Patria Investments Stock

Hello, everyone. I'm Andre Medina, IR Director at Patria, and welcome to the Sixth edition of our Pax Talks. Today to discuss Patria's role in building the data center infrastructure in Latin America.

This will be a panel discussion. So you're welcome to submit your questions. We'll try to get through as many as we can. And before we start, I have to read our forward-looking statements.

So I would like to remind everyone that today's call may include forward-looking statements, which are uncertain, do not guarantee future performance and undue reliance should not be based on them. Patria assumes no obligation and does not intend to update any such forward-looking statements. Such statements are based on current management expectations and involves risks, including those discussed in the Risk Factors section of our latest Form 20-F annual report.

I also note that those statements on this call do not constitute an offer to sell or a solicitation of an offer to purchase an interest in any Patria fund.

Okay. With that cleared, I'm very happy to have with us Cristiano Souza and Rodrigo Abbud. Cristiano, who will lead the questions is the founder and CIO of Zeno Equity Partners, a London-based equity investor focused on concentrated, long-term-oriented global equity strategy. Prior to founding Zeno in 2023, Cristiano was a senior partner at Dynamo Administração de Recursos where he spent 30 years.

And on the other side of the table, we have Rodrigo, who is Patria's operating partner for digital infrastructure sector, an electrical engineer with Stanford MBA, who has held senior leadership positions in large technology companies in Brazil, LatAm and the U.S. for over 30 years, including the CEO post at two of the largest public telecom operators in Brazil. He is an enthusiast, intent of transforming and creating businesses and is currently focused on developing Patria's business on large AI data centers in LatAm.

Well, so as you can see, two heavyweight names for today's discussion. And without further ado, I would like to pass the word to Cristiano to kick off the panel. So Cristiano, the floor is yours.

Thank you. Thank you, Andre, and thank you for the opportunity to have this discussion.

Rodrigo, maybe we should start with a little bit of context. Can you give us an overview of Patria's experience and history in this space in Latin America. And so -- where you guys are coming from in this space? And what's the current position? What exactly is the current structure that you guys have in place for...

Absolutely. Good morning, everybody. Thank you, Andre and Cristiano. Pleasure to be with you. And as you mentioned, Cristiano, to give a little bit of context of what have we done in data centers and what are we doing today.

As you know, Patria had a previous very successful experience in data centers in the data center space. And curiously enough, it was launched right at the time I was at Patria as an adviser back in 2015, 2016. So by that time, the Patria team identified that the cloud trends would really sped up -- sped up in LatAm. And there were no dedicated cloud data centers in LatAm. The data centers were here for a while. They have been here for almost 15 years, but they were still growing in a very small scale. And on the other hand, this was happening everywhere else in the globe with the growth of cloud.

So Patria decided to invest in a greenfield thesis by that time. And we created ODATA. ODATA was created from scratch. It had a first project, which was a small data center outside Sao Paulo. Well, we say small today, but by that time, it was a 3-megawatt data center, so a good-sized data center for 2015. It was built in 2016. It was launched at the end of '16, '17, and then the company started.

And it was an interesting experience because the company started really as a greenfield with no previous experience in this sector. Just the reputation of Patria, its contacts, obviously, the management team that Patria was able to attract by that time. And the company ended up being very, very successful. It transformed into one of the largest data center platforms in Latin America. We admitted a partner along the way. So we had a partnership with CyrusOne in the middle of the way.

And in 2022, after a very successful run, ODATA had developed 7 data centers throughout LatAm in Brazil, Mexico, Chile and Colombia. Had contracted significant capacity with hyperscalers with offtakers. And at the end of 2022, Patria successfully signs the sale of ODATA to a U.S.-based company called Aligned Data Centers.

And the story that I used to tell about is interesting because at the end of 2022, when Patria sold the company or signed the selling of the company, the closing occurred in '23, ChatGPT had not been publicly announced yet. ChatGPT was announced publicly a couple of weeks later, literally, a couple of weeks later, we're talking about November 2022. But by that time, ODATA had around 45 to 50 megawatts of operating capacity and had almost 140 megawatts of contracted capacity, contracts that were already in-house and were being developed. So it was a very successful experience.

But what happened in 2023, after ChatGPT was launched was that the AI scenario really turned the data center capacity demand on its head because I mean, really -- we're already growing, but they started to grow faster enough -- faster yet. And then during 2023, I started talking to the Patria team and they invited me to come back to the firm to lead this new thesis of, "Hey, what can we do about the AI world and the large-scale data centers now."

And so at the beginning of 2024, we started the development of our new thesis. We worked a good part of a year in, I call stealth mode, not really saying what we were doing, but just gathering the thesis, talking to potential hyperscalers, potential energy partners, developing projects. And by the beginning of 2025, we announced the creation of our new platform, which is Omnia Data Center. So we launched Omnia Data Centers by the beginning of 2025. I'm the CEO of Omnia. And during 2025 over this period, we really successfully developed, not only a good energy partnership, but also attracted a global hyperscaler to Brazil. And at the end of 2025, we announced Latin America's largest data center project, which is Omnia's first project, which is a 200 megawatts data center for ByteDance in the northeast of Brazil.

It's going to be the first large global data center base installed in Brazil. And so this is where we are right now. We're in the middle of construction. We have a plan of expanding again to all of Latin America, looking at the usual suspects there. Mexico, Colombia, Chile and obviously, Brazil as the key focus for the company. But really from -- we're replicating the story here from zero, we again are at the forefront of what's happening in terms of large-scale data center development in Latin America here.

[Technical Difficulty] obviously, it's been very centered around the U.S.

Yes.

Why is Latin America a good place to build a hyperscaler data center? What are the attributes that we have in Brazil or in other places that make it a place where, yes, of course, it makes sense to build the data center there?

Well, Cristiano, there are several factors that ended up developing over this time. And you're right, the U.S. continues to be and will likely remain the key focus for data center investment. If you look at the overall global data center capacity today, hovering around 100 gigawatts, give or take. The U.S. concentrates more than half of it, which is incredible. But in the end, several things started to happen, which actually benefits Latin America and call for the need to decentralize a little bit the global data center deployment And they were first just a sheer magnitude of growth that's going to happen.

We're talking about the most conservative projections -- talk about growing the data center capacity in the next 4, 5 years multiplied by 3 to get to close to 300 gigawatts globally. And it's virtually impossible to grow everything in the U.S. for several reasons. The power required to do so, obviously, every time more is the key component. It always was the key component. But every time more is the key component of this equation because it needs to be installed at high voltage, high capacity developments where you at once, deploy 300 megawatts, 500 megawatts, 1 gigawatt project in terms of power requirements. And this is not easy, nor fast, especially in a country such as the U.S., where the grid is not integrated. So developing these large power projects in the U.S. is very time consuming.

They have been growing. They will continue to grow but some projects can take like 5, 7 years. And so projects started to spread across the globe. So there was a global base developed in Southeast Asia and Malaysia, there were projects developed in Ireland. Obviously, the projects in Europe already existed, they continue to expand. But all of the hyperscalers realize that they need to diversify this geographic positioning of new capacity for data centers globally.

And then Latin America entered into the map because primarily, the power requirements and power availability that we have. Obviously, coupled with the other requirements, connectivity, fiber connectivity. We are very good connected to the world right now, but Brazil is connected with 18 subsea cables to the rest of the world. Availability of land, geopolitical neutrality. But primarily because if you look at LatAm, we have over 200 gigawatts of renewable energy potential development.

And not only that, but at very competitive rates. If you look at Brazil today, the price per megawatt hovers around $50, give or take, all in. And if you compare this to prices in the U.S., we can talk about the cheapest prices being in the range of $70 to $80. The most expensive ones in the range of $150 to $180. Europe is north of $150. Southeast Asia has already gone over $120. And so Latin America remains a very reliable source of renewable power at very competitive prices.

And so people started looking at LatAm as a potential base to expand. And we successfully were able to convince one of the key hyperscalers, global hyperscalers that we're looking to develop -- that was looking to develop a global base to actually come to LatAm. And we see this potential actually just starting. Our project is the first large-scale project, and we believe Latin America is going to receive much more projects like that.

Understood. The energy angle is clearly super important. Two-part question. Can you take us through what you guys think is the size of the opportunity you pointed to 200 gigawatts and potential of renewable energy developments in Brazil. But what do you think, realistically, when we think about a 5- to 10-year time frame, what's the potential in terms of gigawatts of installed capacity for data centers in Latin America, maybe more specifically in Brazil?

And the second part is, what would a typical project look like sort of time to develop main components of the CapEx, how you fund it, the commercial strategy, how do you think about levered and unlevered returns. So if you could first talk about the size of the opportunity and then go into the details of what the economics look like. That will be super helpful.

Absolutely. And you're right. I mean, first, the opportunity, you're correct. We have 200 gigawatts of potential development -- renewable developments here. But it's obvious that we're not going to capture the majority of the share that's going to occur in data centers. This is most likely going to the U.S. But what are we used to discuss here with the sector and with the players is that if we just catch up to our proportional participation in the global economy in terms of moving up from roughly 1% of the data center capacity globally that LatAm has today to something around 5%, 6%, which should be where we could have the economic representation of the economy at large, we could certainly think about having in LatAm over the next 3 to 4 years, a multiplication of 4 to 5 of the current installed capacity.

And this is -- this means bringing the 1 gigawatt of data center capacity that LatAm has today and bring it up to 5 gigawatts just as a bare minimum. This by itself in terms of infrastructure investment, represents an opportunity of roughly USD 40 billion to USD 50 billion in infrastructure alone.

I'm not talking about the hyperscaler investment, which comes on top of that, which is significant. But just on the infrastructure alone USD 40 billion to USD 50 billion in infrastructure opportunities. If we are successful and capture even a slightly unfair share to the best part of it in terms of growth, there's no reason why we could not think about LatAm having 10 gigawatts in the next 5 years. There's no reason why not.

Obviously, we still have to do our homework to get the fair share of getting to 4, 5 gigawatts. But that's the size of the opportunity here. In terms of a project, if you think about the typical project, there is a metric that hovers around USD 10 million per megawatt. So a typical project for AI starts in the range of 100 to 200 megawatts IT capacity, which means 1.3 to 1.5x this in power capacity, true power gross capacity. But what we're talking about projects that normally start at the 200 megawatts mark.

But they have a characteristic in common, which is all of the hyperscalers when they set up a 100- to 200-megawatt facility, they want to see expansion capacity. So in our case, for instance, our first project is 200 megawatts, but ByteDance when it announced the project late 2025, they said that they expect this project eventually to grow to 1 gigawatts. So this is the size, typical size of projects.

How long does it take to develop those projects? And this is a complex development. I mean, we should not underestimate the requirements because we're talking about developing the whole power licensing, which depending on the country can be a very lengthy process, I mean, taking 9 years -- 9 months to a year of developing just the power licenses. We're talking about environmental permits, which are significant. We're talking about the big enterprises here.

Talking about obviously, construction itself. There's different methodologies that are evolving today in terms of construction just a precast, steel structure and most recently, modular structures where you pre-integrate components in factory and then just install them in containers in a precast structure on site.

But we can talk about development times that the range for the full project, 2 to 2.5 years, construction alone 12 to 18 months, 12 to 24 months, depending on the size of the project. And the key components are virtually 2 and one is construction, just basic construction and just putting the buildings together, and this is traditional construction methods such as precast concrete or steel structures. And it's a large construction. And just to give you an idea of the project we're building right now, we're talking about 150,000 square meters of just construction roof capacity.

And then, obviously, you have the key components of technology in the CapEx, which make this not an ordinary traditional civil construction project. We're talking about -- these are generators for backup, batteries, cooling systems, water systems, security, temperature and environmental control, access control, all of the very sophisticated infrastructure that goes on these projects. And this roughly represents, I would say, 60% to 70% of the cost of the project. So the CapEx, the roughly $10 million per megawatt of CapEx go primarily to equipment and construction at the 30% to 40%, 60% to 70% proportion give or take.

And how do we fund that? We're funding that based on the most traditional proportions that we see in large data center projects. This is starting to come to LatAm as well. We are being initially slightly more conservative, but those projects can actually go all the way up to 80% leverage. So 80% debt, 20% equity.

There is a proportion that starts at 65% goes all the way up to 80%. In aggressive cases, there are even projects that go all the way to 85% debt. But we're being on the more conservative side. So talking about roughly 70-30 here in terms of equity debt.

And obviously, the funding strategy comes from our own infrastructure funds. So Patria Infra V Fund is the key investor controlling the project on our end. We just closed a significant project syndicate with the large global banks to fund the debt part. And it's true project financing. That's one difference as well that's starting to happen. We're talking about true project financing, nonrecourse, no parent company guarantees involved, I mean, all of that is expected for a large true project financing project.

And those projects, as you may imagine, they all are born with the offtaker already contracted. There's no sense in developing as in the past, just developing "speculative building." And where you just sell a portion of the enterprise and then go after other customers or other tenants to make up for it. So in this case, when we're talking about an investment of $2 billion, it only starts construction when it's fully contracted.

And we're talking about long-term contracts. PPA is involved. Normally USD-denominated, very, very rare not to have USD denominated in this case. And with returns, that are compatible with the risk that we're taking here, normally buy-and-hold returns, I would say, in yields in the low teens. It's going to depend on the complexity of the project and obviously, the region. But working with the exit multiples here, very conservative exit multiples, we can see that levered returns can go all the way up to north of 20%.

Because if you look at just the exit multiples that we're seeing, the average exit multiples for the sector globally actually are above 20%. If you look at LatAm, it hovers around this as well, maybe slightly lower, but not very far from that. So the leverage returns can go all the way up to 20 plus without a question.

Very good. Very good. Obviously, we're talking about Brazil and Latin America. And as we say in Brazil, Brazil is not for the weak, right? So let's talk a little bit about risks, execution risks, power availability, the regulatory environment. There's an ongoing discussion right now about import tariffs on equipment. So if you could talk a little bit about how -- what are -- how do you think about the risk matrix and what are the main ones that you're concerned with -- that would be great.

Yes. We could talk about very, very quickly 4 key components. You mentioned 3 of them, I would add a fourth one, which is just construction and availability of good quality workforce, general contractors and just the sheer construction process, which is not minor. But all 4, in terms of construction, just starting from the last one I mentioned, we have experience working with large GCs and LatAm as a whole has been having more experience with GCs being specialized in data center construction. So there will always be, in particular, the scheduled pressure on the project. So it's not a matter of, hey, we will be able to build this project or not. We will always be able to build it.

The problem is we will be able to build it exactly in the time line and schedule that is required because this is what actually can hurt significantly the returns of our projects. The penalties and contracts with the large global hyperscalers are very strict because obviously they have to follow a global schedule of online capacity. And so if you delay delivery of projects just by a month, a couple of months, it can hurt your returns already. And obviously, if you delay more, then it can be very, very dramatic. So the key risk here is timing. But gladly, we have been able to work with competent capable GCs. We have good experience as well managing those large complex projects, and this is a risk that we can mitigate.

On the power side, power availability per se has not been such an issue because Brazil and LatAm as a whole, Brazil, in particular, have excellent power capacity. So we have surplus energy at this point. So -- and as we have an integrated grid, this is another interesting thing. If you're connected to the grid, and there's no large-scale AI project, which is not connected to the grid is very, very rare globally, I'm talking about, to have a project that is not connected to the grid, power will always be available.

And so the key components here is do you have the right PPA? And do you have a trustable and -- with the financial capacity partner for the PPA because obviously, the PPA is going to have to be settled by this partner if it is not able to generate the energy required for the project. But the grid will always be there. So power availability will always be there, and this is critical.

On the regulatory front, yes, there are several licenses and permits that are required. Probably across LatAm, this is a macro topic in terms of the scale, but it's very important because it impacts directly the schedules that we discussed. So having track of all of the licensing and permits that are required towards such projects, it's key. Obviously, because of the very strict time lines and pressure for delivery that we face in those projects, there's normally some risk that you incur at the beginning where you don't have eventually 100% of the licenses and already have the commitments, but we have been able to manage that to a good extent.

It will be good to see some of those processes improving in some countries. And we know that, for instance, Chile is revamping their whole permit regulation right now. It was too cumbersome, very complex to obtain licenses in Chile.

Brazil has done some work in our case. We have worked with the state government in Ceará to really speed up, streamline many of the processes which have actually benefited next projects that will occur there. So this is obviously something that we have to track.

For hyperscalers, the regulatory requirements, I would say that are relatively benign. LatAm and Brazil, in particular, have been known for being kind of in the middle between the U.S. as a completely regulation-friendly environment in Europe, which is more strict into the regulation. We're normally in the middle of the way. But we're very balanced in our application of regulation. So we heard of no real issues spinning out of regulation in our case.

And finally, tax and tariffs, obviously, this is the key critical point in particular for Brazil. One of the key deterrents for large projects to come to Brazil in the past was exactly the high import tariffs. And high tax chain as a whole, not just the import tariffs, which could add a 50%, 60% surplus on top of the CapEx investments. Brazil has been addressing that in several ways. One of them is through specific regulation for data centers, tax regulation for data centers. It started 2 years ago. It's taken a lot longer than it could, but it's been resumed as we speak, this week, we had news about it so the government expects to pass this regulation of having a special regime for data center investments called REDATA by the end of the year.

And this is going to help tremendously to speed up the number of projects that have been kind of waiting for this regulation. In our case, we also resorted to something that already exists in many countries and in Brazil as well, but we were the first ones to benefit from it, which are the special economic zones. So in our case, we're using a free trade zone called a Special Export Processing Zone, where as our project is targeted to a local base -- to a global base, not a local base, we have a full tax exemption there because it's an export operation.

So this doesn't depend on specific regulations. It's already a law that has been deployed in Brazil several years ago, and is an existing special economic zone. It's not a new special economic zone. And this already exists as well. In Colombia, for instance, Colombia has had several free trade zones. Mexico obviously has the proximity to the U.S. and doesn't have this issue. And Chile has lower taxes in multiple cases to actually attract the investment as well. So we believe this is a risk. But some of the measures that the region is taking are providing a long-term stability. The FTZ in our case, the free trade zone that we're using has a 20-year time frame for the stability of the benefit in the exemptions that are issued.

Same thing in Argentina. We know that Argentina has been receiving more attention recently, they instituted RIGI and Super RIGI as the special incentive programs. Colombia, same thing. So -- there are several things going on that we believe address this issue of taxes and tariffs. And the key thing here is long-term stability, long-term visibility.

In terms of incentivizing -- long-term investment, it's good to know that REDATA is back on track. Changing a little bit the scope. Obviously, everybody is aware of the deal that NVIDIA recently announced, the new funding structure, along with some of Patria's peers in the U.S. This comes in the context of an ongoing debate about circular financing and returns. Do you have any thoughts on this and whether this funding mechanism is something that could eventually play a part in how you guys are developing the infrastructure in Brazil?

Well, this question is interesting because it prompts to another question that I believe everybody has, but nobody really likes to touch upon it, which is -- are we living a bubble? And is there a possibility of this bubble bursting? And I responded to this question many times, and I'd like to say that in a sense, yes, because obviously, if you see the projections that go far beyond the next 3, 4 years, they continue to be really incredible, outlandish sometimes.

But what I'd like to say is that definitely from many cases in the past, even if this bubble bursts, what's underneath it it's already really, really, really big and much bigger than what we have today because capacity is in short supply. It's different in the case of previous infrastructure investment cycles where people say build it and it will come, demand will come. In our case, demand is already here and is not satisfied. So you mentioned NVIDIA. NVIDIA just published their results, as you know. And the key deterrent for NVIDIA's revenue growth was supply. It was not demand.

If they have produced like 50% more than what they sold in the last quarter, they would have sold it everything. And this is because capacity is in short supply today. If we have globally another 10, 20, 30 gigawatts of capacity, it would already be consumed. The problem is there is no capacity. Capacity is being built as we speak. So -- if you look at just the fundamentals of how capacity is going to grow, our capacity requirements, demand is going to grow. It's obvious to see that there's no way other than up.

Eventually, it may taper down and grow slightly slower than what we're seeing today, yes. But remember that probably today, we're at the peak of growth last year, just the 5 hyperscalers -- U.S. hyperscalers alone invested $250 billion, which was an all-time record and a very, very healthy investment number for global infrastructure economy. This year, they're expected to invest $750 billion. It's 3x as much as last year. So do we need years of $750 billion every year to sustain this growth? No, we don't. I mean if we go back to just $200 billion, $300 billion a year, which was the steady state that probably '24, '25 showed. The infrastructure sector would have a significant opportunity still for the next 5, 10 years. And we can see this happen.

So we see this as something that's normally associated with the demands of the IT investments as well, not only the infrastructure investments.

And as a race here, there's also this component. We know that eventually, this will stabilize. We have winners, we will have a different models. But the thing is that the applications are so new that honestly, I don't believe nobody, and I mean nobody has yet a clear view of what can be done with the technology we're developing. And I believe that we haven't seen even the start of it. If you think about, for instance, agents that we're talking about personal agents, a single agent can occupy the training capacity required for an entire model.

And we're talking about multiplying the capacity that we're using to train models today by millions, millions. And so demand will be there. Obviously, it has to make sense economically. We've seen the growth of revenues, for instance, for Anthropic in all of the last 24 months, and it's nothing short of incredible. We're talking about adding $10 billion, $15 billion of revenue a month, a month. So the economic, the fundamentals will be there.

Eventually, they will not grow to the sky, there's a saying, let's say that trees don't grow to the sky, right, but they're continuing. And so there's still a cycle that is not at its end yet. We still see a cycle that will continue for some time to come. But obviously, we should not expect that this is going to grow forever or grow in the proportions that we have been seeing. I mean, eventually, it's going to start to slow down and start into a more regular growth trajectory. That's what I expect.

That makes a lot of sense. And I have one final question. Obviously, as everything else, this is going to be a competitive race, to gigawatts and to commercialize them. Why do you think that Patria has a right to win in this market? And who else you're competing with that you see in Latin America that is trying to do what you guys are doing?

Sure. No, that's a great question. And one thing we have in mind is that when you look at the type of investments that we're seeing and needing in infrastructure, digital infrastructure projects today, business can be changing. Digital infrastructure used to be a sector where there were all sorts of projects, small projects, very small projects and local players. But when we're talking about 200-megawatt plus data centers, we're talking about serious commitments of equity and debt. And so naturally, the number of players have already reduced because you have to have the financial backing, the financial capacity, the musculature to actually take care of that.

And not only that, but you have to have the reputation, the means of actually fulfilling very complex construction contracts and the development projects. And so naturally, the number of players gets reduced. Globally, what we're seeing is that the role of infrastructure funds and large private equity funds have is virtually 100%. I mean, there's almost not a single project where you don't have infrastructure development funds involved. And in our case, we're obviously the largest development fund in LatAm.

We obviously have a good experience in developing greenfield investments. We have the financial backing, the financial expertise and the track record in the segment. But in addition to that, I will mention that Patria has I believe some of the core competencies to develop those kinds of projects, which start in the financial capabilities, obviously, but then it quickly moves towards the engineering space where we do have a hands-on approach. Patria has its own team of engineers and technical experts, and that's what we use, for instance, to start up Omnia.

We brought the Patria engineering team to help and to work alongside us in making sure we were developing the right projects with the GCs and with the suppliers and having a very, very hands-on technical approach. We also have a power expertise, which is really required for those large projects. We have the capability of developing power partnerships. We do have our own power operations. We do have power trading. So we understand power and have the power skills inside internally.

And finally, Patria also has a very developed real estate capability across LatAm. And if you think about data centers, large-scale data centers, we're talking about a combination of power, real estate, construction and project development and financial capabilities. I mean this is exactly the sweet spot of where Patria has in terms of supporting capabilities, funding capabilities here. And we're using that to the full extent.

Obviously, we're competing with global funds. Normally the large players in the space, and we're talking about a handful of players here. We're not talking about 20 players. We're talking about 5, 6 different players, large-scale players. They all have financial backing from global funds. And we believe that Patria is now a global fund and we have our right to play.

Got it. It's so interesting that we finally found a way to export power in Latin America and in Brazil. We've always had this blessing of having more power than what we consume. But we can never do anything with it. Now we're exporting it through bits. It's super interesting.

And just as a complement to your point, I mean, initially, everybody thought that would happen with green hydrogen. But green hydrogen has taken a long time. So everything migrates to data centers. And yes, we're exporting power. You're absolutely correct.

Yes. Great. Look, thank you so much for taking the time. That's all the questions I have. Andre, I'll pass it back to you. Rodrigo, thank you so much.

No. Thank you, Cristiano. Pleasure discussing this with you. It's a fascinating topic that you're going to hear a lot about it.

Yes. Thank you guys very much. Very valuable discussion. We do have some questions here from the audience. The first one is a little bit more technical. The question is how to handle energy intermittency given that we use renewable sources when setting up the data center at this scale.

Yes, absolutely. That's a very good question. But we have to remember something that I mentioned during the talk, which is the data center is connected to the grid. It's not connected directly to the renewable source. It's not behind the meter project where you just develop a generation project and connect it to the data center. The data center is connected to the grid, and the generation is also connected to the grid.

So for the purpose of supplying energy to the project, we don't have intermittency. Because we're connected to the grid. So the energy is there. And as we like to joke, right, the electrons don't have color. I mean they come from anywhere. They come from the wind sources, they come from the hydro source, they come from the solar source. And if the grid has the capacity to supply it, we're going to receive this with no intermittency.

As far as the generator and the PPAs associated with our project, there's one thing that, yes, the generators are doing it. And in our case, the first project is developed with a partner called Casa dos Ventos. But what they did is to supply an average power of around 300 megawatts, which is the PPA side of our contract. They have developed and are building close to 700 megawatts of wind plants. And so as you have a larger capacity on the wind plants, and many of them are in different places. They compensate and are able, even with some intermittency to generate the required average loads for the power for the PPAs.

But in our case, we don't depend on that. Even if they didn't produce a single watt, we will be connected to the grid, and we will receive the power with no intermittency.

Excellent. Very clear. The other question is, we've seen around the world, governments partner with managers to build and scale data centers in their domestic AI development platforms. Are you seeing governments in the region start to take these steps? And how is Patria positioned to benefit from it?

We've seen that. It's just starting, Andre. We're not there yet. We know that there are some sovereign AI discussions happening pretty much everywhere. Some governments took a step of eventually creating their own model developments and their own data center capabilities with partners. But it's just starting. I mean, it's not a common yet. In the case of Brazil, for instance, REDATA brought some considerations of having to have capacity dedicated to local developments and to sovereign AI. But it was as part of a larger incentive, they want us to have part of this capacity "reserved for local development." But it's starting. It's not there yet.

It's going to be a discussion remembering that in the case of these partnerships, obviously, it helps to have a local team on the ground with local experience with local presence with local participation with local institutional relations and understanding the requirements to do things such as this, which require, for instance, public bids, participation in public bids. Patria has a long-standing history and track record of participating in public bids. That's what we do for most of our concessions, for instance. And so -- when it comes, if it comes, we'll have a right to play because of that.

Excellent. The other question here, I will read it. I think it's hyperscalers just saying, I've seen reports that Amazon, Google and Microsoft are looking to develop in data centers and related infrastructure in the region. Is Patria in discussions with these other larger global hyperscalers? And how is Patria positioned to be their partner of choice?

We're discussing with all hyperscalers. Because in our sector, if you think about the large AI data centers, even though the number is slightly larger than this because we can include some other companies, which we call neoclouds, which are new players that demand a high capacity as well. If you think about the traditional big tech hyperscalers, we're talking about 8 players globally. And everybody knows their names, and it's -- we're talking about 5 U.S. players, 3 Chinese players. And by definition, a platform that focuses on AI, data center and large-scale data center development has to talk with all of them. So we're talking to all of them.

The good thing that we believe in our case happened is that as we successfully were able to implement a very large first scale project which, upon launch, will be the largest data center project in Latin America ever. This obviously qualifies us to have live discussions and very engaging discussions with pretty much all hyperscalers, looking towards developments in the Northeast where we are locating our first campus, but also talking about other countries as well where we have presence as Patria in terms of real estate and energy. So yes, we're talking to them.

It's a competitive field. It's -- obviously, we do have our expertise, and we do have our competitive advantages, in particular, by having developed this first very large project in a zone which nobody had explored before. So we are ahead with our knowledge of the special economic zones. But as the number of projects is so large eventually, we believe that there is space for, as I mentioned, again, 4, 5, 6 different players actually sharing this growth that's going to come.

Let's remember what we talked at the beginning of the conversation, we see the possibility of LatAm receiving another 4 to 5 gigawatts in the next 3 years. It's impossible for a single player to address all 4 to 5 gigawatts. So we're going to have to have a number of players working here to deploy this type of capacity.

Great. And I think the last question here, and you pretty much touched base on it already. But with regard to the energy, right, sources, renewable very strongly in the region. How much that is playing as a competitive advantage on getting us with hyperscalers, which would not consider the region or which would be more interested in the region because of the use of renewable energy?

Yes. No, you're right. Energy is the key differential. And I would say that there's 2 points to the energy. One is the competitive pricing. And as we mentioned that we have very competitive pricing in Brazil and competitive pricing, in general, in Latin America. And that by itself should be one of the deciding factors in bringing projects here because energy, if you include energy plus the leasing -- the infrastructure leasing as the key components of cost, operating cost for a hyperscaler in a data center. We're talking about energy being responsible for between 30% and 40% of expenses. So it's big. It's a large cost.

But on the other side, there's the commitments to carbon neutrality. And this is something that all of the hyperscalers have done. It's facing challenges because as capacity is growing so much and in particular, in the U.S., it's hard to keep track of carbon neutrality when you're deploying gas power plants or even coal power plants. And that's why when they have the capability of developing projects with renewable energy with no need for carbon compensation, this is attractive. This is really attractive in the economic sense because here, when you deploy a project with full wind power or full hydropower, you don't need to buy carbon credits. And this ends up getting factored into the equation as well.

And we do see that this is happening every time more so. We deal with some hyperscalers that when they look towards projects here, they say, "I will only deploy a project in Latin America if it's 100% renewable." And that's the key motivation as well. It's pricing, but also the commitment to carbon neutrality, which can be helped by those kinds of projects here.

Perfect. We have one last question here with you. And I think you already discussed it, but maybe we can double-click on it. It's with regards to the additional opportunities that this will open for Patria. Many firms have developed multiple products to service the data center demand, from development to compute financing to power financing to buy and invest in stabilized assets. What is Patria's strategy here? What's the current plans or strategies do you have to take advantage of this?

Well, we're at the very beginning of our journey. As we mentioned, Patria launched Omnia back in 2025. So we're developing our first project. We already are looking towards developing other projects in Brazil and in the other countries. But what we see -- first, we see the possibility of expansion pure and simple, and we're talking about other avenues that include connectivity, that includes ancillary services that normally will come in those projects. But as I mentioned, Patria has expertise and presence in the power sector, and the real estate sector. And those are 2 adjacent factors that, without a question, will be significantly impacted by data centers. And that's what we're trying to do as well.

So we have internal discussions with the real estate team, with the power teams to see what can we develop together. And it will always be an arms length discussion. So we're going to do whatever is good for the project itself and for the funds. But we open up opportunities for power. We open up opportunities for real estate. And in some cases, we open up opportunities for credit and for core funds. Remember that we're starting to work with core funds as well, where we pretty much buy stabilized more mature assets for a different profile of risk return. And eventually, we're going to have those kinds of assets as well in the data center space.

Normally, an asset from construction to stabilization takes around 2, 2.5 years to be developed. But after that, there's multiple examples across the globe of projects from stabilized assets moving to continuation funds or moving to core funds. And it shouldn't be different here in the long term as well.

No further questions from the audience. So Cristiano, Rodrigo, thank you very much. Very interesting discussion. Thank you for your time.

Thank you, Andre. Thank you, Cristiano, for your questions.

Thank you very much, everybody.

All right. And if you have any additional questions, just send us an e-mail and we'll try to answer you. Thank you.

Ladies and gentlemen, thank you for standing by. Welcome to Patria's Second Quarter 2026 Earnings Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to turn the conference over to Andre Medina, Investor Relations Director. Please go ahead.

Good morning, everyone. Welcome to Patria's Second Quarter 2026 Earnings Call. Speaking today are Chief Executive Officer, Alex Saigh; and our Chief Financial Officer, Raphael Denadai. This morning, we issued a press release and earnings presentation available on our Investor Relations website and on Form 6-K furnished to the SEC. A replay will be available on our IR website.

As a reminder, today's call contains forward-looking statements, including statements relating to our guidance and targets, which are subject to risks and uncertainties, do not guarantee future performance and undue reliance should not be placed on them. Please refer to the forward-looking statements disclaimer and risk factors in our most recent Form 20-F. Patria reports under IFRS and will reference certain non-IFRS measures. Definitions and reconciliations to the most direct comparable IFRS measures are in the earnings presentation.

With that, I'll hand it over to Alex.

Thank you, Andre. Good morning, everyone. Our second quarter results reflect continued strong fundraising momentum, supported by consistent investment performance across our diversified platform.

Fundraising in the quarter totaled $2.3 billion, bringing the year-to-date total to $4.5 billion and keeping us on track to exceed our full year fundraising target of $7 billion. Given the strong momentum in investor demand, we continue to believe fundraising can surpass our 2025 all-time record of $7.7 billion, and we are on pace to exceed our 3-year fundraising target of $21 billion from 2025 through 2027.

Fee earning AUM reached $48.9 billion, up approximately 7% from first quarter '26 and 32% from 1 year ago, reflecting year-over-year organic growth, the closing of 3 acquisitions and positive investment performance, primarily in credit, real estate, public equities and GPMS. The growth in fee-earning AUM drove fee-related earnings of $57.1 million for the quarter, up 13% sequentially and 24% year-over-year, and we remain on track to achieve our full year FRE guidance of $225 million to $245 million. Finally, distributable earnings per share of $0.32 rose 19% sequentially and 31% year-over-year. Raphael will take you through our financials in more detail.

Investment performance. Our investment performance remains consistent and continues to support fundraising across the platform. Over 85% of our current fee-earning AUM, excluding SMAs and third-party managed funds, which are not reported, are invested in funds performing at or above their benchmarks since inception.

In credit, our flagship LatAm high-yield strategy with over $5.5 billion in fee-earning AUM has generated 11% annualized net returns in U.S. dollars since its inception 26 years ago, outperforming its benchmark by more than 360 basis points. As you can see in our earnings presentation, this strategy is outperforming its benchmark for all periods presented, including year-to-date 1, 3 and 5 years.

In infrastructure, the pool return of our latest 3 vintages, which are our active funds exceeds the benchmark by more than 750 basis points. In Global Private Market Solutions, our two active and more mature co-mingled secondary funds, SOF III and SOF IV are outperforming their benchmarks by 650 and 560 basis points, respectively. For further information on our investment performance, please refer to Pages 17 to 21 of our second quarter '26 earnings presentation.

Now in private equity, two of our older active vintages, our buyout Funds IV and V, which together represent under $2 billion of AUM or under $1.3 billion of fee-earning AUM have, as previously disclosed, not performed well, and we have marked these funds down in the quarter. Among other things, these funds have been seeking divestments through an atypically long period of high interest rates in Brazil and several of their investments were severely affected by long-standing macroeconomic adversities in the aftermath of COVID as well as by sector-specific shocks. These challenges and our focus on accelerating divestments from these funds to expedite the return of capital to investors are now reflected in their marks.

Importantly, the management fees for our private equity drawdown funds, funds in which committed capital is deployed gradually into investments are not impacted by portfolio markdowns or markups as fees are charged on invested cost. In addition, Fund IV has not generated management fees for the last 2 years and both Funds IV and V have no accrued performance fees since the fourth quarter of '25. So these markdowns do not impact our net accrued performance fees. These two older private equity vintages do not describe our private equity franchise today. We have made significant changes to our private equity team and strategy over the past few years and Funds VI and VII were invested in a different macro environment. Of note, portfolio companies in Funds VI and VII have little to no leverage and have been performing well, growing EBITDA by approximately 10.5% on average over the past 2 years.

It is important to note that while approximately 30% of our fee-earning AUM, which are mainly in drawdown funds and earn fees predominantly on invested capital at cost, approximately 70% of our fee-earning AUM are in funds, mostly in credit, real estate and public equities that charge fees on the market value of traded securities and where, therefore, investment performance directly translates into revenue growth.

Fundraising now. Now let me provide some additional color on fundraising. A key highlight of the quarter was a new $1 billion commitment from an existing sovereign wealth fund client to a multi-asset separately managed account. This mandate significantly expands our relationship with the clients and reflects the growing demand for Patria's solutions-oriented approach, allowing capital to be deployed flexibly across asset classes and strategies. We believe this type of mandate is particularly attractive given its stable, long-duration capital profile and its ability to deepen strategic partnerships with investors.

Now on credit. Focusing more specifically on our asset classes, credit remained a strong contributor to fundraising with over $650 million raised in the quarter, bringing the year-to-date total to approximately $1.6 billion. Demand momentum continues, driven by the aforementioned strong performance across our public credit strategies, the growing interest in dollar-denominated private credit funds and the multiple structural growth drivers, namely banking disintermediation and the broader financial deepening, which are supporting the growth of Solis, our recently acquired CLO business in Brazil. Solis has raised over $500 million since we closed the transaction at the start of the year.

Now on Global Private Market Solutions. For Global Private Market Solutions, the fundraising highlight of the quarter was the final close of SOF V, our fifth vintage flagship secondaries commingled fund. Total commitments to this fund reached $676 million, exceeding our original fundraising targets of $500 million by approximately 35%. Re-up investors represented approximately 36% of commitments with the balance comprising a combination of existing and new investor relationships.

The fund attracted capital from five regions with North America representing over 50% of capital commitments, followed by Europe at approximately 40%, together with additional commitments from investors across Latin America, the Middle East and APAC. Of course, a key focus for GPMS during the quarter was the closing on April 1 and onboarding of our WP Global Partners acquisition, which expands our lower middle market private equity solutions platform in the U.S. We are pleased with the progress we have made to date with the WP team successfully integrated into our New York office and already contributing to investment activity across the GPMS platform.

Now on infrastructure. In infrastructure, we are excited about our infra core strategy and are targeting a first closing later this year alongside its inaugural deal. This strategy focuses on a pipeline of mature infrastructure assets in Latin America with contracted U.S. dollar revenues, mainly in Chile, Colombia and Brazil and seeks an attractive return premium versus similar global funds.

Infrastructure also represents one of the primary areas of interest within our SMAs, and we expect a significant portion of the capital associated with our recently secured $1 billion multi-asset mandate to be allocated to this asset class. Of note, during the first half of the year through the deployment of capital sourced from a variety of fee-paying SMAs and co-investments, infrastructure added $5 million of annual recurring net revenues to Patria. We continue to see significant opportunities to deploy our growing base of dry powder over the coming years into sizable projects such as our data center initiative, and we have visible line of sight to deploy its approximate $1 billion of pending fee-earning AUM.

Now on AUM quality. Our fundraising success continues to reflect the evolution of Patria's platform. Since our IPO, we have expanded from 2 flagship strategies with the capacity to raise more than $1 billion per vintage to at least 10 flagship strategies. This diversification has strengthened both the quality and resilience of earnings base with approximately 90% of fee-earning AUM invested in vehicles with limited or no redemption rights and approximately $11 billion of permanent capital, representing roughly 22% of total fee-earning AUM. Pending fee-earning AUM increased approximately 20% in the quarter to $4 billion, supported in part by our new multi-asset SMA mandate, providing meaningful visibility into future fee growth.

Now on macro context. With respect to the broader operating environment, our view remains unchanged. The geopolitical backdrop continues to be supportive of Latin America and particularly of South America, where we are seeing a meaningful shift toward more market-friendly governments. Institutional investors across Asia and Europe continue to engage with us across a wider range of strategies than historically, while existing clients are further deepening their relationships with the firm as evidenced by the recently closed $1 billion multi-asset mandate.

In summary, our execution remains very consistent. Fundraising momentum continues. And with $4.5 billion raised year-to-date, we see a clear pathway to potentially yet another record year of fundraising. With our capital formation and asset growth increasingly driven by long-duration vehicles, we conclude the quarter with even greater confidence in our ability to achieve both our 2026 financial objectives and the longer-term goals outlined in our 2027 vision. For example, our year-to-date FRE totaled $108 million. If we simply annualize this figure and include the same incentive fees we reported in 2025, our FRE would be more than $225 million, already at our target range, even before accounting for incremental growth in fee-earning AUM and fees we are seeing quarter-over-quarter.

With that, I will hand the call to Raphael. Thank you.

Thank you, Alex. Good morning, everyone. I will now take you through the second quarter results, fee revenue and expenses. Total fee revenues for the quarter were approximately $105.8 million, up 30% year-over-year and 14% sequentially. Fee revenues in the quarter include $1.5 million of catch-up fees related to the final closing of SOF V.

Growth in fee revenues was driven by fee-earning AUM growth of 32% year-over-year and 7% sequentially, supported by net organic inflows, positive investment performance and the three acquisitions completed this year. Incentive fees of $2.5 million in the second quarter were attributable to real estate and Solis, which earns incentive fees semiannually. Solis also contributed $0.4 million of structuring fees, which are included in other fee revenues. These fees are a regular feature of our private credit business. And although the specific timing and size of the structuring fees are difficult to forecast, we expect that over time, they will be an attractive source of incremental fee revenues.

Our last 12 months average management fee rate in the quarter was approximately 86 basis points, reflecting the impact of WP transaction as well as the continued growth in credit, real estate, GPMS and various co-investments and SMAs over the recent quarters.

FRE & margin. Our fee-related earnings in the second quarter of 2026 were approximately $57.1 million, up 24% year-over-year and 13% sequentially, driven by the strong growth in our net fee revenues, partially offset by 16% sequential growth in expenses. Our FRE margin came in at 54% compared to 54.6% in the prior quarter. Among other things, our FRE margin reflects the short-term impact of acquisitions, which occurred at a faster pace and larger AUM volume than expected as of our original guidance. And also the impact of FX, normal expense growth, including annual promotions and ongoing investment in our platform.

Indeed, given the evident success we have been having in our fundraising initiatives, we have been steadily focused on continuing to invest in our platform as we expand our global marketing, distribution and product capabilities. In light of these factors, we now expect our FRE margin for the full year 2026 to fall modestly below our 58% to 60% target, although we remain confident in our 58% to 60% target for 2027 and onwards.

Now while the FRE margin is a key byproduct of our financial results, it's important to highlight that our focus is primarily on FRE, not simply the FRE margin. And in that regard, as Alex noted, we remain confident that we are on track to meet our 2026 FRE objective of $225 million to $245 million or $1.42 to $1.54 per share, representing approximately 11% to 21% growth from last year's $202.5 million. We are also maintaining our 2027 FRE target of $260 million to $290 million or $1.60 to $1.8 per share.

Distributable earnings. Total distributable earnings for the quarter were $50.7 million or $0.32 per share, up 31% year-over-year and 19% sequentially on a per share basis. This growth was driven primarily by the increase in FRE as we generate no performance-related earnings in the quarter. In addition, our net financial expense of $1.5 million benefited from $2.9 million of contribution from TRIA, our trading platform as well as higher investment income, which was partially offset by higher interest expenses related to the $350 million bond offering we successfully completed early in the quarter.

While the contribution from TRIA is difficult to forecast and can vary sharply quarter-to-quarter, over the past 6 quarters, the contribution from TRIA has averaged about $1.4 million per quarter. Over time, we expect the contribution from TRIA to grow as the business continues to expand its capabilities.

Stock-based compensation. Stock-based compensation in the quarter was $13.5 million, totaling $23.6 million year-to-date or 12% of total fee revenues, consistent with our recent guidance.

Tax. Now with regards to taxes, the second quarter 2026 effective rate was approximately 9%, reflecting our evolving business mix and also consistent with our guidance.

Balance sheet & Capital Management. Regarding the balance sheet, as previously mentioned, we completed our $350 million bond offering during the quarter, the proceeds from which we paid our outstanding credit facility with the remaining cash available to fund various M&A-related payments, share repurchases and growth initiatives. Also, as previously reported, we completed a second TRS facility in which we repurchased a total of 1.5 million shares for a total cost of $18.3 million. This facility matures in the second quarter of 2027.

We also are in the process of refinancing and slightly increase the size of our first POS facility by an additional 1.3 million shares to 2.8 million shares, which we expect will total approximately $31 million and mature in the third quarter of 2027.

We updated the slide we introduced last quarter in the reconciliations and disclosures section of our earnings presentation, which highlights our current liabilities through 2028, so you can continue to have a clear picture of our future obligations.

Supported by the debt offering proceeds, expected cash generation and our available undrawn credit facility, we believe we have ample liquidity to meet all obligations, fund dividends, reinvest in the business and repurchase shares while maintaining a conservative balance sheet. In this context, share count for the quarter was 159.5 million shares, and it remains our long-term goal to maintain the share count in the 158 million to 160 million range.

To summarize, we believe our financial position remains strong. We continue to generate growing durable cash flows from a highly diversified and long-duration asset base. Strong fundraising momentum and growing fee-related earnings reinforce our confidence in achieving our growth objectives, while our balance sheet remains well positioned to support future growth.

We look forward to your questions.

[Operator Instructions] And our first question is going to come from Tito Labarta with Goldman Sachs.

Congratulations on the results. My question on the fees, very strong performance on fees in general. First on the management fees as a percent of AUM has come down a little bit. Just given the changing mix a little bit, do you expect any further pressure on that? How do you think about the mix and how that will impact sort of the management fees as a percent of the fee earning AUM? And then also, you had a good quarter on the other fees, I guess, M&A, other advisory fees. Anything there to highlight? How should we think about that going forward from here?

Tito, this is Alex here. Thanks for your question. Thanks, of course, for participating in our call. No pressure on fees on a product-by-product basis. So I don't see any pressure on that side. Of course, our -- when our management fees over revenues are change is more related to mix than to pressure on a specific product, fees on a specific product or strategy.

As we did buy and incorporate Solis in the beginning of 2026, we were expecting to do it by the end of '26 in our projections and guidance together with WP, the GPMS extension in the U.S. plus the RBR, which is a real estate investment trust here in Brazil, these three acquisitions, they come in with a lower fee base. They have a lower FRE in that sense, but they also have a lower ROA. In the case -- and that actually then because of mix that pushes our ROA slightly down. But the 90%, 92%, that's what we're getting to, should not change. It's minor, minor changes, okay? So I don't see, again, no pressure on fees on a product specific or strategy specific.

Fees are as a percentage of net revenues are changing because of mix. We did introduce -- we did incorporate Solis and the other acquisitions that I mentioned in the beginning of the year. They have a lower ROA, and that's why fees have changed a little bit. But we don't see going forward any significant change.

On the adviser M&A advisory fees, part of the Solis business, which is a CLO business here in Brazil, is a structuring advisory service that they do to their clients. So when Solis is structuring a CLO for one of their clients, they charge a structuring fee or sometimes also a consulting fee. So this line, no other revenues that has advisory fees embedded. It's not M&A fees. It will come from these structuring/consulting fees that Solis charges that is now part of our business.

It's part of their business model. They do originate these CLOs with several originators. They have around 100 originators. Of course, the 80/20 rule have around 20 originators that are significant for Solis. These 100 originators, they bring the opportunities to Solis in order to, of course, buy receivables, asset-backed receivables or structure a new CLO. And when Solis has structured this new CLO, it charges the structure fees that I mentioned to you.

So going forward, I think we have -- normally, we have other fees of around $1.5 million to $2. I think we're going to add to that moving forward another $2 million coming from the Solis structuring fees per quarter going forward. But it's parts of Solis business model, okay? So it's going to be a recurrent fee for us. I hope I answered your question.

Yes. No, very helpful, Alex. I guess -- so we should think of this new level of around $7 million is more recurring, particularly with the Solis business now going forward. And then also just with the incorporation of Solis and all the other businesses, right, the FRE margin was lower, it will be a little bit lower for the year, but should normalize maybe in the future years to the 58% to 60%. How are the margins and, I guess, these incentive fees? And was it also just mix impacting the margin or anything else? Like what's it going to take to get the margin back up to that 58% to 60% in future years?

Yes. Yes, straight answer here. We see it coming back to the 58%, 60%. And I don't see any major issues there. It's just a timing issue. We did incorporate these two acquisitions in the beginning of '26 versus in our budget guidance for the end of '26, plus the point that these acquisitions came in before, so revenues and of course, fee-related earnings, et cetera. But these acquisitions have They were operating at a lower margin than us. We operate at a 58%, 60% FRE margin. They were operating at close to 30% FRE margin. Very, very similar to the other acquisitions that we have already done, the GPMS business, the real estate investment trust in Brazil, et cetera, et cetera.

So what we do after we integrate these businesses, we start managing all their costs, we gain, of course, synergies, scale also, of course, and driving the margins back to 58%, 60%. So it's just a timing issue. No, I don't see any blip on the way. You're going to probably see margins going up quarter-over-quarter as we reach the end of '26. But the overall yearly margin will be slightly down to the 58%, 60% because we incorporated this lower-margin business in the beginning of '26. But you're going to see quarter-over-quarter the margins heading up to the 58%, 60%. So we go into 2027 already in a good pace -- in a good margin pace increase. And that's why our comfort level that '27 will be in the 58% to 60% FRE margin arena.

The incentive fees also that you mentioned is just mix. There's nothing that I would comment besides mix that sometimes you have an incentive fees that fund performance performs a little better in the second quarter versus another one in the third quarter. So there's very slight changes, $2 million to -- $1 million here or there from one quarter to the other versus $111 million total revenue. So I'm talking about 1.5%, 2% changing from one quarter to the other because a strategy performed better in the second quarter, the other strategy performed a little better in the third quarter versus the benchmark. So -- and then we do accrue the fees that I mentioned. So nothing, nothing structural. It's just slight changes here or there because of what I just mentioned.

So very -- no structural changes, very confident with a 58%, 60% margin -- FRE margin for us, timing issue for the acquisitions. Actually, we see the business very, very solid, to be honest, Tito. As we diversify the business to other asset classes and other countries, extremely solid as we see our fundraising in a solid ground, $4.5 billion versus $7 billion, which is the guidance for the whole year. So if we do another quarter of $2.5 billion, we're basically there already to the $7 billion. And the fundraising come from diverse strategies, diverse asset classes, credit, infrastructure, real estate.

So I think the business that we built, the diversification of product and countries. I was in Chile this week, came back last night, amazing upbeat there, the whole momentum in Chile is really, really, really positive. We have our seminar with clients on Wednesday, 1,000 people showed up and seedings -- no, seeding of 1,000 people, another 1,000 people online, an amazing finance seminar that our Chilean partners actually put up every year. The Minister of Finance of Chile was presented, Paolo Gedges, the ex Minister of Finance of Brazil, the Vice Minister of Finance of Argentina, Jose Luis Daza. So great momentum for the country.

I think we're going to see the same great momentum in Colombia, early signs that comes from the government change there to Abergardo and talking to the future government officials of the Abergardo government, strong momentum there as well, positiveism coming from Colombia. I think that the Colombia economy has greater challenges to tackle versus the Chilean ones, mainly the deficit, but also great, great momentum coming there. And we see the same in Peru. And we have these three countries, they're very important for us today and continue to perform very, very well, the funds, the strategies, the asset classes, the countries. So very solid business that we're managing here, and I think nothing really structural to report. Thank you, Tito.

And the next question will come from Ricardo Buchpiguel with BTG.

Could you please comment to which regions and clients are the increased fundraising coming from? And are there mainly new clients? Or are they existing ones? And for my second question, could you comment on what we should expect in terms of Patria's M&A agenda for the next 12 months following the acceleration on deal closing during the first half of the year, we saw also an increase in the transaction costs. So should we expect this cost to decline? And if so, to what levels?

Thanks, Ricardo, and thank you for participating in the call. Thanks for the question again. On the fundraising side, I think we see the three asset classes, credit infrastructure, GPMS performing the best of the five that we have -- or the six that we have, sorry. So credit, looking at the numbers there, again, solid performance that drives solid fundraising. We very, very positive on where we -- what we can achieve there. We are on the road to raise our private credit LatAm, dollar-denominated Fund II. And I think it's going to surprise us on the upside.

On the infra side, again, very, very solid fundraising on the road fundraising dollar-denominated LatAm pan-regional core -- funding Infra Core. Again, very strong momentum there. GPMS as well, we closed SOF V at around $700 million. The cover was $500 million. So 40% up versus the cover. And now the latest fund that was raised through the Aberdeen franchise was around $500 million there. So under our leadership fund, the secondary opportunities Fund V within the GPMS asset class, raising 40% over or more than the cover.

So again -- and the other three asset classes, real estate, public and private equity is also performing, as you can see there, reasonably well in fundraising. In the case of public equities, the returns of our funds, mainly the Chilean ones are really, really, really solid. And I mentioned about Chile a couple of minutes ago, how bullish I am with Chile for the next 2 to 4 years and even after that.

We see that in real estate, I think second quarter, I think you're going to see strong fundraising momentum, mainly coming from exchanging shares to quotas of our Brazilian real estate investment trusts, a lot of interest from investors to do that. And finally, private equity, I think we have -- we raised money for a big deal, which is a health care deal that we did acquire in Colombia and Chile through an investment through our Private Equity Fund VII and a co-investment vehicle with several investors there.

A lot of re-ups in the case of GPMS secondary opportunities Fund V around 35%, 40% of re-ups, and that's more or less has been in general, 1/3 to 1/2 of our fundraising comes from re-ups. But as we are increasing fundraising significantly, right, we raised $7.7 billion last year. The guidance is $7 billion this year. We already raised $4.5 billion. If you go 5 years back in 2021 when we IPO-ed, we were raising $2 billion to $3 billion. So we increased significantly our fundraising.

So of course, we need re-ups, but also we need new clients. And new clients coming from different regions. I think we mainly Asia, we -- the top performing region and LatAm, second top performing region for us. Asia more on the SMA side, big tickets, SMAs, LatAm clients more on the day-to-day investing in our credit strategies, public equity strategies. And we're back fundraising in North America. I have mentioned for so many quarters here that we have been underperforming North America, underperforming fundraising in private equity. I mentioned this quarter after quarter after quarter. And now we see some light at the end of the tunnel there in North America.

We raised a significant amount of money for secondaries opportunity Fund V. Of course, what is kind of obvious, of course, you need to have the right product to sell to the clients. Clients don't buy what you want to sell, clients buy what they want to buy, right, not what you want to sell. So I think we have now -- we're starting to have now a menu of products that is guided to the North American clients, North American clients willing to get exposed to mid-market private equity in Europe and globally, and we have the best performing team and assets and strategies there to offer.

They are looking again into infrastructure LatAm, dollar-denominated. So our infrastructure, pan-regional LatAm dollar-denominated core is doing very well in that sense. They're also looking for private credit, dollar-denominated LatAm, great inlays in North America with that private credit pan-regional LatAm, dollar-denominated Fund II, with North American clients. So we see North America back. And I think that's -- hopefully, that's going to be the beginning of us trending up to start raising more money in North America.

So again, I couldn't ask for the commercial team to do a better job, raising $4.5 billion out of the $7 billion annual guidance. If we do, as I mentioned, to achieve to another $2.5 billion fundraising quarter, we basically beat the guidance in the third quarter. We still have a whole full quarter to go, which would be the upside of the fundraising. So that's why we mentioned that we are confident that we're going to beat the record fundraising year, which was 2025 when we raised $7.7 billion.

On the M&A side, I think we're going to be very selective, Ricardo. We have already, I think, acquired the asset classes that we wanted to go into expand. We were basically a private equity infrastructure company at our IPO. We expanded with the Moneda Association into credit, big time, public equities and then through acquisitions, mostly of real estate investment trust in Brazil and Colombia. We expanded in the real estate side and then the GPMS business in Europe. So the asset -- all the asset classes that we want to have, we're already there. Now we are now looking into specific strategies, sub-strategies within the asset class, but it's a lot more selective and represents so much less of our future growth.

We see future growth coming mostly from organic, as we have explained here and less so from acquisitions. So I think you will see acquisitions going forward represent a much lesser part of our growth strategy as we have already established ourselves, as I mentioned, the countries that we want to get exposed to, the asset class that we want to get exposed to.

I think the last baton here in Latin America for us is Mexico. We did buy a small real estate investment trust in Mexico earlier this year, FIBRA as they call them there, as you know. But I think also in Mexico will be more acqui hires, which is acquisition of teams and cautiously expanding into the Mexican arena versus a large Mexican market versus a large acquisition. We don't even see a large acquisition available actually to be done in Mexico. So very selective M&A going forward. Most of our growth coming from organic, already well established in the asset classes that we wanted to go into at the IPO, very solid fundraising from the credit infrastructure GPMS mainly coming from different regions, Asia and LatAm being the two most important and absolute value, but very positive that North America is back as it was 5 years for us ago was one of the most important fundraising regions for us. And with the right products, we're back fundraising in North America in a significant way.

Thank you very much, Ricardo. I hope I answered your question.

That's super clear and very helpful. Just one follow-up. Like I understand that most of the M&A agenda is behind us and we should see some deceleration. So in terms of the timing for the line of transaction costs going down, if you could clarify what you could expect here, please?

Yes. I think -- yes, I think I'll turn it over to then I dive, Raphael Denadai, our CFO, to comment. But the answer is yes. As we go on and just pursue selective M&As in a smaller scale, the transaction costs should actually come down. But Raphael?

Okay. The transaction and restructuring costs were around $11 million in the second quarter of 2026. And of course, assuming no incremental M&A, we expect a small decline in 2026 with the third quarter and the fourth quarter running around $7 million to $8 million per quarter, followed by a significant decline in 2027 and beyond.

Yes. So again, it's a result, Ricardo, of us actually having done the big M&A that we wanted to do, now being more selective than M&A, this line -- this expense line just comes down during '26 being a very line and subdued line in '27.

And the next question will come from Guilherme Grespan with JPMorgan.

Congrats on fundraising pretty solid. Most of my questions were answered. Just a quick one, maybe even to Raphael here on the balance sheet. I caught my attention to the shareholders' equity. It declined $40 million this quarter. It was $600 million last quarter, this quarter, $560 million. And doing a very rough math here, what I was struggling is net income was $10 million. You paid out as dividends $25 million roughly, right? So it was supposed to go down in this math only $15 million, but it went down $40 million. So there is something else that is $25 million there against equity. I just want to understand what exactly is in this point. I would imagine FX is something that sometimes goes against equity. But this quarter, I don't recall having a lot of FX movement. So I just want to understand if there's anything else on the OCI here on the equity book.

Yes. Thank you for your question. Yes, there is another reason, okay? And it's in other reserves. So other reserves is impacted by the accounting recognition of gross obligations related to put options over minority interest in certain subsidiaries. So following the closing of Solis in January, the company recognized for the first time the gross obligation associated with the potential future acquisition of the remaining 49% minority interest. So this is the explanation for the additional impact.

And the next question will come from Nicolas Vaysselier with BNP.

Three questions from my side. The first one, I just wanted to check this multi-asset line in disclosing the fundraising bridge, which I understand is SMAs. I want to know if you can give more color on the fee margin, the management fee margin on this line. Then my second question is on the other income in the fee-related revenues line. I do understand the point on the solid structuring fees, yet if I'm correct, they represented only around $0.5 million this quarter. So that doesn't really get us to the quarter-on-quarter increase to $7 million that we've seen. So I wanted to know a bit more what goes into this line.

And then finally, if I look at the accrued carry pool across your funds, it's been going down this quarter, mostly due to private equity Fund VI. And I understand from your statement, it's mostly related to negative mark-to-market movements over the quarter. So I wanted to understand if this changes your view on the PRA guidance for the year 2026 and 2027.

Okay. Thank you very much, Nicolas. Thanks for the questions and participating here in our call. SMA margins, 1 in 10, 1% management fees, 10% performance on average. We have some of the SMAs with 1 in 15%, 1% management fees and 15% performance fees. That has been the case for the last 20 years, 25 years. Normally, the funds that we raise, the drawdown funds natures funds are 1.5% to 2% management fees and performance fees 15% to 20%. Infrastructure funds being closer to the 1.5 -- 15%, private equity funds close to 2% with 20% performance fees. And the SMAs or co-investments where we charge in general, has been 1% management fees and 10% performance fees. So this is -- and it has been the case for the last 20 years, 25 years, it hasn't really changed much.

Just to be clear, sometimes we do give co-investment rights, no fee no carry in our infrastructure drawdown funds and private equity drawdown funds, it has to do with the big size tickets of the big clients that come into the fund.

On the Solis structuring fees, when Solis raises $500 million, it's not really correlated with the structuring fees because sometimes we get the structuring fees, and we're going to raise money for that specific fund that we structure over the next quarters, not the past quarters. So one thing I think it's difficult to relate one with the other, correlate one with the other.

So for example, if we do -- if Solis does raise $500 million, the structuring fees of these funds were probably 3, 4 quarters ago because then we structure and then we go out to fundraise, we charge the structuring fees and then we go out to fundraise and the fundraising is 2 to 4 quarters later than the structuring itself, the quarter that we did structure a specific CLO. So Solis charges structuring fees in most of the CLOs that they structure. Sometimes they charge also consulting fees, as I mentioned, which is more or less the same idea of consulting a client on how to structure a CLO or structuring fee. It's more or less the same.

As mentioned during my answer to Tito's question, we should see another $2 million per quarter on average of structuring fees going forward. Private Equity VI markdown was one specific company that we really marked down. And again, I think the whole private equity universe have the issues today about how do you value a company, a private company, should you compare directly with public peers, but our company is not public, it's private blah, blah, blah. But we decided to, again, be -- try, we always try to be as conservative as possible in our valuation, show exactly, again, what is the value of the company over the next -- the last 10 exits, 7 of them were at mark, one was 5% of mark and then two of them were close to more than 5% of the mark. So 80% of the cases, we sell companies at mark or 5% above or below the mark, 80% of the cases. And this was the case of the last 10 exits, which was the case if I go back 10, 15, 20 years ago, that's more or less the case.

So for private equity Fund VI, there was a markdown of one specific company that we felt that was not -- we felt that we saw that was not performing as planned. Going forward, private equity companies that are also in Fund V, Fund VI and Fund VII, we have two health care companies -- three health care companies in Fund V. We see two of them performing at very well and aligned with our expectations and the companies in Fund VI and Fund VII as well performing aligned with our expectations.

They don't carry any leverage. We deleverage these companies. They are cash flow generators. So they have, I think, the right capital structure for this moment of Brazil, which is a moment of very, very high interest rates in Brazil, very high interest rates in Brazil. And we, again, preparing ourselves for the next 4 years mandate or the next President, which will have to -- at least in Brazil, have to tackle the inflation, the high interest rate. So we're coming in getting out of '26 coming into 2027 with all these private equity companies completely deleveraged with a very, very solid capital structure to be able to face a high interest rate environment that we are already facing.

So we are we are not changing the FRE guidance because of any of the private equity markdowns. We have -- Private Equity Fund IV and Fund V have not been contributing to net unrealized performance fees since the end of '25. Private Equity Fund IV has not been contributing to net unrealized performance fees since '23, '24. We did not incorporate in our guidance or budget that we were going to raise significant amount of monies from the private equity side.

Our high-growth private equity funds are doing very well. The growth fund is doing extremely well, and we should be in the market raising for that fund sometime late this year or early next year. Our venture funds are doing very well. We are top quartile DPIs. So actually, our growth fund is a top quartile fund. We have in the investment performance page there. It's a top quartile fund. Our venture capital funds are second quartile of top quartile.

As far as DPI is concerned, our venture funds are top quartile with 1 or -- times or over DPI for venture funds in LatAm is extremely, extremely, extremely solid performance. So I don't see anything different there than we foresee very, very good future years for venture and growth, which we call the high-growth areas. We were not and we are not -- we were not and we are not projecting fundraising on the private equity side in a significant manner over the next years, more the SMAs because we still having to invest private equity Fund VII, so before actually raising or thinking about raising private equity Fund VII.

And Private Equity Fund VII has a significant amount of dry powder. I think there's another 2 to 3 deals that we should do there of $100 million tickets per deal for Private Equity Fund VII, plus, I think raising co-investments in SMAs to co-invest with Private Equity Fund VII. So there's still a lot of work to do to finish investing in Private Equity Fund VII, even thinking before Private Equity Fund VII. And again, no changes in our FRE guidance for '26 or '27 because of the private equity marks.

Thank you. I hope I answered your questions, Nicolas.

And the next question is going to come from William Barranjard with Itaú BBA.

I have a couple here on my side. First, about the multi-asset SMA you disclosed this quarter. Just wondering how should we estimate when it becomes the fee AUM, right, for now it's considered pending? And regard to it, what is the expected management fee charge there, if it's below or above the blended of 0.86% we see here? Also regarding multi-asset, this new segment, how do you see the pipeline here? Do you have any new fundraisings coming to this new line soon? What kind of fundraising, what kind of SMAs there?

And a second one, maybe it's a long shot, but regarding the redemptions on credit, I saw that this quarter amounted to almost half of the redemptions we saw through the last 12 months. So I was wondering if this is maybe related to Brazil because we saw some sizable outflows during the second quarter. And now in July, we've seen some net inflows increasing again on fixed income funds here in Brazil. So if we should -- if this is correlated, we should expect maybe improvements on net intakes in this credit front.

Thank you, William. Thanks for your questions. And again, thanks for participating in the call. The multi-asset SMA, it is really positive news. I think it's shows our relationship with clients of us actually having the prerogative to invest in several different asset classes. So clients looking to LatAm alternative assets saying, look, Patria is my service provider, my trusted partner, and I would like to allocate to asset Class A, B and C, and let's work together into a multi-asset mandate.

So extremely positive in that sense because it really shows that we have been able to develop a trust -- a partner of choice relationship with this specific client in several different asset classes in our four asset classes, to be honest. And these are chunky in nature, of course, because the clients that are able to do that and make sense economically for us are $1 billion, $1 billion plus. We do, of course, work with significant large sizable SMAs in our GPMS business, mostly for English pension schemes, U.K. pension schemes. This specific client is Asian, it's not European, but extremely, extremely interesting.

Which asset classes we're going to deploy? It's hard to say, but I would say that it would be mostly infrastructure and credit from -- because of the opportunities and the risk profile of this client and the dollar-denominated view on the revenue side of the specific asset class that they require, probably deploy this over the next 4 to 6 quarters, becoming then, of course, fee earnings AUM.

Also, I think on the -- your question on the redemption of the credit fund, around $100 million of the redemption on the credit fund actually was a client that redeemed from one fund and invested in another fund of ours. So it was -- so technically, it is a redemption, but then it actually -- he wanted to change from one strategy, one of our credit strategies to another one of our credit strategies. So $100 million were redeemed from one fund and that same $100 million was invested in another fund within our credit menu of products.

So it's absolutely normal. It's positive. They wanted to change the fund that they were invested in. So nothing actually structural, nothing to do with higher delinquencies or higher or issues here or issue there is absolutely 0 structural issues whatsoever. Sometimes clients do that, which is absolutely fine. Within their global credit allocation, they change the fund that they're exposed to in LatAm and with us, whatever. So completely, completely normal.

We -- in our credit funds, I think we -- our portfolios are very, very healthy, our private credit fund and of course, the public as well, but whatever, very healthy portfolios. Our credit -- private credit Fund dollar-denominated and regional LatAm is performing extremely well. It's really beating our expectations. You can see there from our investment performance pages. We're expecting a 10% to 12% net IRR. The fund is posting 16% net IRR in U.S. dollars. And that actually -- that performance gave us the whole -- very good track record for us to go back to the road and raise private credit and regional dollar-denominated Fund II. And I think that fund is going to be very sizable, a multiple of the first fund, which was close to $200 million. So very positive on the credit side. I don't see anything structural on the quality of our securities in the funds. On the contrary, funds performing very well. And I think this asset class will continue to be a major fundraising asset class for us in the near future. I hope I answered your questions, William.

And I'm showing no more questions in the queue at this time. I will now turn the call back over to Alex for closing remarks.

Well, thank you very much for participating. I know it's a very busy agenda for everyone and a lot of our peers reporting earnings. I can see that the whole industry is more upbeat than it was a couple of quarters ago from the earnings of peers that already came out. On our side, very solid performance, fundraising, FRE, FRE per share, DED per share, most of the metrics, very positive that we're going to continue to hit and deliver our guidance for 2026 that you guys know why now and beating on the fundraising side, delivering the FRE that we mentioned, $225 million to $245 million for '26, positioning us in a very good position to also deliver our '27 guidance. So very confident here, confident Solis business performing very well. Thanks for your patience. Thanks for participating. I hope to see you in person soon, and have a great Friday and a great weekend. Goodbye.

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

Good day, and thank you for standing by. Welcome to the Patria First Quarter 2026 Earnings. [Operator Instructions] Please be advised that today's conference is being recorded.

I would like to hand over the conference to our first speaker today, Andre Medina, Investor Relations Director. Please go ahead.

Good morning, everyone. Welcome to Patria's First Quarter 2026 Earnings Call. Speaking today are our Chief Executive Officer, Alex Saigh; and our Chief Financial Officer, Raphael Denadai, who joined us for his first earnings call in this role.

This morning, we issued a press release and earnings presentation available on our Investor Relations website and on Form 6-K filed with the SEC. A replay will be available on our IR website.

As a reminder, today's call contains forward-looking statements, which are subject to risks and uncertainties, do not guarantee future performance and undue reliance should not be placed on them. Please refer to the forward-looking statement disclaimer and risk factors in our most recent Form 20-F. Patria reports under IFRS and will reference certain non-IFRS measures. Reconciliations are in the earnings presentation.

With that, I'll hand it to Alex.

Thank you, Andre. Good morning, everyone. We started 2026 with solid operating performance as we continue to make progress expanding the breadth and reach of our platform. Our results this quarter reflect three consistent drivers: continued organic fundraising momentum, growth in fee-earning AUM and differentiated investment performance across our investment strategies.

Before I turn to the quarter, I want to formally welcome Raphael Denadai for his first earnings call as our CFO. Raphael has been a partner of this firm since 2024 and has been closely involved in our financial operations. He knows our business well, and I am confident he will bring a fresh perspective to the role.

Now turning to the quarter. Fundraising totaled $2.1 billion, keeping us firmly on track to achieve our full year guidance of $7 billion. We see upside potential as we work to beat our 2025 record fundraising of $7.7 billion, given the strength of investor demand we are seeing across the platform.

Fee-earning AUM reached $45.8 billion, up approximately 12% from fourth quarter 2025 and 31% year-over-year, reflecting year-over-year organic growth and the closing of Solis, our Brazilian CLO platform and three Brazilian REITs acquisitions, including RBR, Vectis and Genial, which together added approximately $4.9 billion of fee-earning AUM.

Pro forma for WP Global Partners, our co-investment platform in the U.S., which closed on April 1, fee-earning AUM stands at approximately $47.5 billion. The growth in fee earnings AUM drove fee-related earnings of approximately $51 million for the quarter, up 19% year-over-year, and we remain on a solid path to achieve our full year FRE guidance of $225 million to $245 million.

To put this progress into context, annualizing our first quarter FRE and adding the $10 million to $15 million of seasonal incentive fees that typically crystallize in the fourth quarter gets us to roughly $215 million to $220 million, even before considering the additional revenue growth and margin expansion versus first quarter 2026 that we expect to see over the balance of the year. Finally, distributable earnings per share of $0.27 rose 14% year-over-year. Raphael will take you through the financials in detail.

I also want to highlight that subsequent to the quarter, Patria reached an important milestone as we completed our first issuance of $350 million of fixed rate long-term debt. The notes were placed with a diversified group of institutional investors, primarily in the United States, and the offering was approximately 3x oversubscribed. This transaction extends our maturity profile, reduces our reliance on short-term credit facilities and provides additional balance sheet flexibility.

The notes include a mix of 5-, 7- and 10-year maturities with fixed coupons ranging from 6% to 6.6% resulting in an average duration of 8.5 years and an average cost of 6.4% per year. Proceeds are being used to retire our existing revolving credit facilities with the balance sheet available to fund future growth initiatives.

Pro forma for the offering, our net debt to FRE ratio stands at approximately 0.8x, consistent with our long-term target of 1x or less. Raphael will provide more detail on our capital management outlook in his remarks. Of course, the bedrock of our ability to grow the business is investment performance, and we continue to generate attractive returns across our platform. As shown in our earnings presentation, the vast majority of our funds have historically outperformed their relevant benchmark with over 80% of our current fee-earning AUM, excluding SMAs and third-party managed funds invested in funds that have exceeded their benchmarks since inception.

This reflects the consistency of our investment process across cycles and strategies and remains the foundation of our LP relationships and our capacity to raise capital. I invite you to take a look at the return pages of our earnings presentation. For example, our largest strategy, Credit LatAm high yield with over $5 billion in fee-earning AUM shown on the investment performance section of our earnings presentation, has generated 11% annualized net returns in U.S. dollars since inception 26 years ago, outperforming its benchmark by over 360 basis points. And as you can also see in the page, is outperforming its benchmark for all periods analyzed year-to-date, 1, 3 and 5 years.

Investment performance, of course, directly translates into revenue growth as over 70% of our fee-earning AUM, mainly in credit, real estate, GPMS and public equities grows as our funds deliver positive performance according to their underlying market value. As a reminder, our drawdown vehicles charge fees on a cost basis, so marks in underlying portfolios do not affect management fees.

Moving on, we are very pleased with our fundraising in the quarter, which reflected our continued momentum across multiple verticals. Our credit vertical continues to stand out as we raised over $925 million across various strategies that keep attracting strong demand from local investors and depending on the strategy, global investors as well.

Of note, Solis contributed with over $265 million in the quarter, quickly highlighting how this business is additive to our overall platform. The integration of Solis is progressing well and is expanding our capabilities in private structured credit, particularly in the Brazilian CLO market. This positions us to benefit from the continued development of non-bank financing in Brazil, which we view as a structural multiyear growth opportunity.

We're also seeing strong interest in our dollar-denominated private credit LatAm Fund II from international investors and expect this to be a meaningful contributor to fundraising throughout the year. Infrastructure continues to attract sustained demand from global institutional investors and raised over $545 million in the quarter, particularly notable as we are not currently raising a flagship fund. We are seeing growing interest in large-scale SMA and co-investment mandates. Many of these mandates are targeted to specific initiatives such as the data center project we announced in partnership with ByteDance that is now advancing through its construction phase, and we are in active conversations on additional transactions of comparable scale.

This represents the kind of fee-generating structured mandate we expect to see with greater regularity as our product offering continues to develop. In addition, we continue to expand the breadth of our infrastructure platform into new strategies such as infrastructure core.

In private equity, we raised $275 million through a co-investment opportunity and continue to develop a pipeline of additional co-investment and SMA transactions. We are also seeing growing traction in our local buyout Colombian fund and our high-growth reforest fund.

Our ability to raise capital for co-investments reflects continued LP confidence in our origination capabilities, even considering the DPI challenge facing the more mature vintages of our flagship private equity buyout funds, Fund V and especially Fund IV. The DPI profile of our buyout funds reflects a slower realization environment as well as company-specific challenges. And while lower interest rates would support improved exit activity, the new interest rate environment has not yet materialized.

To address the challenges of that part of our business, we have recently appointed the leader of our value creation team to focus primarily on divestments, while the existing leader of our private equity vertical will focus on investing our buyout Fund #7 and various SMAs and co-investment opportunities.

Meanwhile, buyout Fund #6 and buyout Fund #7 portfolio companies are performing well, having generated an average EBITDA growth of approximately 17% last year. Performance has also been strong for our growth equity and venture capital strategies, with flagship funds generating a net IRR in U.S. dollars of 13% and 17%, respectively.

Now with respect to GPMS, first quarter fundraising totaled around $265 million, and we anticipate that 2026 should be a good year for several reasons. First, we note that this quarter's fundraising includes a $139 million first close for our inaugural commingled co-investment vehicle, the Patria Co-investment Partnership Fund. This highlights our ability to develop new products on top of acquired platforms.

Second, we expect to complete the fundraise for our Secondaries Opportunity Fund V or SOF V in the coming months. We can share that SOF V has already received commitments in excess of its initial target of $500 million and that we believe the fund could reach close to $600 million by its final close, which would make it approximately 50% larger than its predecessor. This highlights our ability to enhance the commercial performance of existing products within acquired platforms.

And finally, we are particularly pleased to see that our European program is seeing increased interest from a broad range of institutional investors, including local institutional clients in Latin America as well as North American and Asian investors who are already part of Patria's global client base. This is an important development I want to highlight. The incremental demand from existing investors who have partnered with us in Latin America and are now expanding their engagement with us into new strategies and most notably into new regions.

Furthermore, the WP Global Partners acquisition, which closed on April 1st, further strengthens our position in the U.S. lower middle market, adding a local institutional presence and origination network in a segment where track record and relationships are the primary competitive differentiators.

Real estate fundraising outlook remains strong. Take two of our largest Brazilian REITs in logistics and urban retail, for example. They have over $160 million of capital already contracted, which should flow into fee-earning AUM in the coming quarters, highlighting what we believe to be one of our structural competitive advantages.

The scale of our listed vehicles allows us to execute on our asset exchange model through which property owners transfer illiquid assets in exchange for shares of our large liquid listed funds as a way to monetize their portfolios. This asset exchange program is generating an attractive fundraising pipeline that we believe is not only less dependent on the interest rate environment than traditional fundraising, but also potentially less costly to originate as well. The RBR acquisition further enhanced our scale and structural advantage as we expect real estate, which is currently over 90% in permanent capital vehicles to be a strong contributor to fundraising over the balance of the year.

Reflecting on the growth and fundraising that we are experiencing across our platform, it is clear to us that we have significantly diversified our firm's investment and distribution capabilities, both organically and inorganically. We believe we now have at least 10 investment strategies with flagship funds with the potential to raise more than $1 billion each per fund, up from just two flagship funds at the time of our IPO. All of our fundraising initiatives reinforce and support the high quality of our asset base as over 85% of our fee-earning AUM is in vehicles with no or limited redemptions, and our permanent capital base now stands at approximately $10.7 billion or roughly 23% of total fee-earning AUM.

In addition, pending fee-earning AUM, capital committed that would earn fees as deployed increased about 17% to approximately $3.3 billion in the quarter, providing additional visibility into future management fee revenues.

At our December 2024 Investor Day, we set a 3-year cumulative performance-related earnings, or PRE, target of $120 million to $140 million for the period from fourth quarter 2024 through year-end 2027, having generated approximately $62 million through the first quarter of 2026.

Infrastructure Fund III continues to support this progress with about $19 million of net accrued carry well positioned for monetization this year. As we approach the midterm of our guidance period and gain greater visibility into Private Equity Fund VI, which has $237 million of net accrued carry, we now expect PRE realization to take longer, making contributions more likely beyond 2027 rather than within our original time frame. Importantly, this is a timing issue, not a value one and private equity buyout Fund VI is well positioned to be a significant PRE contributor in 2028 and beyond.

Meanwhile, we are encouraged by the expansion of our PRE sources across growth, venture, real estate and credit, which together has about $13 million of growing net accrued carry, some of which could generate PRE in 2027. Taking it all together, we believe cumulative PRE for the fourth quarter 2024 through the fourth quarter 2027 period can reach $80 million to $100 million with upside potential if markets improve and divestment activity accelerates.

Now let me share a brief perspective on the operating macro environment. Having invested across Latin America through multiple cycles for nearly 40 years, we bring long-term standing perspective, deep local knowledge and resilience that few can match. We continue to believe the region's exposure to commodities, its evolving renewable energy mix and its significant infrastructure needs make it an area of sustained structural interest for global capital well beyond short-term market dynamics.

Given the recent geopolitical developments you are well aware of, we are seeing growing engagement from global investors with institutional allocators across Asia and Europe increasingly turning their attention to Latin America and engaging with us across a broader and more diversified set of strategies that has historically been the case. This reflects not just interest in the region, but confidence in our integrated platform, scale and execution capabilities. We are continuing to invest in our ability to meet this demand, and we believe we are uniquely positioned to capture these opportunities.

In summary, we are executing consistently across the business. Fundraising is on track. Our asset base is predominantly long duration and nonredeemable. Our investment performance is solid, and we remain confident in our ability to achieve our full year objectives.

With that, I will hand the call to Raphael. Thank you.

Thank you, Alex. Good morning, everyone. I'm pleased to be here for my first earnings call as CFO. I have been deeply involved with Patria since 2023, and I aim to bring to this role continued transparency, a focus on the quality of our earnings and over time, improvements in the clarity of our financial disclosures.

Now let me take you through the first quarter results. Total fee revenues for the first quarter was approximately $92.6 million, up 20% year-over-year from $77.3 million in first quarter 2025 and up 3% sequentially from fourth quarter 2025, excluding the incentive fees that typically crystallize in the fourth quarter.

The year-over-year growth reflects the full quarter contribution of Solis and the Brazilian REITs acquired through 2025, two months of RBR, organic fee AUM growth and the net FX and performance effect.

Our last 12-month management fee rate was approximately 87 basis points in the quarter, reflecting the full quarter impact of Solis in first quarter as well as stronger growth in credit, real estate, GPMS and various co-investments in SMAs over the recent quarters.

Independently of fluctuations in average fee rates and as evidenced by our margin outlook to be discussed in a few moments, the economics of these products remain very attractive given their often high incremental margin and the sticky and long duration structure of the mandate, which can include permanent capital vehicles.

Regarding expenses, total compensation and operating expenses for the quarter were approximately $42 million, up 14% sequentially from fourth quarter 2025. The increase reflects integration of recent acquisitions, planned investments and distribution and investment capabilities and the seasonal reset of compensation programs at the start of the year.

Fee-related earnings for the quarter were approximately $50.5 million, up 19% year-over-year, showing an FRE margin of 54.6%. The margin reflects the contribution of the acquisitions closed in the quarter, platform investments and seasonal compensation timing, all consistent with our prior guidance on quarterly phasing. We expect the margin to improve progressively through the year as management fee growth, integration work evolves and expense growth moderates. We remain comfortable with our long-term FRE margin guidance of 58% to 60%.

Overall, we are reaffirming full year 2026 FRE guidance of $225 million to $245 million or $1.42 to $1.54 per share. Approximately 15% to 16% growth from last year's $202.5 million. We are also maintaining our 2027 FRE target of $260 million to $290 million.

Total distributable earnings for the quarter were $42.4 million or $0.27 per share, up 14% year-over-year on a per share basis. Growth was driven primarily by FRE. Alex has updated you on our PRE expectations. So let me turn to stock-based compensation. Stock-based compensation in the quarter was $10.1 million.

Based on current programs, we expect full year 2026 and 2027 stock-based compensation to represent between 11% to 12% and 10% to 11% of total fee revenues, respectively. The expected nominal increase reflects an intentional expansion of equity ownership deeper into the organization and a higher proportion of total compensation delivered in equity for key employees.

When benchmarked against listed alternative manager peers, we believe our stock-based compensation profile is consistent with the group. Finally, we believe that over the long term, our stock-based compensation will moderate as a percent of the net revenues as our business scales.

Now a brief note on taxes. The first quarter effective rate was approximately 0.3%, reflecting our evolving business mix and consistent with our guidance. This is driven by country mix as we engage in acquisitions with higher tax burden, which increased the total tax expense.

Regarding the balance sheet, I want to make the opportunity to help you understand Patria's updated liquidity profile following the completion of our debt private placement, which, as Alex noted, extends our maturity profile, eliminates reliance on revolving credit facilities and provides fixed rate capital for future business development.

To facilitate this discussion, we have added a specific slide to reconciliations and disclosures section of our earnings presentation available on our website. Between proceeds from the debt offering and expected cash generation, we expect to have ample capacity to meet all of our obligations, pay out dividends, reinvest in the business and buy back shares while maintaining a conservatively structured balance sheet.

In this context, share count for the quarter was 159.1 million shares, inclusive of 893,000 shares repurchased directly in the market for $12.7 million and the initial implementation of a new total return swap or TRS of an additional 840,000 shares. It remains our goal to maintain the share count in the 158 million to 160 million range.

So to summarize, our financial picture is straightforward. We have a business generating growing, sticky cash flows from a highly diversified and predominantly long duration and no redeemable asset base. Our fundraising momentum continues and fee-related earnings are growing, giving us confidence that we are on track to meet our objectives. In addition, the balance sheet remains strong and positioned to support future growth initiatives.

We look forward to your questions.

[Operator Instructions] Our first question comes from the line of Craig Siegenthaler from Bank of America.

So you have a big election coming up in Brazil. I was wondering if you could talk about what the outcomes could mean for the asset management industry in Brazil and Patria, even though I know Brazil has been a shrinking part of your overall business given your diversification?

Yes, of course. Well, as you know, it's pretty tied between the 2 runner-ups, right, the current President Lula and the son of Mr. Bolsonaro, the ex-President under the name of Flavio, right? And so it's very hard to say which way it's going to go. But the scenario of having a fourth mandate of Mr. Lula is more of the same. And I think what we can see will be, in our take here, an environment with higher inflation and therefore, higher interest rates, driven by a fiscal indiscipline that is currently kind of the trademark of the Mr. Lula's government.

So I think the main difference for the asset management industry, Craig, is a higher inflation, higher interest rate environment under Mr. Lula's government's fourth mandate and a lower inflation, lower interest rates under Mr. Bolsonaro's, Jair Bolsonaro's government. Even though I think in the first moment it's going to be hard for Mr. Bolsonaro to reduce the deficits from Monday to Tuesday, but the projections will show that he will work on that deficit. The yield curve will start showing a decline in interest rates during his fourth four-year mandate, therefore, I think the environment will be less benign versus Mr. Lula's is gonna be more, I think, with a higher interest rate environment.

So where do we -- does Patria then actually act on that, and where do we stand? Our, you know, credit business will continue to perform extremely well as it is right now. As you saw, fundraising over the last years and the last quarter, record fundraising for our credit products. We're expanding our credit portfolio, mainly in Brazil with the acquisition of Solis. I think that the non-bank financing in Brazil is a huge opportunity.

As I say in my earnings call here, I think it's a multi-year, very important opportunity for us. We want to place Patria the same way that we placed Patria in the REITs business in Brazil, the Real Estate Investment Trust. There we are the number one, the leader of a [ BRL 250 billion reais ] plus industry that is growing at a double digits. Same in credit. The non-bank financing in Brazil is expanding tremendously.

And 2025 was the first year that capital markets non-bank financing surpassed financing for corporations in Brazil. Banks, because of the regulation and Basel and et cetera, and restrictions are lending less. Capital markets was for the first year actually surpassed banks again in lending in Brazil. For individuals, the same thing is gonna happen.

The right structure to do this is through Solis, through our FIIs, which is the real estate investment trusts that focuses on real estate credit. The opportunity there, you know, the numbers there, Craig, are just immense. Positioning ourselves there to continue to expanding our credit business and our real estate business that as it relates to credit, we have a very large real estate credit business as well within our real estate investment trusts. And I think on the other side of the equation with Lula, for equities might continue to suffer given what the high interest rates environment, right.

Now with Mr. Bolsonaro, I think again, we're gonna see, you know, credit continue to be a major source of income for us because I think it will take some time for Mr. Bolsonaro to be able to reduce inflation, and therefore interest rates in Brazil. The yield curve already projecting a decrease. Other, you know, products that are more real estate dependent, like, you know, the brick-and-mortar real estate side of the business, not the credit side of the business, and equities will favor under Mr. Bolsonaro.

What we're trying to do is actually, you know, given our, you know, 40-year experience in doing business in Brazil, is actually having a broad spectrum of products. And, you know, betting a lot on the credit side, private credit, non-bank financing that actually can be, you know, the engine of our growth, followed by, you know, real estate. Of course, we don't have GPMS here, which is growing a lot outside LatAm for us, followed by infrastructure, which is, you know, inflation-hedged, with a higher inflation environment that also should benefit under Mr. Lula's government.

Mr. Lula, during his 3 terms, did promote once, one of the, you know, largest concession programs in the world, toll roads, water sanitation, et cetera, et cetera, et cetera. We are benefiting a lot from that through our infrastructure division and vertical here. As it is inflation protected because, you know, most of the revenues are contracted and the revenues are, you know, adjusted by inflation. That's another product that we see favoring under Mr. Lula's government because of his willingness to do concessions and his, in our view, higher interest rate environment. I hope I answered your question there, Craig.

No, Alexandre, great. Very comprehensive. Just for my follow-up, Brazilian public equities have been very strong over the last 12-plus months. So I'm curious on how this impacted your realization outlook, which should make IPO exits easier. And I'm especially looking at some of your older vintage private equity funds like Fund IV and V.

Yeah. We are, yes, all true that you said. I think the, you know, the more liquid, listed securities, of course, looking into, you know, a change in geopolitics, you know, favoring Latin America, a lot of flows coming to the region. Independent of Mr. Lula's fiscal imbalance, we saw a huge flow coming into the region benefiting, of course, our stock exchange and other listed securities, appreciating the value of those assets.

Of course, you know, you see some of the, you know, the returns of some of our funds are just amazing. Last year, our public equities funds had returned from 40%-60% in US dollars and in reais, and then even more so in US dollars. And our credit funds that also have no listed securities. The market value of these securities went up with everything that you just said.

We are also seeing some that -- flow into the private markets. It takes a little longer. I think last year we saw listed securities being benefited from this flow first, of course, comes into that benefit kind of flows into the private side of the world. It takes some time for that to ripple down, that ripple down effect.

However, we are now exiting most of our companies in our Private Equity Fund IV, Private Equity Fund V, Infrastructure Fund II, Infrastructure Fund III, and using this momentum to exit. Even with the exits that we are actually under execution, we will not generate performance fees for Private Equity Fund IV in our view. Private Equity Fund V might generate performance fee, but Private Equity Fund IV will not.

Infrastructure Fund II will not generate performance fees, but Infrastructure Fund III, yes, and it's a great fund which has, you know, been paying performance fees over the last years, and we see that we will continue to pay performance fees in 2026. Yes, we are using this momentum to sell a lot of the companies in the funds and clean our portfolio, send money back to investors. Private Equity Fund IV, Craig, not enough for it to generate performance fees.

Our next question comes from the line of Lindsey Shema from Goldman Sachs.

Welcome Raphael. Look forward to working with you. Maybe just kind of following up on the private equity outlook and performance fees. I know last call you had mentioned that the not official accrued, but Private Equity Fund V performance fees were running around $40 million. Is that still the case? What kind of has changed since then to take it out of carry? I know it's very volatile, but maybe just kind of updates on the outlook specifically there.

Then more broadly, what do you really need to see? I know rates is a factor, and you mentioned you're starting to get some momentum from the inflows into Brazil, but I mean, you now have a person entirely, it seems like, in charge of focusing on divestment. Is the upside really just on rates? Is it maybe this momentum's a little bit better? Just kind of understanding the factors that led to revising down guidance and what could kind of, you know, be upside there.

Thank you. Thank you, Lindsey. I think as mentioned to Craig and to you all, I think the outlook for performance fees coming from Private Equity Fund IV is not positive. We do not expect performance fees coming from Private Equity Fund IV, even though we are selling companies from Private Equity Fund IV. It will, you know, generate DPI for investors, but not enough. Not enough, no. Not even close to enough. Okay.

For Private Equity Fund V, I think we conservatively value the companies at very conservative valuations in our view, in, you know, all of the companies of Private Equity Fund V. The upside there, Lindsey, is like if we can sell companies with a, you know, valuation higher than our current marks, then it will generate performance fees. Under this scenario, I prefer to be conservative and as of today, not have any expectations of performance fees coming from Private Equity Fund V as well.

Private Equity Fund IV, pretty sure about that. Private Equity Fund V, I'm being conservative about it, but I think that's the scenario. We're using a more conservative scenario in order not to generate expectations. There's an upside potential for Private Equity Fund V, but there's no upside for Private Equity Fund IV.

Private Equity Fund VI, you can see that, you know, no great performance fee there, over $230 million. Private Equity Fund VII is too early to say, but the companies in the portfolio is performing very well. In addition, our growth equity funds, as you see, are performing very well. We have a large asset in our growth equity fund, which is an online pet business that is, you know, a sizable investment that can generate sizable performance fees. We don't see it within the range of 2027. An upside could be 2027. That's why we reduced the expectations for the 2027 period.

I think there's sizable performance fees coming from that business, which is called Petlove. It's a market leader in Brazil. Patria Growth Equity Fund II, you know, the portfolio's shaping extremely well. Venture also, you know, portfolio's shaping extremely well. DPI is very high for our, you know, Venture Funds. You know, our Venture Fund II over 1x DPI. Our Venture Fund III already 0.3x DPI. We're after one that company, it will go to close to 1x DPI, 0.9x DPI for the Venture III. Venture IV is pretty new. Very, you know, good news coming from that side of the business. Plus performance fees that can come from other asset classes like real estate, like credit, et cetera.

But lastly, what I would like to emphasize, Lindsey, is like, you know, let's say that, you know, we do generate $80 million-$100 million of performance fees versus the $120 million, $140 million. The difference, you know, between one scenario and the other is around, you know, $40 million to $60 million. If we divide that by 3, you know, because it's a three-year period guidance. 40 divided by 3, around, whatever, $13 million, and 60 divided by 3, around $20 million. It will be an additional $13 million to $20 million that we'll add to our DE.

Given our, you know, projections that we're going to generate $225 million to $245 million of FRE this year, $260 million to $290 million of FRE next year, an additional $13 million to $20 million, of course, I prefer more $13 million to $20 million than less $13 million to $20 million. Percentage-wise, it's pretty small. It doesn't actually move tremendously the needle. Our performance fees, because, as you know, are becoming less relevant to our business and our results, we moved Patria into more NAV and market-oriented funds.

Listed funds where we charge fees on the market value of these funds, like REITs, like the public equities, like credit, et cetera. 70%, so the 7-0% of our fee-earning AUM come from funds that actually do charge fees on the market value of the assets, like credit, like public equities, like real estate, like GPMS. 30% are the drawdown nature funds that has the performance fees. That's already now in 2026, 2027.

Looking into 2030, by the end of the year, first week of December, we're gonna give out our 2030 vision. Even more so, this path continues for us to expand the business on the asset classes that I just mentioned, permanent capital vehicle, listed funds, whatever, that charge fees on the market value of the assets. The performance fees are gonna become even less relevant as we move into the future. That's not by chance. It's by strategy.

Of course, we wanted to guide the company because it becomes more predictable, more visible, as performance fees have this kind of volatility. Sometimes, you know, we are, you know, doing an M&A, and I joke that M&A stands not only for mergers and acquisitions, but it also stands for misery and anguish. You're there signing a deal, someone, you know, doesn't wanna sign the deal, whatever, it goes to the next quarter. We're moving the business to be allocated to asset classes and fund strategies that give us a lot more predictability. That's what the bond investors actually saw.

I think the rating agency, the investors that came into our bond, of course, they have a look into the credit quality. They want to, you know, of course, get their debt paid. They don't want much upside on that sense. They want predictability. Even though, you know, the performance fees can add that extra $15 million-$20 million in my example here, you know, they saw this very predictable business of Patria. That's why we managed to raise a, you know, seven-year, ten-year notes with these kind of terms that we just went over here.

I hope I answered your question, Lindsey.

Yes, that was great. I definitely heard on the strategy moving more towards market valued assets. And then I do have one more question, maybe a little bit more specific on this year. On the expense growth in the quarter, if you could just break down maybe by magnitude, how much was acquisition related, how much was investment, how much was comp resetting? How much was FX? Just trying to get a sense of what each impact was and how much margin can expand throughout the year? Could you reach your longer-term FRE margin target this year? Or is that more of a topic for 2027?

Yes. I'll go for the short answer, and then I'll pass on to Raphael. Yes, we can reach the 58%, 60% FRE margin for this year. And I'll pass on to Raphael to give you this breakdown.

Yes, I would say -- hello, Lindsay. First, thank you for your question. We have three temporary factors that explain the first quarter margin.

The first one is integration costs from the Solis and RBR closings. The second one is the seasonal compensation reset at the start of the year. The third one is the platform investment that were front-loaded. Okay. The path, as Alexandre said, to 58%-60% margin is supported by simple math.

So moving the margin from 54.6% to 58% on our $45.8 billion Fee-Earning AUM base generates approximately $50 million of additional FRE before any new fundraising contribution. On top of that, our $3.3 billion of Pending Fee-Earning AUM converts to fee-paying status through the year. We expect $10 million to $15 million of seasonal incentive fees in the fourth quarter. Annualizing first quarter FRE plus those incentive fees gets us to roughly [ $215 million ], and the margin expansion plus organic growth reaches the rest. We are reaffirming the 58%-60% range.

Just to give you some more perspective on the costs, we have, that's your question. We have an FX impact that is pretty much important in the first quarter of the year. We have to keep in mind that we also have a positive impact on revenues, okay? When we look, the expenses, separately, we can see this impact, but when we look it all together, it goes to the bridge that I just mentioned to you.

Perfect. And just confirming the $3.3 billion of pending fee AUM, is that all to be deployed this year or only part?

No, I would -- no. Of course, the plan is to deploy within the year because it's -- and if you do a ROA of 90 basis, which is our ROA, you can see where $25 million coming from here. But yes, within the next quarters. And I think our expectation and also investors' expectation and they want to see the money on the ground being deployed.

Our next question comes from the line of Guilherme Grespan from JPMorgan.

So my first question was actually answered was on the pending AUM. But the second one is just on the average management fee rate, Alex. I know that when you look at the consolidated view, there was a step down, I think, mostly related to mix. But whenever we try to do the per-segment here basis that you disclosed the management fee per segment, we saw a small step down on private equity and infra that there was no M&A. So I just want to confirm, sometimes those movements are average balance calculation that impacts the average management fee. But I just want to confirm there was no step down or any change to the fee schedule of PE and Infra.

No, Guilherme, thank you for your question, a great question, because it's, I think it's important for us to emphasize. The short answer, then I'll go through the explanation. No fee pressure, okay? Within private equity and infrastructure. What happens, when we raise a flagship fund, which is not the case of this year and this quarter, the flagship funds do actually post a higher fee rate. You know? Private Equity 1.17 and 20, 1 -- 1.75 for our management fees and 20% performance fees. Infrastructure, 1.5, 1.6 management fees and 15% performance fees, okay? The flagship funds, which we are not raising this year.

When we actually raise the SMAs which we mentioned. The SMA that was actually even used as an example in our earnings call, the data center SMA, with ByteDance or the toll road SMA that we did with PIF, the Saudi sovereign fund, and also with GIC, the Singaporean sovereign fund. Those SMAs are more on the 1 and 10 basis, 1% management fees and 10% performance fees. It is a way, so that's all.

As we raise these SMAs during 2026, and we are not raising a flagship fund, you see some of this margin movements or lower movements that you just mentioned for private equity and infrastructure. Private equity, we did raise an SMA. We did sign, not yet closed, a large healthcare deal in Colombia and in Chile. You probably, you probably know, recall that UnitedHealthcare owns three large assets in the region in South America, one in Brazil, Amil, that it sold last year. And then, UnitedHealthcare, which is facing now their issues of their own, decided to sell the Colombian asset and the Chilean asset. We did actually raise an SMA of over $500 million there with now 200 is already there in our first quarter. We will have another 200 to come in the second quarter for private equity to buy these 2 assets in Colombia and in Chile.

Again, now raising an SMA for private equity is 1 in 10, is not 1.75 and 20. Actually it's 1 in 15 in this case of private equity. During the year, you're gonna see this, the years that we are not raising flagship funds, but no fee pressure.

Needless to say, you know, some of the investors that do put money in the fund, in the main fund and are paying 1.75 and 20 in the case of private equity at 1.5%, 1.6% management fees and 15 in the case of infrastructure, they do require that we do give them opportunities to co-invest, where in the co-investment vehicles, they pay a fee of 1 in 10. It's a way of giving them a discount, Guilherme, right? It's not in the main fund because it would spoil the whole economics that other investors are now getting into the fund. They want most favored nations clause, whatever.

We don't reduce the funds that the fees for the main flagship funds. We do give them the opportunities to co-invest. In the co-investment vehicles, we have this lower fee combination. Which is now the way that the industry operates. It's not a 2025 or 2026 phenomenon. For the last 20 years, we've been doing this, and it's the same, the same mechanics. A very large investor gets into the fund, pays full fees, but then asks to co-invest and pay a lower fee in the co-investment vehicle. That is a 20-year phenomenon. It's not a 2025, 2026 phenomenon. We're not getting any fee pressure going back to the beginning of my answer here. Hope I answered your question.

Our next question comes from the line of Nicholas Vaysselier from BNP Paribas.

Hope you can hear me. I have two questions on my side. The first one would be a bit of a follow-up on the previous one. But I was wondering on the co-invest in infrastructure and private equity, do you manage to charge anything at all in terms of fees, or is it purely at zero? And I do understand that it's necessary for doing the business in that industry, but just wondering if there's any revenue impact?

And second question, your last acquisition this year in mid-market secondaries, developed mid-market secondaries. I was wondering if any other deal you might be doing in the near future would still be looking at developed market capacities. I know you've been talking about the U.S. quite a bit on recent calls. So I was wondering if this is going to be something you're going to focus on more in the near future?

Nicholas, thank you very much for your question, and thanks for participating on. We do charge fees on the co-investment vehicles. How does that work? I don't wanna, you know, bog you guys into much detail, but very big institutional investors, normally, they require that the first dollar that they invest that matches the dollar that they put in the fund is no fee, no carry.

Let me give you an example. If a very large investor decides to invest $300 million in one of our flagship funds, they require that the first $300 million of co-investments do not pay any fee and carry, the management fees and carry. In the end, it's a 50% discount. Of course, it's their option to do the co-investment. After that, Nicolas, we charge the 1 in 10 that I mentioned when I was answering Guilherme's question. 1 to 1, yes, for the large guys, no fee, no carry. After 1 to 1, we do charge, normally we charge 1 in 10. If it's an investor that is not an investor in the fund, he already goes into the 1 in 10. Okay? In the case of infrastructure.

In the case of private equity is 1 in 15. They pay a higher performance fee for the SMEs, for, you know, private equity. In private equity, it works the same. The first dollar for dollar, no fee, no carry. After that, they pay fee and carry. I'm generalizing, of course, there's no, if we go into the, you know, detail of some of the relationships, there might be a little twist here or there. In general terms, I think this is, I think gives you a good view of how it works. Again, it's not a Patria thing, it's not just for Patria, it's an industry thing. It's an industry kind of phenomenon, an industry characteristics of our industry, the 1 to 1, and over 1 to 1 people do pay fees for co-investments. Okay?

On the USA and the WP acquisition. The WP acquisition was -- let me start with a short answer. No, we do not intend to expand in the U.S. in a big way. Let me give you then some more detail. The WP acquisition was targeted to enhance our capabilities through the GPMS team. The GPMS does, as you know, private equity primaries, secondaries, and co-invest, and is mainly in Europe. Two-thirds of our portfolio is a, you know, European focused portfolio.

Our investors that ask us to have more of a global approach to, you know, private equity primaries, secondaries, and co-invest mid-market focus. That means, you know, having a larger U.S. presence and competence. The WP acquisition comes to fulfill and enhance and strengthen the part of the strategy of our GPMS business. So besides that, which is, you know, enhancing something that we have already purchased in Europe, which is a GPMS business from abrdn, we don't see any other short-term opportunities to get into the U.S.

Our focus is to, you know, LatAm and, you know, we're not really in big time in Mexico. We're growing in Colombia, as you know. U.K. is a main focus. U.K. is the second-largest alternative asset market in the world. I think the second technically is China, so U.S., China, and the U.K. For us, U.K. is, as it's harder for us to approach the Chinese market. The U.K. for us is the second-largest alternative market in the world. Very fragmented, contrary to the American market, which is, you know, went through a consolidation.

We actually can see ourselves through organic growth and acquisitions becoming one of the top 3 to 5 alternative managers in the U.K. and therefore in Europe, in credit, in GPMS, in real estate, in these asset classes. Our focus is to continue expanding where we already are in the U.K./Europe, continental Europe, LatAm, but not in the U.S. besides the GPMS that I just mentioned. I hope I answered your question, Nicholas.

I am showing no further questions at this time. This concludes our Q&A, and I would like to turn it back to Alex Saigh for closing remarks.

Well, thank you very much for your participation. Again, I think a great quarter for us. A strong performance, starting with performance of our funds, then, you know, rippling down to fundraising, great fundraising of $2.1 billion for the quarter. We know there's an upside there on our $7 billion guidance, and even, I think, beating the $7.7 billion record fundraising that we had in 2025. You know, very strong FRE growth for us, confirming the $225 million to $245 million FRE for 2026. And a 58% to 60% FRE margin. We also, you know, would like to thank you for your participation. Hope to see you in person soon, and have a very, very good day. Thank you.

Thank you all for your participation in today's conference. This does conclude the program. You may now disconnect.

Hello, everyone. I'm Andre Medina, Shareholder Relations Director at Patria, and welcome to the fifth edition of our PAX Talks, a deep dive into Patria's Credit platform. This will be a panel discussion. And if you have questions, please submit them, and we'll try to get through as many as we can. Of course, before we start, I have to read the obligatory forward-looking statement. So 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.

Patria assumes no obligation and does not intend to update any such forward-looking statements. Such statements are based on current management expectations and involve risks, including those discussed in the Risk Factors section of our latest 20-F annual report. I also note that those statements on this call constitute an offer to sell or a solicitation of an offer to purchase an interest in any Patria fund. Okay. So with that, I'm very happy to have with us today Alexandre Coutinho, our Partner and Head of Credit in Brazil; Carlos Gundersen, Patria's Senior Director, helping lead our Credit Investor Relations; and as the moderator, Rob Lee, currently Patria's Senior Adviser that I know a lot of you are familiar with.

So, to kick off the panel, I'd like to pass the word to Rob Lee. So Rob?

Great. Thank you, Andre, and thanks, everyone, for joining us and what I think will be an interesting discussion on Private Credit, which is in the news lately. So, maybe a good way to start is, I mean, equity investors, I think, typically think of private credit as being monolithic. When in reality, private credit is highly diverse when it comes to various types of strategies, product structures, and targeted investors. I think PAX Credit [ platform ] in that sense is no different, in that the business may be more diverse than I think investors may realize, particularly following the Solis acquisition.

Since both Carlos and Alex here represent different aspects of PAX's Credit platform, I think as a starting point and before we get into more detail, I think it would be great if you both could take a couple of minutes to summarize the types of credit assets and structures managed in part by the pieces of the business that you represent. Summarize that and very simplistically, the products, the structures, and the types of investors before we'll get into more specifics around market, TAM, and opportunities. So guys, thank you for joining me on this. And Alex, why don't we start with you?

Thank you, Rob. Concerning Credit, it's interesting to mention that also I'm part of the Investment Credit Committee of Private Debt fund for Latin America, and also I'm part of the -- a member of the Investment Committee of Solis. What we do here in Latin America is really different from what you can observe there in the U.S. It's much more, I would say, structured credit, although we do bilateral transactions, but the scope is a little bit different. Indeed, I will do the following. Carlos, do you want to go through these pages to explain, because it's very clear and very transparent. It will be very helpful; then I go in more details of the transactions. Carlos...

Absolutely, Alex. I'll start with that. Good morning, afternoon, or evening, everybody. So, today, across the Patria Credit Platform, we are managing about $12.3 billion. We mainly separate this in 3 sort of flagship strategies. The first one, and the oldest one, which was launched in year 2000 is our Hard Currency High-Yield strategy that invests primarily in high-yield bonds, performing bonds of Latin American companies. We've grown that strategy from $15 million in 2000 to over $5 billion and mostly to performance. So, this strategy has returned 11.1% net returns per year over 26 years. So, it's very impressive. Then, 16 years ago, we started our Local Currency Bond strategy, which manages about $2.3 billion at the moment.

This is mainly a strategy geared towards local investors who, most of the time have liabilities in local currency and want to match that with a product that offers the pairing counter side. And then, last but not least, we have what brings us together today, Private Debt. We manage about $4.7 billion at the moment after the acquisition of the Solis platform. And in this part, we do both. So, we do Hard Currency Private Credit and also Local Currency Private Credit to both the CLO platform, SMAs or funds. Alex, back to you, if you want to go deeper into any of those.

Okay. Thank you, Carlos. So the structures, the fine investments that we perform over Latin America, I would say that we do bilateral transactions as well. The major difference when compared to the U.S. market is deeply over-collateralized. So the transaction that when do -- when we provide loans to the companies. We have a very broad and expanded collateral. And I would say that typically is absolutely of the transaction. So, basically, it's much easier to execute these collaterals and much easier and faster than traditionally -- it is a traditional loan.

We do also a lot of securitizations in the form of CLOs, CDOs. And basically, what's the advantage? Because in this case, it's not collateral. We own the receivables. So, if the company filed for Chapter 11, 7, doesn't matter, the collateral is ours, and we execute and receive the cash as the cash flows concerning that specific package of receivables. So that Solis specifically is very strong in this front. And also, you do also the traditional asset-backed securities as well. For example, a fleet of auto loans, so we have the -- we provide lending to the final buyer of the car. We have the fleet of cars, we do that for ships as well for vessels.

And because of that, our transaction is very resistant to defaults. And also another aspect that is different, we have a very extended coverage of covenants. We have typically very long list of financial and operational covenants that make our process faster. And finally, I would like to mention that another angle that is very important to us is that we prefer to provide credit to companies that naturally, because of all of this that I mentioned to you, companies that are very heavy in assets. So, for us, it's very difficult to provide loans to a service provider, to a developer of software because it doesn't have assets to provide as collateral. So, very quickly, that's what we do here in Latin America. Carlos, am I missing something here?

No, no, no. You said it all. And, I would like to maybe summarize that the biggest or one of the biggest advantages Patria has in this market is that we can act as a Credit Manufacturer to basically assist companies on any type of credit they need. We can lend locally, we can lend in local currency, in hard currency, and also privately or publicly. We have different buckets in our strategies to basically accommodate that and find the best solution both for us, our investors, and our counterparts.

Great. I think that's probably a good starting point for maybe talking a little bit about the market TAM, the opportunity within the region. I mean, obviously, in the developed world, you've seen explosive growth of Private Credit, broadly defined. Notwithstanding a lot of recent headlines around retail-evergreen product redemptions generally, you've seen very strong demand globally. And obviously, in the U.S. and elsewhere, the markets are more developed.

So, can you talk a little bit about, obviously, Credit in general, but Private Credit, in particular? Where are we within the region in terms of its penetration rate and its ability to grow and expand? And maybe also as part of that -- what's changing to drive that or not and the competitive universe as you see it?

Yes. Maybe let me start just to paint a little bit how the market looks nowadays. So -- if you think about the Corporate Solutions market in Latin America or credit market, it's a market that, in size, is much bigger than most people realize. It's $2.3 trillion at the moment, where obviously, the largest chunk is dominated by the banking sector. So banks represent about 42% of the market. And that's been inherently a blue-chip, very constrained market, both by regulation and also because they have a great business, and Alex can touch on that in a minute, but they don't need to get very creative when it comes to offer credit solutions.

So, they have their playbook and they play by it. Then you have another very large market, which is the Local Currency Bond Market that represents about $700 billion at the moment, 32% market share. And again, very large corporates, very high credit, and mostly Investment Grade quality market. So mostly senior unsecured, covenant-lite. So, they cater for the very large corporates seeking credit. Then you have the High Yield and Investment Grade markets in dollars, which has been a very strong and novel asset class over years.

But again, if you want to play in that market, you need to issue at scale. Normally, if you don't issue at $300 million, $400 million, you won't be in the Indices as such and liquidity for those bonds is going to be constrained. And what this creates, everything I've said until now is that there's a very large mid- and small-market that is underserved. So, companies seeking to look for a credit solution, $10 million, $20 million, $50 million, $100 million, don't have many obvious places to go look for those solutions.

And that's where Private Credit has been doing its first steps. If you look at the chart here on the left, on the bottom, there's that tiny less than 1% Private Credit bucket, which is according to Preqin about $16 billion at the moment. So, extremely small. And let me make a small comparison here. If you take the Private Credit market and compare it against the High Yield market, in the U.S., this is all Preqin data, and that represents about 79% of the High Yield market. For Europe, 124%, so much larger. If you look at Latin America, and the Private Credit market represents 5% of the credit solutions compared to High Yield.

As such, we think that there is a runway for this market to grow 20x over the last 20 years. So, this is like investing in the U.S. Private Credit 20 years ago when it was just starting. And we believe that, that's an amazing opportunity. And that's, again, in a market with very low levels of leverage where credit penetration is very low. So, if you look at corporate credit against GDP in Latin America, it is 40%. North America is about double of that, and Europe and Asia are almost 3x that. And even when you look at total debt, including households, credit cards, consumer goods, et cetera, those numbers are still much, much lower than in other economies.

A good point, Carlos. And, I would like to emphasize one of the aspects that you mentioned concerning the dynamics in Latin America. Once again, Latin America has this history of high inflation, and we learned how to fight for a high inflation a long time ago. And fortunately, unfortunately, it comes back time to time. And because of that, the Central Banks, they are very fast and aggressive in increasing interest rates whenever it is needed. And that's the situation, for example, in Brazil. So LTM, last 12 months, I would say that the Real Interest Rate is similar close to 10% real return, so 10% above inflation.

So -- and if you imagine that you have a bank, so basically, this bank can buy government bonds with a 10% real return. And naturally, a bank is leveraged. So, the banks, although the Latin American banks, they are really good, they are very conservative, but they don't have to work really hard to have a really good Return on Equity or Return on Assets. And because of that, it creates an opportunity. Basically, we complement the banks and we fulfill some blanks at the banks they cannot provide credit because of regulation. Basel III, for example, in the case of the U.S., American banks with a local presence have certain rule, they have some limitations that a Private Credit fund, they don't have. And that's the reason that we have such good interest opportunity in Latin America.

And because of that, I really believe that the opportunity that we are facing in Latin America is the same opportunity that the Private Credit market faced around 2008 and really started this, I would say, this market there. That's the reason that we have a very interesting return. We have a very interest package of collateral and covenants. And we don't face that much competition, because there are a couple of players. But, as you can imagine, Latin America is difficult to invest from New York. So, you have to have a local presence. So, we do have offices in Brazil, in São Paulo, in Fortaleza—, in Argentina, Uruguay, Chile, Peru, Colombia.

It does make a lot of sense, with this local capacity to originate, to do maintenance of the portfolio. And this creates this opportunity, and that dynamic makes our investment process very different from the process in the U.S. And something that also is important to mention that we have a Private Equity DNA. And what does it mean? It means that our funds, usually, they are long-term funds, they are closed-end funds. So, you don't have this mismatch of assets and liabilities. Our funds is really -- all of them, they are long term when we invest in Private Debt. Usually, they are closed-end funds with Capital Calls. So, it's another difference that is very meaningful when you compare it to the U.S. market.

Great. One -- maybe a couple of things I think are worth maybe drilling down a bit. One is talking about the differences of the Private Debt markets in the Region versus the U.S. and globally is number one, the notable, absence of Direct Lending in the region; if you could touch on that a little bit. Number two, based on what you said and conversations we've had in the past is one of the concerns in the developed markets, you read about is Covenant-lite, a lot of PIKs in portfolios, and concerns about the general overall protections going down and maybe diving into those aspects.

Why or how you think the -- why there's something different or unique about the covenant structures that you have in the Region versus what we read about in the rest of the world. I think those would be 2 great rabbit holes to go down. And then after that, we'll come back. I would like to talk about what investors are you seeing? Are you seeing more global investors coming into the market and different strategies? Are you seeing it expand locally as well? Carlos, do you want to start, please?

Absolutely, yes. I think when you think about, let's call it, developed markets, Direct Lending, and because of the actors and different players we see in those markets, in our opinion, that market is primarily enterprise value-based, relying heavily on covenants, but also sponsor support and quite broad security packages over operating companies. In contrast, when you look at LatAm, Private Credit here is much more structurally driven. So, what features our different transactions here is very hard collateral, as Alex said before, and cash flow controls, true sale of receivables, and bankruptcy-remote structures, and very important, and this is a meaningful difference with amortizing profiles.

This results in protections that are less dependent on the enterprise value of the business, but more on the contractual cash flows that we can capture through our structuring. So, a different way of looking at it is in developed markets, collateral often supports a restructuring. In Latin America, the structure is designed to avoid needing a restructuring. We always say our mindset, when we face an opportunity and we analyze the opportunity, at the end of the day, 1 point more or less on IRR is important, but it's not our driving force.

Our driving force is our Structuring first mindset, where we basically spend a lot of time making sure that the thing we're creating -- the structure we're creating works for us, works for the company, and we're protected in case something happens because we know we operate across many different markets in the Regions, different industry, different dynamics, different Central Banks, different currency sometimes for different businesses. Something can happen there, and something can happen to the companies. What we need to make sure is that nothing is going to happen and that our structure is robust enough so that we can fulfill our goals.

I'll just say -- this may be a single question, sorry, Alex. But at the risk of maybe overstating it, do you think this characterization is correct? I think of, say, the U.S., it was -- Private Credit was really predominantly Direct Lending driven. And now in the U.S., they're diversifying into other types of Private Credit, whereas in the Region, you never -- there was no Direct Lending to speak of. And so you immediately started in a place where maybe parts of the rest of the world are migrating to in terms of structure and being driven outside of the LBO market. Am I overstating it?

Yes. No, no, no. But there's a few points there, and Alex is more eloquent than me on a few of them. But I would say that because of the structure of the companies in Latin America, I want to say the vast majority of companies are still family-owned. So these are families that built, created, prove these companies. These are -- their families have their wealth. They have created over time. So they're very conservative. That coupled with the environment where we live, where there's less access to credit, scarcity of capital, companies, at the end of the day, showcase much lower levels of leverage than one which you find in other places.

So, if you look at Latin America, I think the High Yield market is 2.6x net debt to EBITDA. In the U.S., that's 4x, 5x, depending on those segments. So, companies are very conservative when it comes to debt. And as such, there's way more space to do things and lend money and also not having sponsor-backed companies because the LBO model failed when they try to implement it in Latin America. That's why Patria in the Private Equity vertical follows a Buy-and-Build model, right? But having that more conservative approach allows you to have better structures and more protection.

Yes. I'd like to emphasize 2 points that Carlos mentioned. One that's concerning the covenants, and it is interesting because we are very -- it is strange, but it's true. We are very happy when a company breaches a covenant and why? It means that we were -- we are very close to the company and we can monitor the company. And it doesn't mean that we will necessarily we charge a waiver fee or something like that. It means that we have the right leverage to negotiate, and are close enough to the company to do something if it's necessary. So, that's one of your initial questions well.

And the second topic concerning the entrepreneurs in Latin America, and it's fascinating. Something that I love is to start our due diligence with a new businessman. And also it is very different than in the U.S. Here in Brazil, we are providing debt to the traditional families, not for the new techy companies that they are working in AI, et cetera. No, it's a traditional company with real assets, first- or second-generation typically. And with the owner that's a 70-year-old guy that faced all the crisis that you can imagine around the globe, that's not the first thing -- it's not the first war, it's not the second war that this guy is facing.

So, he will try to be as conservative as possible and it is curious that when you talk with U.S. investors that we are providing a Private Debt transaction that the company is 3x net debt to EBITDA, they get surprised, but that's our average company that are providing Direct Lending. It's very unique and very fascinating when we are dealing with these entrepreneurs that creates the company that they love the company because of that, they are very tough in the negotiation at the same time. So -- and they accept to be very tight covenant cut. They will not do that anyway. So it's interesting.

Maybe talk a little bit about your investor base, okay? So obviously, some of the products are dollar-based, some are local. I think it may be interesting to talk about how maybe that's evolved over time, maybe with shifting regulation or as Patria itself is maybe part to leverage its relationships. Can you talk about changes that you've seen and where you think it's going as importantly?

Yes. Well, obviously, at the very beginning, this was -- our client base was dominated by local players, pension funds, insurance companies, large family offices. For them, this has never been a satellite investment; it's core. It's very close to their heart. It's something that they can relate. It's something they understand. So that was originally our bread and butter. I would say around the Global Financial Crisis, we started expanding that and catering for more sophisticated investors across the world.

And what you see today is that a very material portion of our client base is pension funds in North America, global consultants, Middle Eastern family offices and institutions, insurance companies. So, it's very varied. And it was part of an educational process of not looking at Latin America as a tactical allocation or as an opportunistic allocation, but to really drill down and understand that there is a very meaningful risk premium that hasn't been priced correctly by the market. In our opinion, and that has generated consistent alpha over time.

So, when I say that our High Yield fund has delivered 11% per year, that's 370 points above the benchmark. It's not by chance. It's because there's a repeatable alpha to be caught because the spread that those issuers are required to deliver, it's not justified with the underlying risk. [indiscernible] broaden to more institutions across the world. We are, at the moment, raising our Fund II on the Hard Currency side, and almost all of the advanced prospects that are in due diligence right now are Northern Hemisphere or developed-market institutional clients.

And [indiscernible] transformation of this dynamic of global investors with local investors. And we have access to the most sophisticated global investors, including development agencies for specific strategies. Although, it's important to mention that the return is key, always; it's not only a matter of [indiscernible] impact, positive impact. That's always -- it's natural to us to be concerned. So it's natural to partner with them as well, but the return is key.

But in the local market, it's the same dynamic. We have a very good, strong, and close relationship with the most sophisticated local investors, delivering local return that's naturally -- we are very concerned with the balance of Asset Liability Management in all aspects concerning liquidity and also currency. And that's the reason that it's very important also to have a local presence with local investors.

How -- I mean, given the persistency of Alpha, Carlos, in your business, normally, you would expect that kind of Alpha over a long period of time will attract competitors or whatnot and will drive down the return profile. Whether it's in your part of the business or Alex's in yours, are there some structural things that, in your view, limit competition? Or do you think it's just there's so much opportunity, competition comes in, and there's still excess returns to be had? How do you think of that impacting the competitive landscape?

I would say that the key factor here is the people. This is a people business. We have a very large Credit team. If you count the Solis platform, we have over 110 credit analysts just covering Latin America. That's unheard of. So, having boots-on-the-ground, being locals in the markets where we operate, as Alex said before, having offices in São Paulo, in Fortaleza, in Buenos Aires, Montevideo, Santiago, Lima, and Colombia, et cetera, that gives us access and an opportunity to unlock value where most people simply don't have the knowledge.

So, imagine you're a big asset manager in London. How many people do you dedicate to cover Latin America? And how much depth can you gain? So, I think people makes a difference. We invest in our people. We develop our people. Leadership has been there since Day 1. So, in all the strategies I've shown, the people who launched that strategy, it's still on board. So, we have had 0 Portfolio Manager turnover historically in the credit vertical.

So, that acquired and held talent and knowledge is key because this is going to sound surprising, but most of the time, when we engage with clients, it's repeated business. It's people we have been doing business before. We've lent to them in local currency, in dollars, or privately, but it's people we know. So, I think that's the biggest difference and what has limited competition over time.

Maybe it's a good time. I don't know if Andre, if there's any questions from the audience, pass along?

Yes, there is. Actually, just to remind everyone to submit your questions, please do e-mail to us. We do have a few over here, and I'll read them. The first one asks for both Patria's Private Credit Fund I and the CLO, CDO business, could you talk about Patria's proprietary origination capabilities? Alex, do you want to talk about that one and talk about the CLO?

Absolutely. You want to start or...

Yes, please.

You start, please.

Okay. Let me. So on the Private Credit Fund I, I would say the vast majority has been bilateral transactions. So, transactions where we are discussing with a company a credit solution, if it's not done with us, it doesn't get done. And in some cases, we have been part of a larger negotiation. We also have done a couple of secondary steps. So, those were very opportunistic interesting transactions that have been prepaid and made-whole, so have been very accretive for the portfolio.

I would say that due to what I mentioned at the beginning, this Middle Market that's a bit forgotten because either large players are not going to look at a $50 million transaction or a $40 million transaction in the region, and there's not that many sources of capital. We have the advantage of looking at them first and being able to reject or go ahead. Since we launched Fund I in 2024, we have deployed in the strategy $800 million, but that comes after we looked at almost $23.5 billion in deal flow in that same period. So, that's about 2 years.

Those were 305, I think, opportunities we looked at. So that's a yearly rate of about 150 deals for $14 billion, $15 billion per year. Remember, the size of the market is $16 billion. So there is a very large need of capital that comes to us. We analyze it. We make sure that everything is in place. Is it the right yield? Do we have the right protections? Do we understand the business enough? Can we create an SPV where we can capture flows before they flow into the company? If all of that is yes, we can pull the trigger and structure something. But yes, I would say that the vast majority is Proprietary Negotiated.

Yes. Let me talk about the CLO, CDO business and let's split in the dynamics of Solis and the dynamics of the traditional Credit business. So concerning Solis, it's important to mention that they are very strong in the factoring business and in consignado, as you say, in Portuguese. So it's also deductible loans from individuals that work with government entities and also in the private sector. And it's important to mention in these 2 major industries of -- although they invest in all kinds of CLOs, CDOs, but these are the 2 most important lines of business.

A lot of the Originators of Receivables, they are in the market for some time, but some of them, they are not that huge yet in Brazil. And -- so, basically, they provide funding these Originators of Receivables since 0, since a very small portfolio of receivables. And because of that, this origination naturally is on. We don't need someone else and also it would be almost impossible to have someone else originating this kind of transactions to you. And the -- we are talking about a volume of between $5 billion and $6 billion, more or less.

And then we have the traditional Private Debt transaction that we are including CLO deals. As I mentioned, it makes more sense to talk about Structured Credit in this case. But anyway, in this dynamic is a little bit different, although also we originate 60%, 70% of these transactions, but some of them -- they are syndicated with other institutions, including banks. And the difference is that in this line of business, basically, we are investing with very traditional players in the market. So, we are talking with a segment business that has -- they have 20-year experience, 30 years experience.

So, they are very mature, and they are issuing their own CLOs, CDOs for years since the inception of the Brazilian regulation about this line of business. And because of this dynamic, they can originate their own, but we structure by ourselves, and we do have relationships directly with them, but sometimes we have to do a syndication of this transactions. But once again, in this line of business, we are talking about 67% origination for CLO, CDOs in the Traditional Credit portfolio for...

We do have a few additional questions here. The second one says the U.S. Private Credit has become more and more competitive, with the structure and terms increasingly borrower-friendly. Could you talk about the typical structure and terms of deals in Patria's Private Credit Fund? Yes. Give me one second. I'm going to share a slide just to showcase what we've done here.

So, yes, we have the same opinion. And it's important -- sorry, there we go. Here, we have the 14 transactions. There's a 15 now that I haven't included yet. But when you look at Direct Lending in the U.S., I would say that the majority of the things you see on the covenant package and the corporate guarantees are there. So the first 2 columns you see on this very busy chart. The added value that we can consistently add in Latin America are all the other columns.

So, the owner guarantee, the shares, the real assets, the cash flows, the true future of receivables and the bankruptcy-remote structure. I think those are very unique to what we do. And the objective of creating these structures is that we ring-fence cash flows. So, for example, in the telecom, the first line there, the bankruptcy-remote model, it does, it captures both the monthly payments of the users of the cell phone plans in Chile, plus the handset, the mobile phone payments, and that goes into the structure. And, we have over a one-time coverage of the entire credit facility we provided for this company on a monthly basis.

So, once we see that, once we have captured the cash flows, those get released to the company. But if anything ever goes wrong, we can basically without the need of going to a judge or engaging in a very time-consuming judicial process, we own the trust. So, we have direct access to those cash flows, which is a massive advantage. And something I mentioned before that we insist in most cases is to have amortizing structures. So, we don't want to face any or minimize the refinancing risk.

And this also provides you the opportunity of being close to the company and identifying problems earlier. So when you have a debt that's amortizing, they have to pay interest plus principal on a quarterly or semi-annual basis. You can identify problems very early on and address them in time and not wait until the last day to basically be surprised by a breach or a refinancing problem that you didn't foresee.

Yes. I would like to emphasize what I mentioned before. We love companies that breach covenants. And so, basically, we usually have a very long list of all kinds of covenants that you can imagine. Naturally, there are some lines of business that is even tougher. We also do Project Finance in our Infra Credit Funds. And, as you can imagine, we have as collateral, everything, shares. We have the assets, the contracts, the cash flow, the bank accounts. So, basically, something gets wrong, we can assume the company and sell to someone else. And also, we have technical expertise to do that if it's necessary.

Fortunately or unfortunately, we use these covenants in these tools in the past. And very quickly, we solved the problems. I have a couple of experience that before the company managed to do to file for Chapter 11, we managed to [indiscernible] collateral, to get the cash and to leave the company and something that is unusual for CLOs and CDOs in the U.S., and here in Latin America as well, but it's very common to us to include covenants related to the seller of the receivables in the securitizations.

Usually, we have only covenants related to the securities to the receivables, but we include as well the covenants related to the company. So why to move faster. We would like to move as fast as possible if something gets wrong inside the company. And that's the reason that, basically, when we put together an indenture or a collateral agreement, or something like that, we have hundreds of pages of documents in order to have as many tools as possible to execute and leave the problem as soon as possible with our cash back.

So, it's very detailed, and we haven't seen a deterioration of this package over the years and because this market in Latin America is really different and a lot of players that are trying to invest from London, from New York and you have to have a local presence with -- in order to move fast, we have to be local in talking directly with the owners of the company very frequently to have the feeling if something is going wrong to help the company when it's the case. And once it's too late to leave as soon as possible.

Maybe just to reinforce something we have said, Alex, we have access to a multilayer approach to company. So, Alex, Fernando, Javier, the Senior Leadership of the company, they talk to the owners, they talk to the families. Then our co-PMs, they might talk to the CFOs to the Investor Relations, the analysts, they're speaking with the analysts in their respective companies. So that multilayered approach allows us to, one, check consistency and be very close to the company and we understand exactly what's going on.

Because remember, these companies we invest in -- sometimes in developed markets, they are small companies in the middle of an industry that are not very well known. In the case of Latin America, usually, we're dealing with the leaders of each sector. So, we're dealing with very large corporates with very good and established business that need a credit solution that we can fulfill.

And just going back to the structuring, something I didn't mention before that it's quite important for Latin America in hard currency. So, that applies for our Private Credit Fund I and soon to come up Fund II is that we fixed. So these are mostly fixed-rate loans. So, we are able to lock in a very good interest rate at the moment, and are not floating, as they are in most in developed markets.

And we do have a third question here, which is about our LatAm High Yield outperformance of the strategy. So it says, could you talk -- could you walk through how Patria's Flagship Credit fund outperformed the benchmark by 370 basis points net per annum for over 20 years.

It's 26 years, but who's counting there? Look, we launched that fund in the year 2000. It's been led by Fernando Chiarella, our Head of Credit since Day 1. And if you ask him, he's going to say it's a very simple business. It's lend money to good corporates with good contractual features, read everything and pricing is key. So, we might have a lot of position in that fund, but at the end of the day, it's also very concentrated. So, the top 10 positions usually represent about 40% of the portfolio. The top 20, it is about 60%. We're not afraid to get our hands dirty when there's a problem, when a company is facing some issues and the bonds are trading downwards.

If we understand the company, if we think that the price is an event and not a sustained loss of their capacity to fulfill their debt -- we might buy on the downward stream, get involved in the restructuring. And that has been one of the levers we can apply that has been very unique. So about 5% or 6% of the portfolio is in Special Situations, which is interesting. But at the end of the day, the vast majority of this portfolio is performing bonds that yield, and the default rate has been very low. We have managed to avoid the bad situations by being close to the companies and by having a team that basically does their job and avoids the defaults. That's been the main driver of performance.

I just say I know we're coming up towards the end, but I did have a question maybe for Alex, and this is talking about the market and Structured Finance. Can you talk a little bit about -- I mean, it's a growing market, the demand. Oftentimes, you see kind of business that maybe banks would be interested in or not. But can you talk about maybe the regulatory and banking environment in the Region that how that's impacting growth at least in that part of the Private Credit business and kind of what are some of those kind of macro impacts?

Do you want to start with Carlos and I guess? I don't know. Carlos, can you hear me?

Start.

So, concerning the regulation in Latin America in generally and the global regulation for banks, I would see that it creates a very interesting opportunity. And specifically in the case, for example, CLOs and CDOs have seen a lot of banks that's doing the calculation of capital allocation in order to optimize Return on Equity, they cannot buy a mezzanine tranches of securitizations. And when they buy senior tranche, the capital allocation is much better than buying an equivalent risk profile. So, they are moving to buy senior tranches of securitizations.

It's a good partnership that we can do with Latin American banks. So we buy the mezzanine. But in order to do that, we have to know very well the portfolio, the origination. We define the investment criteria of the CDOs, CLOs. So, it's creating a good opportunity to us. And at the same time, to invest in illiquid assets and long-term assets, always naturally matching assets with liabilities, matching the funds. The capital allocation for all the banks is extremely negative for the bank. So, it creates opportunities to us. And sometimes we are long, sometimes we are syndicating with banks.

Also concerning technology, so technology is getting easier and cheaper. So once again, for securitization, it helps a lot to make a very robust and transparent and being able to monitor a portfolio of receivables and as in securitization or as collateral for transactions in both structures and it makes the Risk-Return Profile better. I would say that we see a lot of potential in Latin America. And all the noise that we are observing now, globally speaking, is positive for the business.

We are able to originate very good opportunities, investments, and creates opportunities where a lot of people see challenges, and we are deploying capital with a very good Risk-Return Profile, concerning collateral, concerning problem-solving once again and return naturally. So, the perspective for Latin America is extremely positive for Private Credit in general, locally or globally speaking, in Latin America. Am I missing something here, Carlos?

I think you said it very well. And at the end of the day, we are not inviting people to sell all the Developed Market Credit or Private Credit exposure and get into this. But we think this is a fantastic complement to what you already have. So, we all have seen what's that the challenges faced by the industry. Competition in other pockets of the world is very strong. And this is a market that's nascent that the first-movers will have an advantage and will capture more of the upside.

But I always ask a question to clients, like if you could travel in time and go 20 years back, would you invest in U.S. Private Credit when it was the innovative people who are doing it? And the answer is mostly yes. And my answer is, well, then Latin America is starting with the advantage that we've seen that market develop. So we have to learn from their mistakes. We can anticipate some of the things that will happen in this market as it evolves. And we have the platform, we have the people, we have the technology to address that opportunity, to move fast, and to allocate capital at a very, very -- with a good Alpha proposition.

I would like to emphasize this aspect. For example, we learned from the mistakes of the developed markets. For example, 2008 was a very meaningful benchmark, and we learned a lot. That's the reason that we haven't seen the same mistakes in Latin America. From 2008 up to now, basically, we overcame that because the regulation in those countries improved in observation of what happened in the U.S. and also technology. Basically, we are investing in the same kind of instruments, but with the current technology, so this makes a huge difference to avoid fraud or credit wrong analysis, et cetera. So it's a good point, Carlos.

That's great. I think we're just about out of time. Andre, I don't know if there's anything else from the from the audience? Any last questions?

Yes. No additional questions from the audience at this time. I just think this was a very, very valuable discussion. Thank you Coutinho. Thank you, Carlos. Thank you, Rob, so much. And I don't know if you guys have any closing remarks, or Rob, if you have any additional questions that you want to wrap up.

No, I think we got most of them. I'm sure if anyone out there has more questions, they could pass them through to Andre, and he will pass them along to Carlos, Alex, or myself, as the case may be. And I just want to thank everyone for doing this. I think it was very helpful and interesting conversation, and look forward to more of these in the future.

Thank you all. Thank you for the opportunity.

Good day, and thank you for standing by. Welcome to the Patria's Fourth Quarter and Full Year 2025 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your first speaker today, Andre Medina from Patria Shareholder Relations. Please go ahead.

Thank you. Good morning, everyone, and welcome to Patria's Fourth Quarter and Full Year 2025 Earnings Call. Speaking today on the call are our Chief Executive Officer, Alex Saigh; and our Chief Financial Officer, Ana Russo; and our Chief Economist, Luis Fernando Lopes for the Q&A session.

This morning, we issued a press release and earnings presentation detailing our results for the quarter which you can find posted in the Investor Relations section of our website or on Form 6-K filed with the Securities and Exchange Commission. This call is being webcast, and a replay will be available.

Before we begin, I'd like to remind everyone that today's call may include forward-looking statements, which are uncertain, do not guarantee future performance and undue reliance should not be placed on them. Patria assumes no obligation and does not intend to update any such forward-looking statements. Such statements are based on current management expectations and involve risks including those discussed in the Risk Factors section of our latest Form 20-F annual report. Also note that no statement on this call constitute an offer to sell or a solicitation of an offer to purchase an interest in any Patria fund.

As a foreign private issuer, Patria reports financial results using International Financial Reporting Standards, or IFRS, as opposed to U.S. GAAP. Additionally, we would like to remind everyone that we will refer to certain non-IFRS measures, which we believe are relevant in assessing the financial performance of the business, but which should not be considered in isolation from or as a substitute for measures prepared in accordance with IFRS. Reconciliation of these measures to the most comparable IFRS measures are included in our earnings presentation.

Now I'll turn the call over to Alex.

Thank you, Andre. Good morning everyone, and thank you for joining us today. We are very excited to report our fourth quarter results, a capstone to a very successful 2025, which highlights how as we enter 2026, Patria is in a strong position to achieve and hopefully exceed the 3-year fundraising and FRE fee-related earnings objectives, in addition to other important KPIs we set for ourselves at our Investor Day in December 2024.

Highlights of the quarter and 2025 includes organic fundraising of $1.7 billion in the quarter and a record $7.7 billion for the full year. Sharply surpassed our previously upwardly revised full year target [ of $6 billion ] by more than $1 billion. We generated $203 million of fee-related earnings in 2025, up 19% year-over-year, achieving our objective of $200 million plus for the year. Distributable earnings per share reached $1.27 in 2025, driven by the strong fee-related earnings growth in addition to $19.6 million of performance-related earnings in the fourth quarter. We announced back on November 26, 2025 the acquisition of 51% of the Brazilian private credit manager, Solis, which closed on January 2, Solis with approximately $3.5 billion of fee earning AUM as of the third quarter 2025, substantially expands our capabilities and scale in the rapidly growing private credit market in Brazil.

Pro forma for the acquisition, our credit vertical fee earning AUM is approximately $12.1 billion. We also announced on December 11, 2025, the acquisition of several REITs, real estate investment trusts, from the Brazilian Real Estate Manager, RBR, which closed yesterday and is expected to add approximately $1.3 billion of permanent capital real estate investment trust assets in Brazil. We are now the largest manager of listed REITs in Brazil with a pro forma fee earning AUM of approximately $5.7 billion, a market in which we believe scale provides significant competitive advantages. Also, just yesterday, we announced an agreement to acquire WP Global Partners, a U.S.-based lower middle market private equity solutions manager with $1.8 billion of fee earning AUM as of the third quarter 2025, which will enhance our global capabilities in our global private markets solutions business.

Pro forma for the acquisition, our GPMS global private markets solutions, fee earning AUM is approximately $13.6 billion. Our total fee earning AUM of $41 billion as of the fourth quarter 2025 rose 5% sequentially and 24% year-over-year. Pro forma for the announced acquisitions, our fee earning AUM at year-end is approximately $47.4 billion, putting us in a strong position to achieve our year-end 2027 target of [ $70 billion ]. We are also pleased to share that our energy trading platform, Tria, which has experienced strong growth since its launch in 2024 and contributed with $4 million to our 2025 distributable earnings signed a definite agreement with Raizen to acquire its energy trading arm, Raizen Power. Upon completion of the transaction, Tria is expected to become one of the largest independent energy trading companies in Brazil.

Finally, adding to our current approved share buyback program of 3 million shares of which we have already acquired $1.5 million in the third quarter 2025, our Board just approved an additional 3 million share buyback program. On top, further illustrating Patria's partners' alignment with our business, of which we already own approximately 60% and our belief in Patria's unique position to continue its growth path, we, [ Mattress Partners ] through our holding company, PHL, I'm happy to announce our intention to purchase up to 2.5 million PAX shares. Summing it all up we can now purchase up to 7 million shares to return capital to our shareholders.

Now let's take a closer look into the quarter and the year, starting with fundraising. The $1.7 billion of capital we raised in the fourth quarter of 2025 and the $7.7 billion we raised for the full year do not include any acquisition and were driven by continued demand for our infrastructure, credit, real estate and GPMS strategies. Our fundraising in 2025 exceeded the initial $6 billion target we set back at our Investor Day in December 2024 as well as the revised target of $6.6 billion was set in the third quarter of 2025, while we are leaving our 2026 and 2027 fundraising targets at $7 billion and $8 billion, unchanged for now. Our success in leveraging the investments we have been making in our platforms and distribution capabilities, increases our confidence in our ability to meet and hopefully exceed our targets.

Now turning to the fundraising performance of specific asset classes. As the leading infrastructure investor in Latin America, we continue to see increased global interest in this fast-growing asset class as we raised approximately $2.3 billion for our infrastructure strategies in 2025, led by the final closing of our infrastructure development fund [indiscernible] and various fee-paying SMAs and co-investment vehicles. This was approximately 5x what we raised for infrastructure in 2024 and we see no letup in demand for these strategies from both global investors as exemplified by the recently announced $2 billion data center projects led by one of our drawdown funds in partnership with [indiscernible] and increasingly local investors.

Next, GPMS raised almost $2 billion in 2025, continuing to highlight the strong support from our clients and our success in integrating this business into our platform. The recently announced agreement to acquire WP Global Partners with approximately $1.8 billion of fee earning AUM, we expect will further strengthen investor demand for our solutions strategies over time as it enhances our investment capabilities in the United States. Credit also had another strong year, fund raising a record $1.8 billion of capital, handily surpassing the $1 billion to $4 billion raised in 2024, which was itself a record. Continued strong investment performance combined with the addition of Solid and its robust private credit capabilities further enhances the capital-raising prospects of our credit platform.

On that note, let me give a little more color on how we see the private credit opportunity in Brazil. The total Brazilian credit market reached $1.7 trillion in 2024 with $800 billion estimated to represent the addressable market opportunity for asset-backed nonbank private credit, of which around $200 billion is already currently served through private credit vehicles mainly CLOs. CLOs which AUM in Brazil exceeded $150 billion as of September 2025 have been the fastest-growing asset management strategy in the country, having grown at a 30% plus CAGR compounded annual growth rate since 2019. This growth is supported by multiple structural drivers, including, but not limited to: favorable regulation, banking disintermediation, tax incentives and broader financial deepening and growing interest in the CLO structure amongst investors. With the acquisition of a majority stake in [indiscernible], Patria significantly enhances its capabilities and scale in this very attractive market.

Finally, even within a high interest rate environment, we see building momentum in our real estate business. Our real estate strategies raised over $520 million in the fourth quarter of 2025 including over $260 million through a follow-on offering in our Brazilian logistics REITs and over $180 million in our funds in Colombia. As the largest manager of REIT assets in Brazil and one of the largest in Colombia with over $8 billion of pro forma permanent capital fee earning AUM, we believe our substantial scale in this business is a significant competitive advantage when it comes to attracting investor capital, and we are excited with the opportunities this business has to offer heading into 2026. Of course, fundraising alone does not drive growth in fee-earning AUM and management fees. And we are proud to report that redemptions decreased by approximately 25% in 2025 versus 2024, a clear reflection of our strong investment performance across our verticals.

Our ability to grow our fee earning AUM is further enhanced by the stickiness of our asset base, given that approximately 90% is in vehicles with no or limited redemptions, including 22% or $9.1 billion of fee earning AUM in permanent capital vehicles. Our strong fundraising coupled with low redemption rates and a sticky asset base is translating into solid net organic growth as we generated approximately $2.4 billion of organic net inflows into fee earning AUM in 2025, representing an organic growth rate of about 7%. We see additional room for our organic growth rates to increase further in the years ahead as we plan to grow our base of attractive products in sticky structures. In addition, with over 50% of our management fees charged on NAV or market value, our strong investment performance continues to be an important growth driver, contributing approximately $3 billion to our fee earning AUM.

Combined organic net inflows and the positive impact of investment performance added over $5.3 billion to our fee earning AUM in 2025. The impact of FX throughout the year was also positive, adding $2 billion to our fee-paying asset base. Finally, the acquisition of the Brazilian reach discussed during our last earnings call, and concluded in the second quarter of 2025, contributed with $600 million. Summing it all together, our fee earning AUM in the fourth quarter of 2025 reached $40.8 billion, up 24% or $7.9 billion year-over-year. Pro forma for recently announced acquisitions, our fee earning AUM is now at $47.4 billion.

It is also important to highlight that as we expand our business A large portion of the capital we raised will only flow into fee earning AUM as capital is [indiscernible]. Our fourth quarter 2025 pending fee-earning AUM totaled about $2.9 billion, further highlighting our future fee-earning AUM and management fee growth potential. Our fee-earning AUM growth is also reflected in the diversification of our business. Pro forma for recent acquisitions, our fee-earning AUM base is well diversified across our asset classes with 29% in GPMS, 26% in credit, 19% in real estate, 12% in private equity, 9% in infrastructure and 6% in public equities. Patria today has over 35 investment strategies with more than 100 products with no single product representing more than 8% of our pro forma fee-earning AUM. Our largest fund, which is a corporate credit LatAm high-yield fund, has approximately $3.8 billion in AUM and has delivered an impressive 13.1% net compounded annualized return since inception in 2022 and as of the fourth quarter 2025.

Our corporate credit LatAm high-yield strategy more broadly, which started back in 2000, currently has an aggregate AUM of over $5 billion. And as of the fourth quarter 2025 has outperformed its benchmark for every single period, 1 year, 3 years, 5 years and since inception. With the since inception, net compounded annualized return of 11.1%, exceeding the benchmark by more than 360 basis points. In terms of geography, approximately 1/3 of our assets are invested in Brazil, 1/3 in other Latin American countries and 1/3 in developed markets across Europe and the United States. With regards to our investor base, our sources of capital are also diversified across geographies with approximately 27% of our AUM coming from Europe and the Middle East, 31% from Latin America, excluding Brazil, 16% from North America, 18% from Brazil and 9% from the Asia Pacific region.

Looking at our foreign exchange exposure, over 60% of our fee earning AUM is denominated in a diversified basket of hard currencies, mainly the U.S. dollar and not exposed to soft currency fluctuations.

Finally, as I mentioned before, approximately 90% of our pro forma fee-earning AUM is in vehicles with no or limited redemptions including 22% or $9.1 billion of fee-earning AUM in permanent capital vehicles. These points further highlight the quality of our fee-paying asset base and the predictability and long duration of our management fees. Finally, we're also expanding the number of flagship drawdown funds into new strategies and asset classes, including infrastructure development, infrastructure credit, private active buyouts, growth equity, venture capital, private credit, real estate development, secondaries, co-investment vehicles, among others. All of these products will be eligible to generate performance fees, highlighting the potential for even greater diversification of our performance fee earnings stream.

Now our strong fee-earning AUM growth is translating into robust growth in fee-related earnings. In the fourth quarter 2025, we reported fee-related earnings of $64.2 million, representing 30% sequential and 17% year-over-year growth, also supported by our margin expansion of 5% versus the third quarter 2025 and 5% versus 1 year ago, reflecting our success in integrating acquisitions and the growing scale of our business. For the full year, fee-related earnings reached $202.5 million, up 19% and in line with our guidance. On a per share basis, fee-related earnings of $0.41 in the fourth quarter 2025 rose 30% sequentially and 14% year-over-year. Full year fee-related earnings per share was $1.28, a 15% year-over-year increase. Given our strong fundraising momentum and fee-earning AUM growth outlook, we remain confident in meeting our 2026 fee-related earnings targets of $225 million to $245 million or $1.42 to $1.54 per share. In addition to our target of $260 million to $290 million or $1.60 to $1.80 per share.

As a reminder, our fee-related earnings targets are inclusive of already announced and prospective M&A. We reported [ $78.5 million ] of distributable earnings in the fourth quarter and $200.9 million for the full year. On a per share basis, this was $0.50 and $1.27, respectively. In addition to the very strong fee-related earnings growth we highlighted earlier, distributable earnings also benefited from multiple monetization events in our Infrastructure Fund III. As we announced last quarter, our share count the fourth quarter 2025 remain at 158 million shares. In connection with performance-related earnings, I think it is important to address the decrease in our net accrued performance fees, primarily due to private buyouts Fund V falling out of carry. As this particular fund's performance is close to its hurdle rates and given its European car structure, foreign exchange and the price of public holdings can drive private equity buyout Fund V in and out of carry frequently.

However, as we look more deeply into our business, we are optimistic in our ability to generate future performance fees as we believe we remain on track to deliver our performance-related earnings target range of $120 million to $140 million from the fourth quarter 2024 to the end of 2027. We have already realized $62 million of performance-related earnings against our target, an Infrastructure Fund III, which is generating cash carry and had approximately $19 million of net accrued carry remaining as of year-end is expected to generate performance fees in 2026. Private active buyouts Fund VI which is a 2019 vintage and has over $210 million of net accrued carry is fully invested and entering its monetization phase. We have several newer strategies in growth and ventures that have performed well. And while still early days, already have about $7 million of net accrued carry, a balance that we would expect to grow over the coming years.

For both private equity and infrastructure, an increasing proportion of our growing co-investment assets are carry eligible which has the potential to generate performance fees on a deal-by-deal basis. In addition, as I mentioned, we have an expanding range of drawdown funds across our asset classes eligible to generate performance fees. To summarize, I want to reinforce that we believe that we are on track to deliver on our performance-related earnings target range of $120 million to $140 million from the fourth quarter 2024 to the end of 2027. With $62 million already realized approximately $20 million expected in 2026, mainly from our infrastructure development Fund III and the remaining balance expected to be realized in 2027 from multiple funds.

Before I conclude, a quick note on macro. From our perspective, the macro events both globally and within the region favor the drivers of our business. These long-term drivers, such as the financial deepening across Latin America, deregulation and pension reforms in large economies in the region, increased allocations to alternatives robust demand for infrastructure investing, potentially lower interest rates on the back of declining inflation and better fiscal prospects, a consequence of more market-friendly governments being elected in the region continue to drive demand from both local and global investors. If anything, the current geopolitical scenario, coupled with a weaker U.S. dollar and attractive underground trends are fueling increased interest in Latin America from a broadening range of investors. Incidentally, that is what capital markets showed in 2025 and also year-to-date with the region outperforming in many asset classes.

With that as a backdrop, we think it is important for investors to keep in mind that we have close to 40 years of investing experience navigating the various economic and political cycles in the region. This experience, combined with a greater diversification and resilience of our business, in our view, make us uniquely positioned to capitalize on both the increased investor interest in the region and the wide range of investment opportunities we see. Again, we are excited about the fundraising and fee-related earnings momentum we have been building momentum, which is supported by our increasing scale and capabilities across an expanding range of strategies. We believe our long-term opportunity and outlook remain bright and none of this would be possible without the dedication and capabilities of our team members, for which I am very proud and grateful.

On a final note, I want to comment on organizational and structural changes we have announced in recent months. First, I would like to thank our CFO, Chief Financial Officer, Ana Russo. Ana approached me about a year ago with her plan to step down from her current corporate role as Patria's CFO to focus the next stage of her career on advisory and nonexecutive roles and projects. We are sorry to see Ana leave, and I want to thank her for all her hard work and contribution in the past several years. But we are glad that we will continue our relationship in several fronts as, for example, with our current position as a Board member of Patria Moneda Asset Management in Chile. I wish Ana the best of luck as she charts a new career path.

Following an extensive review process, we announced that Raphael Denadai, Currency Packages Partner and CFO of portfolio management, with over 25 years of experience, we'll assume the role of Patria's CFO effective in April 2026. Ana, who will remain in her position until then, we'll provide more color on the transition in her prepared remarks. In addition, as we announced back in December 2025 to further strengthen our corporate structure in order to drive operational excellence and better support Patria's strategic execution at scale, Patria recently created the role of Global Chief Operating Officer and was pleased to introduce Nikitas Psyllakis as our new global COO. Nikitas joined Patria from DWS Group, bringing over 20 years of extensive global experience in financial services, having led strategic planning, operational transformation and regulatory initiatives. With that, I would like to once again welcome Nikitas and Raphael to their new roles.

Now let me turn the call over to Ana to review our financial results in more detail. Thank you, Ana.

Thank you, Alex, for the kind words, and good morning, everyone. Indeed, its quite rewarding to close out 2025 with $7.7 billion of organic fund raising exceeding by a large margin, our previously upwardly revised full year target of $6.6 billion by more than $1 billion. We expect the strong fundraising momentum and fee-earning AUM growth for 2025 to continue as we enter the second year of our current 3-year plan and are even more confident of our ability to achieve our objectives for 2026 and 2027.

Before I review our financials in more detail, I would like to take a moment to speak about my transition from the CFO role. Stepping down as a Project CFO with a deeply personal decision driven by my desire to dedicate the next stage of my career to advisory and no executive position, [indiscernible] where I believe I can contribute to a different organization given my diverse background. I will continue serving as a Board member of Patria Moneda Asset Management in Chile and remain fully committed to Patria as a CFO through the end of April. Over the next few months, my focus will be on delivering all 2025 annual reports and regulatory obligations, supporting our new auditor, KPMG, as they complete their first annual audit and most importantly, ensuring a smooth and effective transition to Raphael Denadai. I'm extremely proud of how Patria has evolved during my 3.5-year [ dinner ] as CFO, and I'm confident that my colleague, Raphael will do an excellent job and supported by a strong and committed team.

Let's review our fourth quarter and full year 2025 results in more detail. Our full year organic fundraising of $7.7 billion was an important step to deliver our cumulative 3-year plan of $21 billion of total fundraising that we communicated at our 2024 Investor Day. Our success this year demonstrates that the strategic investments we made across our investment platforms, products and distribution capabilities are paying off. We entered 2026 with greater visibility and unwavering confidence in our ability and our path to achieve our objectives for this year and next. Our fee AUM rose 24% year-over-year and 5% sequentially to $40.8 billion. The strong year-over-year growth reflects mainly the combination of solid organic net inflows of $2.4 billion and the positive contribution from our strong investment in performance in addition to a positive FX impact and the acquisition of several Brazilian REITs concluded in the second quarter of 2025.

As Alex mentioned, our fee earning AUM growth continues to highlight our spending fundraising capabilities and deployment opportunities coupled with the stickiness and resilience of our asset base. Pending fee-earning AUM of $2.9 billion, combined with our fundraising goals, the 22% of fee-earning AUM that are in current capital vehicles, the almost 35% of fee-earning AUM winning drawdown funds with an average life of 6 years and an overall stickiness of our asset base altogether, highlight our ongoing ability to generate net organic AUM growth over time. Total fee revenue in the fourth quarter reached $101 million, up 8% year-over-year and about 19% sequentially. For the full year, total fee revenue reached $344 million, an increase of 14% versus 1 year ago. Our management fee rate averaged 92 basis points over the trailing 4 quarters. As reviewed at our December 9, 2024, Investor Day, we are steadily diversifying our business and introducing new investment strategies and product structures, which are key drivers of our growth.

Consequently, our management fee rate will continue to evolve and we expect our fee rate to trend towards approximately 90 basis points over the coming quarters, but with the potential to vary depending on the mix.

Looking into our expense line. Operating expenses, which include personnel and G&A expenses totaled approximately $36.1 million in the quarter, up 5% sequentially and down 4% year-over-year. We remain focused on controlling expenses and capturing operating efficiencies even as we continue to invest in the business. For the full year, operating expenses totaled $141.6 million up 8% versus 2024, mainly driven by new acquisitions and salary increase inflation adjustment, partially offset by realized operating efficiencies. As we look ahead to 2026, excluding the impact of acquisitions, total expenses in the fourth quarter are good starting point as we entered [indiscernible].

Putting it all together, Patria delivered fee-related earnings of $64.3 million in the quarter, up 17% versus prior year and 30% sequentially with an FRE margin that role approximately 5% [indiscernible] versus Q4 '24 and sequentially to 63.6%. We remind everyone that the fourth quarter is often our strongest quarter in terms of FRE margin driven by the recognition of most of our high-margin incentive fees from our credit and public equity part for, which totaled $11.3 million in the quarter. For the full year 2025, we generated $202.5 million of fee-related earnings, up 19% year-over-year, in line with our guidance.

As Alex mentioned, we continue to expect to generate $225 million to $245 million of FRE in 2026, and we remain confident that we are on path to deliver on our 2027 FRE target of $260 million to $290 million, with an FRE margin objective of 58% to 60%. While our recent M&A may exert short-term pressures of FRE margins, our spending scale and ability to realize operating efficiencies keep us confident that we can meet our FRE margin objectives for 2026 and 2027 of 58% to 60%.

As noted on our last call, in Q4 2025, we had multiple monetization events in our Infrastructure Fund III, which generated $19.6 million of performance-related earnings in the fourth quarter. We continue to expect Infrastructure III, which had approximately $19 million of net accrued performance fees at the quarter end to continue its realization through 2026. Our total net accrued performance fee decreased from $402 million in the third quarter '25 to $249 million in the fourth quarter of 2025, mainly driven by private equity Fund V falling out of carry, driven by the price of public listed companies and FX.

For reference purposes, if we consider the FX rate and the price of the public holdings by end of January, net accrued performance fees for Fund V would have been around $40 million. As we look more deeply into our business and as detailed by Alex, we are optimistic about our ability to generate future performance fees from multiple funds. Next, our net financial and other income and expenses in fourth quarter '25 total a positive $1.8 million versus Q4 '24, mainly due to lower average debt and higher contribution from See, our energy trading platform. Sequentially, net financial income and other expenses were up of $0.8 million versus third quarter '25, mainly reflecting a lower contribution from Tria. What it can vary sharply quarter-to-quarter, it's worth noting that in 2025, Tria contributed approximately $4 million to Patria, and we are very excited regarding the long-term potential of this business. and hope to share more updates on the development of this business over the course of 2026.

At the end of the quarter, net debt totaled approximately $105 million is slightly below the $108 million for the third quarter '25 as we did not have any meaningful M&A payments in the quarter. Our net debt to FRE ratio of 0.5 was well below our long-term guidance of 1x deferred M&A-related cash payment through 2028 currently total approximately $110 million, excluding potential earnout. As highlighted in previous earnings calls, during third quarter, we entered a total return or TRS with a financial institution through which 1.5 million shares were purchased on our behalf. We expect to settle the TRS by Q3 2026 at which point, the share will be transferred to Patria and subsequently retired.

I would like to take the opportunity to recap our capital management strategy based on our strong cash generation and conversion of distributable earnings. First, we increased our dividend by $0.05 per share for 2026, resulting in an expected dividend payment of $100 million. Second, we will target around 3 million shares repurchased to offset dilution from stock-based compensation and any M&A transaction settled in shares. For this purpose, we may again consider the use of total return swaps, which have proven to be a cost-effective capital management tool. With regard to current M&A, we expect funding to come primarily from cash. Also as of December 31, our 2026 deferring contingent payments totaled approximately $100 million, of which about 80% is expected to be paying cash.

To highlight our ample ability to fund our growth and maintain a healthy dividend, let's look at a simple math. Based on the midpoint of our 2026 FRA guidance and expected period, we estimate our cash generation in 2026 will be approximately $220 million. So detracting our dividend, payment of TRS and the current deferred and contingent payments noted before will still leave us with the capacity to fund CapEx and additional M&A when considering our cash generation and our total unused debt capacity of over $100 million. Of note, our total current net debt capacity is about $235 million or onetime IFRS compared to the $105 million at year-end, which is very conservative as industry standards.

All the above underscores the strength of our financial position to support growth initiatives and maintain strategic optionality for our shareholders. Our effective tax rate in the fourth quarter '25 was 4.2%, excluding performance fees, which is usually crystallized in the tax favorable jurisdiction. The effective rate was 5.6%, which represents a 120 basis point improvement versus Q4 '24 on a comparable basis. The reduction was mainly driven by tax credits on our U.K. entities. On a full year basis, excluding performance fees, the effective tax rate reached 6.3% with [ 108 ] basis points lower than 2024. Looking ahead, we continue to expect our annual tax rate to average around 10%.

In the fourth quarter, we generated $78.5 million of distributor earnings or $0.50 per share. For the full year, distributor earnings were $200.9 million or $1.27 per share representing a 6% year-over-year growth from $189.2 million in 2024 with a strong FRE growth more than offsetting lower performance-related earnings and the higher share count. While FRE and are important financial metrics, I would like to give you some additional color on line items that impact our net income. In 2025, net income totaled $85.6 million, which is up 19% versus $71.9 million in 2024. The increase of $13.6 million is mainly driven by distributor earnings growth and lower deferred contingent consideration, partially offset by higher than originally anticipated equity-based compensation reflecting better performance, lower employee turnover and expansion of the program. We give more color on the equity-based comp and other line items during our first quarter call.

We finished the quarter with 158 million shares, unchanged from the prior quarter. We did not repurchase any share in the quarter and continue to expect the share count to average between 158 million and 160 million from 2025 through 2027, inclusive of our additional share repurchase. In 2025, the Board approved a share repurchase program of up to 3 million shares, of which we have utilized 1.5 million through the TRS. At our recent Board meeting, we received the approval for an additional 3 million shares to be added to the program. Finally, we declared a dividend of $0.15 per share for the fourth quarter. We remind everyone that we have updated our fixed dividend policy from $0.60 in 2025 to $0.65 per share for 2026, an increase of 8%.

Overall, we are truly encouraged by our fourth quarter results and with the momentum we are building as we continue to diversify and improve the resilience of our business. We believe we are firmly on track to achieve the various targets we have shared with you, and we are excited by the growth opportunity ahead. Thank you, everybody, to dial in, and we are now ready to answer your questions.

[Operator Instructions] And our first incomes from Craig Siegenthaler of Bank of America.

So first question is on private equity valuation process. We've had some recent inbound on the topic, so I thought we could kind of clean it up here. Private Equity Funds IV and V, they're both pre-2016 vintage funds, they both have a significant amount of unrealized value. So I was wondering if you could talk about your internal valuation process, how it works and also how those valuations are validated by third parties.

Okay. Thank you very much, Craig. Thanks for your question. On the valuation process, we are -- in summary, we use industry practice, industry common valuation process for our private access drawdown funds and our infrastructure funds, all of our drawdown funds we -- once a year, we have an independent appraiser to value the funds. We normally use a recognized independent appraiser that does the valuation with year-end numbers, in this case, end of 2025. This independent appraisal works with the management team, teams of the respective portfolio company going through a whole understanding of the business, understanding of the next 3 to 5 years and future prospects of the business and more of a technical discounted cash flow model as it is common in the industry for these kinds of valuations.

And then this valuation, of course, is compared with multiples and compared with industry multiples, peers. If there are no comparable listed peers, whatever. So it's not for the main methodology is a discounted flow. And of course, the end result is compared with peers, valuations, listed, nonlisted M&A transactions, et cetera, et cetera. As it is what I'm saying is completely normal for these kind of valuations in the industry. And what we do is actually we then -- they give us a range and then we value within the range, we actually marked the company's one by one. That's what we do. And during the year, we don't really do much. We just actually have the valuation during the year quarter-by-quarter, be adjusted by the cost of capital of that specific business and adjust the valuation is something major happens, like we sell part of the business or we merge or whatever would be or something really went goes wrong, like COVID or something like that, whatever.

But if there's no major changes, I don't -- we really don't like and we are advised not really to keep changing the valuation because if nothing major happens with that specific business during the year. We just then adjust the valuation by, again, the cost of capital until we go through that process, all that process again at the end of the subsequent year. So again, we have been doing this for since inception, right, our first product active fund was back in '97. It's going to be 30 years, not 29 years as of now. We know that because it's going to be -- this year is going to be our annual meeting with investors #29, and we do one a year. So it's 29 years ago, we did our first one, and we've been doing this kind of valuation for the businesses since then. We check with the industry practices now and again, and the industry practices continue to be more or less what I just mentioned, but it's different.

And I think there's sometimes confusion when we -- if we are -- when we charging management fees and performance fees, et cetera. Now we do not charge management fees on NAV for the drawdown funds. So the valuation is an indicative value because it doesn't mean much for our revenues. It doesn't mean anything for our revenues because we charge on costs -- so if we did invest $100 in that business, and that business now is valued at $150 or $50, we continue charging on $100 until we sell the business. So the valuation does not affect our management fees. Number two, we do not run performance fees, unrealized performance fees through our P&L. So if we have more performance fee and more unrealized performance fees or less unrealized performance fees, all the numbers that you just heard me say about our 2025 financials and Ana Russo say, about 2025 financials does not affect any little bit, okay? It's no effect whatsoever because we do not run our performance fees through our P&L.

Our team, our employees are not incentivized by unrealized performance fees. They do not receive a bonus on unrealized performance fees. So if the valuation is 1, 2, 3 or 4, 10 or 0, their bonus is exactly the same. We only run the performance fees through our P&L. We only recognize performance fees if they are paid, if they're paid, cash in the bank. And then we recognize as revenues and then we calculate the bonuses of our employees, and we paid a couple of quarters later. So it's even a negative working capital here the firm versus the employees on paying performance fees. Now we don't anticipate any performance fees as bonus before we actually get the cash, okay? And we got the money in the bank account.

So we do actually give the number of unrealized performance fees as an off-balance sheet number. Now completely off balance sheet is unrealized. And as you probably saw, for the December 2025 numbers, we have around $250 million of unrealized performance fees and we gave the guidance that we kind of -- we should generate around $120 million to $140 million of performance fees from the last quarter of 2024, all the way to the end of 2027. We already realized 60 plus. We have another $60 million to go, $60 million. And there's a -- I think the most -- the highest probability fund that will generate performance fees continues to be Infrastructure Fund III for 2026. We just gave the guide that we think we're going to generate another $20 million for 2026. And there are so many other strategies that today we have in our menu of products that generate performance lease venture capital, growth equity, private debt, opportunistic real estate, blah, blah, blah, blah, blah, all of them should then generate more fees that we should actually make us hit the target by the end of 2027.

So this is what we do. Again, it's industry practice. We try to be as conservative as possible, but we get a valuation range from the appraiser. No, we normally don't -- of course, we talk to the appraiser about the valuation process. But what we do is like we try to put in the middle of the range, and that's how we use the -- that's the exercise of how we actually mark our companies. I think it's -- again, it's -- this is -- again, you are -- you know the industry very well. And sometimes, you might compare the valuation of a company with another company that you might know well in another industry in another country, another situation, one company is doing better. The other company is doing worse, one company is this, one companies is that, one company has more debt, less debt. Has -- it's very hard sometimes for you took one single asset with another single asset. Of course, it's hard for us to also be able to have individual opinions because we follow the valuation of the independent appraising, okay?

So this is what we do. And yes, our Private Equity Fund IV, as you know, has been underperforming. And now we have Private Equity Fund V also not generating performance fees. So no 2 funds that as of the end of 2025, we don't expect performance fees coming from these 2 funds. And this is also already reflected in all of our numbers. So when we gave our projections guidance for '25, '26, '27, at the end of 2024, we had a [indiscernible] with '25, '26, '27 projections. As you can see from that presentation, we had asset class by asset class projection. And you can see that we were conservative in capital raising for private equity, given that Private Equity Fund IV, V are underperforming and we were more optimistic and realistic about fundraising for the other asset classes. So again, if you look at how much money we raise in 2025, $7.7 billion surpassing by 30%, our initial guidance of $6 billion, 30% more than our initial guidance is a substantial increase in which asset classes in credit, in real estate and in GPMS, global private market solutions.

So we were not expecting to raise in 2025, more money for the private exit asset class vertical. We were expecting to raise from other asset classes. Not only we did, we surpassed in total by 30% of our initial guidance. We gave a guidance for 2026 of $7 billion organic fundraising in 2027 for $8 billion, and we raised $7.7 billion in 2025. So I think we are in a strong position to continue delivering the guidance and hopefully even exceeding. So I hope I answered your question there.

I do have a follow-up also on private equity. But if you look at the MSCI Brazil index, of listed public equities. Brazil has been very strong. As you know, it's returned 55% over the last 12 months, outperforming the S&P 500 in the U.S. by about 40%. Interest rates are expected to decline in Brazil. All this should benefit public equities, private equities, your realization pipeline. So can you talk about the prospects for both IPOs and strategic exits in private equity in 2026. And I assume exits to other private equity firms are still quite limited at this moment given the lack of competition of Brazil.

Yes. Thank you very much. Yes, I think normally, I'm generalizing again here, sorry to generalize, listed traded securities did anticipate trends. And in this case, I think the upward trend that you just mentioned, we did see through the 2025 numbers of listed securities. And the MSCI is one of them. As you mentioned, appreciating substantially in 2025 in local currency and in U.S. dollars. Of course, the U.S. dollar weakened against some of the local currency. So that's helped the U.S. dollar also base return. That normally translates into private securities with time. It is not from Monday to Tuesday, but a whole enthusiasm with the region and investors start buying assets, which they can and the listed ones are the ones that they have more access because they're listed, of course.

And the private assets come in due time. And that's exactly what we're seeing and a lot of exits from both our infrastructure and private equity funds programmed infrastructure coming first. Basically, all of the assets of our Infrastructure Fund II were sold already. All of the assets of our Infrastructure III sold most of the assets in Infrastructure Fund III. So we're getting into the mode of beginning to realize the investments of Infrastructure Fund IV. Same in private equity, I think focusing in selling the assets of private equity for IV and V. Private Equity Fund IV as we do invest -- we did invest mostly in health care, it was affected also by COVID, companies there are recovering. And interest in private equity Fund V, we have invested also in health care, also investing in other sectors and Private Equity VI and VII, VI fully invested, VII being invested now should begin to come into realization.

Also, we have the growth equity funds, which are also private equity. Now we just mentioned about the private buyout funds, but we have private equity growth funds. Private equity growth fund #1, which is a single-asset fund which was managed by [ Kamado ] being the asset manager that we did partner with acquire a couple of years ago, is a company in the pet care space, but it's doing extremely well, and that's a prospect for a sale and IPO as well. We also see private equity growth for number 2 with already 2 realizations, 1 partial realization, 1 full realization of an education company was the full realization. And we see other prospects coming along of the more realizations this year and in 2026. And we also see our private active venture fund with significant and important realizations in '25 and other realizations coming into 2026. One of the notorious realizations that we did of our private active venture fund #3 was a company called Avenue, which is basically a brokerage house targeted for Brazilians willing to open a cash account or a bank account in U.S. dogs, and it was acquired by Itau was a very, very, very good deal for us. So not only now the private active buyout strategies that are posed to generate performance fees, our private equity growth funds, our private equity venture funds, our infrastructure development funds, our real estate opportunistic funds that we have in Colombia, that is also right for realizations. Our real estate opportunistic funds in Chile that also are right for realizations and generate and will generate performance fees in the future. And now with other funds like private debt that we raised private debt LatAm, #1, also fully invested short duration should generate performance fees in the future, and we are currently in the road raising private debt number two.

So again, I think we're excited about the prospects, but boil everything down, we're expecting $60 million of performance fees over the next 2 years. 20 should come from Infrastructure Fund III. Our presentation shows that we have an inventory as of December 2025 of approximately $250 million of performance fees. So $60 million out of $250 million, it goes to 20%, 20-something percent. So if we realize 20-something percent of that $249 million, $250 million of performance fees that we showed as of now in our December 2025 numbers, we should then be able to hit the guidance that we gave for the next 2 years.

Of course, no major caveats. Performance fees depends on so many things. It depends on the macro situation, it depends on the political situation. So I'm just saying this macro caveat here. I think when I look into management fees, the preservability and predictability of our management fee is given the 22% of PM is no permanent capital structures, and we have long-dated drawdown funds, 90% of our funds are in drawdown funds or permanent capital, I can say with more confidence that our predictability of our management fees, and therefore, our FRE is more visible. Everything that I said about performance fees, there's a big question mark because things going to happen and companies can perform better or worse as the macro situation can get better or worse. The U.S. dollar can strengthen and weaken. So therefore, we have a low hit ratio and I'm putting this major caveats that we might generate it, we might not as well given the or performance fees, not management fees that have already been driven by proven capital or drawdown funds in the U.K. Thank you, Greg.

And our next question comes from [ Lindsay Shama ] of Goldman Sachs.

Alex, Ana and Andre. Just wondering your -- you maintained your 2026 fundraising guidance. And because of that, it does imply slightly lower fundraising in 2026. So because of that, I just want to understand do you see any risks to fundraising? Are you maybe a little bit less optimistic? And what are really those reasons for maintaining the fundraising guidance where they are? And then on the flip side, if there's kind of any upside risk to that guidance? And then on that note, if you could just mention how much of your fundraising is coming from your own fund of funds and how that plays into your fundraising?

Lindsay, thanks for the question, and thanks for participating in the call. No, we're just being conservative, to be honest. I think it's -- we're not -- we had a guidance we gave a 3-year plan. We want to hit the 3-year plan. And the 3-year plan that we did give out December of '24 was to raise organically $21 billion. So it would be $6 billion in 2025, which we did $7.7 billion, actual $7.7 billion versus $6 billion the guidance. And $7 billion for 2026, $8 billion for 2027, so $6 billion plus $7 billion plus $8 billion, $21 billion, our organic fundraising to hit the $70 billion of fee-earning AUM by the end of 2027, having started in the end of 2024 at around 35%. So we would double fee-earning AUM, which is 25% increase for you.

And we are extremely positive about our fundraising momentum and -- but we wanted to keep that as a $7 billion and $8 billion guidance. Nothing that really worries about that. On the contrary, we see good momentum. But we didn't see any reason for us to upsize this guidance given that it's $21 billion for the 3 years. I think we're in a good momentum to deliver the 3-year plan. But having said that, let us go through the first 1 or 2 quarters of 2026, and we're going to be in the midst of the $21 billion target. And if we feel even more confident we'll come out with a new number. Hopefully, cannot guarantee. Hopefully, it's going to be on the positive side, but that's it. It was more for conservative reasons than any other reason.

On the second part of your question, our fund of funds do not really fund our funds, to be honest. And if you drive equity and infrastructure, if that's what you're referring to, we don't see any of our -- we don't have any fund of funds investing in our buyout private equity funds, growth private equity funds, venture private equity funds. We don't have any fund of our fund of funds investing in our development infrastructure funds. We do not -- we don't have that fund of funds investing in our own funds that I can -- I don't know, Marco, any comments there. I don't think we have anything, right?

In, my only comment here and good afternoon, everyone. My only comment here is that, as Alex said, we don't have a fund of fund. We do manage the listed trust that has actually funded one of our secondary fund. The amount is $75 million. Again, a very small amount relative to the overall fundraising for last year. Just to remind, this is a vehicle that has an independent Board is a list of trust listed in the London Stock Exchange. Therefore, decisions are subject to an independent board.

Any subsequent questions, Lindsay, did we manage to answer your questions?

Yes. It was the listed vehicle that I was asking about there. And then maybe just some further color on fundraising. Are you still seeing international interest in Latin Americas region. I know Brazil has been kind of a hot topic right now. What regions are you really seeing the most interest from? And where do you expect that incremental fundraising to come from?

Yes, thank you, Lindsay. No, yes, I think we have I have been saying that I think over the last earnings, several earnings calls that we have been geographically overperforming LatAm, overperforming Asia the least. We're kind of performing at expectations in Europe, and we are underperforming in the U.S. So I've been saying that for several earnings call, that hasn't really changed much throughout the whole year 2025. We have been, again, overperforming LATAM.

In general, we have been overperforming, right? 7.7 versus the guidance of 6, 30% more. Where is it coming from? Overperforming Asia Pacific, overperforming the lease, overperforming LatAm in line with our expectations in Europe, underperforming in the U.S. And asset class wise, over performing credit, overperforming, GPMS, overperforming infrastructure in line with real estate and in line with private X. And as I mentioned, our expectations for [indiscernible] low, but were in line with our expectations. We see these geopolitical shifts in the world, benefiting LatAm we see interested interest from Asia Pacific, Middle East and LatAm itself. I think it's some of that interest in LatAm has to do with geopolitical shifts in some of the investors in these regions, allocating more to LatAm versus other parts of the world.

And I think LatAm is extremely well positioned to benefit from these trends, given the solid democracies with solid institutional frameworks, solid regulatory framework with -- if you look at the kind of balanced fiscal budgets relative to other countries in the world, of course, you can see that -- you can say that 1% or 2% there years that, but if you compare to other countries in the world in a somewhat better situation, we see also a region of the world with a high percentage of renewable energy being driving manufacturing. We have commodities, soft and hard commodities in the region. We have the region has the second largest deposit of rare earths in the world is in the region, a region that is also rich in oil and gas and also in protein and other commodities.

So it's a region that actually was in my view, underrated for so many years. And now I think it's getting -- it's placed under the sun. Optimistic about continuing to see even more resources coming to the region in the new future [indiscernible].

Our next question comes from Ricardo Buchpiguel of BTG Pactual.

Can you please provide more color on the nature of the process related to the around $100 million in litigation liabilities Patria has? And also comment about the chances of having to pay some of this value? And how are the key steps on the main mitigations on this bulk of $100 million?

All right. Ana, do you want to help me with this answer, I think specifically the litigation liability, please?

Thank you, Ricardo, for the question. I will also making sure that that's what -- the $100 million as is posted in our, I think, in our financial statement and also in [ 20-F, ] it just so that is not in our balance sheet, as you know, because we just consider and accrue if there is a possibility for considering that is losing.

So you, as part of our information, you're going to see that more than 80% of this litigation, we already -- it's going to went away in our next report and basically has as we already in the past already included in all the statements that are very no, it was not possible. It was not -- it was not a remote, but it's a problem. So it's -- we actually won, and this more than 85% is going to go in our next report. Okay. So we will see in our next report.

That's clear. And a follow-up question, we saw that there was an increase in transaction costs related to M&As. I understand that Patria has been reaccelerating the M&A agenda and some announcements were made this year. So my question is if we should expect this level of transaction costs of around $20 million, $25 million quarter in the following quarters?

Yes. Well, I can take that from a macro view, and I can answer specific about the numbers. Just again, just to go through this litigation process again. So we want a specific litigation there, Ricardo, where around approximately 85% of the number of $100 million will come out of our numbers as of beginning of 2026, okay. So that's 85% out of the $100 million there.

On transaction costs, I think we did say, I think, the market that we would have a hiatus in our acquisitions during 2025 in order to be able to show our capability to integrate the businesses that we have acquired and fundraise for the businesses that we did acquire, which I think we were spot on with the $7.7 billion that we raised does not include any acquisitions because we did not do any acquisitions at 2025. And we raised money for businesses that we had acquired in the past, like our credit business, our GPMS business, et cetera. I don't know, real estate business as well. So happy that, that happened. We had one year of hiatus.

In addition, we also mentioned that as we do integrate these acquisitions, we'll bring our FRE margins again to 58% to 60%. Now our FRE margin was close to 59% for 2025. So right in the middle of the 58%, 60% number that we gave and compared to 2024, our margins increased from around 56% to around 59% because of the integration of the business that we acquired in 2024 or earlier than that, okay?

We also mentioned that as of the end of 2025, we would like to continue our acquisitions very strategically placed. We also gave the guidance in December 2024 that we would fund raise $21 billion organically, as I mentioned here, in these days answered, but also do $18 billion of fee-paying AUM acquisitions in order to reach the $70 billion of fee-paying end by 2027. So we will come back with the acquisitions programs as we did with the acquisition of the private debt platform, private credit platform in Brazil, plus some real estate investment trusts in Brazil as well. Plus recently, we announced the signing of a global private market solutions business in the United States called WP.

So yes, I think we were back. And I think what is the guideline is the [ $18 billion ]. If you add these 3 acquisitions is around 7.5, 8. So we see that -- or we give us a guidance that we should try to buy another $10 billion of fee-paying AUM by the end of 2027. So that's -- it's the same guidance as we gave in the end of 2024, the $18 billion . I'm just subtracting what we have already acquired, around 8. So we have another 10 to go by the end of 2027. I hope I answered your question.

No, that's clear. And given that the pace of M&A should continue in line with the strategy here, should we expect still this transaction cost that impact the accounting net profit and excluded from distributable earnings, should it continue to be around like $20 million, $25 million?

Yes. Sorry. That's right. Ana, if you can comment on the number itself, please, I'm sorry. I forgot the second part of your answer.

Ricardo, as you know, this line of transaction cause including all our nonrecurring expenses, which is directly related to our M&As and also restructuring costs, as you know, the quarter specifically was accelerated because of those M&A agenda, as Alexandre mentioned, the closing of those of [indiscernible] and just signing up WP. And specifically in this quarter is a higher is higher than usual. The quarter is specifically because of the impact of those transactions and some of the specific agreements that hit -- or cost that hit the fourth quarter.

So when we look on a quarterly basis, is -- I would say this is on the high end. So you can -- it's too high to consider that is all quarters going to be around $20 million. But we are -- as we have no new M&As. When we talk about total year, we can expect to have slightly lower next year, but not in a quarterly basis, $20 million is more on the high side because of those events happening in the same quarter. I think -- I don't know if we answered your question.

That's very clear. So mainly when you are closing M&A, we should see it's more towards the level. That's very clear.

And our next question comes from Nicolas Vaysselier of BNP Paribas.

I would like to bring the discussion back to the flagship and infrastructure funds. I acknowledge this is not the bulk of your fundraising targets for the next few years. Still, I'd like to have a bit of color from your side. I mean you've managed to raise the success of funds in what was a difficult environment macro environment for the LatAm region. And I was wondering if you could tell us more about the changes in the LP base you might have had from PE Fund IV to PE Fund V and same thing on the infra and particularly the sort of free up rates you've managed to achieve from your LPs?

Nicolas, thanks for your question. Well, we have seen, in general, I think if we go back to our earlier funds and today, a shift from endowments and family offices to institutional investors in -- so if you look at the absolute value of the dollars that we raised more and more for these funds that you mentioned, the drawdown funds, private equity funds and infrastructure funds draw down private active buyout private equity growth and infrastructure development, which no value add. We see more and more institutional investors composing the absolute value of the fundraising. We can have a big number of family offices.

But in absolute value, they are contributing less and because the institutional investors comes with sizable checks, sizable checks. So that has been the trend in most of our drawdown funds, those that you just mentioned specifically, the trends are similar to ones that I described. Reoperates, they go from 40% to 60%, reoperates, I think the latest fund that we are raising drawdown is our secondary opportunity fund number V. We have reoperates above 50%. So that's the latest one. So to give you no fresh news on that. And if you go back to the funds that you mentioned, even though you mentioned private equity buyout number IV, but it's a 10-year old fund. To be honest, I forget now how -- what is the reoperate versus private equity buyout number III because it's 10, 12 years ago. But the latest funds, it's around the 40%, 60%, which I have in mind number, Nicolas.

I can get back to you off-line on the repeat of private equity buyout number IV, which I forget, given that it's not a 10-year-old fund. But the last ones that I see infrastructure develop fund number V that we closed in 2025. That's the range, 40% to 60% reap secondary opportunity for number V, we see now around 50% reoperates. So that's more or less between the 40% and 60% for the more recent funds that I have pressure in my memory, but I can go offline and look for you for the older funds, okay? If you don't mind.

And our next question comes from [ Carlos Gomez Lopez ] of HSBC.

So first, I want to congratulate, I think, Ana, for a very good presentation, [indiscernible]. A good job and good luck on your next endeavor. Specifically, on Page 21, you gave us a very good breakdown about shares outstanding and which the increase in the first quarter of '25. We [indiscernible] this is related to particular transactions as an [indiscernible]. What should we expect for the share count in the next 2 or 3 years? Where should we specifically in shareholders consider? And so when you look at the [indiscernible] evolution on Page 22, and I realize that [indiscernible] is not everything, but you have had 126 and 123, 124, in terms of 127, 125, again, what is the evolution that we should expect [indiscernible]?

Carlos, thank you for your question. And I'll ask also Ana to help you here and answer specifically on the numbers that you just mentioned. In general, we gave a guide on guidelines in the -- in our December 2024 3-year planned back day that we will have a share count of around 158 million to 160 million shares for the '25, '26 and '27 period. We have finished 2025 with 158 million shares and we project 2026 to '27 for the share count to stay within that range, around 160 million shares, around 160 million shares.

Again, a guideline that we gave in the end of 2024 for the '25, '26 and '27 period. And we have, as also we gave us a guideline, our FRE for 2026, for this year is $225 million to $245 million, with a midrange of course, of $235 million. And for 2027, $260 million to $290 million with a midrange to [ $275 million ]. So then we use these numbers and we use the share count that I gave you and to calculate the FRE per share. And Ana, do you have the specific numbers there that you can help me, please? For FRE per share for '26 and '27?

Sorry, I was [indiscernible]. Yes. I think just so understand what -- Carlos, is what you're saying. So we are -- when we look into our FRE per share. On -- sorry, it was -- we have 108 on the FRE -- sorry, you were talking about FRE per share? I'm sorry that we couldn't hear no.

Actually, your answer has been on -- sorry, appreciate and I understand that he remain metric that you use, but I was in [Technical Difficulty ].

To be honest, it's very hard to listen exactly to what you were asking. I think there was a noise in the background. So I understood the FRE, but you're saying DE. So sorry about that, Carlos, [indiscernible]. No, I'm sorry. We were not listening very well to your question. So on the DE side, what do we do is the following. We give an FRE number, which is the one that I just gave you, $225 million to $245 million for 2026. It's $160 million to $190 million for 2027.

We also gave the share count number, which is 158 million shares to 160 million shares for '26 and '27. And we also give a performance-related earnings number. We do not give a per year number because it's very hard, as I was, I think, answering one of the questions here today to pinpoint exactly which quarter, which year, that performance fees is going to be generated. So we gave a 3-year guidance. The 3-year guidance was $120 million to $140 million of performance fees. As of the end of 2025, we generated approximately $60 million, $62 million of performance fees. So for 2026 and 2027, there are $60 million to $80 million to go, okay? And we -- it's very hard again to predict exactly what quarter or what -- even 1 year. So that's why we gave a 3-year guidance. We are 1 year into the guidance. We have another 2 years ago.

If we take into the low end of the range, which is now $60 million to go of performance fees, now we predict that Infrastructure Fund III is the one that will probably generate -- the highest ability to generate performance fees. And we estimate that there is a non -- unrealized performance fees impact from $20 million. So that's $20 million out of the $60 million. And the other $40 million should come from other funds that we have several funds that are maturing to generate performance fees in several different asset classes. So we don't give specific DE per share on a quarter-by-quarter basis or year-by-year basis because of this nature of our performance fees. If I managed to answer your question.

You have answered that question. And last one, do you expect the tax rate, which is now we're going to have 5% or so to stay in those levels?

Our guidance on tax is around 10% tax rate. That's our guidance. We're currently being able to have a lower tax rate for several different reasons. One, specifically for 2025 is because we had a tax credit in the U.K., but we don't see that as a recurring tax credit for 2026, 2027. So we should, as we move into 2026, 2027 to see a 10% tax rate. Ana, do you want to comment on that as well, please?

Yes. So we're -- tax rate to impact when you look into our tax rate is also performed yet side of the performance that also impact our effective tax rate because of this revenue sometimes comes from jurisdiction, which has a favorable tax rate. So you also have to take that into consideration when compared year-over-year.

But when we look into over time and as Alexandre mentioned and I mentioned in my remarks, is actually this year was actually had a favorable impact of a credit on the U.K. And therefore, we foresee for the next 3 years that at the end of this 3-year period, would reach approximately 10%. So it's going to increase over time to reach approximately 10% as we increased revenue and income in jurisdictions and paying more tax as our mix of M&A that enters and also our revenue. So this has been our guidance and we're looking for [indiscernible].

Our next question comes from [ Fernanda Sao ] of JPMorgan.

You've been growing very aggressively on the real estate business. Could you elaborate a little bit more on the strategy here? And how dependent do you think that lower rate is to grow this business?

Thank you, Fernanda. Thanks for your question. And well, we are extremely excited with our real estate business in general, not only in Brazil, but in Lat Am. And we are the largest real estate investment trust manager in Brazil as of now and scale in this asset class does matter.

Yes, I think it's -- we've been successfully fundraising and there are several ways that we can fund raise. It is an asset class in general that is interest rate dependent. Yes, it is in general. We see that as interest rates do the raise, you have a slower pace of fundraising as interest rates start showing a trend of decreasing, which is the case of Brazil, which is -- we saw that in Chile last year, we see the fundraising increasing. So it is dependent in interest rates. When interest rates increased in Brazil, using Brazil as an example, fundraising then the pace of fundraising decrease. And vice versa now, we see that the Brazilian Central Bank will most probably reduce interest rates in Brazil this year as the yield curve also shows that and our phase-in pace at least in Brazil should increase, should increase, it should be better fundraising environment for our Brazilian real estate investment trusts.

In addition, Fernanda, what we also see, given the size of our funds in Brazil, we -- a lot of investors look to us. And of course, we are talking also proactively with investors in exchanging their assets for shares of the fund. So it's an asset exchange. If you have a portfolio of real estate and you want to exit that portfolio, maybe you don't want to sell the whole real estate 100%. You can actually get shares of the fund and you can sell 10% now, 20% then because we have large funds that do have a sizable and very reasonable daily liquidity. It's also very interesting for families when they do inheritance planning. We have one real estate or a portfolio of real estate when you have 2 or 3 sons of daughters.

Now you don't have to sell the whole thing and you don't have to give one real estate to [indiscernible], you can give shares of a fun which for inheritance purposes and planning is very, very intelligent. So we see a lot of -- not only institutional investors looking for our funds as a liquidity path exchanging their portfolio with shares of our funds. We also see families and family offices looking for our funds in order to have better family inheritance planning. So all of that together, I think we see that 2026 should be a better year in Brazil for fundraising for the real estate investment versus '25. '25 was already a good year and we already started doing this exchange of assets for shares of the fund. But I think we see even more so in 2026.

So yes, I think excited about that asset class. And I think that as to our enthusiasm with fundraising for 2026 for another. Hope I answered your question.

I'm showing no further questions at this time. I'd like to turn it back to Alex Saigh for any closing remarks.

Great. Thank you very much for your patience in keeping on with us for long 1.5 hour here and your support is very much appreciated. I hope to see all of you in person during the year. I think there are several conferences that we already invited, and thank you very much for the invitation, and here we go. No hope to continue delivering as we are extremely confident in our numbers, and we started the year with a very strong momentum. And hopefully, that momentum is going to translate into even better fundraising that we gave the guidance and there also fee AUM and revenues, et cetera. Have a good day. Bye-bye.

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

Hello, everyone. I'm Andre Medina. I lead Patria Shareholder Relations, and welcome to the fourth edition of our PAX Talks on macroeconomics, Investing Amidst Ugly Geopolitics. This will be a fireside chat Q&A format. So you're welcome to submit your questions. If we're not able to, if we don't have the time to answer your questions live, we'll get back to you via e-mail.

Before we start, I have to read the forward-looking statement. So I would like to remind everyone that today's call may include forward-looking statements, which are uncertain, do not guarantee future performance and undue reliance should not be placed on them. Patria assumes no obligation and does not intend to update any such forward-looking statements. Such statements are based on current management expectations and involve risks, including those discussed in the Risk Factors section of our latest Form 20-F annual report.

Also note no statements on this call constitute an offer to sell or a solicitation of an offer to purchase any interest in any Patria fund. As a foreign private issuer, Patria reports financial results using International Financial Reporting Standards, or IFRS, as opposed to U.S. GAAP.

Additionally, we would like to remind everyone that we may refer to certain non-IFRS measures, which we believe are relevant in assessing the financial performance of the business, but which should not be considered in isolation from or a substitute for measures prepared in accordance with IFRS. Reconciliations of these measures to the most comparable IFRS are included in our earnings presentation and SEC filings.

So with that out of the hand -- out of the way, I'm very happy to have here with us today Luis Fernando Lopes, our Chief Economist that most of you know; and [ Thiago Pasqua ], our Chief Strategy Officer. And to kick off, I would like to ask both of them to give a brief introduction of themselves, of course, touching base on how they support our investment team and Patria's growth story. So Thiago?

Thank you, Medina, and good to be here. Pleasure to be with you guys. I've been at Patria for 7 years roughly. I worked directly with Alex Saigh, our CEO, running Strategic Office and what we call office of the CEO as well. So related to our strategy, our M&A agenda, and I support Alex on our management daily activities and, of course, strategic initiatives that we have internally. Pleasure to be here. Good to be with you guys.

Luis Fernando, please, floor is yours, introduce yourself, and we can jump start.

Thank you very much, Thiago. Thank you, everybody, for connecting. Please spare some time to listen to our history. Head Economist and Partner for Patria, I'm definitely the elderly here in this conversation. I joined the company 30 years ago, 1996. And the role of Head Economist at Patria actually speaks of several jobs at the same time. So how do we help our investment efforts.

First, of course, we have to produce regular analysis on the basic macroeconomic indicators, economic growth, inflation, interest rates, foreign exchange, so on and so forth. Also that we started doing because the focus -- our initial focus was only in Latin America, knew that geopolitical analysis was something very important for the region. And over the years, we learned that, well, that's something very relevant for investing in any corner of the world, not only in Latin America. And then -- but there is a second block of things that we do and we made deep dive today, which is called sectoral knowledge, something that the economic team also does is to connect the macro story with those key verticals, investment verticals in which Patria has an expertise.

So if we look in terms of our capital deployment, 2/3 of the capital that Patria has deployed so far are concentrated in 6 key investment verticals, which are health and wellness, food and beverage, agribusiness, power transmission generation and distribution, especially renewable power, logistics and transportation and then digital and tech services. So we have to produce research, knowledge, insights on these key sectors and connect to the macro story.

And last but not least, there is a third block of what we do, which is basically look at the markets, see the capital flows where they are going to portfolio changes. And of course, we do this to help our fundraising activity. And in addition to that, we have to measure ourselves, our funds, our products against the benchmark, against the competition. So that's also something that the research team helps do.

And then in this condition, for example, and actually some -- everything that I mentioned, we travel a lot. We talk to a lot of limited partners and investors around the globe. So we also can have a very good intuition about their concerns, portfolio changes, if they are getting increased exposure to one region or the other, so on and so forth. So it's a combination of this, everything shows what we do.

And then just to start, I think perhaps keeping the ball here, one thing that we can start if you focus -- talking about Latin America, we think that's interesting. That's a mix of everything that we mentioned here. For instance, there is -- in addition to geopolitics, we are going to discuss probably what's happening in Venezuela recently. But there is -- there are fundamental trends happening in Latin America.

And then one of them, probably the most important and not very correctly estimated. There are fundamental reforms taking place in the region, especially on the pension systems in Latin America. So key economies like Mexico, Colombia, Chile, Peru, they are changing the regulation of their pension plans and that basically speaks of higher -- increasing contributions by employees, by employers to the system. So this speaks about increasing the AUM in the region.

And in addition to that, there is a change in regulation that is making more space for alternative investments. That's definitely an underpenetrated asset class in the region. Typically, the allocation of institutional investors in Latin America, pension plans or insurance companies, we are talking about 5% of AUM. With this increase in AUM coming from the pension reform plus some changes in regulation, this allocation is going to increase significantly.

So for example, we see a significant increase in demand for alternative assets that Patria offers in Latin America or even outside of Latin America. And this is a very interesting opportunity that is taking place despite all the changes in currency, U.S. strike in Venezuela, so on and so forth. So this gives you an example of what we do and how we do research and how we help our investment teams. And of course, our shareholders as well to understand the investment environment around us.

So this is my long introduction, but I think it's an interesting message to start conveying.

Thank you, Luis. I think just to maybe to set up a common ground and starting point for everybody. Maybe you can elaborate a little bit on -- give us a snapshot on what is Latin America, current main figures and its global relevance that we see nowadays. Maybe you can elaborate a little bit so we can set up a stage here for particular questions.

Definitely, Thiago. So what I'm going to do now, I'm going to share a screen just to show you -- the idea is not to go through a presentation, but basically to show you some examples of what we do. So what we have here is a snapshot of the region. Actually, in every country that we invest and even if you go to the sector, the 6 that I mentioned, we have to produce something like this, which is a summary of the big numbers and the most important trends.

So for example, Latin America as of last year -- 2024, the latest number we have is a USD 7.3 trillion economy space, 662 million people living there. A lot of FDI inflow going into the region. I'm going to go back to this point, 7% of global GDP, 8% of global population, 14% of global net FDI. So this $196 billion that you see on your left-hand side is 14% of the net global FDI. And then you start to see something that differentiates Latin America from other regions. 8% of the global population, 7% of global GDP, but 14% of global FDI, that speaks of a region that welcomes long-term foreign direct investment. So let's be clear about FDI.

FDI, foreign direct investment, does not include investments in bonds and stocks, which are considered portfolio investment. This is really long-term capital expenditures in new factories, in new assets. So we have to create new assets. So this is the FDI thing. But most importantly, in this region, the dynamics is in the very center of this chart, which is basically Latin America is an unusual combination of 2 things, perhaps unknown to several investors. It's a story of robust domestic markets.

So this $7.3 trillion GDP, if you take the 662 million people that live there, nearly half of these people are middle class. This is the World Bank standard. The world average in terms of the size of the middle class is 31%. So this speaks of a deep domestic market. So a lot of investment stories and opportunities in Latin America are related to domestic demand, domestic market. So for example, in the 6 key sectors that we mentioned, health care and wellness, typically are domestic market story because you don't sell the exports of health and wellness are not meaningful.

But then you have the second interesting story, which is in the bottom, which is natural resources. That's probably what most of people that get familiar to Latin America and the world, they are reach natural resources. That's true. So we have in the columns, the share of Latin America and global exports, for example, if you take the second column left to right, soybeans, Latin America is a net exporter of soybeans, $54 billion in 2024. This is 59% of global exports. If you combine the 2, it's a story of domestic market opportunities plus expertise in global commodities.

So usually, when you are in emerging markets, you have either one story for the quarter. So either you have a big, big domestic market, for example, if you go to India, if you go to China, there are humongous domestic markets. There's lots of opportunities, but then natural resources are a bottleneck. If you go to Africa or some countries in the Middle East, if you're talking about oil and gas, the natural resources are there, but then the domestic market is not that developed.

Latin America combined both. And that's the thing we like in the region, produces multiple investment opportunities, but also produces a kind of return if you find the right industry, the right player there, the right investment story. Typically, the excess return that you get in Latin America because of this combination is very little correlated and sometimes completely uncorrelated with the kind of returns you get from similar investments in other geographies.

So this is an example of what is Latin America for us, the different things that we see that compared to consensus. And most importantly, the way we create value and then the way we do investment in infrastructure, in private equity, in real estate, in credit is exploring the opportunities, looking at this market space the way we are doing right now. Now I'm going to stop sharing.

Thanks Luis, thanks for initial thoughts. I think you mentioned in the beginning about the political environment in the region. I think we're seeing kind of a political shift from recent elections. Could you give us your view on the '25, '26 elections also to come and how it could benefit the region and Patria is the new cycle in the region? How do you see this and how we can actually work and get better results in this environment?

If you talk to Latin America, basically, you're talking about everything from Mexico down. So it basically does not include United States, of course, and Canada. If you take the election cycle in the region, it's been very active for actually a couple of years. It's important to stress, we are talking about 35 nations in Latin America, including the very small ones, of which 2 now are not central democracies at this stage, at this moment, Cuba and Nicaragua. Venezuela was not a central democracy, but that story may change. We can discuss this later on in this conversation.

But all the other nations, there are central democracies, which means regular elections, and there are political changes and political cycles. A couple of years ago, we started to see a change in the region, starting with relatively large economy, which is Argentina. Basically, we moved from governments that have a very ambitious social agenda, environmental agenda, but the economic agenda was not that ambitious, was not that robust and then start to see a change towards market-friendly administration in which there is still a social ESG agenda. But clearly, the focus or the emphasis was to speed up growth, fight inflation to speed up investments, especially private investment that started in Argentina, but now we are seeing actually a wave in the region.

So if I may just show another one slide, again, I promise it's not going to be -- I'm not going to do this all the time, but just to show the visual impact, I think it's worth showing. So here we are. On the left-hand side, we have the picture end 2024. Shades of pink, we are talking about this government with more social ESG, environmental agenda, more active or more ambitious and then shades of blue, purple are the governments that are more market-friendly approach.

So the first change that we saw was Argentina. And then if you take the picture, as we expect towards the end of 2026, this year, we had already change in Chile, which moved -- it was pink on the left-hand side, moved to blue. Also in Bolivia, the Central America there elections also, we have now more market-friendly governments. There is this question mark in Venezuela. We don't know exactly. Definitely, the picture shift is not there. So there will be some kind of transition we may discuss. And there is Brazil elections in the end of the year.

So the election cycle here is very clearly that the governments are getting more ambitious on the economic agenda. And part of what the market is liking in this conversation, we can show the asset performance is basically this slide, which shows you looking at the election cycles in this center in Latin America. The left-hand side shows what happens with public equities, stocks, right-hand side, corporate bonds. So basically fixed income but with a focus not on the government bonds, but on the private sector issued bonds.

And then you see what happens before elections and after election, if there is a change towards market-friendly governments, that's the black line. If we have the orange line is exactly the opposite when the change takes place, but it's from a market-friendly administration into a more social active or state active kind of thing. So what we are seeing in the region because of the election cycle in the midway through the cycle in black. Stock markets in Latin America last year outperformed almost all the world. We talked about the MSCI, you see on the left-hand side, it was north of 50%, 5-0, last year in U.S. dollars. Also, we have 30% appreciation in bonds.

So that tells you a story that in addition to the fundamental trends, the fundamental dynamics in Latin America that's different, there is a political change. And this political change because it favors market and private investment. We are halfway through this thing in terms of where the shark both on the left and the right side shows you what happens at minus 1, day minus 1, which is basically the day before elections and then what happens 90 days after 3 months, 181 days, of course, is 6 months and then 1 year down the road. So we are in the middle of the story, so cautiously optimistic that if we have more of the same in terms of political change, we are going to see additional asset appreciation there. So this is the importance of the election cycle in the region.

Thank you, Luis. I think despite the short-term election cycle that we are facing and this direction that you just mentioned, I think a lot of things don't happen in the region given all the regulatory framework and things that actually bring robustness to the market itself. I think you see some independent central banks, fiscal rules and so on and so forth. How these things actually are meaningful to Patria in a way as a local player in Latin America? And how does it relate to mid long-term investments?

An important thing -- thank you for this question. It's important to understand that doing investment in Latin America, not only now, but over the past 30, 40 years that what Patria has been doing, it speaks of dealing with volatility. So it's not because the regulators of the central bankers in Latin America, they are smarter than in the rest of the world, but the regulation in Latin America and the monetary policy is very, very strict compared even to developed geographies.

For example, what happened during the global financial crisis, which was that essentially was the United States that was a classic credit crisis. And there was no spillover in Latin America. Latin America had 1 or 2 quarters of adverse economic growth that was an adverse shock. The contagion in the region was close to 0 because most of the asset mispricing on the lack of adequate reserves and the idea that you could do off-balance sheet investment that could not happen in Latin America because we had so many crises in the past that the regulation in the region was very strict and then the contagion effect coming from what happened in the United States was 0.

But in addition to that, because we have also decades of very high inflation in Latin America, especially until the mid-90s the central banks are very, very hawkish in terms of monetary policy. So just to give you an example, the latest cycle of inflation pressure in the region that emerged after the COVID crisis. So everybody in the world had an inflation problem after COVID, but the reactions of the Central Bank was very different. So in Latin America, the Central Bank has led the cycle of monetary tightening. And by tightening, we are talking about interest rates that were never 0. So Latin America never had the experience of 0 interest rate policies. So interest rate in the lowest we had in the region was 2%. But then this 2% turned out to be 10%, 12%, 15%.

So that's the -- how tough monetary policy can be when the Central Bank hit the brakes in order to combat inflation. So imagine if you have a highly leverage buyout investment story in which the cost of capital increased fivefold, sixfold. This is a full disaster. So there's no way to do this in Latin America. So again, not because we are smarter or more intelligent, just because of the regulation, the way the central banks operate. Capital markets are pretty robust, resilient in the region.

And then what you have basically is if you have further evolution in fundamentals, for example, the recent government approving pension reform, so we're going to have probably more resources flowing into insurance companies and pension plans. So the AUM of the industry is going to increase. But as I mentioned before, it's still underpenetrated industry in terms of tapping on alternative assets. So there is room to be cautiously optimistic that we are going to have additional demand for private equity, for infrastructure, for structural credit or real estate that's going to be in a healthy environment.

So amid interest rates, they are still relatively high. Inflation is trending lower in Latin America. Most of the countries are already having inflation within the targets. And that means that from 12%, 15% short-term interest rates, now interest rates are 200, 300, 400 basis points and lower, but there is still a lot to go for example. If you take the largest economy in the region, Brazil, interest rates are about to decrease or about to trend lower. We are at 15% short-term interest rates. The market yield -- the yield curve shows interest rates going down 250 basis points this year.

But depending on the election cycle, remember the slide we showed, there is a question mark. It is more the same when President Lula achieves the fourth mandate, he is seeking reelection. Probably we are going to have this 200, 250 bps cut this year, a bit more next year. But if Brazil goes the same way the rest of the region and then we move to a more market-friendly administration in 2026 -- late 2026, early 2027, interest rates can go down significantly more.

And then all the story that we mentioned, long-term trends going in the right direction, of course, it will be much more impactful and then everything that we said concerning Brazil in terms of the penetration of alternative assets, interest rates going down faster, probably growth acceleration is going to be even more impressive than we have mentioned so far. So our scenario is more on the conservative side, more of the same in Brazil. But the alternative scenario, the 40% probability scenario is something better in terms of market development. If the acquisition means that then Brazil joins the team of the group of countries with more market-friendly deposit, that can be a game changer. Again, not our base scenario at this stage, but let's keep monitoring this because it's going to be a very competitive election.

I'll bridge to our strategy in the region in a second. Just a reminder here, feel free to make your questions. We're happy to get your questions and elaborate on that. But bridging to our strategy, I think you mentioned cycles of high interest rates, high inflation. And although it's happening in the region, we continue to see a financial deepening, not only institutional investors, but also individuals as well.

So how this -- we have a strategy, of course, in financial in the region outside has a very low penetration. So how do you see these cycles to come and how durable it is? And how do you see this phenomenon in the region?

So definitely, we have a deepening of capital markets in the region. It started not as a trend triggered by the major players. So the institutional investor, the pension plans and the insurance company, they were followers. It started basically with the family offices and people that have wealth and then -- because they see what's happening with alternative assets on the changes in capital markets in the United States or Europe, et cetera, they start to demand this kind of thing in the region. But then, of course, over time, if there is demand, the supply will show up.

So we are in the process of deepening capital markets, diversifying in a universe of very high interest rates, it's very difficult to sell the appeal of moving into alternatives, right? So for example, if you're in Brazil, you can receive 15% in your government bonds. And in addition to that, the currency is depreciating 11% against the U.S. dollar. That's one thing is not that easy to sell alternatives. But looking forward, as we said, the yield curve in Brazil projects at least 250 bps of interest rate cuts. In addition to that, we start to see some interesting structuring of alternative assets in Brazil. So actually, Patria spearheaded or pioneer many of this in real estate and credit especially.

So what we are seeing is basically Latin American following through the process that happened already in the United States and Europe 15, 20, 25 years ago. So definitely, you can say that now it's a relatively generalized movement. So the institutional investors that are the ones that write big checks, they are moving in that direction. We see this in our fundraising in the region clearly.

And looking forward, given the reform that we mentioned, pension plans, et cetera, given low interest rates, given the spectacular performance of some of these alternative assets, I mentioned, for example, a very simple thing, if you go to structured credit in local currency, but then you calculate the return in U.S. dollars, we are talking about over 30% appreciation last year. So this is mind boggling. So definitely, the capital deepening in the region is taking place and at a much faster pace because the institutional investor, the ones that can write the big checks, they are doing that. So we see momentum. Again, it's very clear already in our fundraising efforts.

And I think that we have seen recently, right, inclination towards private credit, right? I think we saw that, of course, in the U.S. and Europe as well. And now it's happening in Latin America. So here in Brazil, just for instance, we have our FIDCs. We call it kind of CLO structures, financing working capital for companies, just an example. And you come to the client willing to invest in this kind of products to go from institutional investors to individuals.

So it's -- I think it's a phenomenon that's also happening here on high interest rate cycles. I think credit emerged. And we can see it only on the FIDCs, but also on real estate credit as well. So I think it's a matter of the wider offering. It's also ready to navigate from different kind of types, right, in the region.

Yes. I'm looking at, again, our market intelligence, 2 things are worth mentioning here. If you look at the credit industry in the region, Latin America, especially the biggest economies like Brazil and Mexico, it's still old style financial intermediation in which the big banks they control depending on where you look at AUM or the outstanding credit, they're talking about over 50%, sometimes 60% are controlled by 3, 4, 5 big banks. So there is room for undercutting the traditional banks. So the debanking pieces in Latin America can take place because the market share of the banks is abnormally high for modern standards.

So that's one thing where we are going through, it's basically trying to cut on the market share of the traditional banks. But in addition to that, you mentioned something that's also important that there is the financial -- new financial technology in the region is taking place at a surprising fast pace. So what we are seeing here is those new technological innovation we need to create institutions that are mostly digital, they can provide these new services or new products and they can service, of course, the institutional investors or the family office, but they can provide access to these new products, the alternatives. to middle-class people.

So we have institutions, for example, in the case of Brazil, like XP, it is something that is hard to find in other countries. So these guys are able to cut through the financial intermediation and provide very appealing products, risk-adjusted. And the guys you can have, of course, there is -- they do the proper diligence in terms of investor profile, the risk aversion and knowledge of the market. But the guy now can access -- don't need to have a family office. They can access very good real estate alternative products and credit and also private equity and also infrastructure, et cetera. That's something that is really interesting and has to do with this new financial innovation with an awful lot of technology, a lot of this digital investing.

I think you mentioned 2 topics in the beginning of our conversation here. One is the pension system reform that's taking place in some countries in the region. The other one is about what happened in Venezuela and how all this Trump new way of dealing with the world is impacting maybe investment flows to the region, so on and so forth. Maybe you can start with the second one, elaborating a little bit on what happened in Venezuela, how does it affect the region, how it affect Patria's business in the region and how you see the money flowing to Latin America from the U.S. perspective, from Asia and other parts of the world that usually invest here in the region.

Okay. Definitely. So our take on Venezuela. There is this so-called Trump Corollary to the Monroe Doctrine, which is basically the American continent for the Americans, not for the Europeans or the Asian, et cetera. So we have now a practical example of what does that mean. So it's basically the United States reasserting its hedgemony in the continent, which means basically a very active program to reduce the penetration of other economies or nations or power that have seen us compared to the U.S. It's basically China, but also lower -- there was some penetration, some noise in the region coming from investments or actions from Russia and Iran as well.

So we don't think that there is any meaningful similarity to what happened in Afghanistan or Iraq. So Venezuela probably going to be a very different story first because Venezuela has a very long democratic tradition. So Venezuela is actually one of the richest countries, full functional democratic system in Latin America until the mid-1990s. So the dictatorship that eventually emerged in Venezuela is an exception in the story. So Venezuela was a market country economy, not socialists, relatively robust institution. And then one President was elected that was Chavez. And because he got a constitutional majority in the Congress, he began to control. So the executive part began to control the Congress and then they took control of the judiciary and then the media, et cetera, and then we landed in a dictatorship, but now this is changing.

So if there is mean reversion, if Venezuela can go back to where it was 25, 30, 50 years ago, so we can be cautiously optimistic. That's different from Iraq and Afghanistan that has no democratic tradition, no market institutions of solid market institutions. So probably the best proxy for what the United States is planning in Venezuela is what happened in Panama in 1989. So at that time, there was also a dictator. So the United States has to intervene, get rid of the strong man. The name was -- the gentleman was not Maduro, of course. It was Manuel Noriega. The guy was sentenced to 40 years behind bar because of drug dealing, et cetera.

But then Panama became actually a very impressive success story in Latin America because GDP per capita since the strong man Manuel Noriega was out in late 1989, grew by nearly 160%, 1-6-0, whereas the whole of Latin America grew, take the Latin America region, real GDP per capita grew around 60%. So it's 160% versus 60%. So actually, Panama was a big success. So Venezuela can be a similar story. Definitely, we don't buy that Venezuela will become something like Iraq or Afghanistan, can be a very constructive story.

And then -- but if you don't need to take at face value what we are saying here in this conversation, we can just go to the markets and see how they are reacting in terms of currencies, in terms of stock markets, bonds, year-to-date, remember, the U.S. snatching Maduro was January 3. If you take stock markets, currencies, corporate bonds, et cetera, the market is better now than it was like that. So there is no pricing of contagion and then things getting out of control in Venezuela.

And then if I can show another slide, if you please just share another one, probably it's going to be the last one. So this is what I call extreme geopolitical risk. It's not calculated by us. It's actually a couple of guys from the Federal Reserve. You can see the reference in the bottom of the chart. So it's this Dario Caldara and Matteo Iacoviello. Basically, they map extreme geopolitical shocks.

So what do we mean by extreme? We are talking about wars. We are talking about terrorist attacks. We are talking about conflagration, civil conflagration in terms of people dying or substantial currency depreciation or interruption of capital flows. And then the model uses artificial intelligence and then tracks from where these extreme geopolitical shocks are coming from. So basically, we have here Latin America, Asia Pacific, Europe, North America and Middle East and Africa since the end of the second world war.

So you can see here easy to spot. Latin America is the orange line. If you take what's happening in Venezuela, there is an uptick in the geopolitical risk. But you are talking about Latin America as a region accounting for less than 2% of the extreme geopolitical risk. At this stage, the bulk of the risk is still Europe. It was worse before you see the peak in 2022, that was Russia invading Ukraine, came down and then getting a little bit worse. But the bulk of the global geopolitical risk, things that actually move prices, asset price significantly, they are taking place in Middle East and Africa. They are taking place in other regions. And in North America, there is this uptick here, not because exactly of Greenland or thing like this, is more a combination of what's happening in Canada and Mexico, which is part of, in this case, North America.

So in terms of Venezuela, we are monitoring what's happening on a daily basis, of course. But given what we think is the road map of Venezuela, it's much more Panama than Iraq or Afghanistan. Chances are that 5, 10 years down the road, Venezuela is going to be a better story than it is right now. And then the final number here, I would like to disclose or trivia in terms of numbers. If you take GDP per capita in Venezuela 50 years ago, in the mid-90s,70s, it was 3x higher than it is today.

So what happened with dictatorship? GDP per capita is a proxy for individual wells and how much income people have in Venezuela is 1/3 of it was back in the 1970s. So anything that gets a little bit better than that, it's a plus for the region. And then we already have a cautiously optimistic scenario in terms of growth acceleration in Latin America before the event in Venezuela. We are talking about a region that grew little 10 years ago. So the GDP growth was below 2%. We can have GDP growth going to close to 3% in 2026, 2027. There is political change. Some economies are clearly growing faster.

Argentina, for example, is last year probably grew close to 5%. This year, it's something between 3% and 5% -- 3% and 4%, sorry. Venezuela, negative number, it goes to 0, it's a plus for the region. So Venezuela, again, is a shock is an adverse geopolitical shock, but it's a small fraction of what you see in other regions. And probably the odds of a positive outcome in Venezuela are not 0. Actually, they are substantial.

All right. Thank you, Luis, and thank you, Thiago. Very nice questions and thoughtful discussion. We do have some questions from the audience here. Let me start with the first one. I'll read it as it came. So Luis, can you discuss Latin America's infrastructure build-out, particularly as it relates to data centers? How large is the new build data center opportunity beyond Patria's Omnia ByteDance project in Ceará?

Okay. Thank you, Medina, for the question. So infrastructure is one of Patria's key investment areas. So we have infrastructure along with private equity, real estate, credit listed equities as well. Infrastructure, basically of the 6 key verticals that we mentioned before, 3 are very important for infrastructure, which are power generation and distribution, et cetera, with a focus on renewables, logistics and transportation and infrastructure and data and tech services. So clearly, infrastructure buildup in Latin America is key.

Probably the most important fundamental trend or the fundamental dynamic in Latin America is it's the middle class society in Latin America. So the evolving demand of this middle class, when you are poor or lower middle class and you upgrade to middle class, your demand patterns change. So you tend to move away from public health into private health and move away from public education into private education, so on and so forth. What happens if most of the infrastructure, which is the case in Latin America, was provided by governments to state-owned companies. And these governments are now constrained by fiscal discipline or fiscal rules, and they cannot invest pari passu the demand. So we have huge gaps in basic infrastructure. And we are talking about power generation, we are talking about transportation. We are talking about telecom services, et cetera.

So to understand the infrastructure dynamics in the region is very important to talk about a huge and probably the most ambitious program of privatization and concessions in the role. So we are very active on this process of privatization and more recently, concessions. So concessions, we are talking about toll road concessions, 30-year concessions, inflation adjusted or in some cases, you can have indexation to the U.S. dollar. We are talking about power generation, transmission and distribution that's becoming mostly private. In the past, it was public or state-owned companies, sanitation, water and sewage, so on and so forth.

In terms of -- we are talking about in terms of actionable infrastructure thesis that you can pursue if you have, you can write a check, looking at 2026 to 2030, over USD 100 billion equity checks. So if you add some leverage, some project finance, depending on your ratio, equity to debt, the actual investment thesis increase twofold, threefold, et cetera.

So in terms of lack of opportunities in infrastructure in Latin America, that's the problem you don't have. Of course, some of these projects, they have a risk profile that is closer to what we think that's appropriate for our investors. Some we think it's too risky or if they are not that risky, the return profile is not that good. But having said that, we are very constructive.

In addition to that, remember, the exits or the opportunities to divest because of the deepening of the capital markets, you can -- in the past, basically, you could sell your infrastructure assets to -- once we stabilize your infrastructure, it become regularly yield generating, et cetera, you could sell to another electric utility or public utilities or a multinational that was arriving in Latin America or you could do an IPO. Today, you can do something different. The deepen of capital markets means that you can list -- you can use a fund structure, list the assets and then it becomes tradable and you start to exit through a listed fund. It's not when you need to go into the IPO necessarily or you have to sell to a multinational, et cetera. So we have more ways to exit. So this helps also the asset side.

But then let me concentrate now on infrastructure, digital and the data centers. So what we have here and Patria has already a very successful venture in data center. We actually -- we create from scratch, develop a network of data centers, so sites in Brazil, in Mexico, in Colombia and in Chile. We sold -- we divested a very handsome multiple in U.S. dollars. And now the demand is still there. And actually, we are developing and starting the thesis all over again, but just to give an intuition about the size, the first asset that we have to do in the second generation of data center investment.

The first asset, the capacity is equal to the combined capacity of the 4 sites we sold in the first venture. So this is how strong and robust is the demand for data centers in Brazil. Of course, the idea is not going to stay in Brazil. It's going to be again a regional platform. We're going to build up assets in other regions as well.

And then probably the -- some attendees you may ask the question, but who -- where is the demand coming from? It is from the local economies. Remember, this is a middle class story, nearly 700 million people living there, middle class. So there is this pent-up demand, which is local. But in terms of AI and the usage of data centers, if you are not extremely strict on issues like -- technical issues like latency, you can provide, for example, AI is different from streaming. You can provide or can use these data centers as a backbone of -- for the hyperscales around the globe. It's not only in Latin America.

So actually, these assets that we are now building and it's the beginning of a new cycle of investment in this area. The demand is coming from the rest of the world. And then, of course, we located our assets very close in Brazil, where the point the fiber cables coming from the United States undersea and Europe, of course, it's very close, so we can connect very easily. But in terms of the potential for this investment as it is right now and increasing significantly in the near future, it's there.

And most importantly, and that has a little bit to do with geopolitics. We can definitely play with consumers and demand from several quarters of the world. So do we have demand for these data center services coming from the United States? Yes. And coming from Europe, yes, as well. And coming from Asia, yes, as well. So it's not the case that, oh, now there is a new geopolitics and then you have to pick size, either you service the United States or you service Europe or you service Asia, not true for Latin America. We are going to service everybody.

Even with the new President Trump's Corollary to the Monroe Doctrine, we are going to service. Of course, it's a different proposition to say, no, are you going to have Asian nation building up a mega port complex in Latin America. That's a different proposition. But building up a data center or a network of data centers that good services can be provided worldwide, why not? So we are very, very constructive on especially these data centers with the vertical within the universe of infrastructure.

But -- let's be clear here. There is still demand for the base infrastructure. So we are also moving into our first initiative into sanitation and water services. Our first move is a concession, long-term concession. Patria is doing this. And there is opportunities in toll roads, yes, there is opportunity on other basic infrastructure assets, yes. Desalination plant, for example, is something that we do, a very interesting project. We don't think that there is value added for Patria. For example, we are not going to go into mining to dig copper or lithium, but we are providing infrastructure services to the big players in the mining industry.

For example, the most important operation of a multinational mining company in Chile that has this problem of water, climate change, they use this operation of this mining activity use to rely on natural sources of water, basically a river. And then the river flows start to get a more complicated issue and then they have to service the population as well. So the government of Chile decided that the priority should be given to the population, which is quite correct. And then the mining activity had to find the water in a different source. So it comes desalination plant.

So we are doing this. We are talking about a big project, 1,000 liters per second capacity. We can double this, and it's became vital to this mining activity. Just to show you, it's a infrastructure, completely different from digital. But that's the way, for example, we service the mining industry. And then if the question is how do you play with the critical mineral things, that's the way we can help mining with a focus on critical minerals and other minerals as well.

Great. We do have some additional questions coming from the audience, and I would like to remind everyone that they can submit their questions through the webcast platform. Luis, you already touched base on this, but I'll read the question here. Maybe you can give more details. Do you think the macro scenario discussed, the renewed Monroe Doctrine can negatively impact the dollar inflows from Asian and increase inflows from the U.S. if it becomes a U.S. administration policy to encourage it?

Okay. That's a very good question. What we are -- let me tell what we think and actually what we are seeing from our LP basis. One of the major drivers of diversification into the region, there is this interesting story, a combination of middle class and expertise in commodities. But in terms of getting additional interest from investors, what changed over the past 12 to 18 months was the dollar depreciation globally. So interesting story in Latin America, but we start to have conversations with people that had exposure to Latin America want to increase and some of the investors that were happy with exposure to the U.S., the Latin America story was not that enticing for them. It's basically the dollar started to depreciate significantly. And then they said, okay, I need something different from the typical portfolio that I have, which is heavily exposed to the U.S.

We don't think that this trend is going to change. We think that there is additional room for U.S. dollar depreciation. If you combine everything that's happening in the United States, yes, there is a very constructive and encouraging story in terms of technical -- technological revolution. This is artificial intelligence. But on the other hand, you have the trade policy, fiscal policy, now issues in terms of monetary policy credibility, the clash between the executive power and the Federal Reserve.

So -- and in addition to that, if you do any calculation of exchange rate valuation, the U.S. dollar is still very expensive by any metric. So we are talking about at least 10% overvaluation looking back 25, 50 years, depending on your calculating -- can get to 15%. So there is room for additional depreciation of the U.S. dollar. So we see continued interest in -- actually greater interest in Latin America as a portfolio diversification story.

In terms of the Asian demand, it's not slowing. I think it's important to say, perhaps there is a little bit too much focus on Asia, meaning China. At least for us, that's not true. So China is a key player and a key investor, yes. But in terms of the proportion of checks in proportion to the economy, the share of the economy, Singapore is very active, very impressive, highly professional investors from the sovereign wealth funds. But Japan invest with us as well and so does Korea, et cetera.

So in terms of the Asian interest in the Latin America, we haven't seen any change. Of course, depending on the what was the kind of investment that China did in Venezuela, there will be a shock. But we suspect and looking at what happened in Venezuela, China was not investing more in Venezuela for -- actually for a number of years. So probably the slowdown of monies from China into Venezuela already took place in terms of what we see for our products, not only from China or -- but adding Singapore, Japan, Korea, there is more interest, not less.

But having said that, are we seeing renewed interest from North American investors, U.S. and Canada? And the answer is yes. This interest was decreasing 5, 6, 7 years ago because the United States market was performing so well, there was not much need for diversification. Last year, the United States market performed well. It was not a terrible market until acreage was convoluted, bumpy. But after that, the market is growing nicely. The thing is just compare the numbers again. I think I can show again a slide -- I can show the numbers, but perhaps the visual impact is high. So what I'm going to do is to share again a slide. And then here it is. So what we have here on the left-hand side...

Wait, it is not on the screen, I think.

Sorry. Now it is?

Now you're good, yes.

Okay. Sorry, sorry for that. Left-hand side, listed equities measured in U.S. dollars, MSCI, the bottom of the same chart, fixed income. So we're taking the global corporate index by JPMorgan. So we are talking about U.S. listed equity MSCI, 17% total return last year. That was not bad and 6.2% return in fixed income, corporate fixed income, not bad at all. But look at Latin America, 54.8% return on listed equities and 33.6% return on corporate bonds.

So this is what bringing Canadian American interest to Latin America. Okay. They saw the depreciation of U.S. dollar. They saw that Latin America outperformed. Problem there is -- we don't think that it's going to be the same performance in 2026 and '27 because it's impossible for a region to deliver 50% plus or 30% plus return. But the issue that these guys are having and discussing this a lot with them is on the right-hand side. This is the typical portfolio allocation of global investors and the exposure to U.S. dollars. The number is not ours, it's Cambridge Associates, which is also an investor with us. So they calculated that by mid-2025, a global investor typically had 83% exposure to U.S. dollar; in terms of virtual capital, 76%; in private credit, a 70-30 portfolio of stocks and bonds, 75% exposure; 66% private equity; and 64% stock.

So our little theory here is that the typical global investors and even in the United States or Canada, they are still going to be overexposed to the U.S., but not at that rate. So if you trim 1%, 2%, 3% of the number on the right-hand side, if you sum everything you see on the right-hand side, is an estimation of the financial market assets, liquid like bonds and stocks and illiquid. They're talking about trillions of U.S. dollars, several trillion dollars. So any 1%, 2% that you reduce on the right-hand side and move into Latin America, well, we are talking about hundreds of billions, and then that changes prices in Latin America.

So what we are seeing here is on the right-hand side, investors reducing their excessive exposure to the U.S. or U.S. assets. Again, they are not going to be neutral, not even underweight. They are just going to be a little bit less overweight in the U.S., but every 1%, 2%, 3% that they move out of the U.S. and Latin America captures a small fraction of this, you have significant impact on price because, of course, it's a much smaller market than the U.S. is.

So that's what we are seeing in terms of portfolio changes, Asia and also United States and Canada. When we talk North America, it's the combination of U.S. and Canada because I think everybody knows the institutional investors in Canada, especially pension plans are very active and they're pretty big.

Interesting. We're getting to the top of the hour, but I think you can squeeze one more question from the audience here, Luis. Now I'll focus more on the local fundraising, saying more and more of Patria fundraising is coming from local investors within the region. How do you see local capital flows into private markets evolving in the next few years, both for institutional and individual investors? And what do you see driving that?

The trend is clearly upwards. As I mentioned, the economies are growing probably a little bit faster than they were before. So the economic growth per se gives you more room to increase your allocation to alternative assets. But you have these other 2 changes. So the reform -- potential reforms in the region, increasing more the AUM of institutional investors. But in addition to that, there are regulatory changes in which you can invest. There was a limit in some -- there was a cap on some countries and how much money you could invest in alternative assets because they were deem to risk, et cetera. Now this is changing as well.

And then so what you see, it was a good surprise in terms of fundraising that we had in Latin America, the local fundraising even in an environment of very high interest rates, they were going down, but in absolute terms for international they were pretty high, the fundraising surprised to the upside. So we think more of the same is going to happen in 2026 and 2027 because we have the combination of low interest rates, a little bit faster economic growth. This political change and the regulatory framework is becoming more and more friendly.

So in terms of this penetration, the deepening of capital markets, it's all there. The thing that we have to pay a little bit of attention and depending on the government, on the jurisdiction, this increased demand for alternative assets that we supply, sometimes it comes with some strain. For example, yes, you can invest more in -- especially if you are a pension plan, you can invest more in alternative assets, but you should invest in alternative assets that can help finance infrastructure in that country. That may happen.

But then as we explained, we have a vast array of infrastructure solutions in Latin America, ranging from desalination plants to power distribution lines going into data centers, et cetera, we can easily fill this gap. This is more difficult for our international competition. So some of our competitors, very good companies, excellent managers, they have a more difficult environment because they can provide international assets to these investors in Latin America. But in terms of, oh, how can you help us invest in local infrastructure, that's more difficult for them. For Patria it is not. We are locals. We are local in Brazil, locals in Argentina, locals in Colombia and in Chile.

So what's happening there, we can provide this solution. So we have the best of the world. So we're raising more money. And even in those jurisdictions you need -- you can invest more -- provide more assets or more solutions in terms of alternative assets, but you have to help the country in terms of local infrastructure, et cetera or develop the credit market. We can do that. For our international competitors, it's more difficult.

Great. We did start on time. So let's be mindful of everyone's time and finish on time as well. So thank you very much, Luis. Thank you very much, Thiago, for this very thoughtful conversation. I do still have some questions from the audience that we can reply. We will reply to you guys via e-mail. And yes, so thank you, everyone. And again, like have a fantastic 2026 for all of us.

My great pleasure. Thank you, Medina. Thank you, Thiago. I hope it was a productive session. And please count on us. There are other topics that we may explore by mail or we can schedule another session like this. For sure, we are going to have several interesting developments in terms of the investment opportunities and the investment environment around us. So it will be my pleasure to show up again.

Likewise, good to be here. Thanks for your time.

Thank you.

Good day, and thank you for standing by. Welcome to Patria's Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your first speaker today, Andre Medina from Patria Shareholder Relations. Please go ahead.

Thank you. Good morning, everyone, and welcome to Patria's Third Quarter 2025 Earnings Call. Speaking today on the call are our Chief Executive Officer, Alex Saigh; and our Chief Financial Officer, Ana Russo; and our Chief Economist, Luis Fernando Lopes for the Q&A session.

This morning, we issued a press release and earnings presentation detailing our results for the quarter, which you can find posted on the Investor Relations section of our website or on Form 6-K filed with the Securities and Exchange Commission.

This call is being webcast, and a replay will be available. Before we begin, I would like to remind everyone that today's call may include forward-looking statements, which are uncertain, do not guarantee future performance and undue reliance should not be placed on them.

Patria assumes no obligation and does not intend to update any such forward-looking statements. Such statements are based on current management expectations and involve risks, including those discussed in the Risk Factors section of our latest Form 20-F annual report.

Also, note that no statements on this call constitute an offer to sell or a solicitation of an offer to purchase an interest in any Patria fund. As a foreign private issuer, Patria reports financial results using International Financial Reporting Standards, or IFRS, as opposed to U.S. GAAP.

Additionally, we would like to remind everyone that we will refer to certain non-IFRS measures, which we believe are relevant in assessing the financial performance of the business, but which should not be considered in isolation from or a substitute for measures prepared in accordance with IFRS. Reconciliations of these measures to the most comparable IFRS measures are included in our earnings presentation.

Now I'll turn the call over to Alex.

Thank you, Andre. Good morning, everyone, and thank you for joining us today.

Before we jump into the quarterly results, I would like to take a minute to celebrate an important milestone for Patria as our assets under management exceeded $50 billion as of the end of the third quarter, over 3.5x higher than our assets under management at the time of our IPO in 2021.

Looking back to our origins 37 years ago and seeing the diversified investment platform we have built is extremely rewarding. We could not have achieved this milestone without the hard work and dedication of our team and most importantly, the trust our clients have placed in us.

Since we went public in January 2021, Patria has grown from a $14 billion assets under management asset manager serving primarily a global investor base and focused mainly on private equity and infrastructure in Brazil to a broadly diversified multi-asset class manager serving both local and global investors with strong investments and distribution capabilities across Latin America and expanding capabilities in Europe and the United States. Congratulations to all of our amazing team members in reaching this milestone.

Now with that as a backdrop, the strong third quarter 2025 results further highlight our progress as organic fundraising surpassed $1.5 billion in the quarter, led by our infrastructure and credit businesses and total organic fundraising year-to-date reached $6 billion.

Therefore, we are well on track to exceed the high end of our previously upwardly revised full year target of $6.6 billion. I'd like to note that for the last 12 months, organic fundraising inflows to assets under management totaled approximately $6.9 billion. I'd like also to point out that the aforementioned year-to-date $6 billion of fundraising inflows into assets under management do not include any acquisition, a result of how we are leveraging the investments we have made in our platforms, mainly in our commercial areas.

Redemptions have been trending lower and year-to-date represent approximately 30% less than what we saw last year, a clear reflection of our strong investment performance across our verticals. Strong fundraising supported by lower redemption rates is translating into solid net organic growth as we generated over $1.4 billion of net organic inflows into fee-earning assets under management year-to-date and $1.8 billion over the last 12 months.

Year-to-date, net inflows reflect an annualized organic growth rate of about 6%, which continues to highlight our ability to drive strong organic revenue and earnings growth. With that, our fee-earning assets under management in the third quarter 2025 grew to $38.8 billion, up 4% sequentially and 14% year-over-year.

In the third quarter of 2025, we reported fee-related earnings of $49.5 million, representing 7% sequentially and 22% year-over-year growth, driven mainly by solid fee-earning assets under management growth and margin expansion as we continue to make progress integrating our acquisitions.

On a per share basis, fee-related earnings of $0.31 in the third quarter of 2025 rose 8% sequentially and 19% year-over-year. Our momentum is further illustrated by the $46.9 million of distributable earnings we generated in the third quarter or $0.30 per share, up a robust 22% sequentially and 31% year-over-year, driven mainly by the just mentioned very strong fee-related earnings growth.

In addition, during the third quarter, we entered a total return swap with a financial institution to repurchase 1.5 million shares. With that, as of the end of the third quarter of 2025, our share count stands at 158 million shares.

Ana Russo, our CFO, will provide further details in her comments. While we did not generate performance-related earnings in this quarter, I am excited to announce that subsequent to quarter end, we had multiple monetization events in our Infrastructure Fund III, which we expect will generate approximately $15 million of performance-related earnings in the fourth quarter, bringing year-to-date total to approximately $16 million, with the potential to move higher if we have additional monetizations over the remaining 2 months of the year.

We continue to expect Infrastructure Fund III to be the main source of performance-related earnings through 2026. As it relates to the macro outlook, it is worth noting the depreciation of the United States dollar against most of the other currencies, which contribute to our revenues in addition to the dollar.

Historically, periods of dollar weakness have acted as catalysts for international portfolio diversification, prompting investors to seek exposure to regions with stronger relative performance, lower correlation and more attractive fundamentals.

We are seeing this story unfold once again as many global investors move to reduce their overweight positions in United States assets. We believe there is still more to come as non-United States markets continue to offer compelling valuations and can serve as effective risk-adjusted options to rebalance portfolios and hedge against dollar depreciation. This environment is likely to further support our fundraising efforts.

As I noted at the start of my remarks, we are pleased to report that we raised $1.5 billion in the third quarter of 2025, totaling approximately $6 billion year-to-date. And we are well on track to exceed the high end of our full year target of $6.6 billion. For the last 12 months, organic fundraising inflows to assets under management totaled approximately $6.9 billion.

To provide some additional color on fundraising, we continue to see increased global interest in investments in infrastructure in Latin America from which we continue to benefit as the leading infrastructure investor in the region.

Over the first three quarters of the year, we raised 4x more than in 2024, led by our Infrastructure Fund V drawdown fund, co-investment vehicles and other strategies. I would like to congratulate our infrastructure and commercial teams on the recently announced final close of our Fund V and related vehicles at $2.9 billion, almost 40% higher when compared to our previous vintage, making it the largest dedicated infrastructure vintage focused fund on Latin America.

It is also important to highlight that our credit business continues to stand out and has surpassed total 2024 fundraising by almost 15% as of the third quarter of 2025, reaching $1.6 billion fundraised this year. It is worth noting that 2024 was already a record year for fundraising for credit.

Our success in fundraising for infrastructure and credit is supported by a global economy experiencing persistent inflation and consequently, high interest rates. Finally, GPMS has raised $1.7 billion year-to-date, continuing to highlight the strong support from our clients and the success of the integration of this business onto our platform.

We believe that GPMS will continue to be a strong contributor to our future growth. As we expand our business, a large portion of the capital we raise will flow into fee-earning assets under management as capital is deployed. Our current pending fee-earning assets under management totals about $3.2 billion.

While the level of pending fee-earning assets under management can vary over the short term, over time, we would expect it to grow as our fundraising grows and we can raise more capital in drawdown funds, SMAs and similar fund structures. It is also important to note that our fee-earning assets under management and management fees are very sticky and highly predictable. Indeed, approximately 22% of our fee-earning assets under management are in permanent capital vehicles, listed vehicles with no redemption policies and approximately 90% in vehicles with no or limited redemption policies.

Additionally, it is worth noting that over 50% of our fees are charged over net asset value or market value, which year-to-date has contributed approximately $2 billion to fee-earning assets under management, reflecting our very strong investment performance. We also would like to highlight that our fee-related earnings have limited exposure to foreign exchange volatility.

Based on our current asset class mix, a 10% variance in soft currencies against the dollar impacts fee-related earnings by only about 2%. As we head into the fourth quarter and we gain better visibility into our expected full year 2025 and 2026 results, we believe we are well on the way to delivering on our targets. With regard to fundraising, we are confident in our ability to exceed the high end of our 2025 full year target of $6.6 billion.

Additionally, as disclosed during our December 9, 2024 Investor Day, our objective is to raise $21 billion from 2025 through 2027, comprised of $6 billion of fundraising in 2025, $7 billion in 2026 and $8 billion in 2027. As we expect to exceed the $6.6 billion upper end of our previously upwardly reviewed 2025 guidance, this increases our confidence that we can surpass our announced 2026 targets of $7 billion.

Accordingly, we believe total fundraising for 2025 and 2026 combined could reach $14 billion. Considering our $8 billion fundraising target for 2027, we believe we are well positioned to exceed our total 3-year objective of $21 billion. As it relates to our full year fee-related earnings, we expect full year fee-related earnings to be slightly higher than the entry level of our fee-related earnings target range of $200 million to $225 million for 2025.

Additionally, as we look into the next year, we are introducing the 2026 fee-related earnings target range of $225 million to $245 million or $1.42 to $1.54 per share. When taking into account our share count guidance of 158 million to 160 million shares, our 2026 fee-related earnings objective reflects approximately 15% year-over-year growth in fee-related earnings per share at the midpoint of this range. Importantly, we remain comfortable with our fee-related earnings 2027 target range of $260 million to $290 million or $1.60 to $1.80 per share.

Finally, we are reaffirming our performance fee-related earnings target range of $120 million to $140 million from the fourth quarter of 2024 to the end of 2027, of which we already realized $42 million, and we expect to realize an additional approximate $15 million in the fourth quarter of this year.

Pulling this all together, our financial results and ongoing fundraising momentum provide additional evidence that our strategy to diversify and grow our business both organically and inorganically is paying off.

Now let me turn the call over to Ana to review our financial results in more detail. Thank you very much.

Thank you, Alex, and good morning, everyone. Over $50 billion in AUM is indeed a landmark to be proud of. And as Alex mentioned, our strong momentum continued as we raised $1.5 billion in the third quarter and $6 billion year-to-date.

Our fundraising success show how the strategic investments we have been making in our investment platforms, products and distribution capabilities are paying off. We entered the fourth quarter confident in our ability to achieve our objectives for this year.

Now let's review our third quarter results in more detail. In light of our robust fundraising year-to-date, we are well on track to exceed the high end of our full year target of $6.6 billion against a backdrop of increased global uncertainty and volatility.

Our fee AUM rose 14% year-over-year and 4% sequentially to approximately $38.8 billion. The strong year-over-year growth reflects the combination of solid organic net inflows of $1.8 billion, positive contribution from strong investment performance and the acquisition of the Brazilian REITs we discussed during our last earnings call and concluded this quarter.

Our fee-earning AUM growth continues to highlight our expanding fundraising capabilities and deployment opportunities, coupled with the stickiness and resiliency of our asset base. In addition, our fee-earning AUM is also benefiting from a declining rate of redemptions. Pending fee-earning AUM of $3.2 billion, combined with our fundraising goals, the 22% of fee AUM that are in permanent capital vehicles, the almost 35% of fee AUM in drawdown funds with an average life of 6 years and the overall stickiness of our asset base together highlight our ongoing ability to generate net organic fee AUM growth over time.

Total revenue in the third quarter reached $84.6 million, up 11% year-over-year and about 4% sequentially. This quarter included $1.3 million of catch-up fees. Our management fee rate averaged 94 basis points over the last trailing 4 quarters. As we reviewed at our December 9, 2024 Investor Day, we are steadily diversifying our business and introducing new investment strategies and product structures, which are key drivers of our growth.

Consequently, our management fee rate will continue to evolve, and we expect our fee rate to trend towards 90 basis points over the coming quarters, but with the potential to vary depending on the mix.

Moving on to operating expenses, which include personnel and G&A expenses, totaled approximately $34.4 million in the quarter, flat versus second quarter '25 and prior year. We remain focused on controlling expenses and capturing operating efficiency even as we continue to reinvest in the business.

Looking ahead, we believe the third quarter personnel and G&A expenses combined are a good baseline for the next quarter. Putting it all together, Patria delivered fee-related earnings of $49.5 million in the quarter, up 22% versus the prior year and 7% sequentially, with an FRE margin that rose more than 500 basis points versus the third quarter '24 and 170 basis points sequentially to 58.5%.

We remind everyone that the fourth quarter is often our strongest quarter in terms of FRE margin, driven by the recognition of most of our high-margin incentive fees from our credit and public equity platforms. We continue to expect the full year margin to fall within the range of our 58% to 60% guidance.

As Alex mentioned, as we enter the last quarter of the year and our visibility into the remainder of the 2025 improves, we expect fee-related earnings for the full year to be slightly above the entry level of our FRE target range of $200 million to $225 million.

Additionally, as Alex also noted, we expect to generate $225 million to $245 million of FRE in 2026, and we remain on track to deliver our 2027 FRE target of $260 million to $290 million with an FRE margin objective of 58% to 60% -- as a reminder, about 10% of our 2027 FRE target reflects future potential M&A.

Although we did not generate any performance-related earnings in the third quarter, subsequent to the quarter end, we had multiple monetization events in our Infrastructure Fund III, which we expect will generate approximately $15 million of pro forma-related earnings in the fourth quarter with the potential to move higher if we have additional monetizations over the remaining 2 months of the year.

We continue to expect Infrastructure III, which pro forma for the recent monetization had approximately $45 million of net accrued performance fees at the quarter end to be the main source of PRE through 2026.

Next, our net financial and other income and expenses in the third quarter '25 totaled a negative of $1 million versus a negative of $4 million in the second quarter 2025. This sequential improvement mainly reflects a greater contribution from Tria, our energy trading platform of $1.7 million in the quarter compared to $0.7 million in the second quarter '25.

Additionally, lower average debt over the course of the third quarter also contributed to the lower financial expense. As of the end of the third quarter, net debt totaled approximately $108 million, and our net debt to FRE ratio of 0.6x was well below our long-term guidance of 1x.

As we manage our cash flow and capital structure over the balance of the year, we expect our debt levels to remain relatively unchanged as we do not have any relevant M&A payment for this year. Our current deferred M&A-related cash payment through 2028 will be approximately $95 million, excluding potential earn-outs.

In addition, we entered to a total return swap, or TRS, with a financial institution during the third quarter, which under the terms of the swap, purchased 1.5 million shares on our behalf. We expect to settle the cost of the TRS by mid-'26 and transfer the shares to Patria, which we plan to retire. Our effective tax rate in the third quarter of 3.3% mainly reflects credits related to our U.K. operations.

We expect our tax rate over the coming years to hover around 10% annually, but will vary quarter-by-quarter, depending on the evolving mix of our business, although we expect 2025 to be below 10%. In the third quarter of '25, we generated $46.9 million of distributable earnings, up 34% versus third quarter '24 and DE per share of $0.30, up 31% year-over-year and 22% sequentially, mainly reflecting higher FRE helped by lower net financial and other income expense, lower tax and on a sequential basis, lower share count.

As I mentioned during our last earnings call, the Board of Directors voted to renew and increase our share repurchase program, and we have the authorization to repurchase up to 3 million shares. In the third quarter, Patria entered a total return swap with a financial institution, which under the terms of the swap purchased 1.5 million shares on our behalf.

Considering the nature of the TRS, we finished the quarter at 158 million shares and continue to expect the share count to average between 158 million and 160 million from 2025 to 2027, inclusive of additional share repurchase, which will be focused on offsetting stock-based compensation.

Finally, as announced during our December 9, 2024 Investor Day, the Board had approved an annual dividend of $0.60 per share for 2025. With that, we declared a dividend of $0.15 per share for the third quarter. Also, it is important to note that the Board has now approved a total annual dividend of $0.65 per share for 2026.

Overall, we are very pleased with our third quarter results and the momentum we have built as we continue to diversify and improve the resilience of our business. We believe we are on track to meet the various targets we shared with you, and we are excited regarding the growth opportunity that lies ahead of us.

Thank you for everyone for dialing in, and we are now ready to answer your questions.

[Operator Instructions] Our first question comes from Rodrigo Ferreira at Bank of America.

You've raised $6 billion year-to-date and are on track to exceed the $6.6 billion full year target. Given the strong momentum, how are you thinking about the pacing of capital deployment, especially with the $3.2 billion in pending fee-earning AUM?

Thanks for the question. Thanks for participating in the call. No, really, we've been very excited with the $6.6 billion raise up to the third quarter of '25. As I mentioned during the call, last 12 months, we did raise $6.9 billion. That's why we feel comfortable with $6 billion, sorry, to the end of the third quarter.

Guidance was $6.6 billion. Last 12 months, $6.9 billion. So that's why we feel comfortable that we are probably going to beat the $6.6 billion new guidance. We have over $3 billion of pending paying AUM, but I think over the next 12 to 18 months, we should deploy that. We do have a very active pipeline, mostly in infrastructure.

Most of this earnings -- fee-paying AUM, Rodrigo, comes from our infrastructure efforts as we did raise in 2025, finished rating our flagship vintage Fund V for infrastructure of approximately $2.9 billion. So most of that capital will come from investing in our infrastructure new Vintage, Vintage Fund V.

In addition to the co-investment vehicles that are paying fees together with the infrastructure closed-end Fund V. Also, we did raise capital that's pending for us to invest, which is in the GPMS and also the DPMS, mostly the secondaries, our secondary strategy. We envision to invest along the next 12 to 18 months as well. So most of this fee-ping AUM fee AUM should be invested over the next 12 to 18 months. I hope I answered your question.

No, that was great. And then for my follow-up, can you give us an update on how you're thinking about inorganic growth at this moment? I know we have the $14 billion Investor Day guidance. But at this moment, what asset classes or geographies are you most interested in?

Yes. Well, we had guided that we would try not to do any acquisitions in 2025, but we will try then to restart with our acquisition efforts end of '25, '26. Of course, it's easier said than done. I joke that sometimes the mergers and acquisitions, M&A is a mystery and annguish, right? You don't never know when you're going to sign a deal.

But jokes aside, I think we managed to do that. Now we're finishing '25 because we wanted to have a full 4 quarters, 6 quarters of no M&A. As we mentioned, the last 12 months, the last 4 quarters, all the numbers that we just posted are pure organic fundraising, organic growth, organic related numbers.

And we wanted to have that pause to show us and of course, investors and stakeholders that our strategy was working that the acquisitions that we did were being integrated. You saw that we are very, very disciplined on the cost level of -- you can see it in the third quarter results, and you're going to see it in the full year results. So this was an important as a checkpoint that we paused, we integrated, we fundraised for these new asset classes that we acquired.

We controlled costs, et cetera. As we move into '26 and '27, we would like to turn on then the inorganic expansion, which is important for us to complement our menu offering to also complement our geography footprint. And what we see going on right now is most of the activity is in the real estate and credit arenas. So these two asset classes are the ones that are with negotiations in a more advanced phase coming then in third place, our infrastructure-related also strategies.

So -- and of course, it has to do as well, I think, with the strategies that have been performing the best in fundraising and the best in interest level from our clients. On the geography side, I think we will -- as we mentioned all the way back, I think our GPMS Global Private Market Solutions that we did buy as a carve-out from the asset manager, Aberdeen, was a mostly European-focused business, 2/3 of the business is European focused.

And we would like to expand our U.S. side of this business to become more of a global solutions provider for private equity, primary, secondaries and co-invest. So U.S. would be a geography that we are looking into. I think the acquisition that we're going to do there is not going to be very substantial. That's why it's forced in the list of relevance.

I go back to the infrastructure and real estate -- credit and real estate and then comes infrastructure -- then comes GPMS on relevant size, geography, U.S., mostly GPMS and Mexico, mostly real estate and credit. So in order of importance, again, just repeating here to be redundant, I'm sorry, credit, real estate, then comes infrastructure, then comes GPMS, geography, U.S. and Mexico as new geographies, and we continue to enhance our presence, of course, in the geographies that we already exist, mainly in Brazil.

We are trying to spearhead and be a protagonist of this consolidation of the industry. We see several asset managers in our industry pushing that agenda from the mega ones to the large ones. And now with a $50 billion asset manager, I think we joined the club of the other $50 billion asset managers.

So I think we have the mega ones managing close to $1 trillion. Then there's a second group of around 20 that managed globally between $100 billion and $300 billion. And then we come with this third group, which is -- we're # 31 now globally, 30, 31. Of course, so the second group of $50 billion asset managers, all of us actually pushing this consolidation agenda. Interesting that these $50 billion managers, they have a geographic also origin.

Some of them are -- have Asian origins. Another has a Middle Eastern origin. We have two Europeans. We have a couple of Americans and us, I think the only Latin that does exactly what we do, pursuing this consolidation agenda in their respective regions of origin, first and foremost, in our case, Latin America, of course. And then, of course, trying also to expand globally with one or two asset classes or strategies. In our case, GPMS was the chosen one. So I hope I answered your question, Rodrigo.

Our next question comes from Tito Labarta at Goldman Sachs.

A couple of questions. Just on the FRE guidance for this year, you mentioned you'd like to be slightly above the lower end of the range. Just looking at the trends right now, if FRE is similar in 4Q, you'd be around $188 million. Should we assume that the difference to get you to above that $200 million would mostly come from the incentive fees that you most typically get in 4Q? Or would there be any other potential upside that we could see in 4Q other than the incentive fees? And then I have a second question.

Thanks, Tito. Nice talking to you, and thanks for participating in our call. I think that both, I think mainly the numbers that you just went through there, I think, makes sense.

We expect around $10 million to $12 million coming from incentive fees, and that's a relevant portion of the FRE contributor for the fourth quarter of 2025. In addition, but not at this level of relevance in absolute dollar terms, we have more FIE coming from management fees because the management fees is being driven by the fundraising that we just described during our earnings call and answering Rodrigo's question.

All of that fundraising is already translating into more management fees and that management fees, it's the same team basically that we had in the third quarter. So that actually then flows down to fee-related earnings. But -- in absolute value importance, you are correct. I think that $10 million, $12 million coming from incentive fees is number one contributor for us to then surpass the $200 million of FRE, which is the entry level of our guidance.

Coming second, the contribution from the fundraising that is translating into fee earnings, fee-related earnings in the fourth quarter that we have more fee earnings AUM in the fourth quarter than we had in the third, more in the third than we had in the second and so on and so forth because we are managing to fundraise more than what we expected.

I'll give you one example here just to know also using your question here to throw in another interesting subject that I would like to cover. We didn't cover this in the call because we got that we got that news late last night, our data center platform. So I'm using your question here also to make this release of information here, Tito, but it has to do with your question.

As of yesterday, the Brazilian government did approve a very interesting regulatory framework that basically enables exporting data from these incentivized areas in Brazil in an incentivized tax framework. Basically, you don't pay taxes as data center exports data. So the data that is processed in these data centers in Brazil have this very interesting tax advantage.

And also if you import the machinery equipment to build a data center, you also don't pay any import tariffs. Brazil is kind of mimicking what other regions in the world did like in Malaysia and Singapore, et cetera, to attract these massive data center-related investments. And so I think the Brazilian government is in the forefront in the vanguard of this regulatory framework by approving the legislation as of yesterday.

And of course, an additional advantage of actually building these data centers in Brazil is the vast availability of renewable energy and also the low consumption of water and recycling water that we have in our specific design data center design.

And of course, you know about the renewable energy in Brazil and in our project per se that is actually will leverage on this regulatory framework approved by the Brazilian government of. And of course, we have been working with the Brazilian government very intensively over the last quarters. We already have an offtaker, a relevant offtaker to build a 200 mega data center that consumes around 300 mega of energy.

We already have the energy provider, in this case, is Casa dos Ventos, 100% renewable. And we also have several of the licenses and mainly and most importantly, to connect our data center to the substations that actually are connected to the submarine cables. The real estate that we actually have already identified and already optioned is very close to the submarine cables that connect the Brazilian coastline with the major regions of the world.

And that submarine cables help on the -- in reducing the latency of actually processing that data in the data centers in Brazil. And we're putting up $2 billion of construction infrastructure. The offtake is putting up approximately $8 billion. So it's a $10 billion project. We can threefold, fourfold, fivefold that because it's a 200 there is potential for us to increase that with the same offtaker, which the offtaker has the interest actually to more than double.

We also have the interest to continue investing in that project, and we can actually work with other offtakers as well. If you see that we do have -- we do manage approximately on fee-paying AUM going back to Rodrigo's questions and your question on FREs and revenues.

For our infrastructure vertical, we are managing around $4 billion, $4.5 billion of fee earning AUM. We can basically double that with the fee-paying SMAs dedicated to these data center platform. So extremely interesting. We also did the same kind of SMA joint venture framework to invest in toll roads in Brazil, also through our infrastructure vertical, also answering Rodrigo's question, that will take on then, of course, the AUM raised for our infrastructure vintage #5 and invest and then turning that into fee earnings AUM and revenues.

We won a couple of toll roads through this JV that we call [indiscernible] or Union Unified that has not only Infrastructure Fund V, but has other very, very important large institutional investors of ours, mainly sovereign funds investing in that platform.

We, again, won two concessions through that platform, and we see that we can continue going on that can become it's $1 billion commitment, but it can become 3, 4, fivefold that as we look into the future. So we see these platforms in toll roads, which is already up and running and already won two concessions in data centers where we have this project that I just described and the company there is called Omnia.

And we see other potential platforms that infrastructure-related platforms throughout Latin America where we can actually then co-invest with our infrastructure fund or just have a JV kind of framework, an SMA kind of framework to invest significant amount of money in infrastructure-related projects in Latin America.

And all of that actually transforms then because all of them are fee paying Tito and Rodrigo, all of that transforms into fee earning AUM that actually then fuels our revenues and our numbers going forward. So as we look into '26 and '27, we feel comfortable that we will continue with that good pace of fundraising and good pace of FRE increase that we went through during the call today. Thank you. Sorry to take a long answer to your question on using the data center depot, Tito, but I think that was important.

Yes. No, very helpful. And then just one other quick question on your performance fees. I mean I think you mentioned Infrastructure III sort of the main likely place where you can maybe realize some performance fees in the near term.

In the past, we've seen 4Q, we typically are able to realize them? Just any color you can give on your ability to realize some of these performance fees in the short term?

Yes. After the end of the third quarter, so into October of 2025, we did have some realization events that we highlighted during the call, pushing -- increasing our performance-related earnings by $15 million. We had a small number up to the end of the third quarter of $1 million.

So that actually adds to the $15 million. So we're now looking to $16 million of performance-related fees for this year-to-date end of October. As we look into November and December, we're very active on realizations. So potentially, we're going to have more realizations from our Infrastructure Fund III in the last 60 days of the year.

However, as you know, I don't want to be repetitive on my joke here, but mergers and acquisitions also means misery and languish in some cases. And so they're signing the deal or something happens, the deal then slides to be signed early 2026. It's part of the game.

So that's why we like to give more of a broader kind of view on timing as far as realization of performance fees are concerned. So into 2026 and of course, 2027, we still see the $120 million to $140 million out of which we already did deliver around $45 million. And so we still have some that might happen end of this year, but we see a very good pace and the quality of the investors also very, very high quality as we are being able to attract strategic foreign investors that are coming into the region.

We're going to see the French toll road operator in their first incursion into Brazil was buying one of our toll roads. We also had Indigo, which is another French parking lot operator that bought into our parking lot company called [ Paque Bain ] and so on and so forth.

So -- and so very, very high-quality sovereign funds also buying into our assets. So very interesting in quality of investors and bringing money into Brazil to be able to buy our assets. And you see that the whole theory here is actually turning into reality as it has for the last 25 years in infrastructure. We have development funds.

And then once the asset is developed, we sell to strategic investors. That can be sovereign funds that take a role of strategic investors and can be also pure strategic investors. We see that as well coming along now closer to 2025 now, Tito, not '26. Some of our private equity-related strategies also with a high probability of generating performance fees.

In this case, specifically, we see our growth funds and our venture funds have been able to generate interesting performance fees later in the 3-year plan period, which is into 2027. So we're probably going to see Infrastructure Fund III realizing most of its performance fees during '26.

And as we look into '27, we see some PE-related private equity-related funds in a good moments to realize investments as some of these investments are already mature and we start actually looking into realizations and building into that performance fee.

For example, we recently sold two assets from our growth fund. One is an online psychology-driven business, psychology sessions-driven business that we actually sold and merged into another company. And then we sold our online education business as well. And as you sell these businesses, they build into then return principle and hurdle and after that, you start generating fees.

So as I see the realizations from these funds already happening, I mentioned 2 examples this year 2025, I see other deals that we're working on that we're probably going to realize from these funds in '26, building in to deliver back capital to investors and then performance fees in 2027.

So I can -- I have a lot more of a 24 to 36 months advanced look because I see the realizations building up and getting close to the principal and hurdle. And then we have the whole catch-up as we have right now for Infrastructure Fund III. So more PE-related strategies for 2027, more infrastructure-related strategies for '25 and '26. I hope I answered your question.

Our next question comes from Ricardo Buchpiguel at BTG.

Can you please provide an update on how the cross-sell of the GPMS products to Pat LP should evolve over the next few years? The vertical is now growing around like 8% year-over-year, the AUM. So it will be interesting also to hear what we can in terms of potential acceleration over the next, I don't know, 3 years without considering M&A on this vertical?

Yes. Ricardo, thanks for participating, and thanks for your question. I think it's a -- when we did the acquisition, we saw a couple of phases into raising money from all of our client base. I think Phase 1 was to gain the confidence from the current clients, right?

I think we, as a Latin origin company, buying a business in the U.K. Of course, we did the diligence before that, and we saw that -- and we heard from the clients we did, of course, interviews with these clients, blinded and nonblinded interviews with the main clients of this business, Ricardo, and a lot of thumbs up. They really like the team. And they were saying, of course, depending on the buyer, we would actually, of course, support that new buyer.

So Phase 1 was actually getting back to these clients post closing, which we did, which was, as you know, we did -- we took over the business in April of 2024, so a year or something ago. And that actually went very well. You can see the kind of how do clients actually respond to that in a concrete manner. They don't redeem and they invest more, right?

They invest more with you because they're happy and they don't redeem because they're happy. And that's what happened. I think over the last 12 to 14 months or 15 months, everything worked well. We saw clients actually re-upping. We saw 4 hours special secondaries opportunities in Fund #5, which is a blind structured fund.

We saw SMAs continue to be beef up with new money and renewed and so on and so forth. Then I think we started with, I think, secondaries opportunities # 5 fundraising to attract new clients, new clients from our base and clients that were not in our base of clients or -- and we've been able to be successful, and we are very well on plan to be able to have secondaries opportunities Fund to reach its target, and I think it's going to exceed its target.

We were targeting around $500 million for that. And I think we already see that kind of that number. So it's not very common these days. for a blind structure funds to hit the targets. And I think we're going to surpass it. I think we're going to surpass it in 10% to 20% of that number, which is rare. It's not very common for private equity related strategies, in this case, is a secondary strategy to hit the number that it announces in its -- when we say in its front cover page of the prospectus.

And it's even more rare for actually funds to overcome that number. And we're going to do it. I think we're going to overcome that number in 10% to 20%, as I just mentioned. So that was the second phase and the real test, as I say, is clients actually give you more money. And that's what they did for secondaries opportunities from #5. And not only from our own base, but we had clients that were not even our clients, which is because we had a new product to offer.

And so we are happy. So we are in Phase #2, we're living Phase #2. Of course, Phase #3, we're going to launch more products from this -- from the GPMS structure. We have ahead of us so many new strategies that we're thinking about a blind fund structure, a pure co-investment fund that we are thinking about starting to launch early next year.

So we have the SMAs that invest in private equity primaries, secondaries and co-invest. Then several years ago, the Aberdeen team actually did spin off the secondary strategy and started raising blind structured funds, Fund I, II, III and now we're raising Fund V, as I mentioned a couple of minutes ago. When we take a look at their co-investment track record that they did over 100 co-investments through the SMAs, amazing track record, 16% to 20% net IRRs.

So we are then pulling that off. We're, of course, working to show the investors the fantastic track record that the team actually delivered with that specific strategy and then actually raised a closed-end fund. So it's going to be our co-investment fund #1. And we see some traction, and we're taking that to the road early next year.

So that's Phase #3 to have a new product with the same investors and new investors. And so -- so we're pretty happy that, that's working on well. And I can mention several other products that are also in our pipeline that actually derives from the GPMS strategies. We can have a credit fund that actually works in the same kind of mid-market level.

We can have actually a GP stake fund like Diodes of the world or whatever. So other -- so many new products and exciting new things that we can do over the next years. I mentioned a blind fund structure investment fund as an example.

On the Latin American side, we continue to raise a very important absolute value from Latin American investors into our GPMS products, less so because we are bringing them now into our strategy. But to other global asset managers that we do represent in the region, Carlyle being one, as you guys know. And we have been very successful with that strategy in 2025, raising significant amount of money with Latin American institutional investors, mainly into Carlyle-related funds, working with AlpInvest, which is the solutions provider for Carlyle, helping us actually develop solutions for our institutional clients in LatAm.

We're also looking to represent eventually other global alternative asset managers to sell for our Latin clients. And -- so happy with that as well. So no, I can't complain. I think it's -- we were well accepted by the GPMS clients. And again, as I mentioned, the best way for our clients to say that they are happy with you is to put more money in the new fund or a new strategy and not redeem. And that's what's been happening. And I think we're going to have great news to report during 2026 in these fronts. I hope I answered your question for you.

That's clear. And for my follow-up question on capital return, it would be interesting if you could provide more color on the total return swap mechanism you mentioned in the call and also give more details on the rationale for the 0.65 per share dividend that you also announced for next year.

No. Thank you for those 2 questions. Well, the TRS is a very interesting way of actually to execute a share buyback program, right? And I'll give you my comments on it. So just take a couple of steps back, late last year, we did -- our Board approved a $3 million share buyback program. I think it was early this year, I'm sorry.

Late last year, we did approve -- the Board approved $1.5 million, and then it increased to 3 million shares share buyback program early this year. When we looked into -- as the CEO and the management team, together with Ana, our CFO, when we looked into alternatives to execute this share buyback program, the 3 million share buyback program, we saw and concluded that the TRS total return swap, I think, was one of the most interesting ones.

First of all, you do, I think, for confidentiality reasons, for conflict reasons, you do outsource the execution of the share buyback to a third party, in this case, to a financial institution. So you give the financial institution a plan, an order and you set up a plan, how you're going to buy amount of shares during this period. And we are completely out of the execution.

So as far as conflict is concerned, as far as any type of execution risks are concerned, the company is completely exempt from that. So this is, I think, it is a very pure way of doing something, which the financial institution has a predetermined plan, and we will execute the plan with no interference whatsoever from the company.

And so number one, no confidentiality; number two, managing very well compliance conflicts of interest. Then it comes to the financial, I think, advantages a bit that as you do buy the shares that we have, of course, a cost of -- it's like a loan from a bank, but we don't have to -- we don't have the obligation to actually pay that loan in a year from now, for example, because you could actually have the option to ask the financial institutions to sell down the shares and repay that loan.

Of course, if the shares are now traded at a lower value, we are -- we're going to have to pay the difference. But that's another because it's an asset backed, right, the financial institution does have that asset in this case, the shares and they can sell those shares back into the market. And during the process of buying these shares, the dividends of these shares are flowing back to the company to Patria.

So the net cost is the interest rate that they charge, the financial institution charges minus the dividends. So therefore, a year from now, of course, the cost of actually us having to finance this loan is lower than a pure loan. So it's pretty interesting if we had then, of course, bought the shares and actually canceled those shares, the shares wouldn't have any dividends.

But no, we actually then -- the shares is held by the financial institutions. The dividends paid to these shares are netted from the interest expense. So I think the first two reasons are the majority of the reason why we decided for it, confidentiality, execution, the low risk of execution, et cetera, and financially very interesting.

So that's why we went through a total reserve swap and we did buy -- we did -- the financial institution did buy 5 million shares during the third quarter, and that's why we now have 158 million share count as of the end of September 2025.

On the $0.65 per share, I think we wanted to keep on transferring part of our growth in revenues, in fee-related earnings in distributable earnings to the shareholders. And we looked into lower interest rates in the U.S., which have now treasury bill is running at 75% per year.

And we do the math of actually raising our dividends by approximately 10%, will be 66%, but 65 and we rounded the number to 65 -- and if you do the math, if you want to get a dividend yield similar to what the U.S. Treasury is paying in the short term, we should then actually not only transfer more dividends, more money to our shareholders, but also plus a share buyback program, right, but also give the stock a support level that should push the stock up to around $17, $17.3, which is the $0.65 is 3.75% of $17.3.

So also supports a growth in our stock price. If -- as I talk to shareholders, they kind of tell me that they have this framework in mind. They look at the low the short term, sorry, interest rates paid by the U.S. government. They look at our dividend yield plus the growth that we are delivering.

So it's a dividend yield that actually mimics the short-term U.S. treasury yield plus the growth of 15% per annum to 20% per annum. So that's the combination plus the share buyback program that we just announced. So that combination should then give our share price not only support, but should actually help it increase as we move forward. So that's the rationale, Ricardo. I hope I answered your question here.

This concludes the question-and-answer session. I would now like to turn it back to Alex Saigh, Patria's CEO.

Thank you, Rina. Well, thank you very much, all of participants. I was extremely happy to be able to answer so many interesting questions and very happy that all of you participated.

Again, we had a solid third quarter, looking to a very solid, very positive 2025 and even more so into 2026, '27, feel comfortable that we're going to deliver our PAC Day in December 2024 announced PAC Day numbers guidelines.

So thanks again for your patience. Thanks for participating. I hope to see you in person until the end of the year, trying to organize a couple of roadshows and in-person meetings in Sao Paulo and New York and London. And hopefully, I'll see you in one of these three meetings and roadshows. See you soon. Thanks a lot. Bye-bye.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

Hello, everyone. I'm Andre Medina, leading Shareholder Relations at Patria, and welcome to the third edition of our PAX Talks, an investor-driven deep dive into our Global Private Market Solutions business or GPMS and how we generate Alpha in middle market private equity. We are very happy to have with us today leading the Q&A, Charles Keenan. Charles is the portfolio management along Life Capital, where he has led the firm's public markets portfolio since 2018. He previously worked at Blackstone and holds a Bachelor's degree from MIT.

From Patria, we are very pleased to welcome Merrick Mckay, Partner and Head of Private Equity for GPMS. Merrick is a member of our Management Committee and the GPMS Investment Committee. He's an advisory Board member of numerous funds, a regular speaker at private equity conferences and a Board member of Invest Europe, Europe's private equity trade body. An Australian with British dual nationality, Merrick has over 30 years of experience in the European private equity industry.

This will be a fireside chat Q&A format. If you have questions, each of you will have the opportunity to submit them, and we will try to get through as many as we can. Of course, before we get started, I have to make some introductory remarks and before I make some introductory remarks, I have to read the obligatory forward-looking statement. So I would like to remind everyone that today's call may include forward-looking statements, which are uncertain, do not guarantee future performance and undue reliance should not be placed on them.

Patria assumes no obligation and does not intend to update any such forward-looking statements. Such statements are based on current management expectations and involve risks, including those discussed in the risk factors of the latest Form 20-F annual report. Also note that no statements on this call constitute an offer to sell or a solicitation of an offer to purchase an interest in any Patria fund. Okay.

With that out of the way, let me start by framing and putting some perspective on our GPMS platform and why it is important to our investors before turning it over to Charles and Merrick. Our Global Private Market Solutions business as of the second quarter had $13.9 billion of AUM, of which $11.4 billion were fee-earning AUM, $1.4 billion were pending fee-earning AUM and $3 billion were uncalled capital. The platform invests mainly in middle market, private equity primaries, secondaries and co-investments in Europe and to a lesser extent in the U.S., offering its clients multiple products and structures, including SMAs, commingled funds and listed -- a listed trust.

The listed trust, Patria Private Equity Trust or PPET, is traded at the London Stock Exchange and represents over $1.6 billion of permanent capital fee-earning AUM to Patria. Since April 2024, when Patria closed the carve-out acquisition of Aberdeen's middle market private equity solution business, which was the base for the creation of this strategy, it has raised over $3.5 billion.

From a financial perspective, as of the second quarter, the business generated approximately 17% of our management fee revenues, and we definitely view GPMS as a key component of our growth strategy. On our December 9 Investor Day, we indicated that we believe GPMS fee-earning AUM can -- close to double within the next 3 years. With that as a backdrop, let me now turn it over to Charles and Merrick. Guys, thank you for doing this, and it's all yours.

Wonderful. Well, thanks, Andre, for that Introduction. Merrick, we don't have a ton of time, but it would be great to just hear a bit about your background. How did you end up running the Private Market Solutions business at Aberdeen?

Thanks, Charles, and thanks for the introduction, Andre. So I'll try and keep this short. As Andre mentioned, Australian dual British nationality. So I came over to the U.K. in 1992. I got a job in a -- like a corporate finance advisory advising in the private equity market, 5 years doing that, then 13 years as a direct investor in a company called Primary Capital, which was very much low mid-market private equity, a bit of a midlife crisis in 2010, didn't know what else to do and ended up joining Macquarie for a short period of time to join the dark side as being an LP.

Back then quickly moved into that business joining what was called Standard Life Capital Partners, part of Standard Life, a very large U.K. institution and been investing in European and U.S. private equity for many, many years. In 2017 -- so it was 2014. In 2017, Standard Life and Aberdeen Asset Management, two -- again, large Scottish institutions merged. Both businesses had private equity divisions, and so that came together.

And I was leading the European business of that from 2019 onwards. I think we'll come on to a bit that -- I think after a few years there, it was pretty apparent that Aberdeen probably wasn't the right home for what we did for various reasons. And so the decision was taken certainly with our support that we should seek a new owner. So hopefully, that's helpful.

Yes. No, that's great. And good segue. So walk us through how the carve-out came about. When did you start talking to the Patria guys? And just starting at the beginning, what's the story of that transaction?

Yes. So try to keep it succinct. When -- there were a number of things that we needed as a business to succeed in the future and taking sort of being ownership agnostic about it, we really put it to Aberdeen and say, here are the things that we need to succeed if a lot of this was around distribution. I think that as many would recognize that the public market model is very, very different to private markets. So that needs a separate type of process.

There were challenges around, we needed investment in systems and in people. So it was really a decision either you need to invest in that or we need to go elsewhere. So they took the quite reasonable decision to seek an exit. I think at that point in time, it was looking to put us with some other parts of the business just to sell, which we thought was going to be pretty challenging. And after a period of time, came back to really just our part of the business, which was principally the European private equity business, but with a small part of U.S., which I'll come back to.

What was interesting for us is, with one exception, I would say, every client that we had were really backing our team. We had very close relationships. We talked to our clients all the time. We made them aware of where we were on things. They were -- we were very mindful of wherever we needed to be, that need to be somewhere that they were happy with. But really, it was the other way around. I think their view was they would be happy if we were happy.

So it put us in a really, I think, strong position. There was no way this is a people business that you can go and sell that over our heads. And so it gave us a very strong position in the sense of who we're talking to and how that came about. So that was very helpful. I think candidly, when Patria's names were mentioned, I'm sort of embarrassed to say that I think a lot of the team hadn't heard of Patria. And our initial thoughts were Patria LatAm direct business. Why?

But we listened and there are a number of things that over time, I think really resonated with us on how they -- how they're approaching this, how they view the opportunity, particularly around LatAm looking outside, very entrepreneurial. And so -- and able to move very, very quickly. So we got really comfortable with Patria and vice versa.

So coming back to that timing, I think, gels our discussions, I think, with Patria really started in earnest -- in early 2023. I think there was exclusivity in mid-2023 the -- we signed -- I think the transaction was signed in October 2023 and then completed -- it was quite a long period for regulatory reasons and investor consent and so forth and completed in April last year.

Great. And let's double-click on the LPs there. So how did the LPs think about the transaction? What rights do they have in the -- given the change of control, if we had 5 of the LPs around the table when we're talking to them, what would they say about the journey? And yes...

So I think you can put them in 2 very broad buckets. Firstly, the majority of our business currently -- clients is with SMAs and you can almost forget about the idea of change of control. The beauty of a separate managed account for many large investors is they can modify what they're doing at any point in time. It's their vehicle. And they can -- if they don't like what we're doing, they can effectively give us notice. So not even a change of control. They simply have to be happy with what you're doing for the whole time. So again, you have a close relationship with them.

On the other side, there were a number of our pool products, have specific change of control consents and you have to go through that process. But again, the nature of our business is we're talking to those investors all the time and making sure that they're happy with what they do. It's a high degree of transparency.

So with one exception, I said before, every client that we really had within Aberdeen viewed us as a team. There was one client that actually was an Aberdeen relationship and was the only mandate or client that didn't actually transfer or sought to do something else post acquisition. So very, very high success rate in that, that's what we expected.

And I guess just for context, how many clients roughly do you have?

So I think in terms of SMA clients, we have about 20, I think, that are meaningful and are still working. And then we have a number of different pool products at different stages with clearly numerous underlying investors.

Makes sense. And I guess give us a flavor for who are your LPs, who are your clients? And why would they would choose to partner with the private market solutions business versus just saying, okay, I want to allocate this amount of money to private equity. I'm going to give it to -- give all of it to some big private equity manager.

You can spend a lot of time talking about that. Again, let's separate that into 2 different areas. So if we think about something like a pool product and one that we -- that's been very successful for us for a period of time were called SOF series, Secondary Opportunities Fund series, which is just finished investing its fourth vintage, has been very, very successful.

So that's out there effectively, I think, if you like, competing, it's a secondaries vehicle. And so inevitably, when you're talking to investors, there are people who would be wanting to invest in a pool product as opposed to something else. I think by definition, they are attracted to the secondaries market. And so there's inevitability that they'll be comparing what your offering is against other secondary managers.

On the other hand, as I mentioned before, a lot of our businesses with SMAs. So these will typically be investors who are large enough and sophisticated enough to want to have a strategy which is targeted at a certain area that we have expertise in, but don't have the teams or the people to be able to execute that themselves. And you can get a broad range of solutions there. So we have, for instance, a U.S. public pension plan that is very taken by and fundamentally believes in the mid-market as a place to be investing.

From a U.S. perspective, they're very comfortable with covering that themselves. But when they look at Europe, they realize there's no way they can do that. And so they want to work with somebody who can provide that offering, and we work very closely with them. That would be one example. Another one would be a Dutch pension plan who is, again, taken very much with the lower end market, but has a very specific aspect of what it's looking to do.

Initially, we only -- they only wanted to make primary commitments into funds of under EUR 1.5 billion in size. And they didn't want to hear that, oh, we've got 6 great managers this year and 2 the next. They want to have absolute strict vintage diversification with 4 effectively picks per year. So it really does vary. But what tends to happen is, the clients will have an idea about what they're looking to do, and they'll be marrying it up with effectively our skill set and our ability to do that for them.

If we zoom out at a high level, is it too simplistic to think about -- think that the decision kind of comes down to scale, where if an allocator wants exposure to European middle market and they don't have the scale history or expertise to have -- built out the team themselves and develop the relationships over decades like you have that a private market solutions manager like yourself makes sense. Is that kind of the crux of it? Or is there something else too?

I'd say generally, that is the case. When we're looking at the separate managed accounts market, for us now, it's -- where does it start making sense for someone to think about that? And typically, it would be probably $50 million to $100 million is what makes sense from a vehicle and from a cost perspective, and that gives them the ability then to have a very tailored approach.

So again, how does that fit in effectively with the private equity or private markets allocation of that investor is looking to do? A bit it's interesting. In the past, for instance -- we have a number of years ago, managed investments for CalPERS. So CalPERS again knew that it was making very, very large tickets or investments. I could do that itself, but recognize again, maybe from a European context, that was very difficult for them to do.

So there's someone who is -- you would argue is a very, very sophisticated private equity investor, but just recognizing that it needs that on-the-ground presence -- so I'd say scale is definitely a big part of it. But one of the developments in our market, we've come from effectively the fund of funds market, which was, again, large funds, very pretty much straight jacketed with what they could do -- with what people could do. Now I think people can -- or institutions can have a highly tailored program for a lot less than they would have probably 10 or 15 years ago.

Interesting. And you touched on that, a number of the clients have a specific view that they want middle market exposure -- European middle market exposure, have a view that, that is somehow unique or better. Walk us through why the middle market, what are the benefits? Why have you focused the business there over time?

So I think it's -- for us, again, having been in the market for many, many years and having invested initially in people that were very small and have now become mega managers, we've seen a lot over a long period of time. What we have seen specifically is the mid-market has generated superior returns than the large cap or mega cap market over time. I'll come back to talk about this in a minute around cash flow dynamics.

And so the first thing is the returns are fundamentally better. If it didn't, we wouldn't have an private offering because so many managers -- investors can effectively make those large mega cap investment decisions themselves. It's not difficult to do. It's low value add from our perspective. Why is the middle market a better place to be for investment returns? It's a target-rich environment. There are this lower pricing and leverage. There's far more growth opportunities open to these managers, far more exit optionality. There's lower correlation with public markets.

And one of the things that has really developed since the last financial crisis, particularly from a European perspective, has been the sector specialization and the genuine operational value add that managers can do now at a much smaller level. So again, maybe 10 or 15 years ago, the operational value add that people were doing was to have the larger mega cap players. Now that's really gone right down into smaller managers with very specific sub, subsector strategies.

From a European context now, for instance, rather than in the past, we would have been thinking about things, portfolio construction maybe from a geographic level, now we can construct things on a very sectoral level. And that ability to add value is a bit of a trite term in that mid-market has just pervaded for a long period of time. One of the challenges I think we and others who focused on the mid-market have had for a period of time is that, a lot of investors say, yes, okay, I recognize that the returns may be better. But actually, the returns in the large mega cap end of the market have been really good for an extended period of time.

So do I need to get that extra return for something that, by definition, even if they take us on, requires more effort. What I think we've seen over the past few years is the tide has absolutely turned in that market because you're now seeing private equity returns reduce over time. Again, I think over time, at a premium by definition to public markets, but not at the excessive premium that we were seeing a few years ago. And so I think that's now forcing people to really look at that area much more.

I mean it's interesting. I think if you -- something like 50% of private equity fundraising is in funds of $5 billion plus. I think it's very easy to do that. I think it's 80% in funds of $2 billion plus. The other thing that has really changed a lot of late and a lot of investors are really struggled with this is, the cash-on-cash returns have been coming back from private equity investors.

LPs for a number of years were doing really well up to and just after 2020. They were getting very high returns and very high distributions coming back and people putting more and more money into the market. And this is right across the scene. What we've really seen over the past few years has been a marked drop off in distribution activity at the large and mega cap end of the market.

The IPOs have dried up. They're more reliant on debt to have exits, but sovereign wealth funds haven't been there. Whereas in the mid-market, distributions have definitely declined as well, but have actually held up much more than that part of the market. And so that's something now I think a lot of investors have really focused on because they've seen that.

Interesting.

So there's a lot in there and I'll cover that...

Yes, yes, yes. So let's chew on that a bit. You mentioned that historically returns in the middle market have been higher. Has -- is the dispersion of returns also higher?

Yes, but not to the extent that people think, so...

I guess I bring it up because I believe in Swenson's book on allocation, he talks about this idea that if dispersion is really high, it makes sense to try and hire a manager that you think can get into the top of that bucket. But if dispersion is really low, you want to focus on lower costs.

And so perhaps one can make the argument that middle market returns are higher, dispersion is also higher. It makes sense. It would be a reason why someone like CalPERS would select someone like yourself who can -- who has the expertise and historic relationships to access that top segment of the returns. Does that make any sense? Or am I pushing it too much there?

No, it does. I'll go back to this point, but I think when returns at the large mega cap end of the market have been really pretty good, and it's been relatively easy for large allocators to access and they feel confident about, okay, they're not going to shoot the lights out, but they -- again, they don't think they're going to be in a situation where they're underperforming or losing money. It's an easy decision to make. So that's effectively what we're fighting against.

But there's been a smaller, if you like, set of investors who fundamentally think, okay, is this going to continue in this way? Or is there another way of accessing it to give me the control I want that's, again, relatively cheap and worth it. So clearly, the cost of us doing something for that is a fraction of the extra return that they should get . So I think with that the case, we're -- again, we're tending to talk to sophisticated investors. And what I mean by that is, people who actually understand that there are fundamental differences between -- in private equity and what it will look like in the future.

Interesting. And so I mean, not to just put this in public markets speak, but is it as simple as over the last -- from 2010 through 2020, maybe even going back before that, there was just a lot of positive beta in the private markets as interest rates came down, more money flowed in. And so because the beta in the private markets was really good, you can make your life simple and just allocate to a big manager.

And now private market beta isn't what it once was. And so folks are searching for private market Alpha. And that's where kind of the middle market comes in, that's where you guys come in, where you have those relationships?

Yes. I think that's spot on. As I already said at the beginning, I've been in the industry for 30 years. I've been through a few cycles. I'd have to say that the last one has been the longest. It was -- I don't want to be. It was relatively easy to make or to put it more charitably, there were tailwinds. Everyone recognized it. I think a lot of people started patting themselves on the back.

So there was definitely a element of beta. We're very -- our returns have been very, very strong for a lot of our mandates. But I stand back and say, well, it should be good. We've got to be able to -- one of the things we've been able to demonstrate that Alpha from our perspective as an indirect manager through our manager selection, our portfolio construction, our co-investment activity, I'm pretty confident we can do that. But that's where I think a lot of people have got tied up and start -- they've done very, very well.

And now the tide has turned. So it's the old thing about who -- when the tide goes out, you can see who's been swimming naked in that. What I will say is one of the things I noticed certainly compared with the last -- with the financial crisis, GFC, was that before that, and it is particularly from a European context, I'm not going to speak about the U.S., but really, almost everyone, I would say, was a generalist.

And -- trying to pick numbers on, I'd say a huge amount of what they did was P101. They were definitely benefiting from multiple arbitrage through positive cycle tailwinds, incentivizing management teams in an appropriate way. But the best managers since then who'd come into it and the only ones who were back have absolutely brought something else to the table now. So to me, there's far more value add that's been brought into the PE model. So there's been beta and genuine alpha that's for me, it's far more of that now.

But as I say, it's become more challenging, particularly around -- it's the exits. I think people -- the people we back have shown genuine ability to think strategically and add value to their portfolio. It's when the exit markets have dried up somewhat, particularly the larger mega cap end of the market, that's where it's become more challenging.

Makes sense. Let's double-click on some of these relationships. Marco, I think made a really interesting comment on the acquisition call, going back to October of '23. And I'm paraphrasing here, but he said something along the lines of, we identified private market solutions as an area that made sense for us, and we wanted to get into it.

And to get into it, we realized that we basically had to acquire someone because the business is all about relationships. And so you need to acquire that tenure of relationships, trying to go and build it yourself, it would take 20 years. What's the typical duration of the relationships that you have, both on kind of the LP side and the GP side? We'll start there.

Yes. So firstly, you hit the nail on the head there. That relationship is both on the -- our investor side, our clients and on the investment side itself. So on the client side of things, even at the pooled product level, the people coming in -- investor in a pooled product are not someone that you simply make an investment decision after having met you a few weeks or months previously. They spend their time understanding what you do.

But then when you talk to the -- we look at the SMA clients, these are people who really need to develop that over a long period of time. This is a big decision that people make. So those relationships really matter and as demonstrated, as I said at the beginning of the call around when we were exiting how that works. So that takes a lot of time. But then really on the investment side of things.

So again, what we're doing is making typically primary, secondary and co-investments or a combination of those and there are definitely different flavors for each of those into -- in each of those cases, they are into or alongside a GP. And whilst you could turn around and say, right, well, I can simply go and start allocating our meet different managers, there's literally hundreds of credible and thousands of credible managers that you could go and invest in.

What we bring to the table is a deep understanding of that addressable market over an extended period of -- a very extended period of time who are the best people in that. So that when we're working alongside a GP, we know them and they know us very well, and we can triangulate that in many, many, many ways. The relationship there -- that we have with them can lead to a number of very positive benefits for our investors or investment vehicles.

Firstly, when it comes to situations where this is a really very strong manager and with this allocation, we'll get more than our fair share because of that relationship. When we look at co-investment activity that we undertake. And just to be clear, a lot of co-investment activity in this market is where, particularly at the large and mega cap end of the market is where a GP has made an investment, they want to provide some additional capital or reduce the size in that and will go to their LP base in quite a syndicated way. They will go ahead and say, look, here's what's available. You've got 2 weeks to make a decision. We'll do a management call on that.

And it's quite a very binary decision and a quick one, but relatively easy for people to make. That is not typically the type of co-investing that we're doing. What we're undertaking is working alongside a manager who really needs us and/or somebody else to be alongside them either pre or just after they made that investment. So it's really doing a lot of sort of underwriting alongside the manager. Now that's something that this really matters to a GP. They need to be confident that we're there, we can move quickly.

So that type of relationship is something that takes a lot of effort and time. Our secondary activities cover a broad range. But probably the core of what we do is, where we're acquiring an LP interest in mid-market funds. And these are typically in a situation where we are either an existing investor, primary investor with a strong relationship or someone that we know very, very well, which clearly gives us an advantage against a pure-play secondary buyer who doesn't have primary capital to deploy.

So there's definitely information symmetry there and the GP would like us to have that because we're an existing investor, hopefully, with more primary capital to deploy in the future. When we look at a lot of our activity over the past few years, we've been very successful in these concentrated secondaries or these continuation vehicles where a manager typically has an investment that would make sense holding for longer, typical secondary buyers are providing that capital.

And the situation where we're quite often an investor -- a meaningful investor with a strong relationship with the GP, we can work alongside the GP and say, here's how you should be thinking about constructing this and working there. And we clearly have a much greater advantage in that situation than a pure-play secondary player. So I'm just giving some examples of where those relationships really matter. And to Marco's point, that's something you just can't go and do quickly unless you want to simply throw a lot of money at it. So I hope that gives a...

Yes, that was great. It would be interesting, if possible, to kind of walk through an example of you guys have been primary investors in a GP for a while. There was a co-investment or a secondary opportunity that came up, how it came up, just kind of walking through a story of a specific example of what you're talking about.

One example I'll give is actually probably more on the co-investment front and how a relationship can develop. So we have, again, some very strong GP relationships that have gone back many, many years, which is hugely beneficial. But we're always on the hunt for managers that will bring something else to our portfolio, typically along sectoral plays. So just going up at a slight tangent Charles. I mentioned before about the -- how there's really been this people now think -- doing things from a sectoral position.

So for us, for a number of years, we were -- have been probably quite heavy from portfolio construction on health care, healthcare services, technology services, actually quite a lot of services. So what we're thinking now is how do we construct that if -- is there either a gap in what we're doing or is somebody else bringing some particular angle to something that we haven't had before.

We came across a manager, a new manager in COVID, sort of bizarre and this was the only time we've ever invested in a fund or investment where none of us had ever met the team physically. But it was a team that had got together. They've done a few deals. They had come out of some well-known European GPs that we knew very, very well, so we could really triangulate again, what they're doing, their story.

Part of -- again, what's quite often the case with managers who were just getting into business. They will have made a few investments themselves or when they're raising a fund, they need more firepower to make those initial investments. So -- which we view as something that's -- again, something that's relatively easy for us to do because we've done it for such a long period of time. It gives us a phenomenal angle when it comes to diligence in the manager. Nothing works better than -- than working alongside them in a live transaction.

So we worked very closely with them in making -- investing in their fund, effectively cornerstoning it to some extent by getting a lead role in an investment they are working on. So we were able to do full diligence alongside them. That's hugely valuable to them, both in terms of the capital by having us as a reference name in that and it was enabled them to attract more clients to it. And that relationship worked very well. The co-investment itself did exceptionally well and their first fund has really done exceedingly well. When one of their assets look to be appropriate for a continuation vehicle.

So for them, there was a huge amount of additional growth opportunity in this company. There were a number of investors who came in just to the fund who were, again, how do you provide the option for them to exit and those who want to stay. So again, who else will they turn to, but us to talk through how they would work through that process. And so we were able to take a lead position in that continuation fund or a secondary.

So that's a really small snapshot of how we work very closely alongside existing managers. I think another example of the relationship side of things is, an area we're looking -- actively and we made our first investment is in GP stakes. So again, it's been a very -- an expanding market. I think where a huge number of investors are now seeing the opportunity to invest in a GP to give them capital for new activities or taking a stake in the funds and GP, the GP commit and the GP itself.

It's another really good example that when we've spoken to a lot of our key relationships over time, they would have a preference for having us come in as investors, someone they have known and trusted for a long period of time rather than necessarily almost a pure-play financial investor who, again, they don't know. And so again, we made our first investment for our clients in that earlier this year. That's a strategy that we're looking at. That's something we should do on a stand-alone basis to benefit from that angle. But again, a very good example of that it's a relationship business.

Makes a lot of sense. Shifting gears here because we're already through half the hour. How should we think about the building blocks of growth over the next 2 or 3 years? I think Andre in his introduction mentioned that at the Capital Markets Day, stated that the target was to roughly double fee-earning AUM in the business over the next 3 years. So just -- yes, what are the building blocks for that?

So the first thing I'd say is -- the #1 priority for me is to continue delivering the very strong performance with clients today. That matters hugely to them. So that's a key priority. So fundraising, I think, is a key area for us. We need to continue to maintain and grow our SMA client base. A number of our mandates are either actually evergreen by nature of the vehicle itself or it's say effectively evergreen because the client effectively puts things into different tranches.

We've got such a strong track record in delivering a broad range of activities for different SMA clients. It's an area where we're looking to now because we're able to grow. But as I said before, these relationships take time. So we've got lots of irons in the fire there. Definitely looking to grow our successful secondaries strategy, the SOF strategy. That's something where we could absolutely deploy significantly more capital and effectively the same transactions. We're leaving money on the table.

That's one point I probably would say, Charles, that with our, I'd say, our existing investment capabilities with what we do, we can take on generalization, but I think significantly more capital without increasing the operational -- I think we've got very strong operational leverage in that area. So that's beneficial to us. Developing more pool products. As I said, we've only really got one at the moment, but there are other areas where, again, we have a particularly strong track record in an area that is something that should be resonating with clients.

Developing new channels and products, things like semi-liquids with partners, the CFO market and insurance channel is very interesting. And I think the other area on fundraising is really developing the LatAm opportunity. And this is if you go right back to one of the reasons that I think Patria really saw the global private market solutions opportunities for LatAm investors who really clearly benefit from Patria is maybe not a household name, but financially is very, very strong in that region.

LatAm is significantly underpenetrated in terms of its allocations to private markets, private equity than other developed markets. And so a really strong opportunity for us to be, I think, at the forefront of that in fundraising. On the investing front, again, we may -- we are -- at the moment, we've got a very, very large and strong European presence. We've got a much smaller one in the U.S. It's headed by my colleague, Eric Albertson, who's been with the business for a long period of time, has a phenomenal track record, but we recognize that we have a clear imbalance in terms of the offering to people.

And the U.S. is clearly massively important. So we're looking very carefully right from the start about how do we enhance that around bringing people into it. I mean we've already brought new team members in there. Do we have to re-hire? Do we make an acquisition of a business that sits alongside, has a similar investment philosophy with what we can offer to clients.

And I think the other areas is developing some adjacencies to what we do. I mentioned GP stakes there before, using CFO technology to provide a different offering to others. So I mean, there's many things that we can go for. We're certainly not short of opportunities. I think it's where we place our bets.

If I can add one point there really quick. Like on our Investor Day, there was a page, I think it was Page 99 that shows a little bit how -- as Merrick was saying, how the strong returns also drive asset growth, right? We gave an example of this SMA, this account that started with about $200 million in 2015. And if we fast forward today, it has like about $1 billion -- almost $1 billion with us. So how this investment returns, strong performance that Merrick mentioned also contributes to asset growth?

Makes sense. Yes. It strikes me that one of the unique features of the business, and Merrick maybe this is too simplistic, but is because the SMAs are basically evergreen structures, you're growing your assets just through investment performance, whereas a normal private equity business which -- where it's all pooled structures, you invest, it grows, you return the capital and then you have to raise a bigger vehicle.

And so if we think about the building blocks, you kind of have existing SMAs that are growing over time and that grows your assets, you then layer on new SMAs and then you have your pooled vehicles, which deploy, grow, get distributed back to LPs and then you raise new pooled vehicles, hopefully more of them in a bigger size. And that's kind of how the three chunks of the building blocks for grow. Does that make sense? Or is that...

I wish that were exactly the case, Charles. I think -- but when we look at those SMA activities, so there are certain ones which are actually evergreen vehicles. So if you think of our largest client is the Patria Private Equity Trust, 23 years, about $1.6 billion. By definition, that's a closed-end vehicle. And so the only leakage, if you like, and that is the dividends that you're paying. So that is almost full recycling, you get that. And we've got some other mandates that are actually set up as evergreen vehicles.

The second bucket and I think -- which I think you were describing. I wish just all of the SMAs will like this, but this is where they're thinking for the long term and want to do it, but need to be doing it in tranches, and it's easy for them to turn to the table. But quite a lot of SMAs, unfortunately are where people wanting something at a particular time. I don't think we've ever -- certainly, in my experience, we've never lost an SMA through performance.

But people's positions change. We had -- one of our SMAs was the pension plan of a U.K. financial institution. It's not investing in private equity anymore and it was a pure co-investment mandate. We had two tranches of that. Again, that's their choice. And so things can change. And again, that's the beauty of the SMA market for the client can change anything at any point in time.

But broadly speaking, I think that's what we're looking to get the balance right between our SMA activities and getting that, if you like, growth through the effective recycling. But I think the other area we really want to focus on to is the pool products. I think when we look at our competitors, we -- the pool products are good, and it's a specific offering for potential investors who don't have the scale to be able to do an SMA. So definitely looking to extend that into new areas.

So maybe looking at growth from a different lens, if we were talking 10 years from now, and things have been incredibly successful with the GPMS business. What would success look like in 10 years? What would the business look like? What would you be doing? Where would you be doing it, the different geographies, different products, paint a picture for what that would look like?

One thing I'd say is that everything we've discussed to date within the Global Private Market Solutions has been private equity related and actually buyout within private equity related. So it's certainly the longer-term expectation that, that develops into a much broader range of private market solutions. I think, in terms of what are the areas that we would like to grow more, certainly on the private equity side, having more venture capabilities.

That's something, again, we do a little bit of, but I think effectively acquiring the resource and track record to do that is an area we're looking at. I'll come back to the U.S. in a minute. Outside and other areas, certainly infrastructure, private credit, real estate areas, and this is effectively all as solutions providers and all ex-LatAm are all areas that Patrick is definitely looking to build.

So I think come back to what would success look like, excluding the private equity part of the business, which I managed, I think it would be disappointing if we hadn't made some real inroads into developing other private market solutions and probably in other developed markets. Coming back to the private equity business, I mentioned before that, we really having a -- I'd love to have a team that is at least equal to the size or greater in the U.S., what we're doing, particularly the U.S., there is a reason that U.S. has -- is the biggest private equity market in the world.

There's a reason that most investors have a home market bias within private equity. But the next area they looked to maybe up until recently was the U.S. So clearly, we have to have a really strong offering in that area. And fundraising, I think the success is we really see the benefit in the future of that LatAm market. And LatAm showing migrants coming into -- is a very heterogeneous market.

The dynamics in Chile, for instance, are fundamentally different to Brazil. And there are certain reasons as to how they think about and why they're looking at global private markets or private equity at the moment. But it would be a shame if we hadn't really demonstrated the strong position that Patria has in the region to be gaining market share offshore.

So I think those, I'd say, would be the -- and I think the look, I'm blessed with an incredible team of people who are very strong entrepreneurial. We've got great track records in certain areas and really think laterally about other things we can do. So I mentioned some of the things that we're thinking about at the moment. We've got no shortage of opportunities. I'd love to see some really develop from a standing start into a genuinely new and very scalable product line for us.

Makes a lot of sense. How should we think about the time line for Latin investors to be a material part of material LPs in the Global Private Market Solutions business. And what inning of that process kind of are we in today?

Honestly, it's really difficult to say. So if you look at something like the Chilean market, which is really quite sophisticated with how it views private equity globally. And we have an incredibly strong position in that market, particularly through the Moneda acquisition. So there, it's something which is actually providing probably a more bespoke tailored product for what we're doing. But again, you're going in there, we have an incredibly good set of relationships.

But our competitors have already been in the market. And so again, I go back to what I said before, yes, we've got a very strong position there, but it takes time to develop those. I think once you start getting credibility by maybe you take on one SMA client in a particular area, that answers -- so things can grow from that. But that's something I'd hate to put a time line on because it's very difficult to predict.

If we look at somewhere like Brazil, I think the dynamics are very different. There's a very high interest rates there and actually, the issues have been about actually investing in private equity anywhere given what the returns are. So I think you need to see a change in that environment before we'd see sort of material success. But -- so look, I'd love to be able to give an answer to tell. I know that the whole business is working very, very hard on that. We see tremendous opportunities, but it's really, really difficult to say.

Got it. When I speak with other investors who are early in studying Patria and getting up to speed, a question I often get is, why is Patria the right home for the Private Market Solutions business? We obviously touched on the LatAm opportunity.

In the beginning of today's call, when we were talking about the carve-out process, you talked about how Patria is a very entrepreneurial place, how are of the things you're looking at when searching for a home was a place that would allow you to invest. I guess talk to us about how it's been like working with Patria, what you've been able to do and invest in today that you weren't doing under the umbrella of Aberdeen, give us some flavor for that.

Without naming names, it was interesting. So when we're going through our process, there was a very large European financial institution that was looking at us and very keen and we're going to put a lot of things in place to address the challenges of that financial institutions opening. But it was -- what was really interesting about that is that it's a large financial institution. And when it was -- it had to go through processes to bring people on board.

So it was a very laborious process. And I'm not being critical of them at all. I completely get it. This is a new area for them. Patria, though, and again, this was really led by Marco, was able to come in and it was just a thought that was able to react to things very, very quickly, deliver on that. The lines of communication internally were very, very short. And so we're saying we need this that and the other to exist.

Again -- obviously, we were questioned about it, but decisions were made quickly and assurance is given. So -- again, you're dealing with a business that was and is highly entrepreneurial and is able to move very, very quickly. So some of the things that were important to us, we had challenges around pay structure. We had challenges and we had effectively a hiring freeze or numerous positions that we needed to fill -- and look, I honestly can't -- I don't know what the count is, but it would be 20-plus people, I think, that have been brought into the broader business since the acquisition.

Even before the acquisition effectively is, let's get these things done. I mentioned earlier around systems. We were behind where our competitors needed to be on really having a world-class system. That's something, again -- Patria, again, got it immediately, and we've been working very hard on investing in it. So there's just no shortage of examples of where that's been given.

And I think on the other piece around this entrepreneur is when we think about -- when Patria thinks about how we develop in these other areas, there's no fixed view of we've got to make an acquisition that looks like this or do. There's so many different ways of skinning the cat. So that just gives you far more optionality in how you grow.

So I think definitely, the LatAm opportunity -- because you immediately get it, okay, here's an area that overall is so underpenetrated for private markets globally and Patria has a leading position there. I think Patria has a bigger market share within LatAm than Blackstone has in the U.S. So that's very powerful. So that was definitely one element. And the other was the entrepreneurial and partnership nature of the business. That's been borne out.

Wonderful. I think we have just a couple of minutes left. I have a few more. But Andre, maybe I'll turn it over to you and see if there are any questions from the audience before I take up all the time here.

Yes. Actually, you're getting to the top of the hour. Let's try to squeeze at least one question here from the audience. I'll read it exactly as it came. It says, my understanding is that performance fees for the prior funds did not transfer with the acquisition. How should we, as other shareholders, think about performance fees or PRE for GPMS over the long term?

And Merrick, even before we start that, if I can just give a quick note. So Patria just today -- our net accrued performance fees as of the second quarter totaled about like $400 million or $2.47 per share with about like $50 million coming from our Infrastructure Fund III, which is in full realization mode. And this balance, as the question says, does not include any performance fees accrued for GPMS as the prior funds were not transferred with the acquisition.

So now I'll give you the time to talk a little bit about performance fees going forward.

So that's absolutely true. I'd say that a negative and a positive, I think, on the GPMS when it comes to performance fees. The negative is that, firstly, from the indirect business for those mandates, funds that have performance fees, they are lower level than pure-play private equity or private markets. So even if our model was sort of a 1 in 10, I think there is no mandate that we charge more than a 10% performance fee or carry on that. So it's lower.

And also, our mandates differ hugely. So we have a number of mandates. For instance, the Patria Private Equity Trust has no performance fees at all. So what I would say is that the proportion of developments overall revenue that would be ever attributable to performance fees within GPMS is lower than what you would typically see in the direct business.

The positive, though, is that I mentioned before, we have such a variety of mandates that do have performance fees that when you get into -- when you get into the period where you say nothing was done, but there will be if you like, multiple shots on goal here because you're not reliant on just simply the next fund in the series, which may or may not do well. And so I think there is an inherent longer-term diversification benefit of that, albeit the quantum of performance fees would inherently be lower. Does that explain most of the question?

Yes, I think it makes sense. Maybe I'll squeeze one last one in here. How do you think about growing the sales and distribution side of the business? And specifically in relation to that, what has changed since the business has change the ownership?

So firstly, if you like, on the LatAm side, Charles is -- Patria has a very large distribution team, so...

Yes, obviously, LatAm didn't exist before. Yes.

That's correct. Ex-LatAm, so firstly, there's investment in people. What I would say is that the -- there isn't naturally a massive intersection between -- Patria's sort of global investors in LatAm with what the private markets investors are because again, it's a different offering. But again, this is providing an opportunity for far more conversations and new markets. But there's investment in people there that's happened and is continuing.

So -- and the other element is, again, it comes back to being very pragmatic how we use external companies, placement agents in particular regions or particular strategies to supplement that as we grow. So it's really a combination of using external parties and increasing internally. The other thing I'd say, Charles, is the nature of our business is, we're very client centric. So a significant part of the senior people's time is around maintaining our existing relationships and developing new ones. So we've got a very front -- front-facing role in that because of that relationship nature, particularly on the SMA front.

Great. Andre, are there any more questions from the audience?

Actually, there are a couple, but I think we came in to the top of the hour. I'll free you guys, and I'll just reply to those through e-mail. So thank you very much, Charles. Thank you very much, Merrick, for the conversation, very valuable. And again, if you submitted your questions, we'll get back to you guys through e-mail if we haven't answered to you here.

Thanks a lot, Charles. Thanks Andre.

Thank you.

Bye-bye.

Hello, and welcome to the 2025 Patria Investments Limited Annual General Meeting of Shareholders. Please note that this meeting is being recorded. [Operator Instructions]

It is my pleasure to now turn the meeting over to Mr. Olimpio Matarazzo. The floor is yours.

Thank you very much. Yes. Hello, everyone. Welcome to Patria Investments Limited Annual General Meeting of Shareholders. I am Olímpio Matarazzo Neto, Patria Chairman of the Board of Directors, and I will proceed as Chairman of this Annual General Meeting. I am accompanied by Ana Cristina Russo, our Chief Finance Officer; and by Andre Medina, our VP of Shareholder Relations.

We are conducting today's Annual General Meeting of Shareholders, primarily on a virtual online platform. We regret not being able to see more of you in person. However, like many other companies, we are meeting online in order to provide convenience access to all of our shareholders. I want to thank you for taking the time to join us, and I hope you and your families are well and safe.

Andre Medina will lead us through the meeting. Andre, please.

Thank you, Olimpio. Computershare, our transfer agent has delivered an affidavit of mailing establishing that notice of this Annual General Meeting was duly given. Brian Heffernan of Computershare has informed me that a quorum is present and the Annual General meeting is, therefore, duly convened and may proceed to transact business, subject to confirmation of the quorum in the report by Computershare.

Those who have logged into this Annual General meeting as a shareholder using a control code may submit questions and make comments. [Operator Instructions] After I go through the following proposals to be voted on, we will respond to appropriate questions.

The first proposal to be considered and voted upon is proposal resolved, as an ordinary resolution that the company's financial statements and the auditors' report for the fiscal year ended 31st December 2024, which have been made available to the shareholders for the purpose of the AGM be approved and ratified. We encourage you to vote. If you have already voted your shares and do not wish to change your vote, no actions required at this time. If you have not yet voted or would like to change your vote, you may do so by clicking the proxy voting site link on the vote tab.

We will now pause to provide for a few moments to permit for any questions and to the extent of any to review and organize the questions. Duplicate questions will be consolidated. I will return shortly with the questions and our responses. After the question-and-answer session has concluded, we will announce the preliminary results. We are now pausing.

[Voting]

There are no questions that have been submitted according to our rules of conduct. I pass the word back to Olimpio, who will announce the preliminary results.

Thank you. The report of Computershare confirms that a quorum is and has been in attendance at this Annual General Meeting for all purposes. It also confirms that the preliminary results indicated that the first proposal has received the requisite number of votes that are approved in accordance with the annual and restated Articles of Association of Patria Investments Limited.

Thank you, Olimpio. The second and final proposal to be considered and voted upon is proposal resolved as an ordinary resolution that Daniel Rizardi Sorrentino be appointed as a member of the Board of Directors of the company, to serve on the Board until the earlier for his vacating office or removal from office as a director in accordance with the Amended and Restated Memorandum and Articles of Association of the company.

We encourage you to vote. If you have already voted your shares and do not wish to change your vote, no action is required at this time. If you have not yet voted or would like to change your vote you may do so by clicking the proxy voting site link on the vote tab. We will now pause to provide for a few moments to permit for any questions and to the extent of any to review and organize the questions. Duplicate questions will be consolidated. I will return shortly with the questions and our responses. After the question-and-answer session has concluded, we will announce the preliminary results. We're now pausing.

[Voting]

There are no questions that have been submitted according to our rules of conduct. I pass the word back to Olimpio, who announced the preliminary results.

Thank you, Andre. The report of Computershare confirms again that a quorum is and has been in attendance at this Annual General Meeting for all purposes. It also confirms that the preliminary results indicate that the second proposal has received the requisite number of votes and are approved in accordance with the amended and restated Articles of Association of Patria Investments Limited.

This concludes the business schedule for the Annual General Meeting. I would like to thank your shareholders on behalf of the Board for their support. Our meeting is now concluded. Thank you all for attending.

This concludes the meeting. You may now disconnect.