Patria Investments posted a nice set of numbers to round out 2021 with just over $1 of distributable earnings. The stock currently sells at ~$17, so it isn’t cheap but if one looks past today and into the 5 year future, it is much more interesting. Here are some of the reasons highlighted on the call:
- Patria was backed by Blackstone in 2011 and it’s no surprise they are using the BX playbook. They are publicly repeating that their mission is to be the one-stop shop for alternative investments in Latin America and they are by far the largest LatAm origin alt manager by assets (~$25B). It’s also clear that LPs are looking to consolidate their asset manager relationships so building the full LatAm product suite is high value.
- In the near term, its flagship PE, renewable, and infrastructure funds are in market for 2022 with 50% larger funds for PE and renewable / infrastructure combined. Patria has guided to a 50% increase in fee related earnings alone within 2022.
- Patria is guiding towards the buildout of its perpetual asset management vehicles strategy (which has been the engine of Blackstone’s growth over the past 3 years) in both corporate equity and real estate niches.
- Geographic expansion to cover Mexico, Colombia are in the cards with strong Mexico tailwinds due to on-shoring talent and supply chains currently in Asia.
- Currency tailwinds – the difference in inflation between Brazil / LatAm and the US has been substantial and the principal cause of relative depreciation of the Brazilian Real over the past decade. In this time Patria has performed admirable in dollar terms. However with US inflation ticking up to high single digits while Brazilian inflation is moderating (as Brazil began rate tightening last year), there may be a currency tailwind in future performance versus headwind.
All in all, Patria is doing a great job from the outside in to lay the groundwork for strong growth in the next decade. All of it hinges on the ability to execute its product and geographic buildout while maintaining high net returns to investors, no small feat. But its track record supports the odds of this happening.