we look into the future, the average management fee that we are currently having of 96 basis points over once we actually deploy that money. you can see that the breakdown that actually favors infrastructure and GPMS infrastructure has a higher management fee than the 96 basis points. But as a suggestion, I will use the average. It's very hard to break down quarter by quarter. Now, as we see during the year, you might, in the second quarter, or have a higher fundraising for another asset class, et cetera. So on average, I would use a 96 basis point. When are we deploying that money? Normally, we deploy that money over the next four to six quarters, but again, on the infrastructure and GPMS side, I think within 2025, I think we're gonna be able to deploy that money. Along the year, I would also use an average for the year. as we do deploy that money over the second, third, and fourth quarter. And as I mentioned during my answer to Tito's question, When we projected we're going to raise $6 billion, which is our guidance, we projected on average we're going to have $3 billion of fee-paying AUM, right? Just as a natural average here. But as we did raise the $3.2 billion in the first quarter, we're in a better position to be able to invest that money earlier than our projections because of the fact that we are now with this money ready to go. I hope I answered your question. Maybe if you want to know any other further questions, I'm glad to answer.

speaker
William Berringer
Investor (E2BBA)

No, that is perfect. Thank you. Thank you.

speaker
Operator
Conference Call Operator

Thank you. One moment for our next question. Our next question comes from the line of Guillerme Gerspan with JP Morgan. Your line is open. Please go ahead.

speaker
Guillerme Gerspan
Investor (JP Morgan)

Hey, Alex and team. Good morning. Thank you for the presentation. Congratulations on the fundraising. My question is basically two. The first one is on credit, a very strong performance. It was mostly the high yield rate and also Chilean fixed income was also strong. Just a little bit more granularity. What do you think drove this very strong performance on credit in terms of fundraising? And if you expect it to be resilient throughout the year? I know we had the pension reform in Chile, but I don't think it's in the numbers yet. So I just want to show this performance. And then the second thing, in just a recap, on the drawdown funds, I think nowadays we're sitting at $2.4 billion committed capital on infra already and private equity $1.5. Just a reminder, what is the fund target that you want, the size target you want to have on the funds? And what is going to be the timeline ahead? Until when do you expect to fundraise those funds? Thank you.

speaker
Alex Saig
Chief Executive Officer

Thank you very much, Guilherme. Thanks for participating in the call. Going back to your credit question, we've been performing very well. I think the team has been able to actually ride these volatility moments extremely well and beating the benchmark, as you saw, in most of the credit funds and even more so in the flagship funds, the dollar-denominated LATAM high yields. It was a question of being the right overall for the fund, the right duration with everything that happened. Also, as we see within the countries in South America, Chile coming first in lowering inflation expectations, lowering inflation, lowering interest rates. with an interesting view on a potential political change later this year. So I think that also reflects in better equities and better credit opportunities. prices for Chile, and I think going into Colombia that we'll have elections early next year. We're also seeing that the current government is driving very low popularity rates, and there might be a change there as well. The market will begin to anticipate that, I think, later this year, which will continue to benefit us as we position ourselves in these securities from these countries. And then it comes to Brazil later next year. So it's a little bit far from the Brazilian election here. So that, plus I think the strategy of the team, plus the moment of high interest rates in general, did benefit the market. the asset class, and I think it will continue to do that. I think we raised a private credit fund late last year, early this year, and I think we're already anticipating on raising a second private credit fund of a LATAM and regional product sometime this year because of no high interest from investors. So we might launch private credit number two already nine months after closing private credit number one, which you can see that I'm giving you some data points on the high level of interest from investors for our credit products in general. On the private active seven and infrastructure five that you asked, private active seven will probably finish with around $2 billion, adding these SMAs that were directed to private active that I just mentioned during the call. The SMAs that we raised in the first quarter, most of them were guided to private PrivateXE to invest along PrivateXE 7 and to invest along infrastructure 5. So we will probably land around $2 billion. There are fee-paying and very good fee-paying management fees and performance fees, these SMAs. So it adds to that vintage. So within the vintage of PrivateXE 7, we have the closed-end fund. We have some... closed-end funds that are planned regional, closed-end funds just for Brazilian Reais, we're going to have a closed-end fund just for Colombian pesos, and we have now these SMAs. So if you add the pan-regional dollar denominated fund with the Brazilian just Reais fund, the Colombian pesos denominated fund, and the SMA, and all of these, they have to invest together because it's a that's how investors ask us to invest alongside. One fund investing alongside the other, even though they have different currencies that denominate their management fees and performance fees, they all invest together. So it's a $2 billion vintage. Same for Infrastructure Fund 5. I think we're going to surpass the $2 billion, probably going to be at the $2.5 billion. We already surpassed the $2 billion, probably going to be at the $2.5 billion. And I was also always saying that it's going to be around $2 billion to $2.5 billion in private equity. 7 is going to be around 2, so we'll get there for private equity 7, and infra is going to be closer to 2.5. Same, we have Infrastructure Development Fund 5, dollar denominated PAN Regional. We have Infrastructure Development Fund 5, REI is denominated. We have Infrastructure Development Fund 5, Columbia Business denominated. And we have these SMAs that invest paying fees alongside all these funds that I mentioned, totaling that, we're going to reach, I think, over $2.5 billion. So happy that we're there. I think it took longer than we expected. I think not only us, but all the other alternative managers around the world are feeling that fundraising is taking longer than they expect. But I'm happy that we are landing at least with the numbers that we were talking throughout the last two years, actually. Thank you very much. I hope I answered your question, Guilherme. Thank

speaker
Guillerme Gerspan
Investor (JP Morgan)

Yes, yes, you did. Thank you, Alex.

speaker
Operator
Conference Call Operator

Thank you. And I would now like to hand the conference back over to Alex Og for closing remarks.

speaker
Alex Saig
Chief Executive Officer

Well, thank you very much for your time here. I think, again, out for a great start in 2025. Great fundraising, great results. I think, as I mentioned here when answering Tito's question, our FRA for the quarter, $42.6 million. If you multiply by four, and then if you add the same incentive fees of last year, and then an average $3 billion capital raise for this year, we get already to the 210. So very well positioned here to deliver the $225 million guidance that we gave you guys. Of course, also very well positioned to deliver on the $6 billion fundraising target. And as we move into the year, I think that the region and patria probably will be very much benefited from the whole tariff uncertainties because of the low geopolitical risks of the region and how we are very well positioned to serve our Asian clients, Middle Eastern clients, and European clients. So thanks for your patience. I hope to see you in person soon. And again, have a good Friday. Thank you very much. Bye-bye.

speaker
Operator
Conference Call Operator

This concludes today's conference call. Thank you for participating and you may now disconnect. Everyone have a great day.

Disclaimer

This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.

-

-