This article first appeared on GuruFocus .
Release Date: July 31, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
Positive Points
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Patria Investments Ltd ( NASDAQ:PAX ) reported strong fundraising momentum, with $2.3 billion raised in Q2 2026 and $4.5 billion year-to-date, positioning the company to potentially exceed its full-year target of $7 billion and the 2025 record of $7.7 billion.
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Fee-earning AUM grew 32% year-over-year to $48.9 billion, driven by organic growth, acquisitions, and positive investment performance, leading to a 24% year-over-year increase in fee-related earnings to $57.1 million.
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The company secured a new $1 billion multi-asset mandate from an existing sovereign wealth fund client, demonstrating strong client relationships and demand for its solutions-oriented approach, which provides stable, long-duration capital.
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Investment performance remains robust, with over 85% of fee-earning AUM in funds performing at or above benchmarks, including flagship credit and infrastructure strategies outperforming by 360 and 750 basis points, respectively.
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The final close of SOF5, a flagship secondary fund, exceeded its target by 35% at $676 million, with strong demand from North America and Europe, highlighting the success of the GPMS platform and diversification efforts.
Negative Points
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Patria Investments Ltd ( NASDAQ:PAX ) marked down two older private equity vintages (Funds 4 and 5) due to poor performance, reflecting challenges from high interest rates in Brazil and sector-specific shocks, which negatively impacted the quarter's results.
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The FRE margin fell to 54% in Q2 2026, below the 58%-60% target, due to the faster-than-expected integration of acquisitions with lower margins, FX impacts, and ongoing platform investments, with full-year 2026 margin expected to remain below target.
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The average management fee rate declined to approximately 86 basis points, pressured by the mix shift toward lower-fee acquisitions and strategies, which could impact future revenue growth per dollar of AUM.
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Transaction and restructuring costs remained elevated at $11 million in Q2 2026, with expectations of only a modest decline in the second half of the year, weighing on near-term profitability.
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The accrued carry pool decreased, primarily due to a markdown in Private Equity Fund 6, reflecting negative market movements and raising concerns about future performance-related earnings, despite management's reassurances.
Q & A Highlights
Q: Can you provide more color on the fee margin for the new $1 billion multi-asset SMA mandate, and how should we think about the timing of when it becomes fee-earning AUM? A: CEO Alex Saigh explained that SMA margins are typically 1% management fees and 10% performance fees on average, with some at 1% and 15%. He noted the mandate is from an Asian sovereign wealth fund and will likely be deployed mostly into infrastructure and credit over the next four to six quarters, at which point it will become fee-earning AUM. He emphasized this mandate reflects the firm's ability to deepen strategic partnerships with large clients across multiple asset classes.
Q: Regarding the markdowns in Private Equity Funds 4 and 5, does this change your view on the FRE guidance for 2026 and 2027? A: CEO Alex Saigh confirmed that the markdowns do not impact the FRE guidance. He clarified that management fees for drawdown funds are charged on invested costs, not market values, and that Funds 4 and 5 have had no accrued performance fees since Q4 2025. He emphasized that the newer vintages (Funds 6 and 7) are performing well with portfolio companies growing EBITDA by approximately 10.5% on average, and that the firm remains confident in its 2026 FRE target of $225-$245 million and 2027 target of $260-$290 million.
Q: Can you comment on which regions and clients are driving the increased fundraising, and are these mainly new or existing clients? A: CEO Alex Saigh stated that credit, infrastructure, and GPMS are the best-performing asset classes. Asia is the top-performing region, primarily for large SMA tickets, followed by LatAm for day-to-day strategies. He highlighted that North America is "back" as a fundraising region, driven by the successful close of SOF5 and new products like dollar-denominated private credit and infrastructure funds. He noted that roughly one-third to one-half of fundraising comes from re-ups, but the firm is also attracting new clients as it expands its product menu.
Q: The FRE margin came in at 54% this quarter, below the 58%-60% target. What is driving this, and when will it normalize? A: CEO Alex Saigh explained that the lower margin is a timing issue related to the early closing of acquisitions (Solis, WP Global Partners, and RBR) which operate at roughly 30% FRE margins. He stated that as these businesses are integrated and synergies are realized, margins will trend back up quarter-over-quarter, and the firm remains confident in achieving the 58%-60% FRE margin target for 2027 and onwards. CFO Rafael De Nadai added that the full-year 2026 margin will fall modestly below target due to these factors.
Q: Can you explain the increase in "other fee revenues" to $7 million this quarter, and what should we expect going forward? A: CEO Alex Saigh attributed the increase primarily to structuring fees from Solis, the recently acquired CLO business in Brazil. He explained that Solis charges structuring or consulting fees when it structures new CLOs for its clients, and these fees are typically recognized two to four quarters before the associated fundraising. He guided that the firm should see approximately $2 million per quarter in recurring structuring fees from Solis going forward, adding to the normal $1.5-$2.5 million in other fees.
Q: What should we expect in terms of the M&A agenda and transaction costs over the next 12 months? A: CEO Alex Saigh stated that the firm will be "very selective" on M&A going forward, as it has already acquired the asset classes it wanted (credit, real estate, GPMS). Future growth will be mostly organic, with only small, targeted acquisitions or team hires, particularly in Mexico. CFO Rafael De Nadai added that transaction and restructuring costs were around $11 million in Q2 2026, and assuming no incremental M&A, they expect these to decline to $7-$8 million per quarter in Q3 and Q4, followed by a significant decline in 2027.
Q: The shareholders' equity declined $40 million this quarter, more than explained by net income and dividends. What caused the additional decline? A: CFO Rafael De Nadai explained that the additional impact was in "other reserves," related to the accounting recognition of gross obligations associated with put options over minority interests in certain subsidiaries. Specifically, following the closing of the Solis acquisition in January, the company recognized for the first time the gross obligation associated with the potential future acquisition of the remaining 49% minority interest.
Q: Can you provide more color on the credit fund redemptions this quarter, which were almost half of the last 12 months' total? A: CEO Alex Saigh clarified that approximately $100 million of the credit fund redemptions were actually a client redeeming from one credit strategy and reinvesting the same amount into another of the firm's credit strategies. He emphasized this was a normal portfolio reallocation, not a structural issue, and that the credit portfolios remain very healthy. He also highlighted that the flagship LATAM high-yield strategy is performing well, posting 16% net IRR in USD, which positions the firm well for fundraising for its second dollar-denominated private credit fund.
Q: Regarding the accrued carry pool, it declined this quarter due to a markdown in Private Equity Fund 6. Does this change your view on performance-related earnings? A: CEO Alex Saigh explained that the markdown in Fund 6 was related to one specific company that was not performing as planned. He emphasized that the firm's valuation methodology is conservative, with 70-80% of exits occurring at or within 5% of the mark. He reiterated that the firm did not incorporate significant performance fees from private equity into its guidance, and that the high-growth areas (growth and venture funds) are performing well, with top-quartile DPI metrics. Therefore, there is no change to the FRE guidance for 2026 or 2027.
Q: How should we think about the pipeline for multi-asset SMA mandates, and what is the expected management fee relative to the blended 0.86%? A: CEO Alex Saigh stated that these mandates are "chunky" in nature, typically $1 billion or more, and are attractive due to their stable, long-duration capital profile. He noted that
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
