Patria(PAX) - 2022 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Patria generated fee-related earnings of $31.1 million in Q2 2022, up 76% compared to Q2 2021, driven by organic growth in private equity and infrastructure as well as the addition of Moneda [31] - Distributable earnings were $29.2 million in Q2 2022, compared to $74.2 million in Q2 2021, with the difference attributed to performance-related earnings in the prior year [37] - Total assets under management (AUM) were $26.3 billion at June 30, 2022, down from $27.6 billion last quarter but up 66% from $15.8 billion one year ago [40] Business Line Data and Key Metrics Changes - Fee revenues of $55.6 million in Q2 2022 were up 73% from Q2 2021, with year-to-date fee revenues of $110.6 million up 76% from the prior year [32] - The private equity funds delivered strong net internal rates of return (IRRs) at 24% and 16% respectively in US dollars [14] - Infrastructure Fund IV neared the end of its investing cycle, with the acquisition of nine hydropower assets driving incremental deployment of approximately $200 million [15] Market Data and Key Metrics Changes - The Brazilian REIT market has grown at more than 20% over the last five years, with VBI becoming one of the largest independent players in this asset class [11] - Latin American corporates face low refinancing risks with reasonable liquidity and falling leverage, indicating a stable credit environment [20] Company Strategy and Development Direction - The company aims to grow fee-related earnings by at least 50% year-over-year, with a target of $4 billion in fundraising for 2022 [44][41] - Patria is focused on building its base of permanent capital, which has grown to more than $1 billion, representing 6% of total fee-earning AUM [9] - The acquisition of VBI is a strategic move to anchor the real estate platform in Brazil and expand into other Latin American countries [10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the fundraising process despite challenges in the US market, highlighting Latin America's advantages due to low geopolitical risks and a favorable commodity cycle [50][53] - The company remains optimistic about the alternative asset management industry, emphasizing resilience and growth potential in the current environment [24] Other Important Information - The company declared a quarterly dividend of $0.1609 per share, payable on September 16, 2022 [5] - The net accrued performance fees stood at $419 million at June 30, 2022, down from $503 million last quarter but up 28% from one year ago [39] Q&A Session Summary Question: Update on fundraising and impact of market conditions - Management remains positive on fundraising, noting that Latin America is currently favored by investors due to low geopolitical risks and a favorable commodity cycle [50][53] Question: Scaling of VBI acquisition and impact of high interest rates - Management is optimistic about the VBI acquisition, indicating that the permanent capital business is growing and can scale effectively despite high interest rates [71][75] Question: Credit performance and net outflows - Management clarified that the net outflows in the credit segment were influenced by dividend payments and investor shifts between funds, with overall positive net inflows for the year [81][86] Question: Demand for products and AUM evolution - Management noted that inflation-protected and credit products are currently in high demand, with expectations for continued growth in AUM driven by various fundraising efforts [90][98]