PAX — Patria Investments Limited

Summary of PAX Q4 2025 Earnings Call

1. Key Financial Results and Metrics

• Organic Fundraising: $1.7 billion in Q4 2025; record $7.7 billion for the full year, exceeding the revised target of $6.6 billion by over $1 billion.
• Fee-Related Earnings (FRE): $203 million for 2025, up 19% year-over-year; Q4 FRE at $64.2 million, a 30% sequential increase.
• Distributable Earnings (DE): $200.9 million for 2025 ($1.27 per share), a 6% increase from 2024; Q4 DE at $78.5 million ($0.50 per share).
• Total Fee-Earning Assets Under Management (AUM): $41 billion as of Q4 2025, up 24% year-over-year; pro forma for acquisitions, approximately $47.4 billion.
• Net Debt: Approximately $105 million, with a net debt to FRE ratio of 0.5, below the long-term guidance of 1x.

2. Strategic Updates and Business Highlights

• Acquisitions:
  • Acquired 51% of Brazilian private credit manager Solis, enhancing capabilities in private credit.
  • Acquired several REITs from RBR, making Patria the largest REIT manager in Brazil.
  • Announced acquisition of WP Global Partners, expanding global private markets solutions.
• Investment Performance: Strong investment performance led to low redemption rates (down 25% year-over-year) and a sticky asset base (90% in vehicles with limited redemptions).
• Growth in Real Estate: The real estate sector raised over $520 million in Q4 2025, with expectations of increased fundraising as interest rates decline.

3. Forward Guidance and Outlook

• 2026 Targets:
  • Fundraising target remains at $7 billion; 2027 target at $8 billion.
  • FRE guidance for 2026 set at $225 million to $245 million, with an expectation of $260 million to $290 million for 2027.
  • Anticipated tax rate to stabilize around 10% in the coming years.

4. Bad News, Challenges, or Points of Concern

• Performance Fee Concerns: Net accrued performance fees decreased from $402 million in Q3 2025 to $249 million in Q4 2025, primarily due to private equity Fund V falling out of carry.
• Market Risks: The performance of private equity funds is sensitive to macroeconomic conditions, including interest rates and geopolitical factors, which could impact future fundraising and performance fees.
• Transaction Costs: Increased transaction costs related to M&A activities, with expectations of continued elevated costs in the near term.

5. Notable Q&A Insights

• Private Equity Valuation Process: Management emphasized a conservative and industry-standard approach to valuations, with independent appraisals conducted annually.
• Fundraising Dynamics: Management noted a shift towards institutional investors in their LP base, with re-up rates for newer funds ranging from 40% to 60%.
• Geographic Interest: Continued strong interest from Asia, the Middle East, and Latin America, with Brazil positioned to benefit from declining interest rates.
• Litigation Liabilities: Management indicated that over 80% of the $100 million litigation liabilities are expected to be resolved favorably in upcoming reports.

Overall, Patria Partners demonstrated strong financial performance and strategic growth in 2025, while also acknowledging challenges related to performance fees and market conditions. The outlook for 2026 remains optimistic, supported by a solid fundraising pipeline and strategic acquisitions.