Q3 2024 Patria Investments Ltd Earnings Call
Welcome to the Patria third quarter 'twenty 'twenty four 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 the session you will need to press star one on your telephone you will then.
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Speaker Change: Please be advised that today's conference is being recorded I would now like to hand, the conference over to your first speaker for today, Rob Lee head of shareholder Relations. Please go ahead.
Yeah.
Okay.
Rob Lee: Thank you good morning, everyone and welcome to Procter your third quarter 2024 earnings call.
Speaking today on the call are our Chief Executive Officer, Alex side, and our Chief Financial Officer.
So that our chief economist.
Rob Lee: As Fernando Lopez for the Q&A session.
This morning, we issued a press release and earnings presentation detailing our results for the quarter.
Speaker Change: Which you can find posted on the Investor Relations section of our website or on our form 6K, Bob 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 and do not guarantee future performance and undue reliance should not be placed on them.
Speaker Change: Patria assumes no obligation and does not intend to update any such forward looking statements.
Speaker Change: Such statements are based on current management expectations and involve risks, including those discussed in the risk factors section of our latest form 20-F annual report.
Also note that no statements on this call constitute an offer to sell or a siliceous patients of an offer to purchase an interest in any patria front.
Speaker Change: As a foreign private issuer Patria reports financial results using international financial reporting standards or <unk> as opposed to U S. GAAP.
Speaker Change: Additionally, we would like to remind everyone that we will refer to certain non ifr S measures, which we believe are relevant in assessing the financial performance of the business.
Speaker Change: Which should not be considered in isolation from.
Speaker Change: Or as a substitute for <unk>.
Speaker Change: Measures prepared in accordance with Ifr Rs.
Speaker Change: Reconciliations of these measures to be most comparable <unk> measures are included in our earnings presentation.
Speaker Change: Now I will turn the call over to al.
al: Thank you, Rob and good morning, everyone.
al: The third quarter of 2024 was an exciting quarter for Patria.
Speaker Change: As robust organic fundraising.
Speaker Change: Over $2 billion in the quarter.
Speaker Change: And more than $4 $2 billion year to date.
Speaker Change: Through the end of the third quarter.
Speaker Change: Put us on track to meets or exceeds our $5 billion fund raising targets for 2024.
Speaker Change: Additionally.
Speaker Change: Over the last 12 months through the end of the third quarter.
Speaker Change: We raised over $5 $6 billion all organically.
Speaker Change: This highlights how the increased diversification of our platform.
Speaker Change: And the investments we are making in distribution.
Speaker Change: And new product development.
Speaker Change: Translating into stronger and more diverse growth for the firm.
Speaker Change: Leaving us very excited about what lies ahead.
Speaker Change: Now.
Speaker Change: Let me quickly summarize our third quarter results before we move on to some of the fund raising and other highlights for the quarter.
Speaker Change: Management fees reached approximately $78 million for the quarter up two.
Speaker Change: <unk>, 6% year over year.
Speaker Change: While fee related earnings reached almost.
Speaker Change: $41 million.
Speaker Change: Representing year over year growth of close to 13%.
Speaker Change: Fee related earnings per share in the quarter was 26.
Speaker Change: Up more than 65% since 2021.
Speaker Change: We delivered close to $35 million of distributable earnings in the quarter.
Speaker Change: R 23 cents per share.
Speaker Change: Next.
Speaker Change: While we did not realize any performance fees in the quarter.
Speaker Change: We continue to generate attractive long term investment returns for our clients.
Speaker Change: And we feel good about our potential to generate performance fees over the coming quarters.
Speaker Change: The net accrued performance fee balance of $455 million.
Speaker Change: Or $2.97 per share in.
Speaker Change: Increased slightly sequentially.
Speaker Change: Due to both performance and foreign exchange movements.
Speaker Change: As a reminder.
Speaker Change: Our infrastructure funds three with about $96 million of net accrued performance fees.
Speaker Change: Is already in its catch up phase.
Speaker Change: And we have returned close to $2 billion to investors.
Speaker Change: Our infrastructure funds since the start of 'twenty two 'twenty three.
Speaker Change: Fee, earning AUM of almost $34 billion rose 9% sequentially.
Speaker Change: And 58% year over year.
Speaker Change: And we believe we have a line of sight into solid organic growth.
Speaker Change: Into the fourth quarter and 2025.
Speaker Change: The sequential increase was driven by strong fund raising.
Speaker Change: Plus the additional.
Speaker Change: Of $2.2 billion, mainly from the final transition of credit Suisse real estate assets.
Speaker Change: The closing of the Nexus.
Speaker Change: Zack should in Colombia.
Speaker Change: And the positive investment performance and foreign exchange.
Speaker Change: These inflows were partially offsets.
Speaker Change: By our continued robust pace of returning and recycling capital back to investors through realizations and distributions.
Speaker Change: And important positive attributes of our business.
Speaker Change: In an industry that has struggled to return capital back to limited partners.
Speaker Change: Also.
Speaker Change: Our redemption rates on fee, earning AUM continues to moderate.
Speaker Change: As most of our assets are in long dated locked up capital structures.
Speaker Change: And as the proportion of our fee, earning AUM in permanent capital vehicles continues to increase and now accounts for more than 20% of assets.
Speaker Change: Up from practically zero at the time of the IPO.
Speaker Change: Our growing and increasingly diversified base of fee, earning AUM of almost $34 billion.
Speaker Change: Coupled with solid fund raising.
Speaker Change: And tight expense controls.
Speaker Change: Give us confidence that we remain firmly on track to.
Speaker Change: To deliver our fee related earnings.
Speaker Change: <unk> of $170 million in 2024.
Speaker Change: And $200 million to $225 million in 2025.
Speaker Change: On a per share basis. This is a $1 10.
Speaker Change: To a $1 12 in 2024.
Speaker Change: And the dollar and 26 to.
Speaker Change: So $8 41 in 2025.
Speaker Change: And reflect year over year growth at the midpoint of 12% and 20% for 2024.
Speaker Change: In 2025, respectively.
Speaker Change: In keeping with our updated capital management strategy.
Speaker Change: I announced last quarter.
Speaker Change: We declared a <unk> 15 cents per share dividend for the quarter.
Speaker Change: As a reminder, we will pay 15 cents per share of dividends through the fourth quarter of 2024.
Speaker Change: We also finished the quarter with a 12 months rolling debts to FRE ratio of approximately one time.
Speaker Change: We look forward to updating everyone on our capital management strategy at our December nine Investor Day in New York.
Speaker Change: Overall.
Speaker Change: Our financial results and strong fund raising is evidence that our strategy to diversify.
Speaker Change: And grow our business, both organically and Inorganically is paying off.
Speaker Change: It's been less than four years since our IPO.
Speaker Change: But in that time, we have greatly expanded our regional and global investor base and distribution capabilities.
Speaker Change: And how significantly diversified our investments and product platforms.
Speaker Change: Evidence of our progress.
Speaker Change: Against our strategic initiatives.
Speaker Change: Can be seen in the fact.
Speaker Change: And that over 4 billion of our fund raising year to date.
Speaker Change: <unk> come in strategy.
Speaker Change: <unk> product structures.
Speaker Change: That we did not offer at the time of our IPO.
Speaker Change: Also.
Speaker Change: One of our key initiatives since our IPO has been to become the premier gateway for local investors to invest in locally managed alternatives to take advantage of financial deepening consolidation into the industry and to better serve the many.
Speaker Change: Regional institutional investors, who are limited in their ability to invest outside the region.
Speaker Change: Our early success with this initiative is reflected in the fact that about 40% of our fund raising year to date.
Speaker Change: That has come from local investors within Latin America.
Speaker Change: Investing in local products that we manage compared to virtually zero at the time of our IPO.
Speaker Change: As a result of our diversification strategy.
Speaker Change: We are now better positioned.
Speaker Change: Then we have ever been.
Speaker Change: To be the go to provider of alternative products within Latin America.
Speaker Change: For both local investors and global investors.
Speaker Change: And grow our business as limited partners look to consolidate the number of managers they do business with.
Speaker Change: Now.
Speaker Change: Let's have a closer look Intel our investment verticals.
Speaker Change: First.
Speaker Change: Our real estate platform is generating strong growth and greatly enhances the resiliency of our business.
Speaker Change: Even before we completed.
Speaker Change: In the third quarter, our acquisitions of the Brazilian real estate investment Trust business of credit Suisse.
Speaker Change: And the next is real estate business in Colombia.
Speaker Change: Our real estate fee, earning AUM have grown almost three fold.
Speaker Change: From $1 $3 billion in the second quarter of 2022.
Speaker Change: Or since our initial investments in the BVI.
Speaker Change: $3 9 billion.
Speaker Change: At the end of the second quarter of 2024.
Speaker Change: And just over two years the combination of acquisitions.
Speaker Change: And organic growth.
Speaker Change: Has driven our real estate fee, earning AUM to over $6 billion.
Speaker Change: Approximately 90% of which is permanent capital.
Speaker Change: Patria is now the largest independent real estate investment Trust manager in Brazil.
Speaker Change: Our markets, we believe remains ripe for consolidation.
Speaker Change: And affords meaningful growth opportunities through new product launches as well as secondary offerings.
Speaker Change: In addition.
Speaker Change: There is the opportunity for additional long term growth in fee, earning AUM.
Speaker Change: Through investments performance.
Speaker Change: Credit is another positive story that exemplifies the progress we are making on our strategic priorities.
Speaker Change: Credit fee, earning AUM.
Speaker Change: Have reached $6 5 billion up 43% since the end of 2022.
Speaker Change: On the back of strong organic net inflows of over $760 million.
Speaker Change: The market appreciation and foreign exchange of approximately $1 2 billion.
Speaker Change: As these strategies also earn fees.
Speaker Change: Our net asset value.
Speaker Change: Yes, approximately $450 million of credit assets raised in the quarter.
Speaker Change: Was led by a $190 million that flowed into our leading high yields Latin American strategy.
Speaker Change: As highlighted in the earnings presentation.
Speaker Change: This strategy has outperformed its benchmark across virtually all time periods and.
Speaker Change: And we see a long runway for growth in our credit business given the combination of our strong investment performance.
Speaker Change: And the large addressable market in which there is very low investor penetration.
Speaker Change: We're also excited about the successful launch of several new private credit strategies.
Speaker Change: As our infrastructure private credit fund in Brazil.
Speaker Change: With the support of development banks, such as the IFC.
Speaker Change: And the BN.
Speaker Change: As the anchor investors.
Speaker Change: And our U S dollar denominated Latin American private credit funds.
Speaker Change: Even though it remains early days.
Speaker Change: Our GP MFS solutions business with over $10 $3 billion of fee, earning AUM is off to a great start having raised over $1 $8 billion in the second quarter and the third quarter.
Speaker Change: And since we closed on the acquisition of the Aberdeen solutions business.
Speaker Change: With momentum continuing into the fourth quarter.
Speaker Change: Fund raising high points in the third quarter for GPS include.
Speaker Change: A private equity.
Speaker Change: Hey.
Speaker Change: Over $900 million.
Speaker Change: And in the initial closing of $100 million.
Speaker Change: Our our next vintage co mingled fund.
Speaker Change: Including additional closings early in the fourth quarter.
Speaker Change: Fund raising for our next vintage Commingled fund has reached over $190 million.
Speaker Change: Our early success in this new vertical highlights our ability to bring new solutions to our clients.
Speaker Change: Grow in the very attractive high growth secondary Sim solutions market and reach a global investor base.
Speaker Change: With regard to our infrastructure strategies.
Speaker Change: We have returned to investors closer to $2 billion of capital.
Speaker Change: From our funds since the start of 2023.
Speaker Change: And infrastructure fund III.
Speaker Change: Which is in its catch up phase.
Speaker Change: As expected to generate performance fees over the coming quarters.
Speaker Change: Depending on the pace of realizations.
Speaker Change: In addition, within infrastructure, we see significant deployment opportunities across Latin America.
Speaker Change: And global interest in infrastructure within the region.
Speaker Change: As possibly best exemplified.
Speaker Change: By the Mou, we signed with the Saudis Ministry of infrastructure last quarter.
Speaker Change: To be one of their infrastructure investment partner in Latin America.
Speaker Change: Within private equity realization activity remains constrained.
Speaker Change: As it does across the industry.
Speaker Change: But we are very pleased with the underlying performance of our portfolio companies.
Speaker Change: Which is the aggregates grew EBITDA, 22% over.
Speaker Change: Over the past year organically.
Speaker Change: We also continue to focus on our platform strategy and the <unk>.
Speaker Change: Simple deployment opportunities, we see in front of us.
Speaker Change: In particular however.
Speaker Change: We are very excited about the signing of a $500 million ml.
Speaker Change: Mou.
Speaker Change: And SME with an Asian sovereign wealth funds to invest directly in both our private equity.
Speaker Change: And the infrastructure funds.
Speaker Change: As well as co investment opportunities in both strategies.
Speaker Change: This new long term relationship also highlights our premier positioning as a gateway into Latin America for sophisticated global investors.
Speaker Change: We are very proud that our strong fund raising highlights our enhanced products geographic and investor diversification.
Speaker Change: Allowing us to raise capital and perform.
Speaker Change: Cross different macroeconomic environments.
Speaker Change: This makes us less dependent upon shifting fundraising cycles in individual asset classes all the markets.
Speaker Change: And enhances the resiliency of our business and long term growth.
Speaker Change: Relative to the time of the IPO.
Speaker Change: There is clear evidence that posture today has materially improved its revenue visibility and predictability significantly strengthening our business.
Speaker Change: Overall, we are very excited about our outlook.
Speaker Change: And the progress we have made on our various strategic initiatives in the short time since our IPO.
Speaker Change: We look forward to providing you with a deeper look into our platform and strategy and updating investors on our new three year plans at our December nine Investor Day in New York.
Speaker Change: Now, let me turn the call over to Anna to review the financials.
Anna: Thank you Alex and good morning, everyone.
Anna: As Alex mentioned, the highlight of the quarter hour about fund raising led by our new platform.
Speaker Change: We believe our diversified fund raising momentum is sustainable helping us build and strengthen our base of fee, earning AUM.
Speaker Change: And management fee growth supporting our confidence in our 2024 and 2025.
Speaker Change: Let's review, our third quarter results and the building blocks to reaching our FRE guidance for the remainder of the year.
Speaker Change: Net revenue in third quarter reached $75 $9 million and $276 million year to date.
Speaker Change: Up 28% and 19% respectively.
Speaker Change: The main drivers were the multiple acquisitions, we concluded over the past year or two of the most impactful were the acquisition of the global private market solutions business from Aberdeen, and the Brazilian wheat business of credit Suisse.
Speaker Change: We also generated strong growth in our credit team.
Speaker Change: As a result of solid inflows and investment profile.
Speaker Change: As Alex mentioned earlier, our robust fundraising was partially offset by our success in returning capital to our investors realizations and distributions.
Speaker Change: Private equity fund for also had its Glenn step down in fee, earning AUM in the quarter, we do not expect any additional notable funds step downs in 2020.
Speaker Change: As we diversify our business and Onboarding, new platform and investment strategy, our management fee rate continues to evolve.
Speaker Change: For example, our fee rate in 2020 team was about 121% compared to an average fee rate of <unk>.
Speaker Change: 96% year to date.
Speaker Change: 94% in third quarter.
Speaker Change: In the earnings presentation, you can see that we fine tune our disclosure of the average <unk> bi platform to help you understand the development of our effective fee rate, which can move around noticeably quarter to quarter depending on mix.
Speaker Change: It is important to mention that our fee rate is being driven by the growth in our newer platform. These are these private equity and infrastructure.
Speaker Change: As highlighted in our year to date fund raising we believe this platform has significant growth prospects.
Speaker Change: Many of our newer strategies.
Speaker Change: Permanent capital and Rfps on market value.
Speaker Change: This provides the long term opportunity to compound our fee, earning AUM and related management fee revenues with investment or flattens as evidenced by the robust investment and returns generated by credit that positively impacted fee, earning AUM in the quarter and year to date.
Speaker Change: Moving on operating expenses, which include personnel and G&A expenses totaled $34 $7 million and acquire up $11 8 million versus Q3 2018.
Speaker Change: 7% of the quarter over quarter increase was driven by acquisition with the remainder attributable to increased personnel expenses, reflecting salary increases continuing investment in our business.
Speaker Change: In addition to the impact of inflation.
Speaker Change: Also impacting the year over year comparison is the fact that Q3 23 was the first time, our new equity compensation program.
Speaker Change: Counted for in the P&L overall, our year to date operating expenses of $95 million.
Speaker Change: It's $18 million or 25% with almost 65% of the areas related to our M&A activity and the balance coming from increased personnel costs investments in infrastructure marketing and distribution and the impact of influence.
Speaker Change: Putting it together that'll deliver fee related earnings of $46 million in the quarter up 13% versus the prior year and a $115 $2 million year to date, representing an increase of 14%.
Speaker Change: As we noted in the past acquisitions generally have an adverse short term impact on margins as the new business being onboard and generally have lower margins and before we have an opportunity to capture operating efficiency.
Speaker Change: It happens over time.
Speaker Change: Also since we continue to invest in our growth realized operating efficiencies are substantially reinvested back into the business, but we expect margins to improve with the emergence of top line growth.
Speaker Change: So as a result, our FRE margin in the third quarter was 53, 4%.
Speaker Change: While our year to date margin was 55, 5%.
Speaker Change: As a reminder.
Speaker Change: Presently guided to a full year FRE margin of 56% to 58% inclusive of fourth quarter, which typically includes incentives.
Speaker Change: In 2025, we continue to expect that the ethylene margin to trend towards the 58% to 50% range by year end driven by a combination of revenue growth and the realization of incremental expense efficiency.
Speaker Change: We will update our 2025 and long term margin guidance at our December Investor Day.
Speaker Change: We believe we are on track to generate $170 million of FRE for 2024, as we expect continued growth in fee, earning AUM and fee revenue.
Speaker Change: By strong fundraising and improvement in the ethylene margin in the fourth quarter.
Speaker Change: As a reminder, most of our incentive fees are recognized in the fourth quarter and incentive fees tend to be high margin and driven by our credit real estate and public equity business.
Speaker Change: For perspective, we generated $6 million of incentive.
Speaker Change: Q4 2022.
Speaker Change: $1 million in the Q4, 'twenty three and so far in 2024 performance has remained strong.
Speaker Change: Thanks in large part to our opinions acquisition, we have a large number of our strategies.
Speaker Change: <unk> to generate incentive.
Speaker Change: As a result, we think we are currently on track to generate incentive fees in the high single digit range.
Speaker Change: Okay.
Speaker Change: Net our net financial and other income and expenses in Q3, 24 total on negative one $5 million and a negative $5 $5 million yesterday.
Speaker Change: This line item, mainly reflects interest expenses on our credit facility, partially offset by gain generated in our new energy trading platform.
Speaker Change: Of $2 million in.
Speaker Change: In Q3, and $2 $6 million year to date.
Speaker Change: Thanks, Gordon distributor earnings, we generated $34 $9 million in the quarter up 5% versus prior year and year to date of $100 million.
Speaker Change: Up more than 5% when we exclude performance fees crystallized last year.
Speaker Change: The growth in the D came despite the higher financial expenses noted it both on a per share basis Q3 day of 23 cents of essentially flat.
Speaker Change: And year over year, due to financial expenses higher taxes and higher share count.
Speaker Change: As we reduce shortly we expect <unk> per share growth to improve in 2025 as we move past this short term headwind.
Speaker Change: While we have not crystallized any performance fee so far this year.
Rob Lee: Do you expect to generate.
Speaker Change: Performance here over the coming quarters, driven by infrastructure fund.
Speaker Change: It remains our intention to use realized.
Speaker Change: CRE to pay down our M&A in cricket.
Speaker Change: Our effective tax rate of 10, 6% in Q3, 2004 was higher than previous quarters, and reflected our business and geography and mixed in the quarter.
Speaker Change: Year to date, the effective tax rate.
Speaker Change: Eight 8% and we still expect our full year tax rate in 2024 to be between six and 8% and trend towards 10% over the next few years.
Speaker Change: Regarding the shares outstanding we continue to expect the share count to finish 2020 for around 153 million.
Speaker Change: <unk> 2025 between 158 and $160 million, which includes all shares expected to be issue.
Speaker Change: Cost of regular stock based compensation as well as shares to the issue related to the completion and different M&A pain.
Speaker Change: Our share count guidance does not incorporate any benefit from prospective share repurchase.
Speaker Change: Shifting to the balance sheet, we finished Q3 with approximately $165 million of debt outstanding down from $177 million at the end of the second quarter.
Speaker Change: We expect our debt to reach a peak of approximately 190 million at the end of the year as we from M&A and on the year end payments.
Speaker Change: The actual level of that of course will depend on the timing of our obligation versus our cash generation in particular.
Speaker Change: Heading into 2025, we expect debt levels to decrease as the year progresses, as we generate cash and some M&A related deferred and contingent payments, which we expect to total around $100 million.
Speaker Change: Of which about 60%, we expect to be settled in cash or debt and the issuance of shares as reflected in our FRE per share targets.
Speaker Change: We note that we expect our debt to <unk> ratio as we move through 2025 to be below our target of one time effort.
Speaker Change: I would also note that the interest rate on our debt is based on sulfur so reductions in short term interest rates has a beneficial impact on our borrowing costs.
Speaker Change: Finally, while we believe <unk> are the best financial metrics with which to gauge our results and ongoing earnings power and are the metrics that are most comparable with our alternative manager peers, we would like to comment on some items in our D to net income.
Speaker Change: <unk>.
Speaker Change: You will notice that transaction cost our M&A related expenses declined to half of what we had last quarter to $6 5 million.
Speaker Change: As M&A activity has moderated.
Speaker Change: We would expect this trend to continue as we have no current M&A plans for the next couple of quarters.
Speaker Change: Our equity and long term compensation was 15 million in 2023.
Speaker Change: And $13 million year to date and consistent with our prior guidance, we expect to have 20% increase versus last year.
Speaker Change: Our new program evolve to its second year.
Speaker Change: Overall, we believe we are on track to meet our FRE targets by 2024, and 2025 and we expect the per share excluding the final piece to accelerate into 2025, as we continue to grow revenues and realize some expense synergies over the coming.
Speaker Change: Yes.
Speaker Change: Before the factor in the potential benefit from any debt reduction reduce interest expenses and incremental share repurchases.
Speaker Change: Our robust fundraising momentum make us even more excited regarding the growth opportunity that lies ahead.
Speaker Change: We look forward to presenting a more detailed update on our business and expected financial targets at our December nine Investor Day, which we hope you all can attend.
Speaker Change: I will now turn back to Alan for closing remarks.
Speaker Change: Yeah.
Alan: Thank you Ana.
Alan: So to sum it up.
Speaker Change: There are several key takeaways from the quarter.
Speaker Change: First we believe our fund raising highlights the success, we are having and leveraging our acquisitions.
Speaker Change: And investments in our platform.
Speaker Change: We remain very comfortable with our fund raising fee related earnings.
Speaker Change: And see really the earnings per share targets for 2024.
Speaker Change: And into 2025.
Speaker Change: And I expect to see accelerating.
Speaker Change: Distributable earnings growth into the next year.
Speaker Change: As the full weight.
Speaker Change: Of our fee, earning AUM.
Speaker Change: AUM growth flows through and.
Speaker Change: And we move past the short term.
Speaker Change: The related earnings and distributable earnings headwinds, resulting from M&A costs.
Speaker Change: We believe we have a long runway to grow fund raising generate organic growth.
Speaker Change: And grow fee related earnings and distributable earnings.
Speaker Change: As it remains early days at executing.
Speaker Change: On the platforms, we have added through our M&A strategy.
Speaker Change: The investments we have made in new products and distribution resources.
Speaker Change: Lastly, we are focused on maximizing returns to shareholders.
Speaker Change: And we are excited to provide further color on our updated capital management strategy, we introduced in the second quarter.
Speaker Change: Overall.
Speaker Change: We remain very excited about our future growth prospects and look forward to providing you a more complete update at our next Investor day scheduled.
Speaker Change: For December 9th.
Speaker Change: We thank you for your time.
Speaker Change: We're happy to take your questions.
Speaker Change: Thank you at this time, we will conduct a question and answer session. As a reminder to ask a question you will need to press star one on your telephone and wait for your name to be announced.
Speaker Change: To withdraw your question. Please press star one again, please standby, while we compile the Q&A roster.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: The first question comes from the line of Craig Siegenthaler of Bank of America. Craig. Please go ahead.
Craig Siegenthaler: Good morning, Alex Chaudry hope everyone's doing well.
Craig Siegenthaler: My question is on fundraising so with $4 2 billion raised year to date, you're now in striking distance of the $1 billion target for the full year.
Craig Siegenthaler: <unk> G Pms is driving more than half the inflows just in this past quarter. So I wanted your perspective on how GPS has altered your organic growth trajectory and do you expect it to continue generating an outsource contribution to fund raising relative to its size going forward.
Speaker Change: Hi, Craig how are you hope you on family are doing well and thanks for your question and thanks for participating in such a important days right. We have a U S election today.
Speaker Change: Yes.
Speaker Change: And between U S election battery is earnings call I'm glad that you opted for the second.
Speaker Change: But yes, I think we have no very excited with.
Speaker Change: The first data points that we have.
Speaker Change: On the GPS organic fund raising.
Speaker Change: It ties to the whole strategy of.
Speaker Change: Adding to our platform products.
Speaker Change: Geographically within that.
Speaker Change: And outside of Latam.
Speaker Change: Are more linked to what's known investors are willing to buy.
Speaker Change: Again, we're trying to sell what we want to sell but in the end we sell was in vessels went to buy rate.
Speaker Change: So yes, we are having very good fundraising momentum <unk> said I think that momentum is going to continue.
Speaker Change: We are at $4 8 million.
Speaker Change: As of the end of the third quarter organic fund, raising and I see that momentum pushing us.
Speaker Change: Of course, now if I do the math.
Speaker Change: The fourth quarter of the year is the best for sure the $5 billion guideline is already is.
Speaker Change: Is right even a pocket.
Speaker Change: And so that actually pushes us.
Speaker Change: Two very good entry in 2025.
Speaker Change: With GPS with credit with real estate.
Speaker Change: With infrastructure, and lastly, with private equity and the private equity as I mentioned several several quarters earnings calls one after the other over the last eight.
Speaker Change: Each quarters. Unfortunately, we have no underperforming U S underperforming private equity over performing the other asset classes I performed on over performing Middle East Asia, and Latin America, and now with GPS where no in my view will perform in Europe, because most of the money is.
Speaker Change: Coming from European investors rights for the GP EMS product so happy to see.
Speaker Change: Our initial experience with the.
Speaker Change: Asset class as you'll know secondaries.
Speaker Change: Or gpm's solutions primaries, secondaries and co invest is the hot product of the moment.
Speaker Change: US on the GP side, and most GPC they want to actually give us liquidity they need actually to send money back and find liquidity for their portfolios. So they do a GP led transactions.
Speaker Change: Also Lps want to no.
Speaker Change: Before it was to actually resolve there.
Speaker Change: Folio setting older funds in committing to new funds, because new funds are coming to the market. So they also use the secondary market.
Speaker Change: For that kind of a liquidity so everything is working.
Speaker Change: The direction of this asset class.
Speaker Change: So yes, I think we go into we finished 2024.
Speaker Change: With very strong fund raising numbers for us now for our size.
Speaker Change: Even the 5 billion target guideline compared to where we started and we started the year with around 26.
Speaker Change: <unk> of our fee paying AUM, so five over 2006.
Speaker Change: Now we're already at 20% and if we outperform the five we know we are performing they are also the debt.
Speaker Change: This keep your eye that I just mentioned.
Speaker Change: So yes excited excited Greg.
Speaker Change: On the <unk>.
Speaker Change: Lastly, here the kind of.
Speaker Change: Have to fund.
Speaker Change: <unk> raising structures through the <unk> and a lot of Smes that are being renewed so clients that are following.
Speaker Change: To the team and filing to Patria, because they are renewing their mandates and new monarch complete new money, new new new clients OLED.
Speaker Change: The SME structure, which is <unk>.
Speaker Change: Very very perpetual.
Speaker Change: Yes.
Speaker Change: Secondly.
Speaker Change: Blind fund structure, which is secondary is the opportunity just one number five which we already had our first close and I think definitely move in the direction.
Speaker Change: Two no fundraise, what we expected or a little over what we expected credit has been doing fantastically as well and as you saw the numbers theyre not only on the fundraising side, but on the performance side. The team is doing an incredible job, beating the benchmark.
Speaker Change: In all of the ways that you want to see it in our last 12 months last three years, thus ideas that 10 years whatever in all of the all of the products from no high yield bonds all of it.
Speaker Change: Nominated local Delta.
Speaker Change: Products.
Speaker Change: It's very very very aggressive and lastly real estate.
Speaker Change: Strong fund raising as well throughout the.
Speaker Change: All the real estate investment trust strategies that we have.
Speaker Change: Not only in Brazil, but in Colombia became a major asset class for us I'm not sure, though 90 over 90% of GSE Crts, the AUM of the real estate asset classes in Perm as a permanent capital structure listed funds.
Speaker Change: So again I think.
Speaker Change: The strategy is working.
Speaker Change: And I'm glad to see the results. Thank you Brian.
Speaker Change: Yeah.
Speaker Change: Thank you I was trying to do a very comprehensive.
Speaker Change: Just for my follow up also on fundraising specifically on private equity seven and infrastructure five should we expect final closes for large closes for both in <unk> and then <unk>, we heard your commentary on a $500 million SMA with <unk>.
Speaker Change: <unk> sovereign wealth fund and I think that will invest directly in private equity seven infrastructure. Five can you help us with the timing and size of that one does that also flow in in the fourth quarter.
Speaker Change: Yes.
Speaker Change: Private equity 790, <unk>, though we still keep the $2 billion Mark us for infrastructure five.
Speaker Change: And yes it is.
Speaker Change: The SMA that we signed.
Speaker Change: It is not in.
Speaker Change: Not in these numbers these numbers that you'll see from our slide number there is a slide that actually shows here.
Speaker Change: Number 16 in the presentation that we uploaded.
Speaker Change: The numbers that are shown there does not include this SME that you just mentioned is a $500 million.
Speaker Change: Half on half 250 for each of the funds.
Speaker Change: Most of what.
Speaker Change: As part of that is going to be through the fund structure. The traditional fund structure and part is going to be through fee paying.
Speaker Change: Co invest.
Speaker Change: Good to see.
Speaker Change: Specific sovereign wealth fund wants to have parts of the funnel in part.
Speaker Change: Wants to actually over.
Speaker Change: So we've got an overexposure to one or two companies or fund seven.
Speaker Change: Or funds infrastructure funds, five, but those ICP and a few things. So are not included in the numbers.
Speaker Change: In addition, we have other.
Speaker Change: These types of Smes that we are actually going after and happy to this these Asian sovereign wealth Fund is in addition to what we mentioned during the call.
Speaker Change: Also a mou with the ministry of infrastructure of the Saudi governments and also they want to invest through the front end through Sma's.
Speaker Change: So similar structures and we see that these very large global institutional clients are looking for that kind of relationship.
Speaker Change: I'll sign a check.
Speaker Change: Our funds because I understand that you need the funds will be sizable blah blah blah, but I also want to pick and choose but ill be for.
Speaker Change: For Deca, choosy, but I want to have this pick and choose kind of options. So this is what we call the resumes.
Speaker Change: So also for the middle Eastern Sovereign wealth fund, which is in addition to the <unk> that you mentioned Craig.
Speaker Change: Lastly, we know we still vary.
Speaker Change: It's much in.
Speaker Change: A fund raising mode, a very good fundraising mode in other countries all the ex Brazil, We started a little later fundraising in Chile, Peru, Colombia, and Mexico and in the Engen countries I think.
Speaker Change: <unk> expects to see.
Speaker Change: A good amount of fundraising still compete.
Speaker Change: Completed this year and early next year and we can continue fund raising for infrastructure funds five up to mid next year and private equity funds 700 international portion which is excellent.
Speaker Change: But some few accounts that we.
Speaker Change: Yeah.
Speaker Change: Asked to be exempt from this limitation finish the fund raise the end of this year, but for last time, we can continue fund raising up to mid next year as the fund raising started in different movements. So.
Speaker Change: So we still have.
Speaker Change: For repeating here because it's an important information for all of you guys know private equity fund seven with.
Speaker Change: We finished fund raising X.
Speaker Change: With an exception of a few names as the sovereign wealth funds that I mentioned, but we can still raise money within Latam up to mid next year infrastructure fund.
Speaker Change: Before lockdown on ex Latam clients up to mid next year. So we still have whatever.
Speaker Change: 778 months ago, I Hope I answered your question.
Speaker Change: Yes.
Speaker Change: Andre.
Speaker Change: One moment for your next question.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: The next question comes from the line of benches at route of Goldman Sachs. Beatrice. Please go ahead.
Beatrice: Hi, good morning, everyone.
Beatrice: Nicole and thanks for taking my questions I have.
Beatrice: Two questions one on FRE margin.
Speaker Change: You could repeat your expectation.
Speaker Change: Margins for next year.
Speaker Change: Scott Scott, but I wanted to know if you can expect some expansion to happen in.
Speaker Change: Margins in 2019.
Speaker Change: Is that catch.
Speaker Change: Catherine.
Speaker Change: Yes.
Speaker Change: And also I understand that margins can maybe go up in court.
Speaker Change: Okay.
Speaker Change: Hi.
Speaker Change: But should we expect that that margin.
Speaker Change: That's it.
Speaker Change: 4% level next year.
Speaker Change: Throughout the year.
Speaker Change: That's good color on that.
Speaker Change: And for my first question second question on <unk>.
Speaker Change: Tax rate.
Speaker Change: You mentioned that.
Speaker Change: 8% tax rate this year and that would imply a lower effective tax rate in fourth Q.
Speaker Change: Maybe you could give more color on what could be the reason behind that expectation.
Speaker Change: You should expect the effective tax rate.
Speaker Change: 10% already.
Speaker Change: Sure.
Speaker Change: Thank you.
Speaker Change: Okay. Thank you Bethany.
Speaker Change: Thank you also for participating in our call. This is Alex here.
Speaker Change: I'll take the first question.
Speaker Change: I'll take your second question on tax.
Speaker Change: So as far as margins are concerned of course, you saw the margins for this quarter a little lower.
Speaker Change: Than previous quarters, because we did absorb a 100% of the Aberdeen.
Speaker Change: Aberdeen, GP EMS business and the real estate not only PPI, but at credit Suisse.
Speaker Change: <unk> businesses, the credit Suisse real estate investment trusts for Pgi real estate investment Trust and the GPS the carve out from RBC.
Speaker Change: The fee businesses.
Speaker Change: <unk> had lower.
Speaker Change: Margins than we are.
Speaker Change: Did.
Speaker Change: Operates and I mentioned during the.
Speaker Change:
Speaker Change: Announcement of D C deals that GPS module.
Speaker Change: However, these powerhouse was running at 30% FRE margin as the real estate businesses right and we do run an upper fifty's.
Speaker Change: FRE margin rate. So we did absorb these businesses in the third quarter and a full quarter remembering that in the second quarter was yourself, partially absorbed because these businesses came in late in the second quarter.
Speaker Change: So the whole.
Speaker Change: As for fee businesses was fully absorbed during the third quarter and of course, the margins come down.
Speaker Change: ICEE margins going up to the high upper fifties in 2025, as we move to integrate the businesses.
Speaker Change: And I know I can no no.
Speaker Change: So what we have done in the past I think when we did.
Speaker Change: Absorb the more near that business, the Chilean asset management business that we acquired late 'twenty one.
Speaker Change: Last time, we announced moneta was running a 40% FRE margin business.
Speaker Change: During 'twenty two you saw our margins coming down.
Speaker Change: All sorts of the mid Fifty's lower $50 range, and then we push margins up against a 60% FRE by the end of 'twenty two.
Speaker Change: And then it comes 'twenty three we did other acquisitions, there and I think in that.
Speaker Change: <unk> for the same effects.
Speaker Change: No we know how to do this I'm confident that we're going to push the margins up again.
Speaker Change: Back to the upper <unk> as far as the first quarter of 2025.
Speaker Change: Im not sure where we're going to land in margins. So.
Speaker Change: We'll see a mid 50% number.
Speaker Change: I think <unk> now kind of the low end of mid fifties number.
Speaker Change: We should reach the upper <unk> as a year.
Speaker Change: Complete year full year 2025, not not in the first quarter first quarter more mid fifties.
Speaker Change: And then I will turn to.
Speaker Change: Two other for your second question.
Speaker Change: Good morning.
Speaker Change: You mentioned this quarter.
Speaker Change: Our effective tax rate, which is 10, 6%.
Speaker Change: 8%.
Speaker Change: This is all caused by the <unk>.
Speaker Change: Different next jurisdiction that we have our income.
Speaker Change: And basically the signal of our diversification that we have in the Onboarding.
Speaker Change: The.
Speaker Change: The new company, the new M&A and what we basically are envision banks throughout the.
Speaker Change: End of the year that this extra DVT the tax rate to be between 6% to 8%.
Alex: This is Alex again.
Alex: Basically the result of the income we have in each jurisdiction.
Speaker Change: Also the <unk>.
Speaker Change: Different expenses that hit our normal normally kicks over fourth quarter income and expense in that particular quarter. So this is what we believe and as also mentioned doing.
Speaker Change: The IPO that our evolution and diversification will bring pads that are closer to a 10% throughout the year that slightly and looking to 2025 attach rate.
Speaker Change: Yeah, and just getting back to the to the margin question again just to.
Speaker Change: Use some examples here just so again I think you alluded to this entity as of June your question, but in the fourth quarter, we do have higher margins because of the incentive fees and using.
Speaker Change: 2023 and that is in <unk>.
Speaker Change: Example, the fourth quarter of 2023, we had.
Speaker Change: 70%, 71% snow FRE margins.
Speaker Change: Compared to the third quarter of 2023, there was in the 60, so we actually increased by 10 percentage points.
Speaker Change: The FRE margin in the fourth quarter that trend should also happen here in this year of 2024.
Speaker Change: As we move into the year and as you look into the $170 million of FRE and we are on <unk>, how can we bridge.
Speaker Change: This remains our <unk> 55. This if we do a similar quarter of $40 $41 million of FRE, we're up to $1 55.
Speaker Change: We have around $10 million of incentive fees around 10 ish. That's already 165 that we have two of which $5 million for the 170. So if we repeat the third quarter and as I said, we integrated all of these businesses in the third quarter and we've already started integrating them. So we're moving up.
Speaker Change: The margin leather in the fourth quarter I need $5 million.
Speaker Change: GAAP between the fourth quarter.
Speaker Change: Third quarter.
Speaker Change: Feasible and Thats why we are confirming our $170 million FRE for 2024.
Speaker Change: That trend should also happen in the 25% going forward.
Speaker Change: I Hope I hope we answered your questions.
Speaker Change: Alright.
Speaker Change: Sure.
Speaker Change: Thank you Alex.
Speaker Change: One moment for your next question.
Speaker Change: Yeah.
Speaker Change: The next question comes from the line of Ricardo Bueche Beagle.
Speaker Change: Ricardo Please go ahead.
Speaker Change: Hi, everyone and thank you for the potential of making question I have just one from my side.
Speaker Change: Please comment if the environment philosophy and the infrastructure fund.
Speaker Change: Eddie hit that hurdle rate.
Speaker Change: Given the deterioration in the macro.
Speaker Change: In nano a S.
Speaker Change: Or this particular segment.
Speaker Change: Be much impacted by the virus.
Speaker Change: I'm interested in Brazil with higher rate.
Speaker Change: Next.
Speaker Change: Thank you.
Speaker Change: Thanks, Hey, guys. Thanks for participating in our call.
Speaker Change: Yes, I think there's several things going on in Brazil.
Speaker Change: Some of them are not.
Speaker Change: A lot of good news coming from from the volatility caused by.
Speaker Change: Our presence not willing to come out to the streets with us.
Speaker Change: <unk> on the fiscal imbalances right in.
Speaker Change: All of the <unk>.
Speaker Change: So that causes the economy as you just mentioned.
Speaker Change: But the infrastructure side has been going through it.
Speaker Change: A mini boom, if I would say right.
Speaker Change: The last auctions that came out a b, it's a federal and state auctions that were all huge successes.
Speaker Change: Real difference sectors, several different states and including the federal.
Speaker Change: Union.
Speaker Change: I mentioned, some examples of water and sewage notes, who are three auctions of northeastern states now we're not the largest.
Speaker Change: Though the most appealing states in Brazil in the auction so well that we bid for one we lost but.
Speaker Change: So competitive bids.
Speaker Change: With 345 bidders for diesel in the water and sewage businesses and then we go to the toll roads.
Speaker Change: As you know we've been with us for the last so rolled a couple of weeks ago.
Speaker Change: But also strategic players and financial sponsors.
Speaker Change: So everybody very disciplined as you saw also the.
Speaker Change: In the numbers that we're the winning numbers also.
Speaker Change: Our toll roads to come we have schools in the state of some follow through auctions for the construction of the schools.
Speaker Change: Navy sea sectors here and I can name others.
Speaker Change: So again I think the.
Speaker Change: <unk> is going through a because of the correct risk ticks of infrastructure Thats in general now that you have a long term contract that these are the ones that we look for to add to our funds and these long term contracts are adjusted for inflation.
Speaker Change: And you'll have financing and I think in the infrastructure I think we for our business here he cargo.
Speaker Change: <unk>.
Speaker Change: The best of all that we can have here number one we have foreign interest to invest in infrastructure in Brazil.
Speaker Change: When we are bidding for the still roads, we have co investments together with us from global financial.
Speaker Change: Financial institutions global sovereign wealth funds together with us so we have.
Speaker Change: Foreign interest in.
Speaker Change: I emphasize that because they are very very big checks willing to invest in infrastructure in the region, mainly in Brazil from four and financial players.
Speaker Change: Number two for battery, we have a new front no brand New fund. So we have a lot of money a lot of equity of $2 billion fund, which is a target puts us in.
Speaker Change: And then $8 billion.
Speaker Change: Bidding contest because we do as Youll know leverage 782 to 2030 of equity for us in each of these deals.
Speaker Change: Number three we have the team, though an amazing experience in so many things going on here.
Speaker Change: That is just.
Speaker Change: No our divestments very successful selling to strategic players global strategic players.
Speaker Change: And we also have demand for local investors right in the steakhouse.
Speaker Change: Some of the funds we listed.
Speaker Change: Some of the funds we actually also have local players as you saw in the auctions local strategic players bidding for Dol rules, and et cetera, and local players for water and sewage et cetera.
Speaker Change: So it's a combination of all of these things causes us to be very very exciting.
Speaker Change: Market, where kind of alone there I know we are the financial sponsor.
Speaker Change: One large one together with us Brookfield, which is a global player that has a very strong presence in Brazil.
Speaker Change: But we don't see all of the other no big no infrastructure funds play in Brazil.
Speaker Change: The global infrastructure funds.
Speaker Change: So we're very well positioned we're here because we have been.
Speaker Change: Constructing our track record.
Speaker Change: For the last 20 years that started there with the team at Aveo agenda.
Speaker Change: And then the team on <unk>, and how best Marcel or of the team and all my quarters. There so going through a very very interesting face on the fundraising side not only for the firm with co investors. So we can actually build for larger projects on the management side know that value creation side, creating a lot of items there that translates to value.
Speaker Change: Divestments.
Speaker Change: All of the performance fees over the last several quarters, where it came in from infrastructure funds and lastly here our experience in the sector that actually makes us stand out so.
Speaker Change: Exciting moments, where infrastructure in Brazil at least in.
Speaker Change: I think it will continue and it has to do I think with all of the factors that I just mentioned so I hope I answered your question.
Speaker Change: Thanks.
Speaker Change: Very clear thank you and just a follow up on one thing you mentioned, you said that incentive fees could be in the 10 ish level is that correct just wanted to confirm.
Speaker Change: That makes sense for <unk>.
Speaker Change: Sure.
Speaker Change: Yes, I incentive fees in the fourth quarter around 10, 10 ish million dollars right.
Speaker Change: Thank you and thank you very much.
Speaker Change: Yeah.
Speaker Change: One moment our next question.
Speaker Change: Yeah.
Speaker Change: The next question comes from the line.
Speaker Change: Yeah.
Speaker Change: Great.
Speaker Change: J P. Morgan. Please go ahead.
Speaker Change: Good morning, Alex and team. Thank you for the call and opening up for questions. Just two on my side. The first one is actually pretty quick.
Speaker Change: Thank you and I'll mention among the incentive fees that part of it comes from real estate.
Speaker Change: Just wanted to confirm which product you said real estate generated performance fees just to be sure.
Speaker Change: We have it.
Speaker Change: Yeah.
Speaker Change: I think the ballpark.
Speaker Change: Bulk of it is going to come from from private credit, but just to confirm the real estate product, which one.
Speaker Change: Generates performance.
Speaker Change: And the second one it's more on the product strategy Alex.
Speaker Change: You talked a lot about the infrastructure in Pms.
Speaker Change: I wanted to get to reveal one private credit you touched a little bit during the call, but has been booming I think industry in Brazil and globally I think most of your strategy today is to Chilean legacy rate.
Speaker Change: More near the business.
Speaker Change: Just want to get your thoughts if you feel that there is an opportunity in Brazil or in the rest of Latam to develop the business I think was part of the deal as well, but just want to get the kind of milestones on what youre thinking about this strategy can Brazil.
Speaker Change: And the business outside Chile. Thank you.
Speaker Change: Sure.
Speaker Change: Great I'll ask <unk> to answer the first question on that one.
Speaker Change: Oscar I answer your second question on the credit business. Please.
Speaker Change: Hi, dilemma, yes, youre right.
Speaker Change: Ed.
Speaker Change: Ed.
Speaker Change: That is an incentive he comes mostly from the strategy of credit public equities and real estate. However, most of our.
Speaker Change: Incentive fees are generated by the credit is if I looking to this science is really like 90, 597%.
Speaker Change: And there is just a small portion coming from really stage III are actually coming from.
Speaker Change: Some of the funds that we acquired from credit Suisse.
Speaker Change: Yeah.
Speaker Change: Yes, I'm going to your second question I think not only credit, but also real estate, but.
Speaker Change: Doing extremely well this year, let me, let me turn to credit and then I'll touch.
Speaker Change: On the real estate side for a second as I finish my my answer on the credit side again, Mike.
Speaker Change: I couldn't be happier, we do post the returns of the funds and you can see in our presentation here.
Speaker Change: I think as I mentioned.
Speaker Change: In any shape or form that you'll see it we're beating the benchmarks.
Speaker Change: <unk>.
Speaker Change: The private credit side, William we have a 15% of our public equity funds are private credit transactions.
Speaker Change: Pockets that we have.
Speaker Change: And given our size so for the $6 $5 billion that we currently manage.
Speaker Change: We have around 750 million that is fewer private credit.
Speaker Change: And then the main strategy is no.
Speaker Change: Six $6 5 billion minus 750.
Speaker Change: So you have the number of 5 billion 750, right out of the $5 750, 15% of that which is now close to $800 million is private credits right.
Speaker Change: As a pocket of private credit within the public equity funds. So if you look of how much we do manage in private credit is a substantial number and probably be making us one of the largest private credit alternative asset managers in the region.
Speaker Change: Because of the some that I just did we're managing over $1 5 billion of private credit now pure private credit around 750 million there.
Speaker Change: Infrastructure private credit I have the <unk> that you know in Brazil <unk>.
Speaker Change: All of these other products sign the fifth <unk> formats, and then I have a laptop dollar denominated private credit funds.
Speaker Change: The 15% pocket out of the $5 $5 billion public public credit strategy.
Speaker Change: And that part of the market is doing extremely well.
Speaker Change: With all kinds of different transactions. It is a moment that.
Speaker Change: Companies are kind of stressed because of the high interest rates, mainly in Brazil. So we are managing to do a very interesting transactions, there and getting extremely good returns.
Speaker Change: For our private credit, which is actually helping push the agenda. The overall return of our public credit funds and of course very good returns on our fewer 100% private credit funds that I mentioned to you on that.
Speaker Change: As I look into.
Speaker Change: The new or the near future.
Speaker Change: Mainly in Brazil.
Speaker Change: Because.
Speaker Change: The yield curve shows.
Speaker Change: Crist rates in Brazil will continue to be higher.
Speaker Change: And then I expected whatever 12 months ago in 2025. So these opportunities will continue as companies needs.
Speaker Change: To refinance themselves et cetera.
Speaker Change: We are providing that private credit solution for them.
Speaker Change: In other parts of Latin America. This is also the case with this yield curves are now showing a negative.
Speaker Change: Tendency, which is good mainly in Chile and Colombia.
Speaker Change: Less so in Mexico.
Speaker Change: But as you know Brazil is not there yes, no inflation actually is picking up in Brazil, slightly picking up with speed.
Speaker Change: So this is on the credit side.
Speaker Change: We want to raise more no private credit instruments and funds and I think we are launching other products as we speak.
Speaker Change: It's an area of the market $1 5 billion U S dollars and INR multiplied by five what's implied by six.
Speaker Change: It's pretty reasonably sizable for the Brazilian market.
Speaker Change: But it comes in even.
Speaker Change: Even with the Chilean legacy that you mentioned.
Speaker Change: More around the 40% to 50% of the assets under the Chilean fund our precision.
Speaker Change: This isn't a issued securities.
Speaker Change: Securities issued by Brazilian companies.
Speaker Change: So it is a.
Speaker Change: A fund managed by our channel partners, but half of the fund.
Speaker Change: As.
Speaker Change: Composed of Securities issued by the Brazilian Brasil firms.
Speaker Change: Thats natural given though the size of Brazil in the whole of Latin America, and then of course, Mexico coming second in Chile, and Colombia etcetera.
Speaker Change: On the real estate side, we would know if you look what happened over the last 24 months.
Speaker Change: We doubled AUM.
Speaker Change: When we joined forces with BPI BVI was managing 5 billion Reais without mid 2020 to mid 2024.
Speaker Change: The Guy who was managing 10 billion Ray so from five to 10.
Speaker Change: Addition to that credit Suisse acquisition of around 12 billion Reais, So, making yesterday plus surfing that we already had.
Speaker Change: The largest independent manager top III.
Speaker Change: <unk>.
Speaker Change: Real estate managers linked to no commercial financial institutions. So again.
Speaker Change: Extremely excited but wasn't do we see there in the first half of 2024, we raised a lot what we call a brick and mortar kind of funds funds that invest in the asset the real estate asset itself.
Speaker Change: Buildings construction logistics residential bubble up in the second half of 2024, where we.
Speaker Change: Our focus and whats the market is assia also as for the credit related real estate funds decrease the cri.
Speaker Change: And we've been very successful in raising those funds now so.
Speaker Change: We have a very large market share in most of the segments of the real estate investment trust market in Brazil.
Speaker Change: 30%, 40% market share of the logistics sentiments of the corporate segments of the retail segment and still no. A closer result, 12, 15% share of the credit segments.
Speaker Change: There were no, making inlays and raising a lot of money in the second half because.
Speaker Change: As interest rates go up in Brazil turns through the worst in the second half hour.
Speaker Change: Our investors.
Speaker Change: More in.
Speaker Change: <unk> claimed to invest in these kinds of funds and securities than brick and mortar.
Speaker Change: So first half of 2024 more brick and mortar second half of 2020 for more credit related and again, the beauty of having a diversified platform of not only credit funds, but real estate funds and GPM assets private equity venture in growth and infrastructure core infrastructure core plus infrastructure development. So.
Speaker Change: We have 38 strategies over 100 products.
Speaker Change: Those two no the five main countries in Latam.
Speaker Change: Besides Argentina it gives us this and Europe gives us this ability to.
Speaker Change: To fund raised in different parts of the World Fundraise for all of these different <unk> strategies.
Speaker Change: And not only but deliver but beats.
Speaker Change: The guidance that we have $4 $5 billion organic fund raising FRE et cetera, I have more tools in my hand, now more leavers operational levers to be able to hit the guidance delivered a guidance with all of these different products in countries that we fund rates today.
Speaker Change: Hope I answered your question.
Alex: Let's figure Alex Thank you.
Speaker Change: One moment for your last question.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: The next question comes from the line of William Beringer, <unk> BBA William Please go ahead.
Speaker Change: Yeah.
William: Thank you Alex.
William Beringer: For time. So my question here is also on the topic of product expansion, but here more broadly.
William Beringer: So.
Speaker Change: I would like to understand.
Speaker Change: If you still think there is any product or region that is not already included in your portfolio.
Speaker Change: When you would like to expand there.
Speaker Change: Medium term, so like I understand youre already in the process of digesting, our recent acquisitions, but.
Speaker Change: Theres any upsides for the next year, maybe two years to go to another region other products and complementing it.
Speaker Change: In order to expand on those fronts.
Speaker Change: If you see it.
Speaker Change: Necessarily through M&A or inorganic.
Speaker Change: In organic movements.
Speaker Change: If you believe organic movements would suffice here. Thank you.
Speaker Change: No. Thank you thanks for the question here.
Speaker Change: We are.
Speaker Change: We definitely continue to see though.
Speaker Change: The strategy that we actually set up.
Speaker Change: Prior to the IPO that we delivered during the IPO Road show, which is product expansion geographic expansion within Latam and for some strategies Nike PMC has would be outside of the BMS.
Speaker Change: Market within <unk>.
Speaker Change: On the product side, it's more of the fund raising side, it's good for local investors investing in global products.
Speaker Change: We started with our strategy. We continue there we are.
Speaker Change: In year number of three four.
Speaker Change: My view there is no. It's a 10 year strategy for me to see the complete menu.
Speaker Change: <unk> geographies and products I would like to obtain.
Speaker Change: 30, 40% of weight.
Speaker Change: You will listen from US in this December 19th in New York I'm, hoping you can participate are somewhat from your team.
Speaker Change: Next the year performance and guidance and you will see that we will expand the named a number of strategies is 38 at the time of the IPO, we have seven strategies, where they have 38 and will continue to expense strategies now.
Speaker Change: Specifically, we're now.
Speaker Change: I think there's a lot to do within Latam.
Speaker Change: Mainly in Colombia.
Speaker Change: In Brazil, and in Chile, we have opened our complementary products from Tia products now that will come through organic lounging of products as I mentioned, we launched <unk> in Chile will answer them.
Speaker Change: Local products there, but they are complementing another bank.
Speaker Change: Our products in Colombia. After we signed the JV with Bancolombia late last year in October we are allowing several products that we're launching.
Speaker Change: Local credit funding Columbia, Relaunching, a private equity fund in Colombia, we're launching infrastructure funding color where allowance sheet.
Speaker Change:
Speaker Change: Real estate bad debt credit fund in Colombia, and using the Colombian.
Speaker Change: Bancolombia channel.
Speaker Change: All in the Colombian vessels to Columbia, So as you know some most of institutional clients in Colombia to have restrictions to invest outside of Columbia.
Speaker Change: So they have to invest in Colombia like the Brazilian institution investors that was any pension funds. In addition, these investors they want.
Speaker Change: Colombian business exposure, so the assets and liabilities are exposed to the same currency and this is a huge competitive advantage of ours. Now we are the global size today, no managing $44 billion, but we are very local in nature of implementation, but we have products are designed to the local markets.
Speaker Change: Local investments in Reais Brazilian Reais in Chilean peso is now in Columbus vessels, Andy and Thats exactly what our clients are looking for the global alternative asset manager the.
Speaker Change: No the Blackstone Carlyle, although theyre not going to allowance local products in the countries that I had just mentioned in local currencies is not their business is not their interest and the local guys are too small compared to us. It will have our scale our distribution our fees to be able to invest in marketing and distribution and go to market strategies.
Speaker Change: So I think we're very well positioned and association with Bancolombia has started with a very very.
Speaker Change: Good like foot with our real estate investment trust on how all of these other products that we are launching and we are using the bulk Columbia networks to launch products in Panama.
Speaker Change: See what their modeling cost of FIFA, which bancolombia has sizable operations in these other countries. So becoming a true local player also in Central America through this partnership joint venture with Bancolombia, which is the main bank not only in Colombia, but in the countries that I mentioned to you.
Speaker Change: We're not in Mexico.
Speaker Change: Mexico.
Speaker Change: It's something that we have to analyze with a lot of care is the second largest economy in the region I see real estate in Mexico is still a good play.
Speaker Change: You have the list of the real estate investment Trust in Mexico, the fibrous like our CES named Brazil.
Speaker Change: There are no sizable market actually the Mexican female market is a little bigger than the Brazil real estate investment Trust market.
Speaker Change: And date.
Speaker Change: Real estate in Mexico, because of the whole near shoring friendly shoring whatever it is.
Speaker Change: In the northeast of Mexico.
Speaker Change: He is really booming, but we have to look with care I think what's going to happen today now with the U S presidential elections, and also we wanted to wait.
Speaker Change: Wait a couple of months after the new President cloud took over Mexico to see.
Speaker Change: Her no direction political direction and somewhat some of the aspects that might affect the real estate industry until now actually specifically for the real estate industry. Nothing is really then bring best moments that momentum that I just mentioned.
Speaker Change: I think we have two strategies.
Speaker Change: Here Williams that actually can expand outside of that that one is EPS, we already in Europe.
Speaker Change: Our European operations is two thirds Europe, one third U S.
Speaker Change: If you look geographically it should be the opposite right. It should be two thirds U S. One third Europe. So we're looking for ways to expand in the U S and it could be through an acquisition through acquisitions.
Speaker Change: And also our infrastructure business I think is where as I mentioned were top notch I think we can actually expand.
Speaker Change: The other countries outside of Latin America, we have the experience of doing development infrastructure and I think we should expanded that could come also through acquisitions.
Speaker Change: So we're not going to do any acquisitions over the next two to four quarters.
Speaker Change: Okay and.
Speaker Change: And why is this high asset number is higher this is for us to integrate the businesses.
Speaker Change: For us to show exactly our capability of buying things and then integrating in pushing margins up to close to close to 60 and I have to gain that profitability with you and the other facts investors, but we have one successful case, which was the <unk>, which I just explained.
Speaker Change: Now we have this business that we acquired this year hopefully.
Speaker Change: Even the answer that I gave to <unk> now you're going to see margins heading up in 2025 to the high 50, so I'm going to gain credibility hopefully gain credibility that we can do this we can buy things. We can integrate we don't put any stress through our balance sheet we have.
Speaker Change: Lower than one times FRE LTM of debt net debt to LTM FRE so its below.
Speaker Change: So I think yes, but.
Speaker Change: No growing into locally in Colombia organically through the Bancolombia JV looking into Mexico with a lot of care real estate.
Speaker Change: We'll be we'll be the first one and then heading out to <unk>.
Speaker Change: Tom.
Speaker Change: It is but this is all in time for 2025, specifically at solar again, okay.
Speaker Change: We don't even have an Mou signed basis.
Speaker Change: That Mou signing something unique in all four quarters.
Speaker Change: And we're going to have we want to use 2025 again to show everything that I've said here know with each have some water going down there.
Speaker Change: The river here.
Speaker Change: We are integrating the businesses.
Speaker Change: Leasing margins you guys get comfortable with our confidence of doing things and that will take another step late 'twenty five 'twenty six office okay.
Speaker Change: I hope I answered your question.
Speaker Change: Yes.
Speaker Change: Was very very broad thank you.
Speaker Change: Very clear.
Speaker Change: Okay.
Speaker Change: Thank you. This concludes the question and answer session I would now like to turn it back over to the CEO and founder.
Speaker Change: Please go ahead.
Speaker Change: Alright. Thank you very much for a very very thorough earnings call I really appreciate your questions.
Speaker Change: More interactive in the bedroom. Thank you. Thanks again, I know that it's a busy day for all of US here with the U S elections.
Speaker Change: We are reiterating our guidance of $170 million of FRE for this year.
Speaker Change: $5 billion of.
Speaker Change: Organic fund raising.
Speaker Change: Next year to 112% to $25 million of FRE for next year.
Speaker Change: We're going to have our backstage 19th of December and we are preparing.
Speaker Change: Great.
Speaker Change: For you for you and team. So I hope that you guys can participate it's going to be in New York and the NASDAQ venue at the NASDAQ building the same place that actually we did our last one late 2022 well participated.
Speaker Change: And hopefully we're going to see each other in person.
Speaker Change: And amongst signed today, nor is the fifth of November.
Speaker Change: So thank you very much again, all the best.
Speaker Change: And so youll soon thank you very much bye bye.
Speaker Change: Thank you for your participation in today's conference. This does conclude the program you may now disconnect.
Speaker Change: Yeah.
Speaker Change: Okay.
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