Patria Investments Limited (PAX) Q4 2021 Earnings Call Transcript

Patria Investments Limited (PAX -1.42%)
Q4 2021 Earnings Call
Feb 15, 2022, 9:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day, and thank you for standing by. Welcome to the Patria fourth quarter and full year 2021 earnings conference call. [Operator instructions] Please be advised that today's conference is being recorded. [Operator instructions] I would now like to hand the conference over to your speaker today, Josh Wood, head of shareholder relations.

Please go ahead.

Josh Wood -- Head of Shareholder Relations

Thank you. Good morning, everyone, and welcome to Patria's fourth quarter 2021 earnings call. Joining 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 results for the fourth quarter and full year 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.

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 latest Form 20-F annual report with our 2021 filing to be completed in the coming weeks. 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 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.

As a quick overview of the results, Patria generated fee-related earnings of $29.3 million in 4Q '21 and $86 million for the full year, including performance-related earnings of $58 million, distributable earnings for the full year 2021 were $141.3 million or $1.02 per share, in line with our guidance. Distributable earnings for the fourth quarter were $27.7 million or $0.188 per share, and we declared a dividend of $0.16 per share payable on March 16 to shareholders of record as of March 2, bringing our full year 2021 dividends to $0.869 per share. Note that Patria's combination with Moneda Asset Management closed on December 1, 2021, and our P&L reflects the proportional impact from Moneda only for the month of December. Marco will provide more detail on this in his commentary.

Our reporting for total AUM and fee-earning AUM reflects the year-end levels for Moneda and we have enhanced our reporting on these metrics to provide a breakout along asset class lines. With that, I'll now turn the call over to our chief executive officer, Alex Saigh.

Alex Saigh -- Chief Executive Officer

Thank you, Josh, and good morning, everyone. We hope that you are all well up safe, and it's great to be here with you again today. Just a few weeks ago, Patria celebrated the one-year anniversary of our IPO on NASDAQ, and it has been an incredible year of growth for our firm. Our investment platform is significantly larger and more diverse than it was a year ago.

Our earnings have grown impressively, which, of course, accrues to our shareholders. And we have also grown in maturity as a firm, adding new talent in key areas and making significant advances in our corporate governance as we navigate this journey as a public company. I am honored with the privilege of leading such a dedicated group of people and excited for what we can accomplish moving forward. Just to put a finer point on what we have accomplished in this first year.

Our 2021 fee revenue grew by 27% year over year, driven by a record pace of deployment with more than $2.5 billion deployed from our drawdown funds. We delivered $86 million of fee-related earnings in 2021 which represents year-over-year growth of more than 50% on a comparative basis. With continued value creation across the portfolio, our net accrued performance fees increased by $348 million, up 26% from one year ago, even after realizing $58 million of performance fees during the year. As we guided to you last quarter, we delivered just over $1 per share of distributable earnings, of which 85% is distributed to our shareholders.

This equates to a yield of 5% on our IPO price which we believe is among the best deals in our sector for 2021 and is four times the dividend yield on the SAP 500. Finally, with platform expansion as a major goal, we completed our first M&A transaction with Moneda Asset Management, which brings us a leading regional credit platform and adds critical expertise in Pan-Lat Am and Chilean equities. We also recently announced an agreement to partner with Kamaroopin, A&P in the launch of our Growth Equity strategy. Listen to our commentary over the course of the year, you have heard us to talk a lot about the inherent resiliency of the business model, and how it allows us to thrive in times of volatility, especially investing in a region like Latin America.

These results and metrics for 2021 are a perfect representation of that. The ability to grow our revenue earnings at a high rate over the last year underscores an important point, which is true for our entire sector. Asset managers with long-term capital can do some of their best work in times of market dislocation. We believe these are good times to deploy capital, and for Patria, deployment translates directly to management fee growth.

If the environment is slipped to the other end of the spectrum, and it is a better time to sell than to buy, you may see deployment pace slow but portfolio realizations should then also likely rise, generating more realizations for our LPs and higher realized performance fees for our shareholders. That structural balance in our revenue streams allow us to create value for our shareholders through the peaks and troughs of economic cycles and everywhere in between. Despite the headlines and equity market volatility worldwide, the major economies in Latin America held up well in 2021, as well as in early 2022. Higher asset prices reflected receding pandemic together with constructive fiscal and monetary developments.

On the health front, vaccination rates in the region now surpassed much of the world. While in the fiscal area, there was a sharp reduction of budget imbalances in key economies like Brazil. Inflation trended higher in Latin America sooner than other regions, forcing central banks into a head start on the fight by raising benchmark interest rates in the first half of last year. And now it seems we may be cresting the cycle as other regions and economies are only beginning the tightening process.

We have seen local currencies appreciated in recent weeks, and it is possible we are moving toward a more benign scenario that will provide momentum to ramp up our divestment activity. Looking across the platform, our flagship private equity strategy made strides in all phases of the investment cycle in 2021. We deployed more than $1.6 billion driving management fee growth and positioning ourselves to raise our next vintage fund well ahead of schedule. We indicated last quarter, there was room for one additional allocation out of our Private Equity Fund VI.

And indeed, we committed nearly $400 million in the fourth quarter into our agribusiness, cybersecurity and grocery retail theses. In a year that was particularly difficult for divestments, we also successfully sold our stake in Alliar, allowing us to realize $58 million in performance fees from Private Equity Fund III. Our overall private equity portfolio continued to perform very well, with underlying investments appreciating more than $1 billion and ending the year with a combined $266 million of net accrued performance fees. In infrastructure, our team continued to capitalize on the vast opportunities set in the region, deploying more than $750 million in 2021 from Infrastructure Fund IV.

About $300 million of that came in the fourth quarter, driven by our success in Brazil's 5G spectrum auction, where our telecom platform, Winity, won a concession to build more than 5,000 towers and distribute mobile coverage to operators through an innovative wholesale model. The strategy also saw a meaningful expansion last year into toll roads and data centers, areas where we can see attractive dynamics and opportunity. The performance fee potential of the infrastructure platform is also emerging with net accrued performance fees up to $81 million at year-end, more than three times the accrual from one year ago. With the Moneda combination complete, credit becomes a third major strategy vertical in our platform with $5 billion of AUM.

Already here in the new year, we are hard at work introducing Moneda's products to our global investor base, and we are excited about the potential for this asset class in the region. Moneda's largest product is Lat Am high-yield credit, which is both denominated in U.S. dollars and also invest in U.S. dollar-denominated fixed income.

The primary funds in this strategy returned 10.5% in 2021, outperforming its benchmark by more than 800 basis points and underscoring how these credit strategies can thrive in a rising rate environment. Over the 21 years since inception, the fund has outperformed its benchmark by nearly 400 basis points, along an impressive track record for attracting global capital. To solidify Patria as the leading diversified asset manager in Latin America, our aim is to build a platform that global investors will view as a comprehensive package for allocated capital to the region. Likewise, we want to acquire or develop products to attract more local capital and leverage the long-term financial deepening playing out in our own backyard.

Moneda advances that goal not only through a world-class credit platform, but also with Pan-Lat Am expertise in public equities and greater geographic reach and distribution capabilities in the region. With our pending acquisition of Kamaroopin, we are also laying a foundation for a growth equity vertical that will be highly complementary to our flagship private equity strategy. These are great strides in our first year post IPO, but in my view, we are just getting started. Now let me close with just a few words on our goals in the year ahead.

We told you that we expect fee-related earnings to increase by more than 50% from the $86 million we delivered in 2021. We are set up very well to meet this target and leadership across the firm is aligned and focused on delivering their budgets. Fundraising is a tough priority as we enter another major cycle. We are in the process of raising our next vintage flagship private equity fund with initial closings taking place here in the first quarter.

We're also raising our first dedicated renewable energy fund with our next flagship infrastructure fund soon to follow. Our sales team is on the road and highly engaged with our LPs across the globe to drive much higher influence than we saw in 2021, which was more of an off-cycle year. Investment performance is everything in our industry and never out of focus. Our portfolio teams are executing on our business plans to deliver the continued stream of value creation that sustain our track record.

This year, we aim to move earlier vintage funds like Private Equity Fund V which is currently generating a 27% net IRR in U.S. dollars, further into a harvesting phase and into a position to monetize their performance fees accruals. We will continue to pursue strategic M&A opportunities to further expand and diversify our platform. We see interesting opportunities from both an asset class and geographical perspective, and we will be diligent but persistent in these efforts.

As I finish here, I want to again thank our entire team for delivering great results in 2021, as well as our limited partners and of course, our shareholders for your confidence in Patria as a steward of your capital. Our business is built on performance and trust and we know that we must deliver one to earn the other. I'll now turn the call over to Marco.

Marco D'Ippolito -- Chief Financial Officer

Thank you, Alex, and good morning, everyone. Patria's results for 2021 demonstrate our attractive earnings growth trajectory, and we moved into 2022 with strong momentum looking forward. Fee-related earnings for the full year 2021 were $86 million, comfortably exceeding our guidance of more than $75 million. And we generated a margin of 59% for the full year.

FRE is up 21% from 2020 as reported or up 52% when adjusting the prior year for a comparable compensation structure, a more apples-to-apples comparison. For the fourth quarter, we generated $29.3 million of fee-related earnings at a 63% margin, compared to $20.2 million in 4Q '20. We announced the closing of our combination with Moneda on December 1. And Moneda contributed $6.5 million to our fee-related earnings in that final month of the year.

Adding the $58 million of performance-related earnings from earlier in the year, we generated $141.3 million of distributable earnings, up more than 150% in a comparable basis from 2020, and equivalent to $1.02 per share. Distributable earnings for 4Q '21 were $27.7 million or nearly $0.19 per share which results in a dividend of $0.16 per share for the quarter. This brings our total 2021 dividend to nearly $0.87 per share, which is 85% of distributable earnings per share per our policy and results in more than $120 million of earnings distributed to shareholders in our first year post-IPO. The top line is driving our earnings growth with fee revenues up 27% in 2021 compared to the prior year.

Our fourth quarter '21 management fee were $42.1 million, up 42% compared to fourth quarter '20, which further demonstrates the baseline momentum we carry into 2022. Moneda added $9.1 million of overall fee revenue in December, including the incentive fee of $4.9 million. Personnel expenses for the full year 2021 were $43.7 million, with $1.2 million of that attributable to Moneda in December. That compares to $26.8 million as reported for 2020, but adjusted for comparable compensation structure and excluding the Moneda piece, our organic compensation grew at a rate of about 3% year over year.

There is some effect from local currency devaluation there, and we would expect personnel expenses on an organic basis to grow at a higher rate, closer to 10% in 2022, plus the addition with Moneda. Administrative expenses for full year 2021 were $14.1 million, with $1.1 million related to Moneda. Excluding the Moneda portion, admin expenses were down 11% from 2020, much of which can be attributed to a lower travel-related costs in the pandemic environment and also the impact of local currency depreciation. We would expect admin expenses to rise as more normalized travel agendas resume, which all things considered, we hope happens in 2022.

Net accrued performance fees ended the year at $348 million, up 11% from last quarter driven mostly by appreciation in the Infrastructure Fund III, a 2014 vintage fund, which now has net accrual of $75 million as it moves further into carry. The balance is up 26% compared to one year ago and accounting for the $58 million we realized from Private Equity Fund III during the year, the overall net accrual grew by 47% during 2021. Our latest fund continued to perform very well, led by Private Equity Fund V with a net IRR of 27% as it moves into the harvesting pace. While they are earlier in the life cycle, Private Equity Fund VI and Infrastructure Fund IV are generating 21% and 34% IRRs, respectively.

We feel great about the position of our portfolio, and ability to generate larger amounts of realized performance fees as these funds continue to mature. Turning to AUM, total AUM of $23.8 billion at the end, is up 65% from the end of 2020, including the addition of Moneda's platform. You'll see in our presentation that we have enhanced our breakdown of AUM by asset class. In our AUM bridge schedules for the quarter and the full year, note that Moneda's platform is recognized on a separate acquisition's line for the initial inflow.

From year 2021 onwards, Moneda activity will be reflected in the normal bridge line items. Given we are raising our next flagship private equity fund during 2022, you can expect more fundraising-related growth in total AUM compared to 2021. As the dry powder will be recognized when capital is committed in each individual closing. Fee earnings AWM was $17.9 billion as of year-end 2021, up 132%, including the addition of Moneda, and up 20% on an organic basis, reflecting the similar growth rate in our revenues for the year.

As Alex noted, our record deployment phase in 2021 was the driver of fee earning AUM and revenue growth, and we deployed an additional $733 million in the fourth quarter. Nearly $400 million of that amount was in private equity, where fees are based purely on deployment. And that amount will flow into fee earning AUM and begin to earn management fees here in the first half of 2022. Another $300 million of that fourth quarter deployment was from our fourth infrastructure fund where the fee structure is a split with half charged on commitments and half on deployment.

In this case, this amount was already included in the fee earning AUM, but will still drive incremental management fees in the first half of 2022 due to the portion charged on deployment. Given the increasing diversification of the platform, we're also adding some additional information on fee earning AUM by asset class in our presentation. The goal is to provide color on the structures and key drivers for each bucket and allow you to more easily frame each piece on our forward-looking basis. Our 2022 fee-related earnings' guidance is unchanged.

We expect FRE to increase by more than 50% from our 2021 results with an FRE margin in the low 50% range. As you think about that progression by quarter, remember a few important points. First, our flagship private equity and infrastructure funds charge management fees twice a year based on the updated fee basis. You can expect to see the incremental P&L impact of ongoing deployment and divestment in the first quarter based on activity in the prior six months.

And then again, in the third quarter, which you can relate to my comments on recent deployment just a moment ago. And second, incentive fees generated by Moneda's products are included in the fee-related earnings as they are measured and charged on a periodic basis and do not require divestment events to be realized. These incentive fees generally crystallize at the year-end as a fourth quarter event. Our baseline assumptions for the guidance assume that about 10% of the overall fee revenue from Moneda products will be in the form of these incentive fees.

So that is important to know as you think about timing. Note that incentive fees are not included in our disclosures on effective management fee rates in the presentation. I will close by reiterating Alex's messages that we are very pleased with our 2021 results and proud of the Patria team for their diligent work across all aspects of the business. One year forward from the IPO, we have already used the capital to expand our platform, and the table is set for us to deliver powerful growth again in 2022.

We greatly appreciate the support from all of our shareholders, and we look forward to talking with you again soon. We're now ready to take your questions. Thank you.

Questions & Answers:

Operator

[Operator instructions] Our first question comes from the line of Robert Lee from KBW. Your line is now open.

Robert Lee -- KBW -- Analyst

Thanks so much for taking my questions. Appreciate it. I wanted to maybe focus initially on fundraising. So you talked about having a first close, I guess, in the first quarter on the next PE fund.

But I guess my first question is, you've talked in the -- previously about 50% upsizing on the PE fund and hopefully when you start on the infrastructure fund. Any reason to think that's not kind of where you're headed. And I'm also curious about kind of your LP mix. Any kind of color on what you're seeing so far on reups from existing clients versus how much of the fund you think could come from new investors with Patria?

Alex Saigh -- Chief Executive Officer

Hi, Rob, this is Alex here. Thanks for your question, and I hope you are well and safe. I think everything that you said is in -- on line with our expectations. I have to be a little careful here because as we are fundraising for our next flagship private equity fund, I was advised not to give a lot of details because we are in fundraising mode and we have filed our prospectus.

But it's everything that you said is basically in line with what we expect. Josh, should we give any more color here, or are we fine here?

Josh Wood -- Head of Shareholder Relations

No, I think that's good, Alex. I mean, everything is in line with what we said relative to prior expectations, Rob. And as you said, we're having first closings here in the first quarter. I would just add that with our first quarter earnings report, which will be in May, you'll be able to see the amount that was raised as of the end of the first quarter.

Alex Saigh -- Chief Executive Officer

Last comment on the client profile that you asked. Again, I think pretty much in line with prior funds where we have around 70% to 80% coming from reups and 20%, 30% coming from new clients. As in the past, I see that this time around, we're going to be able to see the same kind of breakdown that I just described. I think that was the second part of your question, Rob?

Robert Lee -- KBW -- Analyst

Yes, it was. Thank you so much. And maybe just as a quick follow-up, sticking with the fundraising theme. Could you update us possibly on your thoughts around fundraising around listed permanent capital vehicles, kind of what -- how you feel about it, at least maybe over the first half of the year?

Alex Saigh -- Chief Executive Officer

Yeah. I think this is a strategy that's we are pursuing aggressively, as you know, I think, pursuing permanent capital vehicles in general for the four asset classes here that we do manage, you know, private equity, infrastructure, credit and real estate. I think we can do it basically both ways through listings in the local stock exchanges. And for example, in the case of real estate, we do have two listed funds in the Brazil Stock Exchange, B3.

We also can do it through a listing of infrastructure investment trust as we have one also listed in the Brazil Stock Exchange. And we are also looking to list some of these vehicles in international stock exchanges. I mean at NASDAQ, we're also looking at the London Stock Exchange to do a listing there. As you probably know, we have already talked to you guys about this.

So yeah, I think it's a very interesting structure fund, and we are now pursuing. We already have three funds as I mentioned, down there in Brazil, in the Brazil Stock Exchange. And we also look for buying these -- kind of these permanent capital structure funds through acquisitions through M&A. And if we do pursue M&A opportunities in the real estate arena, within real estate, there is several permanent capital structure funds in the region that were listed in the main stock exchanges in the region, Mexico, Colombia, Chile and Brazil, so we can also add these kinds of funds, not only organically, as I mentioned, but also through M&A.

Robert Lee -- KBW -- Analyst

Great. That's very helpful. Thanks for taking my questions.

Alex Saigh -- Chief Executive Officer

No, thank you.

Operator

Thank you. our next question comes from the line of Craig Siegenthaler from Bank of America. Your line is now open.

Craig Siegenthaler -- Bank of America Merrill Lynch -- Analyst

Good morning, Alex, Marco. Hope you're both doing well. 

Marco D'Ippolito -- Chief Financial Officer

Good morning, Craig. We're all well. Thank you.

Alex Saigh -- Chief Executive Officer

Hi there. Nice to talk to you. Hope you are well and safe as well. 

Craig Siegenthaler -- Bank of America Merrill Lynch -- Analyst

Nice to talk to you, guys. So on the macroeconomic front, we're actually seeing a divergence here, where the U.S. economy inflation, the outlook there has been deteriorating over the last few months, while Brazil has started to rebound. So I know this is just a few months, but can you remind us how your business will be impacted if these trends continue? And I'm especially thinking that a lot of your LPs are in the U.S.

and Western Europe and they might be positively positioned for the rebound in Brazil here.

Alex Saigh -- Chief Executive Officer

Greg. Thanks for the answer. And we do have also Luis Fernando, our head economist with here -- with us here today. so he can help me answer this question.

But in summary, straight to the point now diversification base, right? And I think our investors are really sure about that, and you can see exactly what you're saying. Last year, we had some economies in the developed world performing well, very well. Some economies in the developed side of the world, or developing side of the world, suffering here or there, but I think more from headline news -- negative headline news than actual data. When you cut into the data, you can see that these economies have actually done their homework on if they were responsible on the fiscal side.

If you look at the main economy in the region, which is Brazil, what a year on the fiscal side, right? We had, I think, first, in the last 15 years, and Luis Fernando here, our Head Economist can correct me if I'm wrong, that we had actually a surplus, in federal and state, and we reduced gross debt to GDP to 80%, and several economists were predicting that we're going to hit 100% gross debt to GDP in Brazil. In Chile, the economy grew 12% last year, and now predicted to grow if things are right here of 3% to 4% this year. And again, projections were that Chile would grow a lot less than the 12% last year. And so fiscally responsible governments monetarily straight to the point of central banks raising rates now before the main economies in the developed side of the world.

So I think we are now heading to a more controlled inflationary environment. And you can see that looking at the yield curves. Yield curves are starting to actually look with a negative trend. And so we might get out of this earlier and the economies might start more growing healthily again.

With that, I think it's -- sorry, I forgot to say the depreciation of the currency adds to everything that I'm saying it's a great moment actually to invest in the region. We saw a record foreign direct investment in Chile last year, same in Brazil, not record, but very healthy and the carry trade looks good for the currencies, right? Now you can borrow money at zero interest rates all over the world and invest in Brazil with rates going to over 10%. So it's a good carry trade. So that actually stabilizes the currencies in the region or even actually makes them appreciate as you can see in the recent weeks and months.

So it's a very benign environment for us -- for investors to invest, and a very good environment for us to divest. So as I tried to mention during the call here is that if this scenario persists, I think it's a good scenario for us to divest and reach our goals in performance fees, etc., but more healthily just divest and real estate the portfolio. So with all due cautions here, I'm pretty optimistic around the region because of the homework that was done by the different governments. So Luis Fernando, if you want to complete my answer here, please do so.

Luis Fernando Lopes -- Partner, Chief Economist and Strategist

Of course, Alex. Hi, Craig, this is Fernando here. Just a couple of more ideas that are not very intuitive, but very important to understand investment environment. So the business cycle in Latin America with the exception of Mexico is not highly correlated to the U.S.

or Europe. It's a business cycle on its own. So correlations are pretty low. So what you are seeing here, as Alex explained, is that the region start to get rid of the COVID thing faster than people expected outside Latin America because the vaccination program is a remarkable success and people want to get the vaccine done in Latin America.

So the economy start to be open fast, and that allowed for the central bank to start moving -- not become -- coming behind the curve. So the central bank start to tighten monetary policy in Latin America back in March last year, March, nearly a year ago. So now we have some countries with double-digit interest rate like Brazil. Other countries are raising interest rates, 150 bps per meeting of the monetary policy committee.

External accounts are very solid. That's the flip side of having a higher commodity price and the global inflation plays out in favor of Latin America because Latin America export most of the oil and some grains and minerals, etc., that are putting pressure on inflation. And then last but not the least, we have this environment in which the currencies are appreciating right now. They were remarkably undervalued.

That's a point that we made several times. Now they are not getting fairly valued or overvalued -- becoming less depreciated than they were one, two years ago. So very benign environment. But then, of course, you have to benefit or to explore this when the cycle didn't look that good and people are still a little bit scary or careful about Latin America.

That's what we did pretty much over the past couple of years. Now maybe we are getting in a different environment in which we make considering some realization because [Inaudible] why not or speed up the fundraising.

Craig Siegenthaler -- Bank of America Merrill Lynch -- Analyst

Great, guys. That was very comprehensive. I have one follow-up on M&A, just after the Moneda acquisition and the growth capital partnership, but how would you rank or list the product gaps and also underpenetrated geographies that you're most attracted to. I heard your earlier comments in Q&A and it sounds like real estate's probably at the top of the list.

And then in terms of geographies, Brazil, Mexico and Colombia on the geography side.

Alex Saigh -- Chief Executive Officer

Yes, Craig, this is Alex again. I think you're right. Yes, I think if you look at our breakdown of our AUM. I think we need to -- it would be good, we don't need to, but it would be good to beef up real estate, diversifying our product offering.

And I think it's a good moment actually to come in as asset -- the asset prices, not the prices for general partners in this field have actually gone down because interest rates have gone up. So we shied from actually looking at these assets, these general partners that actually manage real estate funds last year because -- or the year before, as interest rates were lower. And so these assets would be more expensive. As interest rates rise, I think, we benefit from actually then looking into this asset class more closely.

In addition, it's an asset class that would be very good for us to add more AUM to our portfolio. Mexico is a place that we're not there yet. And I think it's a fine economy in a macro sense, I think the -- everything that is going on in the geopolitical side, I think it favors onshoring to Mexico, serving the U.S., as you guys know this team very well. I've been in Mexico a couple of times last year.

And if you do -- as most of you probably did, whatever fly to the north of Mexico, prices of real estate, they are just going crazy because of warehouses being built and the lack of electricity to actually supply the power for all these factories that are now serving the U.S. and more and more, so again, with these geopolitical issues going on around the world. It favors mix. So it's a different driver, as Luis Fernando just explained.

Mexico is driven by a different forces. It's the Mexican economy, I mean, which is good for our -- for us in diversifying the portfolio. So real estate, yes, Mexico, yes. Now also, I think in Colombia, we're doing so well in private equity and infrastructure.

And I think we are known already there in the market as the No. 1 alternative asset manager. So it would be also good to expand geographically there. So that's where we're looking into, and that's what is the mission here of our M&A team.

So hopefully, I answered your question.

Craig Siegenthaler -- Bank of America Merrill Lynch -- Analyst

Great. Thank you, Alex.

Alex Saigh -- Chief Executive Officer

Thank you.

Operator

Thank you. Our next question comes from the line of Tito Labarta from Goldman Sachs. Your line is now open.

Tito Labarta -- Goldman Sachs -- Analyst

Hi. Good morning, Alex, Marco and Josh. Thank you for the call and taking my question. A couple of questions.

First, on your FRE margin, good performance in the quarter. You're still guiding for kind of low 50% FRE margin. Just help us think about that because you're above 60%, last quarter also around a 60% level. So what's going to pressure the margin this year? Is that just more investments? And is there any seasonality to that? Do you expect the margin in the second half of next year to be higher than the first half similar to what we saw in 2021? That's my first question.

And then I'll ask a second question.

Marco D'Ippolito -- Chief Financial Officer

Hi, Tito, this is Marco. So margins there's no really relevant pressure in margin. What happens and how the way we tie our guidance is when we add up Moneda for the last year, you get only one month of Moneda. And Moneda does have a smaller margin.

So when you blend it up, we're going to land it in the low 50s, but actually, we've seen the business scaling up. We are not providing any relevant guidance in terms of our blended margin increase, but pressure of cost has not been a significant point of concern for us.

Josh Wood -- Head of Shareholder Relations

And Tito, it's Josh. Just one thing I would add there. To your point on seasonality, one thing to consider there, we mentioned this in the remarks, is that generally, the incentive fees for Moneda will crystallize in the fourth quarter. And those incentive fees are part of fee-related earnings because they're measured and realized on a regular basis without the need for actual investment exits or realizations.

And so what that can cause is a pop in the margin in the fourth quarter. That would be the big element of seasonality to think about.

Marco D'Ippolito -- Chief Financial Officer

And just to add one more point. If you look at our financials and you compare the admin expenses' progression over time has not been significant. And even the personnel expenses when adjusted for the compensation from 2020, there's also not a significant increase in expenses.

Tito Labarta -- Goldman Sachs -- Analyst

Great. Thanks for that. So just one question to clarify on the Moneda, right? I know you did mention that incentive fee. And if we back out and trying to get in the management fees, I'm estimating around $8 million, $9 million from Moneda.

I guess, that was in one month, right, if we had about $2 million in total expenses coming from Moneda in the quarter or simply said, how much were the management fees from Moneda in 4Q?

Marco D'Ippolito -- Chief Financial Officer

So what you get is about total net revenues for Moneda in December, $9.1 million. And that translates into a $6.5 million of FRE. And you get a little -- around 50% of this amount being management fees and 50% incentive fees.

Tito Labarta -- Goldman Sachs -- Analyst

OK. That's clear. And then -- so that's how we should think about the margins for Moneda, and as Josh mentioned, that pop in 4Q next year?

Marco D'Ippolito -- Chief Financial Officer

We indicated a guidance of margin in our previous call for Moneda, we actually laid down a page where Moneda was at around 40%. So there is a slight increment of scale but you can generally think of 40% plus some scale.

Tito Labarta -- Goldman Sachs -- Analyst

OK. That's great. Thank you. That's helpful.

And then the second question is on the performance fees, right? So a good increase in the performance accrual fees. How do you think about the environment for potentially realizing some of those fees in 2022?

Alex Saigh -- Chief Executive Officer

Well, I think here -- this is Alex here. My view is that the scenario, the macro scenario is getting more benign or better for us to realize investments. I think if we go back a year from now, there were several quest parts in the region. Now will the region be able to be fiscally responsible? Will the region then suffer from inflation? Will the central banks be responsive to inflation? Will the region be able to comply with the vaccination programs and or accelerate them? The answers for all these were yeses.

And as Luis Fernando, our Head Economist also said a couple of minutes ago, so I think we come out of 2021, the region as a whole of generalizing better than expectations, even though you saw that the data was going into the right direction of what I said, it was very negative headline news and there was, of course, some political uncertainty on the Chilean side because of the election there. And our-the Brazilian president doesn't help much because of his relationship with the media is not very good. So on that side, so we had very negative headline news. But the data is as by itself, and I think media started actually turning their heads to a more positive view on the economies.

And then the numbers came out early this year. Some of the numbers I mentioned were very, very positive. So you go into 2022 with a better background, economic background, monetary background. And on the currency side, because of the high interest rates, it's more expensive to bet against these currencies now.

7-something percent in Chile, rates are heading to that direction. Over 10% in Brazil, heading to that direction as well. So now betting against these currencies is, of course, more expensive than it was two years ago when interest rates were close to zero. So that also helps stabilize the currency and even appreciate the currencies, as you saw recently.

So all of this together, I think, makes us positive on the divestment side. It is hard for us to pinpoint a month or a date. So we're doing everything that we can, of course, to walk through that route. I think we mentioned that on the private equity slide, it's Private Equity Fund V now that we are targeting to divest the assets there as we did fully divest our Private Equity Fund III, and we did generate performance in 2021 of $58 million for the general partner.

So now again, I think we are cautiously optimistic on that front, if I can say that. And I think as we move into the year, again, it's very hard to pinpoint a quarter or a date, it might slip to 2023, whatever, but I think we are in the right direction and the forces are in the right direction. And the view of -- my view, at least on the economies, the major economies of the region is more positive than a year ago.

Marco D'Ippolito -- Chief Financial Officer

And just adding to Alex and tying with the financials, what you're going to see, as well as a quarter by -- as we progress over the quarter is that the split of the net unrealized or the net accrued performance fees becoming better. While we had a higher concentration on Private Equity Fund V, we now see Infrastructure Fund III and Private Equity Fund VI adding up with a bigger chunk of the composition of this net accrued performance fee, which ultimately qualifies as a better -- increases our chances of realizing the performance fee as we have not only number of companies within each of the funds, but also different funds. This will progress over time. So we continue to believe that Private Equity Fund V will be the next contributor for performance fee.

And within Private Equity V, there is -- I always like to refer to that there is a variety of possibilities and combinations that would generate that performance fee, but it's a good and positive news that the other funds are also adding up to this net accrued performance fee.

Tito Labarta -- Goldman Sachs -- Analyst

OK. Great. Thank you very much.

Alex Saigh -- Chief Executive Officer

Yeah. I think here also, I think the -- if we look at the -- also the momentum, incentive fees here, I think that's also a big contributor for us in 2022. And again, I think if you look at where the region is and, of course, on the Moneda side, on the currency side, it's also important for the Lat Am equity strategies and some local debt strategies. So you needed, as you know, MXN 880 to buy $1.

Today, you need MXN 800. Now you needed BRL 5.60 to buy $1, today, you need BRL 5.20. So that actually pushes also the performance fees of these local funds in the right direction as well.

Operator

Thank you. Our next question comes from the line of Marcelo Telles from Credit Suisse. Your line is now open.

Marcelo Telles -- Credit Suisse -- Analyst

Hi. Good morning, everyone, and congratulations on the result. Hi, Alex. Hi, Marco.

I have two questions. The first one with regards to your capital deployment. Clearly, 2021 was a very good year for you with more than $2.5 billion in deployment. So how should we think about your capacity to deploy into 2022? Do you think you can keep more or less like at the same pace? And my second question is more of a top-down question.

Of course, you have elections in Brazil this year. The candidate that is leading the polls, I think, clearly it has more of an agenda of higher participation of the government in potential infrastructure and investments. And how -- and most likely you could expect a bigger role of the BNDES, Brazil's National Development Bank, down the road. So how do you think an increased role of the BNDES can impact your business, either your ability to deploy or your ability to find new assets in Brazil? Thank you.

Alex Saigh -- Chief Executive Officer

Well, on the deployment front, and again, thank you for your question. This is -- Marcelo, this is Alex here. And I hope you are well and safe as well. On your deployment question here, we still have a lot of room what -- which I call now -- we name it capital that is to be called which will then generate fees as shown by Marco here in this presentation.

So we have room to continue investing in our Private Fund VI, our Infrastructure Fund IV. Our other strategies in real estate and credit and, of course, in public equities there. In addition to that, as far as the revenues' goals for 2022, we did deploy a substantial amount of capital for our standards in the second half of '21, which will only generate revenues in 2022. So these two movements with this last one that I'm going to describe, as we do fund raise, we will then continue investing not only in the prior funds, but we will begin investing in the new funds.

As mentioned, we are currently raising our next flagship private equity fund. And we can invest while we fundraise. So if we raise $100. And I aim to raise $200 for this fund.

I can start investing this $100 that I already raised. So as mentioned, we expect to have a first closing of Private Equity Fund VII, for example, in this quarter. For, in my example, $100. I can start investing $100.

I don't have to wait to raise the whole fund, the $200 in my example to start investing. So I can only -- so not only will know revenues in the 2022 first half be impacted positively by the investments that we did in the second half of '21, number one. Number two, we have still a lot of dry powder, as you know, to invest and that then pushes revenues in -- deployment in the first half of '22 pushes revenues up in the second half of '22. In addition and thirdly, as we raise new funds, which we mentioned that we are in the process of doing, I can start actually investing in this fund, I don't have to finish fundraising to start investing in the fund.

And so all these three forces push toward the right direction here. And that's why we mentioned that we see -- or guideline that fee-related earnings will grow by 50% versus 2021. On your -- and then I'll ask Marco or Josh to add anything to my answer here. But on the political side, we already lived through two mandates of Mr.

Lula, as you know. And forgetting about the value side and whatever, I think it's a warm values here. The current President, Mr. Bolsonaro and Mr.

Lula, as you mentioned, which is a presidential candidate, I think they differ a lot on the values and etc. But as far as the major drivers of their economic programs, I think they're very similar. I think Mr. Lula says a lot of things to gain popularity at this moment of the campaign.

So he's shouting to his own crowd and he needs to do that. I think, strategically right now to be able to call in his supporters to come about and see his percentage in the polls go up as he did when he ran for presidential actions in the past. We already saw Mr. Lula running for five presidential elections.

So more or less, we know the strategy, right? And then as things approach to the second round or even earlier than that, and he's already showing that actually at this moment, he drives himself to the center and trying to attract more the moderates and the business crowd as he is by selecting Mr. Alckmin as his Vice President. Now that's a clear sign as he did with Mr. Alencar, as you remember well, his Vice President when he was President in his first term.

So in the end, I think even though on the value side, we can -- each one has their own opinions and Mr. Bolsonaro and Mr. Lula differ tremendously. I think on the economic side, I think it's more or less -- it's similar, it's not the same, but it's very similar, more or less the same economic programs that both of them will pursue.

May be different than what Mr. Lula is saying, but I'm more looking on what Mr. Lula actually did when he was the president. On the BNDES front, I don't think you will have any more leeway to do what he did with the BNDES and funding the champions of Brazil.

As you know, these champions actually got about in messy corruption scandals, right, some of these champions. So I think it's going to be very hard for Mr. Lula to come around with kind of the same strategy, now I'm going to finance these champions again and using the BNDES. I think there's going to be a lot of pressure from society, from the legal system, from Congress not to allow him to go through that route.

And I think Mr. Lula is everything, but non-intelligent, he's very intelligent and smart -- politically smart to know that. So I think he saw that he can use the capital markets to finance deals and finance as it happened during the last years, while he was not a president. Now we've record privatizations, record concessions and the private sector coming in and doing a great work and actually buying all these assets.

You saw the Minister, Mr. Bolsonaro's Infrastructure Minister doing a great job, Mr. Tarcisio de Freitas on that front. So I think in my view, you might see that there's a different route than going through that, no route that he did try to go through and financing champions and actually getting into big trouble on the corruption side.

So that's my view, I think. But again, forgetting about the values, I think on the economic front, they're both similar. And as you probably know, Marcelo, I think the financial market is kind of already -- now going through that thought process that I just explained and say, well, I know that one is going to continue to be more of the same on the economic side is OK. The other one, I think with Mr.

Alckmin and everybody that is saying to the business crowd it's going to be OK as well. And I think that's why the markets are a little calmer in the recent weeks. So I don't know, Marco, if you want to complement or Luis Fernando, please do so.

Luis Fernando Lopes -- Partner, Chief Economist and Strategist

Yeah. I'll just complement on the financial side to help you, Marcelo, when you're building up your model, I think the best way to think about capital deployment on the drawdown funds, if you add up the main funds to be raised, you're going to get somewhere around $6 billion. And if you just split that number in between three to four year of deployment and adding up plus the pending fee earnings AUM, you get to a number that is somewhere around $2 billion. And I think that the $2.5 billion for '21 is a little bit of an exception because it has been an extraordinary year of a capital deployment.

We could do that again because we gave you a little bit of elements and the timing and opportunity for the region. I will just simplistically on your model, lay down and splitting evenly over the three to four next years for the drawdown funds.

Josh Wood -- Head of Shareholder Relations

Marcelo, just to complement from Luis Fernando here from the macro coming point of view. So your question about us being concerned with the crowding out by BNDES, I need to reemphasize Alex's point. So corporate governance in Brazil, especially for state-owned companies, changed. The government cannot do what he did during the 2000 with Petrobras, BNDES, Eletrobras, etc.

So this is the first thing. But even if it could, our business model does not depend on what BNDES does or doesn't. So we did money. We created new areas, we did investment with a very different kind of government.

So we had centrist government leftist government, right -- harder right government. So there are plenty of opportunities for us to explore in Brazil or outside Brazil. So we don't think that the model of being the crowding out the private sector is going to work because there are now many more institutional restrictions. But independent of that, there is no lack of opportunities.

They probably don't have in the region, especially Brazil's lack of opportunity to invest. So if the government becomes more active -- a little bit more active in one area, there are several other industries that we can target and explore. So not really a major concern for us.

Marcelo Telles -- Credit Suisse -- Analyst

Very good. Thank you so much for your detailed answers. Appreciate it.

Operator

Thank you. our next question comes from the line of Ricardo Buchpiguel from BTG Pactual. Your line is now open.

Ricardo Buchpiguel -- BTG Pactual -- Analyst

Good morning, everyone, and congrats on the results. Could you please help us to understand a little bit your general expectations on a couple of details from the new PE Fund VII. I know a lot has been said already about that. But if you can comment, I want to understand and get a sense on what is the fundraising schedule after the first closing of the next quarter that you mentioned? And how much AUM is expected for the new fund after it's fully raised? Thank you.

Alex Saigh -- Chief Executive Officer

Well, thank you again, and this is Alex here. Fundraising for this kind of closed-end funds, they normally take 12 to 18 months. That's the natural -- the historical average, not only for Patria funds, but in general in the industry. What has -- we've been seeing a lot of interest, but we're also seeing that COVID and due diligence and meetings as we did mention in our last call, did interfere a little bit in the pace because investors are -- some of them are -- they want to come down to Brazil and to visit some of the companies and then they had to, of course, change their minds and redo their processes.

Because some of their processes did include local visits and, of course, not only us, but they had to redo their processes for all the funds around the globe, and they couldn't travel. So there was some adaptation last year to the new reality, which is the COVID reality where traveling is more restricted. And I think we overcame that, and that's what we mentioned in our last call. And things are now starting heading away to the right direction, and we expect, I've mentioned, the first close in this first quarter.

So I can mention what happened in the past, and it's hard to predict the future. So looking at the past, all of the KPIs that we have and we have conversion rates, right, which is you generate leads and then you convert them to indication of interest and then you convert them to, what we call in the industry here, soft circles which is a more clear indication of industry, blah, blah, blah, all the way to signing a subscription document, right? And we do have a process. We follow the process. We have gates to manage this process that I just described, describing here very superficially.

And the indicators of these gates are very much in line with the KPIs and the indicator that we had in prior funds. So nothing that -- we are fine there. I think -- we had Rob asked a question on reups and new investors. Now again, for what we are seeing from the KPIs of this fundraising and from conversion rates up to now, etc., more or less the same as previous funds were 70, 80 -- 70% to 80% will come from reups, 20% to 30% from new investors.

We're not seeing anything really different from prior funds. If that's -- if I'm be able to answer your question and how do we know that because following these KPIs that I mentioned. So hopefully, I answered your question.

Josh Wood -- Head of Shareholder Relations

And Ricardo, just to help you out with your model. Fundraising is a metric that we report and we will continue to report every quarter. What I would encourage you is as we move forward over the year, during the reporting for the first quarter, we will clearly present where we stand with that, and not only showing that on the roll-forward AUM, but also giving a little bit more color on how we are progressing.

Ricardo Buchpiguel -- BTG Pactual -- Analyst

Very good. Thank you.

Operator

Thank you. Our next question comes from the line of Guilherme Grespan from J.P. Morgan. Your line is now open.

Guilherme Grespan -- J.P. Morgan -- Analyst

Hi, Alex, Marco, Josh. Thank you for the call. Just two quick questions here from my side. The first one is more of a technical question.

We had $2 million expenses in a line that you guys called deferred consideration. I just want to make sure we got correctly that this is retention bonus for Moneda's actives. And if we're going to see this $2 million repeated going forward every quarter? And then the second question is related to incentive fees from Patria itself. We have been seeing a very good 2019, 2020, a little bit more modest, but we still saw collection.

Of course, last year was a little bit more challenging but just want to touch based on the outlook for this year. We have been seeing markets rebounding, FX doing well. Just want to get an idea if those funds have high watermark, how close you guys are to this performance collection and the outlook for this year for this line? Thank you.

Marco D'Ippolito -- Chief Financial Officer

Yeah, happy to -- so for the first one on your -- that your statement is correct. So this is deferred consideration for Moneda. What you're going to see over time because as we indicated in the third quarter of the reporting for the acquisition of Moneda -- third and second quarter, we indicated that there is a deferred consideration of $59 million. And the way this flows through into our financials is every month, you're going to see this amount being accrued through our balance sheet.

And that's the amount that -- so two-ish is the pace, if you will, of increase that you see basically every month for the upcoming period of time. On the second one, and I can speak a little bit about from the technical perspective. Alex will jump in and talk a little bit about the performance. What you're going to see is the incentive fee that has been accrued for our full year, it's coming mostly from Moneda.

It's coming from its high-yield funds that has outperformed the market very well. The equities fund, both in Patria and Moneda has not contributed with incentive fees significantly through this year. And as you can tie to the performance of the equity market in the region, we, of course, have a positive view. And as we can see from the beginning for this year that has already been a significant bounce back.

Hard to tell where we're going to land over the year. The prospects for equities for this year are better than last year. Most of our funds respect the high watermark. So there's a big way to go before we we'll start kicking in with the incentive fees, but that's directionally, that's the explanation that I will bring here.

Alex Saigh -- Chief Executive Officer

And just complementing here, Marco, I think most of our credit debt funds on our listed equity funds, we charge incentive fees against a benchmark. So even though if our funds did not perform as we expected, for example, I've stated our fund was down 2% for the year. But the benchmark relatively benchmarked being a Chilean benchmarking, the Brazilian benchmark was minus 8%, and our fund, again, in my example, is minus 2% we performed better than the benchmark, and we still collect incentive fees, OK? So that's also an interesting dynamic of our listed equity funds, most of our listed equity funds and most of our credit funds. That's what I wanted to add here.

Thank you.

Operator

Thank you. At this time, I'm showing no further questions. I would like to turn the call back over to CEO Alex Saigh for closing remarks.

Alex Saigh -- Chief Executive Officer

Well, thank you, operator, and thank you all for participating. It's been a real pleasure to be the CEO of this company in 2021. Thank you for your support. Thank you all shareholders for your support, and thanks to the team and our limited partners for also the support and the stamina and the competence for delivering such great results.

Very proud of Patria, the team, I'm very proud of our '21 results. Now heading to '22, again, guidance of 50% growth in fee-related earnings. And we had a good January and steaming ahead, ahead to deliver the results again. Very excited to be here.

Thanks for your support. Be well, be safe. Hope to see you guys in person. And that means that we are over with this COVID craziness.

And again, be well, be safe. Hope to see you guys soon and thank you very much.

Operator

[Operator signoff]

Duration: 76 minutes

Call participants:

Josh Wood -- Head of Shareholder Relations

Alex Saigh -- Chief Executive Officer

Marco D'Ippolito -- Chief Financial Officer

Robert Lee -- KBW -- Analyst

Craig Siegenthaler -- Bank of America Merrill Lynch -- Analyst

Luis Fernando Lopes -- Partner, Chief Economist and Strategist

Tito Labarta -- Goldman Sachs -- Analyst

Marcelo Telles -- Credit Suisse -- Analyst

Ricardo Buchpiguel -- BTG Pactual -- Analyst

Guilherme Grespan -- J.P. Morgan -- Analyst

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