Patria Investments 2026 Q2 Earnings Call

Welcome to Patria's second quarter 2026 earnings call. Speaking today are our 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 on the 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. We are on pace to exceed our three-year fundraising targets of $21 billion from 2025 through 2027. Fee-earning AUM reached $48.9 billion, up approximately 7% from first quarter 2026 and 32% from one year ago, reflecting year-over-year organic growth, the closing of three 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. 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 US 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, one, three, and five years. In infrastructure, the pooled return of our latest three 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 2026 earnings presentation.

In private equity, two of our older active vintages, our buyout Funds 4 and 5, 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 longstanding 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 in which committed capital is deployed gradually into investments, are not impacted by portfolio markdowns or markups, as fees are charged on invested costs. In addition, Fund IV has not generated management fees for the last two years, and both Funds 4 and 5 have no accrued performance fees since the fourth quarter of 2025. 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 6 and 7 were invested in a different macro environment.

Of note, portfolio companies in Funds 6 and 7 have little to no leverage and have been performing well, growing EBITDA by approximately 10.5% on average over the past two 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. 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 client 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 target 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 1st 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, 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, 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 two 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.