Patria Investments Limited Q1 2023 Earnings Call

We are advancing on our next closing for the next fund vintage and we believe divestments and return on capital in the older vintage funds will be a strong catalyst for that fund raising process.

The net accrued performance fee balance stands at $437 million as of March 31, 2023 down from $478 million at December 31, 22.

This continues to equate to approximately $3 per share of value that can accrue to our shareholders as this portfolio.

Right.

Since derivative earnings of $39 1 million in first quarter 'twenty three is up from 35 million in the first quarter 'twenty, primarily driven by the benefit of performance related earnings in the current quarter.

Our <unk> per share of 27 <unk>.

We'll generate a dividend to shareholders of $22, six which translates to roughly 6% yield on annualized base at recent share price levels.

Total AUM was 27 3 billion.

The end of Q1, roughly flat for both the quarter and trailing years with inflows from fund raising and acquisitions offset by the impact of the marketing environment on portfolio companies valuation as well as the outflow pressure we have seen in some of our open end products.

Earnings of $19 9 billion is up 4% for the quarter and up 5% from one year ago, consistent with our concrete and fee revenues.

Remember that for our fee, earning AUM valuation impact is more muted and limited to funds that charge management fee on it.

As opposed to cost base.

In fact, the valuation was actually a positive driver in the first quarter 'twenty three and prior year bridge.

This reinforces the relative stability of our management fee stream.

Markets are volatile.

As Alex noted we are still on track for our 2023 fee related earnings guidance of $150 million at a margin in the upper 50% range. We believe this growth will be concentrated in the back half of the year.

I will now turn the call tomorrow for a few words.

Thank you Ron and Hello, everyone.

With my new role focusing time more fully unpack with corporate development efforts.

I can reiterate that we remain highly focused and active on this vector of growth.

Our goals through M&A are clear.

Expanding our product offering.

Standing our geographic expertise and enhancing our distribution channels and capabilities.

Each of the four acquisitions with close in our first two years since IPO achieved with one or more of those games.

Moneta broad credit and public equities verticals as.

As well as extensive expertise and client relationships in Chile.

Tomorrow team and eager both brought talent and track record to expand our private equity vertical into growth equity and venture capital and.

In BPI.

His expertise in real estate, along with a significant platform of <unk>.

Permanent capital AUM.

Looking forward we.

We have conveyed our interest in three key priorities one.

Geographic expansion into Mexico, where we see significant opportunities.

Stemming from near shoring trend in coming years.

Sue.

Continued expansion of our real estate business, both in <unk> and beyond Brazil, which we believe is a steel subscale relative to its potential in the region.

And three expanding our abilities to serve as a conduit in the region or investing in global alternatives.

We are actively exploring opportunities in these areas and we'll continue to keep you posted on our progress let me now turn it back to Alex to close.

Thanks, Mark one on them.

This earnings call marks the first step in a new calendar year.

<unk> starts 2023 with clear ambitions for growth as we continue our journey as the gateway for alternative investments in Latin America.

We continue to operate in a challenging environment.

And we must continue to deliver consistent attractive returns.

Second <unk> service to our clients.

As we scale and expand the investment platform.

We have assembled a world class team across asset classes and functional areas.

To meet those demands.

And I believe we are very well positioned to succeed.

We shared our goals over the next few years with you at our.

Our Investor day late last year.

So the stage is set.

Now, it's our job to execute.

And assuming we do I believe there is no question that battery looks very attractive at today's valuation.

I am proud and privileged.

To lead this group.

And to serve our clients and our shareholders.

We're now happy to take your questions. Thank you.

As a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw your question. Please press star one again.

Please standby, while we compile the Q&A roster.

Our first question comes from the line of Kian on the BARDA from Goldman Sachs. Your line is now open.

Hi, good morning, Alex.

Josh. Thank you for the calls I'm, taking my questions I guess my question.

Just to follow up a little bit more on the.

<unk> outlook for the year I know you said you're on track in your margins can improve a bit.

But just to think about how that will evolve.

The $31 million, you probably have to get maybe about $40 million in the second half of the year to deliver that $50 million.

Target.

Ken.

That should be.

The increased fee, earning AUM fee revenue be the driver there do you see it.

Proven tier on the margins right at margins at the low end of the guidance.

If you can just help us think about sort of the dynamics from here on out to be able to have that $150 million.

And then the second question just on the performance related earnings good good performance in the quarter is there room to realize more performance fees. This year, given the realization of a volatile and any color you can give on the outlook for that.

Performance fees.

Okay.

This is hi, Tito this is Alex thanks for your for your questions.

Going back to the first question here.

Yes, it's exactly as you said, we see both.

Increases during the year.

As we.

Did raise.

First close of our flagship.

Private equity fund late last year.

Investing that funding that we charge fees on an invested.

<unk> committed on that fund.

Also for our flagship infrastructure fund.

As we mentioned.

Target to have a first close in this quarter second quarter of 2023, and then we.

Start investing that's fun and we also charge on invested capital there.

So this is these two big flagship funds private equity funds seven that I, just mentioned and the first close of infrastructure Fund fund five coming in the second quarter. It gives us a lot of dry powder or more committed capital, but not invested and as we invest.

Along the year that should drive revenues up.

Those revenues come with basically no cost right because we already have the teams in place.

To manage and invest the two funds that I just mentioned in addition, our Brazil driven strategies.

Try to.

Send the message over the call here, they are doing extremely well and managing to rates.

Our global perform in Latin America as previously also stated in other calls.

Earnings calls like this one.

We're also over performing in the Middle East, where we're performing in Asia compensating a little bit still the underperformance in the U S on the fundraising side.

So in general when we add up all the numbers, we still feel comfortable that we will do.

And reach the $5 to $6 billion organic fund raising for 2023 and $150 million.

The related earnings for 2023. In addition, we also see the business scaling a little bit.

As you also mentioned cheaper because revenue is going up.

Expenses more or less in our control.

Margins should notch up a little bit as.

As we move through 2023.

Reaching than the numbers that you just mentioned.

On a quarter by quarter basis to the whole summing up over $150 million of FRE by.

The end of the year in total for 2020 sweetener on the performance fee side, Yes, I think we.

Yeah.

Getting more and more comfortable that side because of the big divestments that we have.

For our infrastructure fund three.

During the year of 2022.

As we can be the new our new followed very closely.

We did set back to investors for over.

One $4 billion.

Yes.

Throughout the last year for that specific funds totaling $2 billion in total with previous divestments for that infrastructure Fund III.

That actually generated a small amount of carry for 2022 of approximately $19 million of $18 nine, but what I was $19 million for 2022.

It did put us in the.

Catch up or.

Bracket, there so everything that we sell.

From that fund, 100% will come with performance fees so lazy.

The possibility of us having a performance fees from infrastructure funds through this year and the performance fees that we had in the first quarter of 2023 came from private equity funds five investments in the quarter, our agricultural inputs distribution company not from.

Infrastructure from three that I just mentioned.

So im happy there on the performance fee side.

I think we can do well on that side.

Overall on a three year basis as mentioned in our backs. The late last year of $180 million for the general partner I think we are in targets of course performances as Youll know that can slip a quarter here quarter there.

You are there, but I am comfortable.

Getting more comfortable there with that number.

Why is that and the last point here.

Just on the Sketchup.

Fees brackets of infrastructure.

Another $100 million performance fees.

Already generated <unk> 19 last year with this trend.

That's 29 with this another 100 139, let's say.

Guidance of 180.

For the whole for years.

$1022 24 to 35 so.

Gets me to be.

In the comfort.

Level here on that front.

So that's why it's come back and say look like looking into 'twenty.

<unk> 2023.

I'm comfortable with the $150 million I'm sorry.

Also I think generally.

As we move into the year.

I hope I answered your questions.

Yeah, no it was pretty clear Alex Thank you very much.

Thank you.

Alright, one moment please for the next question.

Yeah.

Our next question comes from the line of Craig Siegenthaler.

<unk> of America. Your line is now open.

Okay.

Good morning, Alex Mark I hope, you're both doing well and good to hear that you're still on track.

With your targets against a tough backdrop.

With the U S Alt managers.

It's more difficult backdrop, many of the first closes have come and find maybe 50% of the targeting that pretty short period of time.

This can include raises from long term clients that might be a little easier, but the second through final close as had been a lot tougher both in terms of time.

And Si so.

How should I think about this sort of risks when I'm modeling both private equity seven nm provides.

Hi, Craig Nice talking to you as well hope all is well with you and your family.

No.

Youre right Youre right on.

On the Dot there I think.

The window that we are seeing our flagship fund fundraising is exactly as you said, we have a big first close big I mean 40, 50% of the targets of the fund.

Dan comes in the second and third close.

I think contrary to prior fund raising the second third close coming in smaller amounts of more scattered than.

One chunky.

One chunky second close.

Douglas started more of the norm.

Going back whatever several vintages ago.

We're seeing that on our private equity funds seven so we had a big chunky first close and then we have several other smaller ones and we're closing on that fund.

Every two weeks every three weeks in.

As we know.

Group a bunch of investors together, we have another close in addition to that Greg what I can say also from private equity funds seven as I mentioned as we are also raising money from other locations of the world over performing Latam Middle East.

Including Israel Asia.

Underperforming U S.

We also having specific vehicles for those regions. So we have a group of Brazilian vessels coming in through the Brazilian Cedar and a group of.

Then.

Colombian vessels coming from a Colombian cedar and et cetera. So that's why it's also a little bit more patchy.

Having these smaller clauses, but in the end I feel comfortable.

From what I see now in my in my Yeah.

In our pipeline that will continue to fund raise significantly.

Private equity fund seven.

And.

Then comes from infrastructure funds fund three now infrastructure fund III.

The first close I think is.

Is even stronger than I was expected and I think also has to do a lot with.

The divestments I just mentioned sorry.

Sorry infrastructure funds five has a lot to do with them.

Divestments that I, just mentioned for infrastructure fund III and that Big DPI number of course also drives our fundraising.

So so.

So you will probably see in the first quarter in the second quarter I'm, sorry of this year, a chunky first close and then over the year, you're going to see other clauses for there, but I think we will reach the number as well I feel very.

Very comfortable with both on.

Lastly on the on the private equity side.

We do see a lot of divestments.

Coming in though we are.

Signing several exits for our previous vintages funds that helps of course, the DPI number of those funds go up and thus drive also.

A better fund raising in the near future.

So, yes, you're right, it's a little different than it was I think a previous.

And what I can say is I think looking back to our strategy of this capillarity in fund raising have offices all over the world and fund raising from several regions of the world.

We're managing them through competencies in a region like the U S is still underperforming with over performing in other regions and of course I have to over perform in two or three other regions, who competency the U S. Because the U S is a big region.

But as I said Asia, Middle East, including Israel, and Latam in general in Latam are very well surprise to be honest I think we are.

Fund raising two to three times more than I expected, even Israel two to three times more than I expected, even though the numbers from Israel. Some are smaller than the whole lockdown, but it's two to three times more than what I expected in the middle East I think everybody agrees with.

Everybody is fund raising there are a lot more to do you expect that rate because of the net inflows into that region and the sovereign funds and pension funds of the regions.

In Asia as well.

Interesting lastly, again, I said lastly, twice I'm, sorry, but lastly, really the Alaska here comes.

With this raise the geopolitical.

<unk> of the world.

Absolutely pushing companies to look into Latam.

From Asia from our middle East with different and better eyes.

On the strategic front and the investment front.

We're talking to a lot of our Asian clients and prospects that will buy our portfolio companies with an Asian company, a Chinese based company is <unk>.

About expanding.

Out of China, where should they go first given the geopolitical risks.

Going to the U S. While there's all these concerns should I go into into Europe .

Kind of same concerns on the geopolitical front.

Well I can continue to expand to Asia Southeast Asia, India.

When it comes Latin America, which is a very very much interesting.

Market and we are seeing this.

Very positive foreign direct investments into the region.

A lot of Chinese investors investments.

In the region and that is benefiting us from an LP limited partners' point of view and also from selling companies of strategic interest for our portfolio of companies point of view and Thats. Why we are also outperforming in Asia and.

And middle East.

The least net inflows, but Asia. In addition, it has this geopolitical issue.

That is favoring the parts of the world.

Vis vis the U S visa Europe .

In Brazil.

Doing diligence in our funds doing diligence in some of our portfolio companies.

Which is kind of different than several years ago, the volume increased tremendously.

Hopefully I answered your question.

Thank you Alex.

Had one follow up on the data.

What new product is menudo launch since the acquisition or is that a different way.

<unk> now sold to a new client segment I'm, just hoping for an update on the specific synergies of where moneta is leveraging patria and patches client distribution network.

Yes, thanks for your answer.

On the credit side I mentioned I think during the call I shouldn't I should have said more clearly I'm sorry.

We are doing.

Good job fundraising for a product called credit is $3 65.

The <unk> team.

Their credit expertise in this example that I'm using to the Brazilian.

Client needs.

So we identified several of our client needs in Brazil MIT.

Mid last year, we saw working with these clients and we already launched one product under this new.

<unk> seen that synergy synergy.

I think that's one of the main reasons that we did.

<unk> themselves with one EDA to use their credit intelligence.

I'll talk about our public equities in a minute, but the user president intelligence to do then.

Developed products for the Brazilian clients and.

We see that as a great potential.

Of course as you know in.

Second.

As we.

Raise our <unk>.

Private credit funds number two in Brazil, as well, we already had private credit number one.

In Patria.

The monitor credit team did.

Help us a lot and actually expand the addressable market of that products and.

And therefore expand the potential size of our private credit fund number two.

So and we are identifying a lot of needs from our Brazilian clients also on the public equity side and and we are doing the same we haven't launched any projects yet.

Using the public equities intelligence of Moneta, but definitely so it's on it's on.

On the oven there, we are making new solutions for our clients.

On the other side of the equation.

We are of course, raising money with Chile and institutional investors.

What we did.

First Greg is too.

Focus on our private equity funds seven and now infrastructure fund five which is already two products.

Because of the size of the importance of the flagship funds and because theyre already two products and we did the same in Colombia.

Uh huh.

Yes.

And interesting distribution capability in Colombia, we're doing the same focusing first on the two patras flagship products. So we have not designed any products yet to the Chilean institutions. The Columbia institutions. The main reason there is because we want us again to focus the fund raising of the two flagship funds, but we are.

Several new ideas.

We had the whole management team of <unk> in Colombia last week, we do our quarterly management committees in different offices last week was Bogota, we spent the whole week there and so many.

Scientists things going on we are talking to distributors.

On the real estate investment trusts fronts on infrastructure investment Trust front.

Very interesting also given the high interest rates in Colombia.

Credit related products. So we are waiting to finalize the fund raising for the two flagship funds in order to start introducing a new level of products to the Colombian clients and the Chilean clients.

Hope I answered your questions.

Thank you Alex.

Thank you. Thank you.

Okay.

Our next question comes from the line of brilliant Barron Jack of BBA. Your line is now open.

Good morning, everyone. Thanks for the opportunity My question here is regarding the capital market conditions in Brazil.

Since the beginning of the year.

In credits and equity as well so.

Will it be interesting to understand how this environment is impacting you.

In terms of opportunities for investments in our lower valuations are an extra care for currency invested names that are having maybe a harder time due to tighter credit markets here.

Okay.

Yes of course, hi, William Thanks for the question yes.

Yes.

Interesting.

In Brazil, I think the credit markets tightened more because of one specific case, that's frightening the market.

In general as you know.

The retailer named him a recurrence then silicon valley.

First first Republic et cetera, and I think one thing may be added with the other but I think.

If I would say.

Reason number one I think reason number one is more on the whole America on this issue.

Ben.

External issues.

For the local credit market as you probably know.

Well, let me let me.

The breakdown into different verticals here on starting with private equity our companies are not really leveraged.

We have today.

One three signs.

EBITDA of leverage without considering seller financing that we have this consolidation strategy and we do buy some companies was using seller financed with a big chunk of that seller finance is linked to S cruise and guarantees to contingencies that we pay out year number five number six of the claw.

Hosing. So of course, it is seller financing, we all that money to the sellers, but we have a very long term.

Tenure, and it's linked to all these things that I said contingencies that can potentially become liabilities guarantees for <unk> crews et cetera. So it's a very accretive way of leveraging to be honest.

<unk>.

The average cost that we have on our seller financing is inflation plus two in Brazil. So as you know inflation running around five ish.

Plus two is around seven so it's actually way below even the CDI rate in Brazil. So it's a low cost its a low leverage.

As a multiple of EBITDA and the cost of leverage for that seller financing is also low and of course the bank debt market turns, but we don't have a lot of bank debt in our balance sheet.

So yes of course in general the credit tightness affects us.

Because we do manage 42 companies in Brazil, and Latam, but nothing really in particular bit here or there.

Few rolling one of that one three times EV to EBITDA debt of.

Of course, you're going to see the credit tightness, but given the I think the solidity of the balance sheets of our companies and also because we have dry powder as well as most of our funds I think we're fine there.

I'm generalizing a force it might be one case, you won't get there, but in general we don't see a big issue.

Even though we feel the credit tightening on the infrastructure side itself project finance related deaths rate. So.

We don't do any.

Investments that we first commit ourselves and then we go out running running out and looking for that when we go into a concession bids.

We have everything already locked in right either.

All of the costs for constructing that specific asset and of course the.

All the debt already secured for that concession and then if we do win the bid.

Everything is already locked in and the debt is.

Yes.

Project Finance debt, which is then.

Definitely release with the with the assets and the projection of the cash flow projections of that asset in the same currency.

In addition.

We what we what we do we do raise money no inflation plus on our project finance debt.

In the end of the day is basically the spread and again the spread is locked in.

In day, one because we go into the skull sessions with everything already signed.

On your on your institution it out with a major partner of ours and several of these projects.

So that's on the infrastructure side, then if you go to the credit side.

Is the opposite right now we are benefiting from that credit tightening because youll know.

99% of the debt in the region is.

Variable.

We have a very very small portion of the debt in the region that is fixed rate.

So we do of course.

The interest rate hikes.

That's why today, our funds are performing so well as mentioned the mentioned during the call our credit funds.

Our high yield for example, laptop credit fund and the highest due to maturity today of 17%.

Stops.

So it's extremely interesting time for you to invest in the front of them.

Advice all of you here in the call to become so not one of our clients, but it's a.

A very interesting opportunity.

Very interesting.

Yields to maturity because of the right strategy of getting into this.

This tight.

Tightening phase two years ago, with a very short duration portfolio.

Taking on new debt.

The cost of debt.

Do not vary significantly in Brazil to be honest for good projects on the infrastructure side. So we'll continue managing to close on this consortium of construction companies and.

Financial partners for new concessions.

The spread for the projects.

We are looking into have not changed much from today versus six months a year ago.

Hope I answered your question.

That's very clear thank you.

Yes.

Thank you.

Our next question comes from the line of.

English Paula Edina Jpmorgan. Your line is now open.

Thank you Evan and morning, everyone I had a question regarding <unk>.

Net accrued performance.

Specifically on the <unk>.

You'll recognize.

Performance.

On the <unk> deal.

$10 million contribution could be.

16 performance and then to the earnings.

I had a month down of $44 million.

I'm curious to know how much of the 44 is linked to.

We love all of them.

They are a different there are different things first of all hydro mingles. How are you. Thanks for your question I'm, sorry, you start already answering your question.

Yes.

Decision.

Yes.

So we have a huge stock right inventory of love oil.

The fund five approximately $800 million to $1 billion of la volatile stock.

And that inventory the 40 something million that you mentioned and it's over $1 billion. So.

That's why it looks like a big absolute number.

But as a percentage of what's fund five have all stock in La volume is a small percentage for it's something else, but just.

1 billion, just so that I understand the math here is it like you'll have value added.

At $800 million more and then you marked down $800 million and then the performance.

Midland So yes.

Valued at 200.

Of the first quarter's earnings from that point onwards, you have to Mark the company using the price of the shares.

And after the after the IPO of the share prices of the shares traded down.

The trade.

Traded down.

In your example, there by 20% from 1 billion to $800 million.

Is $200 million less 20% of that which is our performance fees the $40 million. That's exactly right. The example that you're using and the numbers were more or less similar to what you just said so again after an IPO.

We don't Mark the company using our discounted cash flow model, we use the price of the stock in D. C. <unk> the volatility of the stock is pretty high.

The company posted incredible 2022 numbers over 80% increase in EBITDA 88 zero.

But nevertheless, the stock do trade up and down tremendously during the after the IPO actually after the IPO the stock went up 30%.

From the IPO price and then it went down 20% and it was up 15% one 7%, but when we just have to get the average over the last 10 days and that's the number that we use.

Sure.

Marketing purposes.

And Thats exactly what you said Domingos I hope I am Super clear and just so that we have an idea what else like given this is already collecting performance.

What other big assets.

In <unk> like in terms of notional.

Ballpark vacate headed from a volatile one.

Yes.

Well.

The fund if we go to the Mark of this fund is yielding a $2 2 billion to two times.

I see multiple of invested capital Mitch.

Net of fees.

It's a $1 $8 billion fund.

So.

One eight.

No that's two times to be easier here 363.

$3 six minus the $1 eight of course is one eight times times, 20%. So this is the this.

This is a.

Very very interesting fun for us.

In that front.

It's a large sizable scalable front funds.

Last quarter was the first company that actually is looking to.

Exits through this IPO.

In addition, we did take one of the company's self funds five public.

Early 'twenty, two which was smart fit I think Thats I think it was early 'twenty two if I'm not if I'm not wrong.

And.

Smartphones.

As a public company, but I can say because they are public information is performing extremely well.

Recovered completely from Covid, you probably know that during COVID-19, we have to close all the clubs, but we.

We're back to 2019 and better.

And so we started studying some of smart.

Shares through block trades.

We did sell a small amount in the first quarter around $15 million.

<unk> tested the market there and it didn't work very well.

No. So these two companies are listed and these two companies, where we do see follow on offerings in block trades that will contribute to the liquidity in the DPI distributable beating capital for fore sight.

Then we.

In.

Advanced negotiations to sell other assets of <unk> five.

Namely too.

One in the food distribution sector and the other one.

In the health care sector.

Five of the real successful funds for us and we're very happy with it and very happy with that.

Potential.

Performance fee generation of this one.

Yes, I am.

I'm, sorry, I didn't mean to.

To ask any kind of pipeline.

Net.

So you have so much deeper and broader.

Health care, Alright, and then and then something on.

The main assets.

Yes, we have in health care, we have two very.

Important assets in this fund I'm, sorry, Domingos, Athena, which is this integrated health plan with hospitals chain, but you know and we have also a company called <unk>, which is the market leader in optical surgical sensors, it's a network of several.

Surgical centers.

Around <unk>.

Brazil. So that's also very very important company for four five very profitable company. So one.

Business related company law voted that we mentioned that went public three healthcare wellness related companies smart fit that went public our network of gyms.

In a network of hospitals integrated with health plans and off to a network of surgery obstacle surgical centers and lap and then.

Last but not least because it's a very important portfolio companies of one five.

<unk>, which is a food.

Distribution company, so basically we buy.

Our products from the.

<unk> through the consumer driven companies and we sell to restaurants hotels and small retail shops. So these are the main assets of private equity fund five.

Perfect. Thank you so much guys.

No. It's a very again, it's a really really good fund that they are very excited all the companies are doing well to very well.

And we can go into also private equity fund six is a newer funds, but also the companies they're not doing well.

Well, so very well as well.

The two funds that we're focusing on divesting private equity fund five coming first because it's an older fund and that coming private equity funds six thank you.

Yeah.

Thank you.

Our next question comes from the line of Mike Brown of <unk>. Your line is now open.

Okay great.

Apologies. If this has already been asked Alex I joined the call little bit late but maybe just one for me on infrastructure. So.

Clearly that's been a very attractive asset class, particularly in a high inflation environment that we've all been building globally.

As inflationary pressure starts to wane in many markets and perhaps you actually enter into a rate cutting cycle. How do you anticipate LP interest for this asset class II to progression does it impact.

Impact your ability to deploy over time, just interested to hear your thoughts as we move throughout 'twenty three 'twenty four.

Yeah.

Yes, I think this is a this infrastructure fund that were mentioned in Norwalk again, sorry, Hi, Mike how are you and again start answering your question without saying, hi, I'm very very sorry about that.

Thank you.

[laughter].

As far as this this strategy.

Strategy.

The infrastructure development fund, it's a private equity approach to infrastructure. So we take on development risk on this.

On this fund so we do win a concession for example, we then construct the asset.

And then after this operation we sell it.

So it does have this private equity component and so that's why you actually does deliver higher returns versus a new fund.

So at this mixture of having the downside protection there with no contracted revenues because you're part of a concession and revenues are corrected by inflation.

That you can leverage very accretively, because the leverages of project finance.

Type leverage with the same kinds of.

Index that Youre correct in your revenues, so you really hedged there.

And in addition, you are taking that.

Compression.

Because you're constructing something so.

You have the whole ability to.

Construct something that generates a higher interest rate because of course the.

Challenges associated to constructing something and then the compression ratio because you're selling something that is operational and generates a very healthy cash flow because it is an operational infrastructure asset.

Think that characteristic that I just mentioned.

Of course interest rates do change appetite here or there, but we raise very large funds when interest rates were.

Lower our infrastructure.

<unk> four is a $2 billion fund that was raised.

Four years ago, when interest rates were really low and now we're having very good appetite for our infrastructure fund five where interest rates are.

A lot higher than they were four years ago because of I think of this characteristic.

So.

And given the addressable market of in Latam addressable market for this fund means snow concessions and privatizations in these sorts of projects that are going on in the region.

Really no no drop in the Ocean, just I think we see over $100 billion worth of concessions going on in the region over the next 18 to 24 months and we are running a $2 billion fund.

No it's really the.

Huge addressable market.

Their city of capital advantage, there not a lot of players actually we don't see no.

So pleased at all from the financial sponsor side play in this market. So we pretty much alone I think is.

It's a very well positioned.

Products that we have given the landscape the addressable opportunity landscape and given the competitive landscape.

Very very one of the very very few players with scale.

Can actually play this market. So I continue to be with the infrastructure seem very excited I think what we do.

No definitely can be exported to other places in Latin America, as we have done or even in the world.

Interesting because.

The suppliers of the products that we actually then construct the comfort of the <unk>.

With our global suppliers, so we're doing a decent organization plant in Chile.

And as soon as ready supplier of the technology that is a global supplier of that technology to other desalinization plants around the world now when we build a wind farm in Brazil.

The supplier of that.

That wind farm is the same as the <unk> of the world with Siemens of the world and that supply.

Equipments for wind farms all over the World is a very interesting because we are dealing with these global suppliers, but locally in Brazil, but there could be no wind farms anyplace in the world.

Again excited with our competence that we have built excited with the opportunities to continue fund raising for this fund.

Good appetite to very good appetite for.

Raising our infrastructure fund five three positive huh, Mike on the product.

Great. Thanks, Alex that sounds like a very robust outlook for our infrastructure here.

I'll leave it there. Thank you for answering my question.

Yeah.

Thank you thanks, Mike I agree.

And I just wanted to get back to.

One of the biggest points here just to be clear.

The $10 million of performance fees.

Accounted for in the first quarter.

Is.

The general partner stake of the performance fee rate the performance fee was $15 million in total.

35% of that was approximately $5 million it goes to the team.

And then 65%.

Goes to the general partner, which is the 10th right. So just for clarification purposes here.

So when we when we talk about the 10 it means the 65% already we already netted out.

The 35% of that goes to the team.

Okay, So just to be clear okay.

Alright.

Operator, any more questions. Please.

Thank you we do not have any other questions I would now like to turn the conference back to Alex Hi.

Oh for closing remarks.

Alright, well. Thank you very much for your patience and for the questions of the call on this call again very excited and positive about.

Our first quarter 2023 results.

We continue to be positive on the $150 million of FRE for the year.

And we continue to be positive also in January more performance fees than we did in the first quarter.

So thanks again for your patience thanks for your support.

See you guys assume firstly and thanks again <unk>.

Okay.

Thank you. This concludes today's conference call. Thank you for participating you may now disconnect.

Okay.

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Yes.

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Good day, and thank you for standing by and welcome to the Patria first quarter 2023 earnings call. At this time, all participants are in a listen only mode.

After the Speakers' presentation, there will be a question and answer session.

To ask a question during the session you will need to press star one one on your telephone.

We'll then hear an automated message advising you had just raised to withdraw your question. Please press star one again.

Please be advised that today's conference is being recorded.

I would now like to hand, the conference over to your speaker today, Josh would.

Head up shareholder relations. Please go ahead.

Okay.

Thank you good morning, everyone and welcome to <unk> first quarter 2023 earnings call joining today, our Chief Executive Officer, Alex <unk>, Our Chief Financial Officer, Ana Russo and our Chief Corporate Development Officer Margaret volatile this.

Morning, We issued a press release and earnings presentation detailing our results for the first quarter 2023, which you can find posted on our Investor Relations website at IR Dot Patria dotcom or on form 6K filed with the Securities and Exchange Commission.

Any forward looking statements made on this call are uncertain.

Ill guarantee future performance and undue reliance should not be placed on them.

<unk> assumes no obligation and does not intend to update any such forward looking statements.

These statements are based on current management expectations and involve inherent risks, including those discussed in the risk factors section of our latest form 20-F annual report.

Those statements on this call constitute an offer to sell or solicitation of an offer to purchase an interest in any patriot THAAD.

As a foreign private issuer Patria reports financial results using international financial reporting standards or <unk> as opposed to U S. 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 <unk>.

Reconciliations of these measures to the most comparable <unk> measures are included in our earnings presentation.

Patriot generated distributable earnings of $39 1 million or 27 per share from <unk> 23, we.

We declared a quarterly dividend of $22 six per share payable on June eight to shareholders of record as of May 17.

With that I'll now turn the call over to Alan.

Thank you Josh.

And good morning to everyone.

<unk> delivered solid results in the first quarter of 2023.

Delivering 27 cents of distributable earnings per share.

As we make progress in some key areas.

March towards our targets for the year.

Post tax distributable earnings were $39 million in the quarter.

Which included $31 million of fee related earnings.

And also $10 million of performance related earnings.

Fund raising in Q1 totaled $390 million.

<unk> by strong momentum in our Brazil focused products.

Including contributions from the Brazil feeder for our latest vintage flagship private equity fund.

Our credit 365 funds.

Which bring thrive at investments opportunities to individual Brazilian investors.

<unk> managed by VPI, our real estate platform in Brazil.

And importantly, we are making good progress towards significantly larger fund raising results in.

In the next few quarters.

Already in Q2.

We have secured approximately $370 million of additional inflows.

Including a follow on in our core infrastructure funds.

And additional inflows from DVI Brie.

Our year to date fund raising through April to more than 750 million adults.

That is capital primarily raised outside of our flagship funds.

Which we expect to contribute more significantly by the close of Q2.

Including the first closing for our next flagship infrastructure fund.

On the people front.

We also just announced Marcello feedback to serve as our head of real estate further strengthening the leadership structure across our asset class verticals.

Overall.

We're happy with the performance in the quarter and continue to feel good about our fund raising targets of 5% to $6 billion.

And fee related earnings guidance of $150 million for the full year 2023.

How is that we are able to maintain confidence in our trajectory in spite of volatile market conditions.

It's because of the resilience of our business model.

We are dependent on deposit based funding.

Much of the capital base is locked up for multiple years.

And even products that offer more frequent liquidity have shown considerable stickiness because of their solid track record.

We also run a life balance sheets.

Meaning we don't require significant capital at the firm level to deliver our earnings stream for shareholders.

And likewise don't have significant mark to market exposure that impacts our balance sheet assets.

While we of course arent immune to the macro environment.

We believe we have a model that allows us to deliver consistent.

And growing fee related earnings.

With the upside from performance fees as we deliver returns to our clients over the cycle.

On the macro front, our business continues to thrive despite fresh challenges.

West and Western Europe brought by the high profile bank failures and rescues.

One off factors investment tenants.

Is the low correlation between Latin America and other geographies.

The investors in the region have indeed began to price in near term interest rate cuts in major Latin American economies.

Cause of the sharp reduction in consumer inflation.

A consequence of preemptive monetary policies implemented by villages Central banks.

In that context.

It seems to be the best candidates and start the cycle of monetary easing.

Consumer inflation peaked in 2022.

The government budget has already turned into surplus.

And the country is posting significant progress in the institutional area.

In Brazil.

Consumer inflation peaked in April 2022.

They are now convincing signs of fiscal consolidation by the new administration.

Despite sometimes clumsy rhetoric, the executive and legislative branches have agreed on the basics of new fiscal framework to secure a breakeven.

Next year and primary surplus.

Afterwards.

Also there is political consensus surpassed the comprehensive tax reform.

Would be gradually enacted from 2024 onwards.

Constructive domestic development, a major Latin American economies are taking place and that favorable terms of trade and robust foreign direct investment flows.

Latin America is increasingly perceived as being in a sweet geopolitical spot.

And an attractive destination for Nir of readily shoring capex.

This outlook has led to currency appreciation against the U S dollar year to date, thus proving further evidence of the regions low correlation with the rest of the world.

Now turning to some details across our platform.

In private equity.

We generated a $10 million of performance related earnings in Q1 through an agreement with fund investors to crystallize a portion of the performance fees related to level.

A leading Latin American agricultural inputs retailer, which completed an IPO at NASDAQ in Q1.

This was utilization was made possible outside of our standard waterfall structure.

Which donna will cover in more detail.

The focus on divestments for five continues.

And we do expect to make meaningful progress this year.

In Q1.

We sold an initial small trench of our investment in smart fit the.

The leading fitness market company in Latin America by membership.

And we are in advanced stages of the exit process for multiple additional portfolio companies.

While the fund raising environment for private equity remains challenging.

We are advancing on our next closing for the next fund vintage.

And we believe divestments and return on capital in the older vintage funds will be a strong catalyst for that fund raising process.

Operating metrics, our underlying portfolio companies continue to look good with EBITDA growing at approximately 15% year over year based on available data for the quarter.

We did reflect a downward impact on our net accrued performance fees and fund five in Q1.

Mainly driven by the volatility in the share price of love more.

Immediately following its IPO, which is not uncommon in a destocking process.

We continue to feel great about the company, which recently reported impressive results for the most recent semester with adjusted EBITDA up 88% compared to the prior year.

We expect to see the valuation improve considerably based on fundamentals and similar industry comps.

Moreover, we feel great about the full portfolio and the value we can deliver to shareholders over the next few years.

In infrastructure.

We are approaching our first closing of the next generation flagship funds.

Which we expect to commence here in Q2.

Strong realizations from infrastructure funds three in 2022 were led by the sale of our data our data center platform and partial exit of Entergy as one of our toll roads in Brazil.

These and prior divestments.

Account for more than $2 billion in proceeds to limited partners.

And with a 13% net IRR in U S dollars.

We are now in the performance fee realization fees of the funds with a high performance portfolio still remaining.

These are likewise, great supporting factors for fundraising and should allow us to deliver a sizable first close on the new flagship funds.

Just after the end of the quarter, we also announced a follow on offer for our non listed infrastructure core vehicle, which we call Pierre.

The offering closed in the first week of April may.

Q2 fund raising result, but it attracted 215 million reais of new permanent capital.

So a great example of how we are expanding our product menu in this asset class to reach new client channels.

And facilitate the expansion of alternatives allocations for local investors in the region.

Our credit strategies continue to perform well.

The largest fund Latam high yield corporate credit.

Outperformed its benchmark by 180 basis points in the first quarter.

And 130 basis points over the past year.

As well as transaction diligence through existing pipeline.

This product will provide a new angle for Patriot and serve clients across the capital stack in the infrastructure.

In public equities.

Our Chilean equity strategies again were a highlight with the main fund pioneros outperforming by 180 basis points in Q1.

For Latam equities more generally we see an attractive set up looking forward in the second half of 2023 and 2024.

Valuations remain at their lowest point since 2008.

With a broad Latam index trading at approximately seven times earnings.

And we are also seeing a historically large gap between local interest rates and falling inflation.

This backdrop is generating some early traction in our investor base.

And we think this is constructed for both performance and flows in the coming quarters.

In real estate with further strengthened our leadership team with Marcello <unk>, Dr. Joining patria as a new partner to serve as our head of real estate across the region.

Marcello has built a successful 14 plus year track record managing over $4 billion.

A real estate focused AUM for large financial institutions.

And we are very excited for his arrival Patrick to lead our growth in this asset class.

The BVI our platform in Brazil is performing very well and continues to grow with nearly $50 million of inflows in Q1, mostly into an office focused REIT.

Just in early April and therefore, yet to reflect in our metrics.

<unk> has secured nearly $250 million of additional inflows by gaining market share with Brazilian institutional investors and consolidated management, both smaller or single asset Reits.

Marcello we will partner with VDI is superb leadership team to continue our momentum in Brazil, and also look broadly to how we can replicate that model in other regional markets.

Advisory and distribution is an area, we don't typically highlight those off.

But has quietly been growing nicely with <unk> up 13% over the last year on a $156 million of inflows in Q1.

Here, we are currently doing a few things.

Traditional wealth management services.

The funds for global alternatives, and even direct friends racing through global partnerships.

On the last point for example, we raised more than $50 million in Q1 for direct third parties, which does not reflect in our AUM.

But thus earn incremental placement fee revenue.

While this part of our business is still relatively small as an earnings driver. Its represents the strategic ambition to be a trusted knowledge partner and conduit for some investors to access alternatives more broadly across the globe.

That can take a number of different forms, which we are exploring and we believe there is potential as a meaningful vector of growth in the coming years.

So again overall I'm pleased with a solid quarter and we are on track for our 2023 targets of $5 6 billion of organic inflows.

Fee related earnings of $150 million.

We are making great progress behind the scenes.

Which we believe will drive results should be seen in the next few quarters.

Let me now turn things over to Anna to cover the numbers in a little more detail and then Michael will add some comments on our corporate development efforts.

Yeah.

Thank you Alex and good morning.

<unk> first quarter 2023 results were in line with our guidance of the last call regarding fee related earnings.

And we are able to generate performance related earnings, which added some upside to the distributable earnings ended it.

Our fee related earnings were $31 2 million in first quarter 'twenty three at similar levels to our first quarter 'twenty Q up $31 9 million.

This result is consistent with our comments that first quarter FRE was likely to be more in line with the 2022 run rate with growth coming in the later quarters of the year.

So I don't see residents were $57 1 million in.

In Q1 'twenty three.

4% from $55 million in Q1 'twenty two.

The positive impact of capital deployment in our drawdown funds and the addition of CBI.

This was partially offset by the impact of outflows in open end credit and public equity fund and the contractual an opposite terms of unnoticed vintage infrastructure fund.

Total operating expenses for first quarter 'twenty, three we're up 12% from first quarter 'twenty two driven by expenses related to recent acquisitions and also increases in compensation and certain costs driven by inflation and the expansion of our platform.

This resulted in a consistently pretty level and therefore, a margin of 55% in the first quarter 2023.

The margin is down from 58% in first quarter 'twenty, two but its still in line with our guidance range.

Our overall FRE guidance for the year implies that the margin will likely rise slightly in later quarters.

Performance related earnings for first quarter, 'twenty three were $10 million.

And were generated from private equity franchise.

Performance fees were crystallized in conjunction with the IPO of level.

For this specific case, the limited apartment of the fund and pace I read that as a consequence of successful completion of the transaction part of performance fee was crystallized through level those shares to pack.

Given the opportunities we are pleased to be able to deliver this value to shareholders here and in the first quarter.

Note that we have adjusted our presentation of net accrued performance fees beginning in first quarter 'twenty three to reflect the balanced drop off related corporate taxes.

It was shown net in all previous reporting.

This change makes sense in order to fully align the performance related earnings in our P&L with this operating metric, which represents the potential inventory for that line item and exclude any impact which will be reflected below in the corporate tax line item of the P&L.

The net accrued performance fee balance stands at $437 million as of March 31, 2023 down from $478 million at December 31, 22.

Driven primarily by quarter end share price of public holdings in private equity fund five as Alex noted.

This continues to equate to approximately $3 per share of value that can accrue to our shareholders as this portfolio.

Okay.

Since derivative earnings of $39 $1 million in first quarter 'twenty three is up from 35 million in the first quarter 'twenty.

Primarily driven by the benefit of performance related earnings in the current quarter.

Our deeper share of 27 <unk>.

We will generate a dividend to shareholders of $22 six.

Which translates to roughly 6% yield on annualized basis at recent share price lift.

Total AUM was 27 3 billion.

The end of Q1, roughly flat for both the quarter and trailing years with inflows from fund raising and acquisitions offset by the impact of the market environment on portfolio company valuation as well as the outflow pressure we have seen in some of our open end products.

Earnings of $19 9 billion is up 4% for the quarter and up 5% from one year ago, consistent with our concrete and fee revenues.

Remember that for our fee, earning AUM valuation impact is more muted and limited to funds that charge management fee on it.

As opposed to cost baked in.

In fact, the valuation was actually a positive driver in the first quarter 'twenty three and prior year bridge.

This reinforces the relative stability of our management fee stream when the public markets are volatile.

As Alex noted we are on track for our 2023 fee related earnings guidance of $150 million at a margin in the upper 50% range. We believe this growth will be concentrated in the back half of the year.

Ill now turn the call tomorrow for a few words.

Thank you Ron and Hello, everyone.

With my new role at using time more fully on patch with corporate development efforts I can reiterate that we remain highly focused and active on this vector of growth.

Our goals through M&A are clear.

Expanding our product offering.

Extending our geographic expertise and enhancing our distribution channels and capabilities.

The four acquisitions with close in our first two years since IPO.

If one or more of those games.

Moneta broad credit and public equities verticals as.

As well as extensive expertise and client relationships in Chile.

<unk> and <unk>, both broth talent and track record to expand our private equity vertical into growth equity and venture capital and.

In BPI.

Her expertise in real estate, along with a significant platform of <unk>.

Permanent capital AUM.

Looking forward with.

We have conveyed our interest in three key priorities one.

Geographic expansion into Mexico, where we see significant opportunities.

Beaming from near shoring trend in coming years.

Sue.

Continued expansion of our real estate business, both in <unk> and beyond Brazil, which we believe is a steel subscale relative to its potential in the region.

And three expanding our abilities to serve as a conduit in the region for investing in global alternatives.

We are actively exploring opportunities in these areas and we will continue to keep you posted on our progress let me now turn it back to Alex to close.

Thanks, Mark one of them.

This earnings call marks the first step in a new calendar year.

<unk> starts 2023 with clear ambitions for growth as.

As we continue our journey as the gateway for alternative investments in Latin America.

We continue to operate in a challenging environment.

And we must continue to deliver consistent attractive returns.

And second to none service to our clients.

As we scale and expand the investment platform.

We have assembled a world class team across asset classes and functional areas.

To meet those demands and.

And I believe we are very well positioned to succeed.

We shared our goals over the next few years with you at our Investor Day late last year.

So the stage is set.

Now, it's our job to execute.

And assuming we do.

I believe there is no question that battery and looks very attractive at today's valuation.

I am proud and privileged.

To lead this group.

And to serve our clients and our shareholders.

We're now happy to take your questions. Thank you.

As a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw your question. Please press star one again.

Please stand by while we compile the Q&A roster.

Our first question comes from the line of Kian on Nebraska from Goldman Sachs. Your line is now open.

Hi, good morning, Alex.

Josh. Thank you for the call I was taking my questions I guess my question.

Just to follow up a little bit more on the <unk>.

<unk> outlook for the year I know you said you're on track in your margins can improve a bit from here.

But just to think about how that will evolve frankly with the $31 million you probably have to get maybe about $40 million in the second half of the year to deliver that $150 million.

Target.

With that she has been increased.

Increased fee, earning AUM fee revenues either driver there do you see.

Improvements here on the margins right at margins at the low end of the guidance.

If you can just help us think about sort of those dynamics from here on out to be able to maybe $150 million.

And then the second question just on the performance related earnings.

Performance in the quarter is there room to realize more performance fees. This year, given the realization of a volatile and any color you can give on the outlook for the performance fees.

Thank you.

Hi, Tito this is Alex thanks for your questions and going back to the first question here yes.

Yes.

Exactly as you said, we see both.

Increases during the year.

As we.

Did raise.

First close of our flagship private equity fund late last year.

Investing dot funding that we charge fees on Uninvested.

I'm committed on that fund.

Also for our flagship infrastructure fund.

As we mentioned we have targets and have a first close in this quarter and second quarter of 2023, and then we.

Start investing that fund and we also charge on invested capital there.

So these are these two big flagship funds private equity funds seven that I just mentioned.

The first close of infrastructure funds.

<unk> five coming in the second quarter. It gives us a lot of dry powder or more committed capital but not.

Vested and as we invest along the year that should drive revenues up.

Those revenues come with basically no cost right because we already have the teams in place.

We manage and invest the two funds that I just mentioned in addition.

Our Brazil driven strategies.

Try to.

Send a message over the call to Youre doing extremely well and managing to Reed's.

Our global perform in Latin America as previously also stated in other in other calls.

Earnings calls like this one.

We're also we're performing in the Middle East, where we're performing in Asia compensating a little bit still the underperformance in the U S on the fund raising side.

So in general when we add up all the numbers, we still feel comfortable that we will do.

And reached the $5 to $6 billion of organic fund raising for 2023 and the $150 million.

Fee related earnings for 2023. In addition, we also see the.

Business scaling a little bit.

As you also mentioned cheaper because revenue is going up.

Expenses more or less under control so the margins should notch up a little bit as we move through 2023.

Reaching than the numbers that you just mentioned.

On a quarter by quarter basis to the whole summing up over $150 million of that probably by the end of the year in total for 2023.

On the performance fee side, Yes, I think we.

Getting more and more comfortable that side because of the big divestments that we have.

For our infrastructure fund III.

During the year of 2022.

As we conveyed in our new followed very closely.

We did set back to investors for over.

One $4 billion.

Yes.

Throughout last year for that specific funds totaling $2 billion in total with previous divestments for that infrastructure Fund III.

That actually generated a small amount of carry for 2022 of approximately $19 million of $18 nine but $119 million for 2022.

It did put us in the.

Catch up or.

Bracket, there so everything that we sell.

From that fund, 100% will come with performance fees so lazy.

Macro the possibility of us having performance fees from infrastructure funds III this year and the performance fees that we had in the first quarter of 2023 came from private equity funds five investments in the quarter, our agricultural inputs distribution company not from.

Infrastructure from three that I just mentioned.

So.

I'm happy there on the performance fee side.

I think we can do well on that side.

Overall.

On a three year basis, and as mentioned in our backs. The late last year of $180 million for the general partner I think we are in targets of course performances as Youll know that can slip a quarter here quarter there.

You are there, but I am comfortable.

Getting more comfortable there with that number.

Why is that last point here.

Just on the Sketchup.

Fees brackets of infrastructure for <unk>.

Another $100 million performance fees.

Already generated <unk> 19 last year with this 10.

That's 29 with this another 100 139, let's say.

<unk> guidance of 180.

For the whole for years.

$2023 24 to 35 so.

It gets me to be.

In the comfort.

Level here on that front.

So that's why I come back and say look at look into 'twenty.

<unk> 2023.

I'm comfortable with the $150 million FRE.

Also I think generally poor.

As we move into the year.

I hope I answered your questions.

Yeah, It was pretty clear Alex Thank you very much.

Thank you.

Alright, one moment please for the next question.

Okay.

Our next question comes from the line of Craig Siegenthaler.

<unk> of America. Your line is now open.

Okay.

Good morning, Alex Mark I hope, you're both doing well and good to hear that you're still on track.

With your targets against a tough backdrop.

With the U S Alt managers.

It's more difficult backdrop, many of the first closes have come and find maybe 50% of the target and that's pretty short period of time.

This can include rate is from long term client so it might be a little easier, but the second through final close as had been a lot tougher both in terms of time.

And Si so.

How should I think about this sort of risks when when I'm modeling both private equity seven nm provides.

Hi, Craig Nice talking to you as well hope all is well with you and your family.

Yes.

Youre right Youre right on the Dot there I think.

The way that we will see our flagship fund a fund raise these exactly as you said, we have a big force close Big I mean 40, 50% of the targets of the fund.

And Dan comes in the second and third for clothes.

I think contrary to prior Fundraisings, a second third close come in in smaller amounts of more scattered that one chunky.

One chunky second close.

Douglas started more of the norm.

Going back several.

Several vintages ago.

Yes.

We're seeing that on a private equity fund seven so we had a big chunky first close and then we have several other smaller ones and we're closing on that fund.

Every two weeks every three weeks in.

As we know.

Group a bunch of investors together, we have another close in addition to that Greg what I can say also from private equity funds seven as I mentioned as we are also raising money from other locations of the world over performing Latam Middle East <unk>.

Including Israel Asia.

Underperforming U S.

We also having specific vehicles for those regions. So we have.

A group of Brazilian vessels coming in through the Brazilian Cedar and a group of.

Then.

Colombian vessels coming from a Colombian feeder and et cetera. So that's why it's also a little bit more patchy.

So having these smaller clauses, but in the end I feel comfortable.

What I see now in my in my.

Pipeline that will continue to fund raise.

Inefficiently.

<unk>.

Private equity fund seven.

And.

Then comes from infrastructure funds from three now infrastructure Fund III.

First close I think is.

Is even stronger than I was expected and I think also has to do a lot with.

The divestments that I just mentioned sorry.

Sorry infrastructure from five has a lot to do with the divestments that I just mentioned for infrastructure fund III and that Big DPI number of course also drives our fundraising.

So so.

So you will probably see in the first quarter in the second quarter I'm, sorry of this year, a chunky first close.

Over the year.

See other clauses for there, but I think we will reach the number as well I feel very.

Very comfortable with both on the lastly on the on the private equity side.

We do see a lot of divestments coming in though we are signing several.

For our previous vintages funds that helps of course, the DPI number of those funds go up and thus drive also.

A better fund raising in the near future.

Yes, you're right, it's a little different than it was I think previous.

Vintages ago.

What I can say is I think looking back to our strategy of capillarity in fund raising have offices all over the world and fund raising from several regions of the world.

We're managing them to compensate.

<unk> like the U S is still underperforming with over performing in other regions and of course I have to over perform in two or three other regions, who competency the U S. Because the U S is a big region.

But as I said Asia, Middle East, including Israel, and Latam in general in Latam are very well surprise to be honest I think we are fun.

Fund raising two to three times more than I expected, even Israel two to three times more than I expected, even though the numbers from Israel are smaller than the whole lockdown, but it's two to three times more than what I expected in the middle East I think everybody agrees.

Everybody is fund raising there are a lot more than we expected because of the net inflows into that region and the sovereign funds and pension funds of that region.

In Asia as well.

Interesting lastly, again, I said lastly, twice I'm, sorry, but lastly, really lastly here it comes.

With this raise the geopolitical.

<unk> of the world are definitely pushing companies to look into Latam.

From Asia from our middle East with different and better eyes.

On the strategic front and the investment front.

So talking to a lot of our Asian clients and prospects that will buy our portfolio companies as they look with an Asian company, a Chinese based company is thinking about expanding.

Out of China, where should they go first given the geopolitical risks.

Going to the U S. While there's all these concerns do I go into into Europe .

Kind of same concerns on the geopolitical front.

I can continue to expand to Asia Southeast Asia, India, and then comes Latin America, which is a very very much interesting.

Market and we are seeing this.

Positive foreign direct investments into the region a lot of Chinese invest investments.

In the region and that is benefiting us from an LP limited partners' point of view and also from selling companies of strategic interest for our portfolio companies point of view and Thats. Why we are also outperforming in Asia and.

And middle East.

The least net inflows, but Asia. In addition, it has this geopolitical issue.

That is favoring the parts of the world.

Vis vis the U S visa Europe .

It's clear that we had several Chinese delegations.

In Brazil.

Doing diligence in our funds doing diligence in some of our portfolio companies.

Which is kind of different than several years ago, the volume increased tremendously.

Hope I answered your question.

Thank you Alex.

One follow up on the data.

What new product is moneta launch since the acquisition or is that a different way.

Our existing funds that they had before the merger.

<unk> now sold to a new client segment I'm, just hoping for an update on the specific synergies of where moneta is leveraging patria and patches client distribution network.

Yes, thanks for your answer.

On the credit side I mentioned I think during the call I shouldn't I should have said more clearly I'm sorry.

We are doing.

Good job fundraising for a product called credits 365.

365 means that this fund has a one year liquidity gates, that's why the C 65 attached to his name.

And that was a no more need the product designs product by one of the other credit team to Brazilian investors.

So last year I think we had a lot of.

The monitor team.

Understanding the Brazilian market and trying to tailor made.

Their credit expertise in this example that I'm using to the Brazilian.

Client needs.

So we identified several of our client needs in Brazil mid last year, we saw working with these clients and we already launched <unk> products under this new.

Seeing that synergy synergy.

The team that I just mentioned.

And that's I think that's one of the main reasons that we did associated themselves with one EDA to use their credit intelligence.

I'll talk about our public equities and I missed it but the user credit and intelligence to do then.

Developed products for the Brazilian clients.

We see that as a great potential of course as you know.

In Brazil, given the high interest rates credit is a sought after product right. So I think thats why the credit products is also doing very well, but of course, you have the whole more near the intelligence behind it.

Second.

As we.

Raise our.

Private credit fund number two in Brazil, as well, we already have private credit number one.

In Patria.

The money that credit team.

Help us a lot and actually expand the addressable market of that products and therefore expand the potential size of our private credit fund number two.

And we are identifying a lot of needs from our Brazilian clients also on the public equity side.

And we are doing the same we haven't launched any projects yet.

Using the public equities intelligence on Juanita, but definitely so it's on it's on the.

On the oven there we're baking in new solutions for our clients.

On the other side of the equation.

We are of course, raising money with Chile and institutional investors.

And what we did.

First Greg is too.

Focus on our private equity funds seven and now infrastructure fund five which is already two products. So.

So look let's focus on these two products and use them on the other distribution.

And channel to raise money for our two flagship funds before actually introducing other products through that channel.

So because of the size of the importance of the flagship funds and because they are already two products and we did the same in Colombia.

Has.

An interesting distribution capability in Colombia, we're doing the same focusing first on the two.

<unk> flagship product. So we have not designed any products yet to the Chilean institutions of the Colombian institutions. The main reason there is because we wanted again to focus the fund raising of the two flagship funds, but we are cooking here.

Several new ideas.

We had the whole management team of <unk> in Colombia last week, we do our quarterly management committees in different offices last week was Bogota, we spent the whole week, there and there's so many.

<unk> things going on we are talking to distributors.

On the real estate investment trusts fronts on the infrastructure investment Trust funds.

Very interesting also given the high interest rates in Colombia.

Credit related products. So we are waiting to finalize the fund raising for the two flagship funds in order to start introducing a new level of products through the Colombian clients and the Chilean clients.

I answered your questions.

Thank you Alex.

Thank you. Thank you.

Okay.

Our next question comes from the line of 1 billion barrel Jack It's how BBA. Your line is now open.

Good morning, everyone. Thanks for the opportunity My question here is regarding the capital market conditions in Brazil.

Since the beginning of the year already touched in.

In credit and equity as well so.

Be interested to understand how this environment is impacting you.

In terms of opportunities for investments at a lower valuations are an extra care part.

To invest of names that are having maybe a harder time due to tighter credit markets here.

Yes.

Yes of course, hi, William Thanks for the question yes.

Yes.

Interesting.

In Brazil, I think the credit markets tightened more because of one specific case, that's right in the market.

In general as you know.

The retailer named him a recurrence then silicon valley.

First first Republic et cetera, and I think one thing may be added with the other but I think.

If I would say.

Reason number one I think reason number one is more of the whole America on this issue.

Then no.

External issues.

For the local credit market as you probably know.

Well, let me let me.

The breakdown into different verticals here on starting with private equity our companies are not really leveraged.

We have today.

113 signs.

EBITDA of leverage without considering seller financing that we have this consolidation strategy and we do buy some companies was using cell is financed with a big chunk of that seller finance is linked to <unk> and guarantees to contingencies that we pay out year number five number six of the claw.

<unk>. So of course, it is seller financing, we all that money to the sellers, but we have a very long term.

Tenure, and it's linked to all of these things that I said contingencies that potentially become liabilities no guarantees for our schools et cetera. So it's a very accretive way of leveraging to be honest.

<unk>.

The average cost that we have on our seller financing is inflation plus two in Brazil. So as you know inflation running around five ish.

<unk> two is around seven so it's actually way below even the CDI rate in Brazil. So it's a low cost of living it's a low leverage.

As a multiple of EBITDA and the cost of leverage for that seller financing is also low and of course the bank debt market turns, but we don't have a lot of bank debt in our balance sheet.

So yes of course in general the credit tightening as it affects us.

Because we do manage 42 companies in Brazil, and Latam, but nothing really in particular bit here or there.

Few rolling one of that one three times EBITDA debt of course, you're going to see the credit tightness, but given the I think the solidity of the balance sheets of our companies and also because we have dry powder as well as most of our funds I think we're fine there.

I'm generalizing of course, it might be one case, you won't get there, but in general we don't see a big issue.

Even though we feel the credit tightening on the infrastructure side, It's so project finance related death rates. So we.

We don't do any.

Investments that we first commit ourselves and then we go out running running out and looking for that when we go into a concession bids.

We have everything already locked in right either.

All the costs for constructing that specific asset and of course the.

All the debt already secured for that concession and then if we do win the bid.

Everything is already locked in and the debt is.

Project Finance debt, which is then.

Definitely relates with the with the assets and the projection of cash flow projections of that asset.

The same currency.

In addition.

We what we what we do we do raise money no inflation plus on our project finance debt.

In infrastructure why because our revenues are adjusted corrected by inflation.

At the end of the day is basically the spread and again the spread is locked in.

In day, one because we go into the skull sessions with everything already signed.

On your on your institution is always a major partner of ours and several of these projects.

So.

So that's on the infrastructure side.

Then if we can.

Go to the credit side.

It's the opposite right now we are benefiting from that credit technique, because as you'll know.

99% of the debt in the region is.

Variable.

We have a very very small portion of the region that is fixed rate.

So we do of course.

We did came in with the right strategy, a very short duration before.

Interest rate hikes, and that's why today, our funds are performing so well as mentioned the mentioned during the call our credit funds.

Our high yield for example.

Laptop credit funds have been used to maturity today of 17%.

In U S dollars.

So it's extremely interesting time for you to invest in the front of it.

Invite all of you here in the call to become so not one of our clients.

It's a very interesting opportunity.

Very interesting.

Yields to maturity because of the right strategy of getting into this.

No.

The phase two years ago, with a very short duration portfolio.

So again, we feel we see it but it's not really affecting us.

Taking on new debt.

The cost of debt.

Do not vary significantly in Brazil to be honest for good projects on the infrastructure side. So we will continue managing to close on these consortiums.

Construction companies in.

Financial partners for new concessions.

The spread for the projects.

We are looking into have not changed much from today versus six months a year ago.

Hope I answered your question.

That's very clear thank you.

Yes.

Thank you.

Our next question comes from the line of.

Domingos <unk> Jpmorgan. Your line is now open.

Thank you good morning, everyone I have a question regarding <unk>.

The net accrued performance.

Specifically on <unk>.

You recognized.

Performance.

On the <unk> deal.

Which was.

10 million contribution for the.

Six.

For flawless and then to the earnings.

You had a month down to $44 million.

I'm curious to know how much of the 44.

To elaborate.

The level of deal.

They are a different there are different things first of all hi, Domingos. How are you. Thanks for your question I'm, sorry, you start already answering your question.

That's good.

Sure.

Yes.

So we have a huge stock right inventory of oil.

The fund five approximately $800 million to $1 billion worth of stock.

And that inventory the 40 something million that you mentioned and it's over a billion dollar or so.

That's why it looks like a big absolute number.

As a percentage of what <unk> has.

Stocking law Boto is a small percentage for it's something else, but just 1 billion just so that I understand the math here is it like you'll have value added.

At $800 million more and then you marked down and $800 million than the performance, 20% on that ballpark 800.

Mainland so yes.

I'm sorry, Sean.

$200 million.

<unk> hundred.

20% to $44 million adjustment.

Yes, yes, that's exactly yes, let's say $1 billion and the numbers are not really different from that to be honest. Coincidentally, we have now a billion dollars worth of stock fund five had a billion dollars worth of stock of level and then when.

When we IPO of the company as of the IPO when we did the IPO in the end of the quarter.

Of the first quarter bookings from that point onwards, you have to Mark the company using the price of the shares.

And after the after the IPO of the share prices of the shares traded down.

And traded down.

In your example, there by 20% from 1 billion to $800 million.

Is $200 million less 20% of that which is our performance fees the $40 million. That's exactly right. The example that you're using and the numbers were more or less similar to what you just said so again after an IPO.

We don't Mark the company using our discounted cash flow model, we use the price of the stock.

<unk> the volatility of the stock is pretty high.

The company posted incredible 2022 numbers over 80% increase in EBITDA is zero.

But nevertheless, the stock to trade up and down tremendously during the after the IPO actually after the IPO of the stock went up 30%.

From the IPO price and then it went down 20% and it was up 15% went down 10%, but we just have to get the average over the last 10 days and that's the number that we use.

Sure.

Marketing purposes.

That's exactly what you said Domingos I hope I am Super clear and just so that we have an idea what else like given this is already collecting performance.

What other big assets.

In <unk> like in terms of an auction.

Ballpark vacate tenant from a volatile one.

Yes.

Well.

The fund if we go to the Mark of this fund is yielding a $2 2 billion to two times.

<unk> multiple of invested capital Mitch.

Net of fees.

It's a $1 $8 billion fund.

So.

One eight.

No that's two times to be easy here 363.

$3 six minus the $1 eight of course is one eight times times, 20%. So this is the this.

This is <unk>.

It's a very very interesting fun for us.

In that front.

It's a large sizable scalable front funds.

And last quarter was the first company that actually is looking to exit through this IPO.

In addition, we did take one of the companies of fund five public.

Early 'twenty, two which was smart fit I think Thats I think it was early 'twenty two if I'm not if I'm not wrong.

<unk>.

Smart fit.

As a public company, but I can say because they are public information is performing extremely well recovered.

Recovered completely from Covid, you, probably know that drink coffee that we had to close all the clubs, but we're back to 2019 and better.

So we started selling some of our smart <unk>.

Shares through block trades.

We did sell a small amount.

In the first quarter of $15 million.

Tested the market there and it didn't work very well.

So no. So these two companies are listed and these two companies, where we do see a follow on offerings in block trades that will contribute to the liquidity in the DPI distributable paid in capital for Sun slides.

Then we are in.

Advanced negotiations to sell other assets of <unk> five.

Namely too.

<unk> in the food distribution sector.

The other one.

In the health care sector.

So <unk> a real successful funds for us and.

And we're very happy with it and very happy with the potential.

Performance fee generation of this one.

No.

Sorry.

I'm going to ask any kind of pipeline.

Let me just put one five so you have a much deeper and broader.

Health care and Alright, and then and then something and so those are the main assets.

Yes, we have in health care, we have two very.

Important assets in this fund I'm, sorry, Domingos, Athena, which is integrated health plan with hospitals chain, but you know and we have also a company called <unk>, which is the market leader in.

Obstacle surgical sensor is a network of several.

Surgical centers.

<unk>.

Brazil. So that's also very very important company for four five very profitable company. So one agri business related company law voted that we mentioned that went public three healthcare wellness related companies smart fit that went public our network of gyms.

Dana network of hospitals integrated with health plans, and obviously a network of surgery optical surgical centers and lap and then.

Last but not least because it's a very important portfolio companies of one five.

<unk>, which is a food distribution.

Distribution company so.

Basically we buy.

Our products from the <unk>.

Main through the consumer driven companies and we sell to restaurants hotels and small retail shops. So these are the main assets of private equity funds.

Perfect. Thank you so much guys.

No. It's a very again, it's a really really good fun and Theyre very excited all the companies doing well to very well.

And we can go into also private equity fund six is a newer funds, but also the companies they're not doing well.

We're also very well as well.

The two funds that we're focusing on divesting private equity fund five coming first because it's an older fund and that coming private equity fund six thank you.

Thank you.

Our next question comes from the line of Mike Brown of <unk>. Your line is now open.

Okay great.

Apologies. If this has already been asked Alex I joined the call little bit late but maybe just one for me on infrastructure. So.

Clearly that's been a very attractive asset class, particularly in a high inflation environment that we've all been living in globally.

As an inflationary pressure starts to wane in many markets and perhaps you actually enter into a rate cutting cycle. How do you anticipate LP interest for this asset class to show progression does it impact.

The impact your ability to deploy over time interested to hear your thoughts as we move throughout 'twenty three 'twenty four.

Yes, I think this is a this infrastructure fund that were mentioned in Norwalk again, sorry, Hi, Mike. How are you how are you and again start answering your question without saying, hi, I'm very very sorry about that.

Thank you.

[laughter].

As far as this this strat.

Strategy.

The infrastructure development funds, it's a private equity approach to infrastructure. So we take on development risk on this.

This fund so we do win a concession for example, we then construct the asset.

And then after this operation we sell it.

So it does have this private equity component and so that's why you actually does deliver higher returns versus a new fund.

So at this mixture of having the downside protection with no contracted revenues because you're part of a concession and revenues are corrected by inflation.

That you can leverage very accretively, because the leverages of project finance.

Type leverage with the same kinds of.

Index that you are correct in your revenue so you really hedged there.

And in addition, you are taking that.

Compression.

Benefits, because you're constructing something so.

You have the whole ability to.

Construct something that generates a higher interest rate because of course.

The challenges associated with constructing something and then the compression ratio because you're selling something that is operational and generates this very healthy cash flow because it's an operational infrastructure assets I think that characteristic that I just mentioned.

Of course interest rates do change appetite here or there, but we raise very large funds when interest rates were.

Lower.

Our infrastructure.

For the $2 billion fund that was raised.

Four years ago, when interest rates were really low and now we're having very good appetite for all our infrastructure fund five where interest rates are.

A lot higher than they were four years ago because of I think of this characteristic.

So.

And given that the addressable market of.

In Latam addressable market for this fund means snow concessions and privatizations.

These sorts of projects that are going on in the region.

Really no no drop in the Ocean, just I think we see over $100 billion worth of concessions going on in the region over the next 18 to 24 months and we're running at $2 billion fund so.

No it's really no.

Huge addressable market.

City of capital advantage, there not a lot of players actually we don't see.

No plans at all from the financial sponsor side.

This market so we pretty much alone I think so.

We're very well positioned.

Products that we have given the landscape the addressable opportunity landscape and given the competitive landscape.

Very very one of the very very few players with scale that can.

Actually play this market so I continue to be.

With the infrastructure seem very excited I think what we do know is no definitely can be exported to other places in Latin America, as we have done or even in the world.

Kristine because.

The suppliers of the products that we actually then constructed.

<unk> is our global suppliers, so we're doing a decent organization plants in Chile.

And as soon as really supplier of that technology that is a global supplier of that technology to other desalinization plants around the world and when we build a wind farm in Brazil.

The supplier of that.

That wind farm is the same as the Ges of the world with Siemens of the world and that supply.

Equipments for wind farms all over the World is a very interesting because we are dealing with these global suppliers, but locally in Brazil, but there could be no wind farms anyplace in the world. So again excited with our competence that we have built excited with the opportunities to continue fund raising for this fund.

Good appetite to very good appetite for raising our infrastructure fund five three positive Mike on the product.

Great. Thanks, Alex it sounds like a very robust outlook for infrastructure here.

I'll leave it there I think I've answered my question.

No. Thank you thanks, Mike I agree.

And I just wanted to get back to.

One of those domingos points here just to be clear.

The $10 million of performance fees.

<unk> accounted for in the first quarter.

Is.

The general partner stake of the performance fee rate the performance fee was $15 million in total.

35% of that was approximately $5 million it goes to the team.

And then 65%.

Goes to the general partner, which is the 10th right. So just for clarification purposes here.

So when we when we talk about the 10th it means the 65% already we already netted out.

35% of that goes to the team.

Okay, So just to be clear.

Alright.

Operator, any more questions. Please.

Thank you and we do not have any other questions I would now like to turn the conference back to Alex.

<unk> for closing remarks.

Alright, well. Thank you very much for your patience and for the questions on the call on this call again very excited and positive about.

Our first quarter 2023 results.

We continue to be positive on the $150 million of FRE for the year.

And we continue to be positive also in January more performance fees than we did in the first quarter.

So thanks again for your patience thanks for your support.

See you guys, so firstly and thanks again <unk>.

Okay.

Thank you. This concludes today's conference call. Thank you for participating you may now disconnect.