Patria Investments Limited (PAX) Q3 2021 Earnings Report, Transcript and Summary

00:02 Good day, and thank you for standing by. Welcome to the Patria Third Quarter twenty twenty one Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation there will be a question-and-answer session. [Operator Instructions]. 00:20 I would now like to hand the conference over to your speaker today, Josh Wood, Head of Shareholder Relations. Please go ahead.

00:37 Thank you. Good morning, everyone and welcome to Patria's third quarter twenty twenty one earnings call. Joining on the call today are our Chief Executive Officer, Alex Saigh; and our Chief Financial Officer, Marco D'Ippolito. Earlier this morning, we issued a press release and earnings presentation detailing our third quarter twenty twenty one results which you can find posted on our Investor Relations website at ir.patria.com or on Form 6-K filed with the Securities and Exchange Commission. 01:07 Any forward-looking statements made on this call 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 inherent risks, including those discussed in the Risk Factors section of our Form 20-F annual report filed earlier this year. As a foreign private issuer, Patria reports financial results using International Financial Reporting Standards or IFRS, as opposed to U.S. GAAP. 01:38 Additionally, we will report and refer to certain non-GAAP industry measures which should not be considered in isolation from, or as a substitute for measures prepared in accordance with IFRS. Reconciliations of these measures to the most comparable measures calculated in accordance with IFRS are included in our earnings presentation. 01:58 As a quick overview of the results, Patria generated twenty one point five million dollars in IFRS net income in Q3 twenty one. On key non-GAAP measures for the third quarter, we generated fee related earnings of twenty one point eight million dollars and performance related earnings of one point five million dollars, resulting in distributable earnings of twenty two point five million dollars or zero point one six five dollars per share. In alignment with our policy, we declared a dividend of zero point one four dollars per share, payable on December sixteenth to shareholders of record as of December two. 02:30 With that, I'll now turn the call over to our Chief Executive Officer, Alex Saigh.

02:36 Thank you, Josh. Good morning to you all and thank you for joining us today. We now find ourselves nearing the end of twenty twenty one. Patria’s first year as a public company, and it has been a privilege getting to know many of our shareholders in these past months. 02:53 I want to reiterate upfront that we greatly value your support, and I think our results continue to demonstrate that we are delivering on the targets we put forward for this year and positioning ourselves well for strong growth in twenty twenty two. 03:10 We remain on track for last quarter's guidance of at least seventy five million dollars of fee related earnings and one dollar per share of distributable earnings, which would generate a five percent dividend yield for an investor in our IPO. Year to date we have generated zero point eight three dollars of distributable earnings per share, of it, zero point one seven dollars of distributable earnings per share in this last quarter, in the third quarter. Meaning, we just need to deliver the same results from third quarter again in the fourth quarter to reach our targets. 03:46 This outcome would represent fee related earnings growth of thirty percent plus and distributable earnings growth of more than one hundred and forty percent compared to twenty twenty, when adjusting the prior year for comparable compensation structure. 04:02 And our twenty twenty one results are purely organic, with other contribution of any acquisition were diluted for the cash raised in our IPO. We see that momentum continuing in twenty twenty two, where we expect, based on current, factors to see our fee related earnings increase by more than fifty percent compared to twenty twenty one, including Moneda’s fee related earnings to Patria’s standalone. 04:32 Our flagship strategy timelines have accelerated with our next generation private equity fund in the market as we speak putting us roughly one year ahead of schedule. Our strong investment performance is the backbone of everything we do. Driving loyalty and larger capital flows allocations from our limited partners, as well as a substantial performance fee of three hundred and fourteen million dollars which will benefit shareholders as distributable earnings in future periods. 05:04 As notably in the third quarter, we took a major first step in our M&A growth strategy with the announcement of our combination with Moneda Asset Management, which will be further additive to earnings in twenty twenty two as it provides the foundation for a leading alternative credit platform in the region. For our flagship Private Equity and Infrastructure strategies, we have raised each new vintage on consistent time intervals raising the majority of capital from sophisticated international limited partners and with the commitments denominated in U.S. dollars. We have done this through many different macro environments and we don't believe now is somehow a special or different. 05:52 Supported by a track record of strong investment performance, we have established trust with our investors as a partner of choice to access private markets in the region. Since they intend to invest in private markets around the globe, they understand that times of volatility are often when firms like Patria can do their best work and they recognize our ability to be opportunistic during market dislocations through deep and localized industry knowledge. For those reasons, we have been able to raise new vintages of long term capital every three to four years, while also scaling the capital commitments at an impressive rate. 06:37 We are almost fully committed on our current generation private equity fund, and we are now back in the market raising the next vintage one year ahead of schedule. We expect the first closing to be around the year -- the end the year, or perhaps just after depending on logistics for some of LPs and we continue to see demand to scale this fund up by fifty percent. The two latest vintage funds, private equity fund six and private equity fund five are performing extraordinarily well with private equity fund five net IRR of twenty nine percent and private equity fund six net IRR in US dollars of twenty seven percent and we are seeing great progress within the portfolio. 07:25 For example, our heavy deployment in the first half of twenty twenty one included commitments to our cyber security thesis in private equity fund six. In the third quarter, we announced the acquisition of Neosecure and Proteus to consolidate the largest information security platform in Latin America, with operations in five countries. This platform can continue to grow through additional consolidation. And this is a classic example of our distinctive approach to building market leaders in the region. 08:01 Likewise in the infrastructure space, our current generation fund continues to progress nicely, addressing an opportunity set in the region that only continues to grow. With a two billion dollars fund, we are analyzing our pipeline for the next twenty four months of around fifty billion dollars of potential equity checks for transactions and CapEx. This figure includes actionable opportunities in sectors like power, logistics, telecom and others in Colombia, Chile, Brazil and other countries in the region. 08:36 In our Infrastructure Fund IV portfolio, we have seen two fantastic stories developed just in the last month. The first was in the telecom sector. Just two weeks ago, Brazil held its 5G spectrum auction. Our telecom platform Winity placed a winning bid for the seven hundred megahertz bands for national coverage. As a result of this winning bid, our company will build more than five thousand telecom towers in the coming years, all pre contracted serving the largest telecom operators and other corporate customers in Brazil. This will drive significant additional deployment of capital from our Infrastructure Fund IV at attractive returns. 09:23 The second was is in the power sector, back in late October, Essentia Energy, a renewable energy portfolio focused on solar and wind power generation announced the beginning of operations at the Sol do Sertao solar panel plants in the Northeast of Brazil, developed from stretch by Patria, Essentia has now delivered the second largest solar complex in Brazil and third largest in Latin America with a capacity of four seventy five megawatts. This plant is now fully operational, serves an estimated five hundred and eighty thousand households and saves the emissions of about four hundred and sixty five thousand tons of Co2 per year. 10:10 We are particularly proud of this project and I think it underscores Patria’s commit to make ESG not just a book that we check, but an active and personal effort throughout our portfolio. Addressing the growing desire from global investors for dedicated allocations to ESG themes and the global energy transition, we also announced last quarter that we are currently raising a renewable energy fund to complement our flagship infrastructure fund. We are targeting to raise the renewables fund before coming back to market with flagship infrastructure fund next year. 10:49 In our country specific strategies, we believe the financial deepening in the region continues to be a substantial long term opportunity and these locally focused products continue to be important to our growth strategy. Currently, they still accounts for less than ten percent of our assets under management and fee revenues. And so for better or worse this bucket is not yet a big needle mover for our P&L. 11:18 The more recent developments in local interest rate environment are particularly supportive of credit strategies. And accordingly, we are seeing the immediate fundraising opportunities shifting in that direction. In the coming quarters, we expect to raise capital for our second middle market credit fund as we finish investing the two hundred million dollars raised for the first one, where performance has been excellent with no defaults and improved credit rating in several portfolio companies. 11:52 We are also targeting to raise capital for our first infrastructure credit product, whether there is significant demand for capital given the regional momentum in infrastructure and investment activity. At this point, we have established anchor investors for both products, which should be primary contributors to country specific fundraising in twenty twenty two. There are multiple work streams in motion within this area, and we will keep you posted on progress as it becomes more material. 12:25 Our big news from the third quarter is, of course, Moneda. And we are well on track to close the transaction before end of the year as we previously noted. We hope the information we shared with you at the announcement in September was helpful, but let me reiterate our big picture view on this strategic combination. 12:48 Moneda has established and an outstanding brand and track record across both credit and equities over the last few decades. And first and foremost, they are an attractive addition to our platform based solely on their existing business today. But the vision here is not just bolting-on on adjacent business, this is about complementary expertise that enables us to build much bigger things together. 13:18 With global investors reducing their number of GP relationships, Patria’s goal was to standalone as the premier comprehensive provider for alternatives in Latin America. In that regard, credit was the most competing white space in our platform. Moneda manages the largest high used credit fund in the region, which is ten times the size of the next largest competitor and has delivered leading returns with more than three fifty basis points of outperformance against the benchmark since inception. 13:53 As a team we are gaining a level of truly regional expertise, not just Brazil, that will be difficult for us to build organically. Immediately out of the gates, we see strong synergies with our global clients who are interested in credit allocations in the region where they can find views that remains absent in developed markets around the world. This translates to incremental wallet share from our existing clients and incremental growth channels that would have been difficult for Moneda to access on their own. 14:31 Bigger picture, you should expect to see product development on the private credit front. Moneda’s current private credit portfolio of roughly four fifty million dollars as the previously mentioned two hundred million Patria managers already, and together we expect to develop distinct private credit offerings with drill down structures similar to our current flagship products. As I noted, we are progressing with plans for middle market credit and intra credit products in our country specific strategies. Given the steep growth trajectory of private credit across the globe, we believe we can attract significant credit allocations from international investors over the coming years as well. 15:20 Beyond Moneda, we continue to be active in pursuing other inorganic opportunities and there is more activity on the horizon. This could mean, both in our high demand and complementary sub-strategies for acquiring local talent in different regional geographies. In any case, our efforts will always be patients and diligence to ensure that any new partners will be a fit for our culture and highly aligned with our vision for what Patria has become. 15:55 With that, I'll now turn the call over to Marco to walk you through the numbers. Marco?

16:00 Thank you, Alex. And good morning to everyone on the call. Our financial results for the quarter reflect our continued progress toward our prior guidance for the full year twenty twenty one and demonstrate the top line impact from the heavy deployment we saw in the first half of the year. 16:24 Fee related earnings were twenty one point eight million dollars in the third quarter of twenty twenty one, up twenty four percent from seventeen point six million dollars in the second quarter. Fee revenue of thirty seven point four million dollars rose sixteen percent from last quarter as we added nearly one billion dollars net of our fee earnings AUM through deployment. 16:54 Our FRE margin for the Q3 was fifty eight percent up from fifty five percent in Q2 due to the jump in revenue, putting us on pace for a margin in the high fifties range for the full year. Compared to 3Q twenty, fee related earnings were actually similar as you see reported in our P&L, but that is not comparable due to the post IPO adjustment to the compensation structure. 17:31 Adjusting the prior year quarter for an apples to apples compensate structure, fee related earnings were up twenty five percent compared to third quarter twenty twenty. Fees earnings AUM of nine point two billion is up eleven percent from eight point three billion last quarter. And up twenty two percent from seven point five billion dollars one year ago. We landed slightly below the range of nine point four billion dollars to nine point six billion dollars we suggest last quarter, with private equity and infrastructure as expansion, but a slightly lower outcome in our company specific strategies, where we have lower visibility due to in part to FX and local equity markets volatility. 18:26 Regardless, we continue to deliver attractive year over year growth in our management fee base, which is the critical driver for the organic FRE growth. On the cost side, 3Q twelve twelve one personal expenses of twelve point one million dollars were up from ten point one million dollars in the prior quarter, with about half of this increase being run rate and the other half relating to some non-recurring adjustments. We therefore expect the fourth quarter personal expenses to fall between the Q2 and Q3 levels. 19:09 Admin expenses of three million dollars in the third quarter twenty one were down from three point eight in Q2 to some recurring items that elevated the prior quarter. On year to date basis, admin expense are running above five percent higher than in twenty twenty. We had one point five million dollars of incremental performance related earnings related to Private Equity Fund III, which aligns with our comments last quarter that we could see some minor adjustments in subsequent quarters as the steps of the Alliar sale are completed and other escrows are received. At this point, we do not expect significant additional performance related earnings in twenty twenty one and we expect Private Equity Fund V to be the major driver in twenty twenty two. 20:11 Net accrued performance fees were three fourteen million dollars as of September thirty, down slightly from three hundred and twenty five million dollars last quarter, driven primarily by currency fluctuation in the quarter. And local equity capital markets volatility fracturing some public position and comps. Year to date the net accrual is up fourteen percent on an absolute basis and up thirty five percent when accounting for the amounts that we realized in Q2. 20:54 The third quarter was mostly an eventful in terms of new reported fundraising deployment and realization activity, but you should certainly not mistake that for a lack of activity on the fundraising trail or in the portfolio and our pipelines. As a reminder, we report our deployment figures based on incremental capital that is deployed or reserved. In other words, binding commitments to a portfolio company or investment thesis since that is typically what drives fee earning AUM and revenue in our flagship funds. 21:36 In the first half of the year, our deployment pace was well above average at nearly one point eight billion higher in six months than in all twenty twenty. In the third quarter, what you are seeing is that, capital really flowing into the business development plan and M&A within the portfolio and Alex noted a few great examples. 22:05 We still have one point four billion dollars of pending fee earnings AUM eligible to earn management once deployed, which will be replenish by our ongoing fundraising efforts. This one point four billion dollar is a spread across a few funds, but most notably, we do expect one additional allocation from private equity fund VI before transitioning to the next vintage event. 22:37 Fundraising for our next vintage private equity fund and first dedicated renewable energy fund is ongoing as Alex covered in his remarks. And we expect this fund will begin deploying cash in twenty twenty two alongside the remaining commitments in infrastructure fund force. 23:00 As we approach the end of twenty twenty one and we now have higher visibility on our full year earnings, we know that attention have naturally turned to twenty twenty two expectations. Our intention will be to provide you with a helpful outlook once we have a good ability to forecast and then refine with a sharper point as the year progresses. Much like we’ve done this year. 23:32 Now, with our initial twenty twenty two annual planning process complete, we are in a much better position to do that on fee related earnings. Overall, as Alex mentioned earlier, we expect total FRE to increase by more than fifty percent in twenty twenty two, driven by solid double digit organic growth as we invest larger flagship funds and launch adjacent strategies, such as renewable energy and the addition of Moneda’s platform. We expect the FRE margin for the organic business to increase slightly in twenty twenty two, while Moneda’s margin is expected to be closer to forty percent. Combined, we expect an FRE margin in the low fifty percent range. 24:30 On performance fees, the twenty twenty two outcome will really depend on the harvesting progress for Private Equity Fund V, which has net accrued performance fee of two seventeen million dollars as of September thirty. We've said that you should think about the Fund V realization ark as expanding mainly over twenty twenty, twenty twenty three and twenty twenty four and that remains the case. 25:02 While we expect to generate some portion of that in twenty twenty two, exit timing is very hard to project. And it only makes sense for us to provide distinct guidance on this when we have very clear line of sight. 25:19 Altogether, this outlook we believe frames a strong growth profile for the coming year and keep in mind that our dividend policy shares eighty five percent of our distributable earnings with our shareholders. In twenty twenty one the outlook for DE of one dollars per share means zero point eight five dollars to the shareholders, which as Alex noted, is a five percent yield on our IPO share price. Nearly four times the current yield on a SAP 500 index fund. If we grow FRE by more than fifty spend next year, most of that incremental value is being delivered directly to shareholders each quarter and even thinking conservatively, we believe our growth and dividend profile imply an attractive current valuation for our shares today. 26:24 Across our entire business from executive leadership to fundraising investment professional to value creation teams, we are focused on execution and we are aligned with building value for all of our stakeholders. 26:41 We thank you for your time and we'll now open the line for questions.

27:03 Thank you. [Operator Instructions] Our first question comes from Craig Siegenthaler with Bank of America. Your line is open.

27:09 Good morning, Alex and Marco. I hope you both are do well?

27:16 Hey, Greg. How are you? Good morning.

27:19 HI, Craig. This is Alex here. I hope you are well. I’m well as well.

27:24 Thank you. And thanks for all the guidance and targets for twenty twenty two, that will be helpful. But my first question is on the M&A outlook after Moneda. So, how do you quantify deal capacity after Moneda? And also, do you have an appetite to pursue additional transactions after this one?

Well, this is Alex again, and thanks for the question. The answer is, yes. We still have appetite. We did consume around one hundred million dollars from the three hundred million dollars that we raised with the primary issuance of shares in the IPO, indeed Moneda deal, or we will consume, because we're going to now close the deal by year end, hopefully, everything looks completely on track, just for instance here. 28:20 With that, we have two hundred million dollars still in cash from the issuance of primary shares at the IPO to direct for additional acquisitions and we want to do that. So if we do translate that two hundred million dollars of cash, if we buy something also using stock, fifty percent cash, fifty percent stock we can still have another four hundred million dollars there of powder to buy other asset managers. Why the fifty-fifty? Because I think it's important as we are people driven business to give the new partners of ours our shares and keep them locked up for a while and to align interests. So if we divide that by the same multiple that we bought Moneda, we have another forty million dollars of earnings to buy. 29:14 In several different geographies and products. We did feel, I think, the credit space quite nicely with the Moneda acquisition as mentioned earlier and today. And I think there we can really continue to grow their private credit with ours and their listed credits, high yields, which is a product that a lot of investment around the world are seeking for given the yields in the region. We also acquired a very, very significant pipe -- a portfolio with Moneda that, we also had a smaller pipe strategy that can join forces and we can do more on that front raising also closed end kind of structures. 29:54 And I think here on the real estate side, Craig, now I think we're going to start try to focus to do other acquisitions to grow our real estate portfolio. Just to remind everyone, in the region real estate is inflation plus, right? So when you buy a real estate product and when you rent out whatever all the contracts in the region are adjusted by inflation, and with inflation picking up around the globe and in the region as well, investors are looking for these kind of products, now REIT, real estate investment trust where the share of that REIT is whatever the yield that you get plus the inflation as the rental contracts are all adjusted by inflation. So that's another product that we want to go into more deeply and an acquisition there or acquisitions there I think makes sense. 30:50 Also, there are several other holes here in our menu that we will like to feel. For example, within the private equity vertical we do have a growth -- a buyout consolidation private equity fund which we call our flagship private equity strategy. I think there's a space for us to launch a core private equity strategy in a listed formats which is a permanent capital format. I think there's also space for us to launch or do a small acquisition in the venture, of which we now call growth equity part of the business. Also there, I think there's a lot of interest from international investors in investing in a products in the growth equity space. So a lot of things to do, very exciting and buying into -- real state buying into private equity, different strategies buying into different geographies. As we did with Moneda, I get more exposed to Chile. We would like to get more exposed to Colombia and Mexico at due time. I think in Colombia, I think it's the right time in Mexico we have to follow through the leadership there and what the leadership in Mexico. I mean the President is actually directing Mexico too, but nevertheless, Mexico is an economy so much linked of the U.S. There are very interesting is like near shoring of production that is done all over the world now being driven to Mexico to be closer to the U.S. And other thesis is very interesting in the infrastructure space as well. 32:36 So, yes, appetite continues to be high. We still have the cash from the IPO, two hundred million dollars. We normally use some stock to do this acquisition. So our dry powder is even larger than the two hundred million dollars or bigger than two hundred million and we are generating so much cash, you know that we are a cash positive and generation business that we can do these acquisitions and continue to distribute eighty five percent of our distributable earnings as dividends. So, hopefully here I answered your question. I don’t if Marco, you want to compliment anything.

33:11 Yes. Just think about our acquisition program aiming at – with three prong, enhancing product offering, expanding our geographic footprint and binding new geographic capabilities and improving the distribution capability. So, Moneda brings the three of them. Following acquisitions may bring the two of -- three of them, but may not be the case as well. So, as Alex alluded to, there's lot of opportunity in infrastructure and credit, real estate, and we will continue with this effort.

33:52 Great. Thanks for that very comprehensive response. In fact, it was so comprehensive, you actually answered my follow-up on M&A, but I do have another one here. And it's on the macroeconomic front. And listen, I know you guys have spent a while answering this, but very simply, the COVID conditions are getting better in Brazil, but inflation starting to rise. Low interest rates are generally a benefit for many private market asset classes, but how do you see higher interest rates impacting -- in Brazil impacting your business, especially your ability to sell to local investors where you're competing with fixed income?

34:34 No, I think -- great question here. And we have of course been asked by other investors the same -- the same question as far a similar kind of question. Yes, I think the interest rates are going up in the region because inflation is going up. But I think here is important to say that actually the products that we offer has always been actually interbank rates linked loss of premium, of course, and inflation linked plus the premium. I mentioned the real estate products, now all of our real estate products, the rental contracts are adjusted by inflation. 35:14 So when we sell the product here in Brazil, we sell a REIT. And normally the way that we actually market it is inflation plus six percent inflation plus eight percent, that's how you actually sell the shares of REIT in Brazil, not only our REIT. So investors that are worried with inflation they look at a real estate see investment trust actually as a protective investment and also our credit products, the same. Of course, sometimes they are interbank plus a premium interbank rates plus the premium and the rates here are power going up in order to cope with the raise of inflation. One hundred percent of our credit products here are variable rates linked. So we are not stuck to any low interest rates that we did lend money in the past and now we were caught off guard. All of our products actually are variable rates. So with the increase of the interbank rates, with the increase of inflation, so does increase of the rates that we receive in our credit products. So they are very much sought after by investors. 36:23 If the infrastructure space, the same Craig, or If you look at our infrastructure fund IV, all of the investments in that fund have the revenues corrected by inflation contractually, because when you – we use the example here in our call today, in our earnings call today that infrastructure won a 5G auction just a couple of weeks ago. That contract is contracted by inflation. So it's X amount real’s plus inflation. So also our core infrastructure fund is same. So all of these -- why don't we do this because inflation has been an issue in the region and because of the structural issues of the economies in the region it will still be an issue and the economist here are, of course, in different moments in time of their developments. So we have always protected given our past experience and we continue to be protected. 37:30 Finally on the private equity side, of course, we don't have revenues contracted by inflation when we go in into a healthcare company, for example, but we do go into resilient sectors, which we normally and most of the times we can pass on to price inflation on our costs. All of these results and the returns that you saw given our best funds and current funds and even more so our past funds, they went through higher inflation environments. Our Fund I, Fund II, Fund III in private equity, for example, already delivered fully diversified, all three funds fully divested, sixteen percent net IRR in U.S. dollars, two point three times your money net in U.S. dollars and fund one, fund two, fund three private equity lived in a higher inflationary environment. At such moments we had inflation high double digits in Brazil, for example, and we still delivered sixteen percent net in US dollars, two point three times net NYC in US dollars for those three funds. 38:36 Now we are harvesting Fund IV and Fund V in the private equity -- in our private equity space. So investors actually they -- they are shifting, of course more to inflation protected instruments like our real estate products, our credit products, our infrastructure products, and we see that locally. Of course, we see more demand for our credit products at the current time and having this broader menu is part of the strategy in order to cope with this different shift in demand and continue to raise money locally in a very healthy manner. So, hopefully I answered your question.

39:14 Very comprehensive again. Thank you guys.

39:19 Thank you. And our next question comes from Robert Lee with KBW. Your line is open.

39:26 Thanks. Good morning, everyone. Appreciate taking the questions. I'm just kind of curious -- couple of questions around the fundraising. So, with the fund you raised now, is there – are you seeing any change in the LP base? Is it mostly, say, eighty percent re ups and you're getting twenty percent new investors, just trying to -- just curious that how maybe the LP base may be changing if at all? And then on renewable fund do you – have you – can you possibly size that? Do you think that that would kind of take any demand away from the fund when you start to raise that, maybe later next year or early the year after or do you view them more as complementary?

40:18 Thanks again, and nice talking to you and thanks for the questions. As with your first question, we see the same LP based on institutional LPs that are most of our LPs in our private equity strategy today. Of course, sometimes there are little shift here or there and one of our LPs is merged with another LP and that's life, and that's -- I'm talking a minority part of our LP base. But yes, the majority are re ups, as you mentioned, eighty percent. What we're trying to do and I think we want to do is to expand our LP base to other regions and other types of clients. We would really enjoy having more money from ultrahigh net worth individuals through the private banking. I think no distributors, we see that private equity alternative investments in general is becoming more and more attractive for individuals – high net worth individuals. So that's I think there's a lot of money to be raised there. 41:34 I think there's some regions in the world that we would like to increase our share of wallet. Australia, for example that we have an amazing amount of, as you know, very large pension funds. I think our market share there is low. So I’d love to bring them in into this fund. So the answer is yes. I think most of our capital for private equity fund VII will come from current LPs and the current LPs are the ones that actually do come earlier in the process. So they are the ones that actually really support us in a first closing, for example, because they already know is, it's a re up, now great returns for private equity fund five and six fully divested for private equity fund one, two and three with the returns that I just mentioned, sixteen percent net in US dollars, two point three net NYC in U.S. dollars. So they are in use, they know us, etcetera. So the percentage of LPs that come in the first closing are even more so current LPs, and then we try then, of course, to work with other LPs. 42:44 Now if I -- to give you a number, I would love to have a two thirds current LPs on a third new LPs in order to do exactly what I just mentioned, expand the base, looking to fund eight, nine and sale, right? On the renewable energy front question, It might happen. I think you have a point there because some of these LPs look at the region and said, look, I'm going to expose myself to infrastructure and I'm going to expose myself to renewable infrastructure in this case, renewable energy. Might that be -- look, I'm going to have a X amount of dollar checks for Patria and slice for renewable and the other slice for infrastructure fund five. If I would guess, I think it might happen. I think it might -- we haven't had these conversations yet with these LPs, because we are not raising infrastructure fund five, we are focused on the infrastructure side to raise the renewable funds. But the LPs are supporting us at lease in the first closing of this renewable fund are current of our infrastructure strategies. 44:02 So it might happen. I think it's a good question. It's hard to circle a number. But I think you have a point there. It might -- one fund corrode a little bit the demand for other.

44:16 Thanks for the complete answer. I appreciate it. And I did have one follow-up. I mean PE fund five performance has been very good and obviously, that's where you expect the next realizations. But do you see much of an opportunity to maybe even accelerate that? I mean, obviously continuation funds, GP led secondary’s have been really growing in the industry, and I'm sure you have some assets there you maybe would like to hold even longer. So is there a possibility that you may be able to deploy some of those strategies to kind of accelerate the return of capital realizations, but also kind of keep the assets and fees in place.

44:59 Yes, definitely so, I think that part of the market is so fighting today. I think there are so many new things and new strategies going on. But the concept of continuing to invest in these, what we call champions has always been parts of our day to day strategy. I'll give you an example, the first deal that we did was a drugstore retail chain, we bought it for twenty eight million dollars, we sold it for three hundred and something million dollars. We thought that we were just genius. This company today is worth five billion dollars. 45:41 And we made twelve times our money, we said, wow what an investments. And we could have made -- the company today worth five billion dollars, the same company. Okay? And it's an amazing company, number one in Brazil, in drug store retailing, blah blah blah blah and continue to grow very strongly. And I can give you other amazing examples from our private equity fund from our infrastructure fund one and two champions per fund, I would love to continue investing in these company's given that they continue to deliver twenty percent plus returns per year. 46:15 And to do that for twenty years for thirty years this drugstore retail company that I mentioned we divested in the late nineties, whatever, twenty something years ago and grow -- and growing twenty percent per year. That's something rare to find. And we have other companies in the diagnostic field, in the energy fields that we could have continued to invest. So, yes, we are looking to set up continuation driven vehicles listed. We are looking at strategies that you can list these funds in exchanges like in Brazil exchanges, like in London that have a pocket for these kind of funds as you know. 47:07 And also we can continue to drive a lot of value. And investors are really supporting us on that, because finding a company that we foresee that will continue to grow twenty percent per year over the next five to ten years, we have demand and we already de-risked that right. It's a company that probably we have already owned for whatever, six to eight years. So we know the management, we actually placed the management there. We de-risked the assets, we know exactly what to do and we did that with – lately with a health club chain called Smartfit, it was part of fund three, now is part of fund five plus a group of co-investors and it's working extremely well. So the answer is definitely yes. And when you have -- when you are managing a fund, right, that's my view at least, which is the case of private equity fund five, but twenty eight percent returns in U.S. dollars net and a two point one NYC net in US dollars you have to sell the assets or you have to have -- go for a continuation fund for some of the assets, but the investors the lPs of fund five, two times your money in dollars, twenty eight percent IRR dollars is starting to grow. So we are looking very, very actively to divestments for all of our companies in private equity fund five, which is a case that -- all of them are mature. It's interesting or they are right – not material, I think, is not the right expression. I think they are right to be sold given the returns that I just mentioned. Thanks.

48:54 Great. Thank you for the full answer.

48:56 [Multiple Speakers] to Alex, there also opportunities to hold some these investments that have been developed under the development trends into a permanent capital structures aiming at offering to local investors field products. That's something that we saw happening in other parts of the globe, that also are opportunities that we are looking at.

49:24 Great. Thank you so much. Appreciate it.

49:28 Thank you. Our next question comes from Marcelo Telles with Credit Suisse. Your line is open.

49:34 Hi, Alex. Hi, Marco. Thanks for the time and congratulation on the results. I have two questions. The first one, I mean, think up to twenty twenty two how do you see the level of capital deployment next year. Of course, you had a remarkable performance this year, one point eight billion in deployed capital. How should you think about twenty twenty two, you think it should be around that two billion that historically have been or given that perhaps valuation in Brazil have come down a lot. I mean, do you see room to deploy capital even faster than that? And my other question is kind of the flip side of that argument in terms of the realizations. Of course, those are big derating in the Brazilian market. Currently the valuations delicious have come down quite a lot. Does that impact and I know you just mentioned your willingness to divest particularly I think the Fund five, how do you think that environment impacts your ability to divest next year, maybe it would be worth maybe to wait a little bit, maybe after elections in Brazil and see to maybe get better valuations in twenty thirty three hopefully. So how should we square these two things that are in some way kind of opposite at this point in time in Brazilian cycle.

51:13 Thank you and nice talking to you. Thanks for the question. On the investment slide, I think the first part of your question, we continue to see a very interesting environment to continue investing. Much more so, I think because we know the size that we have today and plus the opportunity sets, I think that is going on in the market. We continue to be extremely positive on that front and we continue to see kind of same level of activity that we had this year for next year. 51:50 On the infrastructure side, it's amazing. We mentioned during our earnings call, we run a two billion dollars fund, now we raise another infrastructure fund sometime in twenty three, a year ahead of schedule, late twenty twenty two, twenty twenty three. But there are like forty billion dollars, fifty billion dollars, sixty billion dollars of concessions going on just in Brazil. And there's not a lot of capital chasing in this concession. And our interaction with the regulatory bodies in Brazil and the decision makers in Brazil. I mean, the minister of infrastructure, the minister of telecom and energy is very, very close. Now we are talking to them and one is -- because we became a very important bidder in these auctions. 52:41 So, I'm very excited on that front. I think there's so much to do. And again, two billion dollars fund and just in Brazil four billion dollars, fifty billion dollars, sixty billion dollars of concessions, you can really choose the best assets to go after, right? On the private equity side, I think we do focus on three or four sectors, as you know, healthcare being number one and then agriculture, food and beverage and then business services, logistics -- logistics became kind of a business service today given the digitalization of the world and the deliveries, and we continue to be extremely excited. I think there's so much to do there. 53:22 On the healthcare front, I cannot say more, right? Now healthcare is booming, right? And we had more than sixty percent of our investments in healthcare and in our companies it was really -- nobody has planned for COVID, but our companies really benefit from this month, from the situation, because more usage of distribution of drugs, more usage of – now the whole drug consumption really increased in the last years as you know, and we are now extremely excited there. And we are excited to continue to do investments there. On the agri business, you know what happened with the commodity prices for agriculture. So now we have companies in that sector, exposed to that sector, which are doing extremely well. And same thing with logistics, a lot of our companies do last mile logistics and co-logistics and did very well also during these last years. 54:25 On the divestment front, so again, just to summarize, yes, I see the same kind of volume of investment that we did this year for next year. I don't see us decreasing that volume, I see same or increasing actually. On the divestment side, of course, we're going to be as cautious as possible, but when you look at the portfolio, again, on the private equity side you see healthcare, on the private active side you see agri. We have a lot of interest from strategic for our assets. We might not use a capital markets because capital markets are choppy. But we see a lot of strategic interest for the assets. 55:04 Now we are receiving offers for our assets as we speak because we are trying to sell them. Now on the infrastructure side, of course, as we de-risk the assets, there's a lot of interest from strategic and a lot of interest also from Brazilian investors or Colombia origin, one thing to be exposed to a very good yield generating products after you de-risk that infrastructure then it becomes fully mature and operational. It becomes another fixed income products, right, with an equity upside embedded into it, a transmission – an electricity transmission line, a power generation, a -- even in toll road after the big CapEx is done, which is normally in the beginning of the concession. That actually -- that asset becomes a yield asset and you know that investors are looking for yields and these contracts, as I mentioned, are inflation corrected. So it's inflation plus, which is now again very -- we see the demand from investors. 56:13 And in addition to the recaps in our infrastructure because we see the demand for credit. So even if we don't want to sell the equity after we de-risk the assets, we do a recap, now we can raise a new bond at a lower rate because we de-risk the assets, we pay the project finance debt and we actually deliver and we do redeem that cash to investors as a dividend. 56:45 So it's extremely exciting on the divestment side as well. Of course, the capital markets get very choppy given everything that is going on in the region, not only in Brazil. But normally if you look at our divestments, seventy percent plus, close to eighty percent of divestments were strategic and strategic as they continue to be bullish on the region to be honest in the sector that I mentioned to you. 57:17 So, yeah, I think the same value on the investment side and we see that we'll be able to divest also in due time, of course, I think it's more of a question of the portfolio company being ready to be sold because we maxed out the synergies of a consolidation process. So we de-risk the asset, because we finish construction it and it is now fully operational. So that's more the driver actually than interest from strategic that we continue to see as they were in the past. Thank you.

57:49 And in addition there, Marcelo, that I would encourage you to pay attention to is the underlying quality of the portfolio. Not only when you look to the different possibilities of divestment. As Alex noted too, the return of private equity five which is twenty twenty, twenty fifteen vintage is twenty nine percent, product equity six is twenty seven percent, infrastructure four is now yielding twenty five percent. So, I think what is key here is, we will always be – pay a lot of attention to the timing of divestment. But the great thing is that the underlying assets are great. So when the right timing comes we will be in a very good positioning to divesting. So that's -- I just wanted to bring this up. Thank you.

58:48 Extremely clear. Just two follow if I may. Number one, regarding the fundraising for the country specific strategist, you think like a one billion dollars a year still, let's say, a good base case scenario? And secondly, look at your guidance for twenty twenty two, the FRE grows more than the fifty percent, how should we think about Moneda standalone business? Should we expect like perhaps like double digit growth from Moneda in twenty twenty two? How should you think about that? Thank you.

59:33 Well, on the first part of the question, I think you're right on there. I think organically, I think, that's a number that you can work on. We plan to do acquisitions in the local market as well. As mentioned earlier, but yes, organically I think that's the kind of AUM growth that I would expect from the team here. One billion dollars that you mentioned, right? 60:02 On the other fronts, we continue to see very strong growth for Moneda and ourselves. It’s getting harder to actually breakdown, which is -- which to be honest as we are really merging the two businesses and consolidating the back office and the fund administration side. But I think we can definitely, if you do the math here, I think over fifty percent growth from where we landed, where we are landing, I'm sorry, twenty twenty one, it is a double digit growth, high double digit growth for both companies, right? 60:48 Marco, if you want to add anything here, what's your view?

60:53 Yeah. On the Moneda side, well, the whole dynamics with the higher interest rate in the region poses a favorable set up for the high yield dollar denominated funds and the local currency denominated fund, so I'm very positive with the possibilities there. It's still early to say as we are -- we're closing the transaction in the upcoming weeks and there's a lot of work to do there. But as Alex noted, there's also some opportunities on the cost side and the tax side and that would help us out to reached double digits, so I can see a double digit coming in. Still early to say where we're going to land at the point, we'll certainly provide better guidance over the following quarters.

61:51 And I think just as a notes here given that the deal is not yet approved by the regulatory bodies, we have limited capacity of talking to Moneda, okay? The antitrust bodies, they have to approve the deal. And before doing that we are not -- we cannot and we are not in full contact to go deep into the numbers of Moneda. So just as a caveat, which is a very important caveat, right? As you know, it's actually natural of every deal, right? So, we have not gone into any discussions with caveat in a deeper manner, given what I said. 62:40 However, we see on their side demand for their products as Marco just explained and we already seeing on our side from our investor demand for credit related products. But as we get the approvals and they should come, I think there's nothing in the horizon that says that the regulatory body not approve this deal on the contrary, then we're going to be able to have more in-depth conversations with the guys from Moneda. Isn’t that's correct Marco?

63:15 Right. We're on the way for the closing, there is certain approvals that have been granted. There are certain preceding conditions that are still pending, but we're pretty much very positive that we're walking solidly to the closing in the upcoming weeks.

63:34 Thank you.

63:38 Thank you. Our next question comes from Guilherme Grespan with JP Morgan. Your line is open. Q – Guilherme Grespan: 63:47 Hi, Alex, Marco, Josh. Thank you for organizing the call. Two quick ones on our side. We saw the average management fee rate in the quarter is slightly going up. It seems to be related to partially mix on the segments, but also if we recap correctly, for some funds and specifically thinking for four, the last one you raised, the management fee goes up as we deploy? And then my question is actually looking forward, do you still have one point four billion dollars to be deployed if we should expect not only fee earning AUM to grow, but also management fees to go up as a result of this different pricing scheduled? 64:28 And then the second one is just to confirm the general term of the new PE fund being raised? Again if we recap correctly, the latest one, the pricing was only over deployed and was at two percent rate if this new PE follow the same rule? Thank you.

64:48 I can get that one. And thank you for the question. So it's a very simple answer to the trending up of the fees and specific on the infrastructure fund as we deploy capital, there's a component of the fee that kicks up and as we strongly deployed over the quarters that is building up the mix upward is just the nature of the fee setup of the infrastructure fund. And as for the private equity, we expect to have precisely the same dynamics. 65:27 We feel -- and by the way, I think I mentioned that before in previous quarters, but we have a very positive supply demand dynamics to our funds that enable us to continue to sustain the base of fees that we have on the private equity, both on the infrastructure too.

65:55 Yeah. And just to be clear here is, two one twenty for private equity and just -- we just charge when we commit to deploy the capital. Okay. Q – Guilherme Grespan: 66:10 Okay, guys. Super clear. Just one follow-up, the one point four billion still to be deployed. This is -- what is the breakdown between the infra and private equity?

66:22 It's across several family of funds, there's a big piece that is on the – big thing that is on private equity and another big thing, that is infrastructure, but it add up to other products as well.

66:43 Yeah. I think from math here, I think, eighty percent -- seventy percent, eighty percent is private equity and infra, right? Q – Guilherme Grespan: 66:55 Okay, guys. Perfect. Thank you.

66:58 Thank you very.

67:01 Thank you. And I'm showing no further questions. I'd like to turn the call back to Alex Saigh for closing comments.

67:09 Well, thank you very much again for your support. I think we're extremely proud of my team – I’m extremely proud of my team. I think I can say also from the Board, Olympia and Ontario now very proud of what we've been able to accomplish. Now getting out of the gates as a first year public company and managing to deliver what we expected and we talked to most of you during the IPO process of one dollars per share for twenty twenty one. Looking into twenty twenty two with fee related earnings expected to grow by at least fifty percent with all the fundraising efforts that we mentioned to you guys, which would then push us into a good twenty twenty three as well. In addition, we have the two hundred million dollars of cash still left from the primary issuance shares in the IPO to do acquisitions. 68:11 Again, as I mentioned if we buy two hundred million dollars and then another two hundred million of financing, whatever, we have four hundred million still of dry powder in the way that I see, which is at the multiples that we did acquire Moneda, another thirty five million dollars, forty million dollars of fee related earnings to add to the numbers that I just said. 68:32 Then on the performance fee related earnings, great performance from our funds, which was already mentioned and private equity fund five now is ripe for us to harvest the performance fees as we did for private equity fund three in twenty twenty one. Also then broaden a little bit of view on the strategic side, I think we've been able to accomplish also what we wanted to do and what we actually conveyed and talked to you guys over this year, which is, expand our geographic footprint, expand our product offering, Moneda fits exactly with that recipe and being exposed to different countries, different currencies, different products gives me as a CEO of this company more predictability looking into the future of growth, but more predictable -- even more predictable growth than we have. We already have a very solid predictable growth on the CRE side and with this new products credit related products even more so from Moneda. 69:41 So, we want to expand our -- continue to expand our businesses as mentioned in countries like Columbia, Mexico. So, very, very excited. Extremely pleased with the team. I'd like to now thank the team that are probably listening here with you guys today and thank you for your support. All of our investors, it’s great talking to you, if it was not for you guys support, we would be here. I think of course, I'll probably going to talk to most of you in the coming days or weeks. But if there is any of you that I won't be able to talk to for some reason or another I would like to wish a great happy holidays and all the best for end of twenty one into twenty twenty two. All of you be well, be safe. Thank God, we are getting out of this amazing and crazy pandemic. And hopefully twenty twenty two on the healthcare side is going to be a much better year than twenty twenty one and twenty twenty. So thank you very much again, and that's it for today.

70:44 This concludes today's conference call. Thank you for participating. You may now disconnect.