Q1 2024 Patria Investments Ltd Earnings Call

Participants

Andre Medina; SVP; Patria Investments Ltd

Alexandre Saigh; Chief Executive Officer, Director; Patria Investments Ltd

Ana Russo; Chief Financial Officer; Patria Investments Ltd

Presentation

Operator

Good day, and thank you for standing by. Welcome to the Patria first-quarter 2024 earnings conference call. (Operator Instructions) Please be advised that today's conference is being recorded.
I would now like to hand the conference call over to your first speaker for today, Andre Medina from Patria's Shareholder Relations. Andre, please go ahead.

Andre Medina

Thank you. Good morning, everyone, and welcome to Patria's first-quarter 2024 earnings call.
Speaking today on the call are our Chief Executive Officer, Alex Saigh; and our Chief Financial Officer, Ana Russo. We are also joined by our Chief Corporate Development Officer, Marco D'Ippolito; and our Chief Economist, Luis Lopes, for the Q&A session.
This morning, we issued a press release and earnings presentation detailing our results for the quarter, which you can find posted on the Investor Relations section of our website and on Form 6-K filed with the Securities and Exchange Commission. This call is being webcast, and a replay will be available.
Before we begin, I would like to remind you that today's call may include forward-looking statements, which 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 and risks, including those discussed in the Risk Factors section of our latest Form 20-F annual report.
I also note that no statement on this call constitutes an offer to sell or solicitation of an offer to purchase and interest in any future funds as a foreign private issuer partner reports, financial results using International Financial Reporting Standards, or IFRS, as opposed to US GAAP.
Additionally, we would like to remind everyone that we will refer to certain non-GAAP measures, which we believe are relevant in assessing the financial performance of the business, which should not be considered in isolation from or a substitute for measures prepared in accordance with IFRS. Reconciliations of these measures to the most comparable IFRS measures are included in our earnings presentation.
Now, I'll turn the call over to Alex.

Alexandre Saigh

Thank you, Andrea, and good morning, everyone. The first quarter of 2024 marked a great start for the year, and I'm very pleased with the performance we delivered. We generated $35.1 million of fee-related earnings in the quarter, representing a 13% increase from 1Q 23, with only 20% of this growth coming from acquisitions. We delivered more than $31.3 million of distributable earnings or $0.21 per share and announced a quarterly dividends of $0.18 per share. We raised $1.1 billion year to date through April and over $5.1 billion in the last 12 months. We are confident we are on track towards meeting our $5 billion fundraising target for the year.
At the portfolio level, we generated solid investment performance, which helped offset the impact from realizations and FX movements. Generating strong investment returns for our fund investors remain our primary objective. And this strong performance continues to support our healthy net accrued performance fee balance of $514 million or $3 and $0.41 per share as of March 31, total AUM and fee earning AUM have grown more than 17% and 20% from one year ago, respectively, with only one-third of this growth coming from acquisitions.
This past Monday, we were thrilled to announce the closing of our acquisition of Arbor Dean's Private Equity Solutions business. As previously announced, the acquired platform when combined with battery as existing Global Private Markets vehicles will form a new vertical global private market solutions, or GPMS. with aggregate fee earning AUM of over $10 billion. We believe the breadth and scale of this new vertical positions Patria as a premier gateway to global private markets for underserved investors in LatAm.
Also on the M&A front, we are making good progress towards closing the pending acquisition of Credit Suisse's real estate business in Brazil with up to $2.4 billion in fee earning AUM as of 1Q 24, we now have all the required regulatory approvals in place and expect to hold the necessary fund shareholder votes to approve the transfer of the management contracts, driven by strong organic growth and our accretive acquisition strategy. We remain confident in our ability to deliver our previously communicated 2024 FRE. target of $170 million, and our 2025 targets of FRT in excess of $200 million, reflecting year-over-year growth of 15% and over 17% respectively.
Digging deeper in our expanding platform and pro forma for acquisition, our 1Q 24 fee earning AUM reached over $34 billion, representing over four times growth in the three years since our IPO. Notably pro forma for the acquisitions, permanent capital comprises about 20% of our fee earning AUM up from insignificant levels at the time of our IPO. The expanding breadth, scope and earnings power of our platform is highlighted by the fact that number one, we have grown from a two-product asset manager at the time of our IPO into a diversified alternative manager with pro forma $34 billion of fee-earning AUM spanning across a range of strategies and investment vehicles, including private equity infrastructure, credit's real estate, public equities and global private market solution.
The recent launch of our infrastructure private credit funds highlights how we are leveraging our expanded platform to bring new and differentiated investment solutions to our clients. Two, we offer an expanding range of product structures in order to meet investor objectives and with permanent capital drawdown funds and SMAs, representing over 70% of our fee earning AUM, underscoring the inherent stickiness of our management fee revenues and fee-related earnings three. We are diversified across currencies and importantly, 70% of our pro forma fee earnings AUM is denominated in hard currencies, USD, British pounds and euros.
As we think about our path forward. It's important to emphasize that organic growth of existing and acquired investment platforms post acquisition remains our top priority. This is highlighted by the fact that from year end 2018 through 2023, our fee earning AUM, excluding the initial inflows of acquisitions, grew at a CAGR of 17%, while sensible organic growth is our top priority diversification through inorganic expansion remains a key component of our strategy.
We believe in the ongoing consolidation within the asset management industry and at many times, M&A is the most efficient way to capture new avenues of growth. It can speed time to market and allows us to capture the opportunities we see in the region through the addition of skills and culturally aligned investment teams with strong investment track records, complementary and differentiated investment strategies and new distribution capabilities in some instances, by may also be cheaper than raising equivalent amounts of capital replacement age.
Overall, we are very proud of the differentiated and diversified investment platform. We have built both organically and inorganically, making us the largest alternative asset management platform in the region in terms of direct assets under management revenues and fee-related earnings as we remain very excited regarding our future growth prospects.
Now let's have a closer look into our investment verticals. This past March, private equity international released its 2023 DYI. awards, ranking part of Patria private equity as the Firm of the Year in Latin America. This was our 2nd year of participation and the second win in a row. The award reflects the market's recognition of consistent performance sector knowledge, commitment and leadership in Latin America.
Investment performance excellence is highlighted by the 20-year pooled net IRR in USD of our flagship private equity funds of 17.5% as of the first Q 24. For comparison purposes, as of 3Q 23, the latest available market data from cable's Associates.
Our pooled performance was 18.3%, which represented 11.9% of excess returns over the past 20 years relative to Cambridge benchmark returns in LatAm over the same period. Patria private equity also generated excess returns relative to Cambridge benchmarks when compared to emerging markets, Asia and the U.S. with excess returns over 7.1%, 7.2% and 3.3%, respectively, in what remains a challenging private equity fund raising environment.
The strong track record helps our fundraising fundraising efforts in first Q 24, we signed a new $65 million co-investment in our new vintage private equity fund, which is currently in the marks. We have secured approximately $1.2 billion of commitments as of 1Q 24 for our new vintage buyout funds with fundraising outperforming in LatAm, Asia and the Middle East as the private equity fundraising environment in the US remains challenging. Nevertheless, we continue to see a path to reaching $2 billion of commitments beyond our flagship funds. Our private equity platform currently with $11.7 billion in AUM also offers growth equity and venture capital funds strategies that we did not offer at the time of our IPO.
With regards to our infrastructure vertical and new product developments. In 1Q 24, we raised over $60 million for one of our F. corporate funds with a focus on mature energy distribution and transmission assets. This was the third capital raised for this specific vehicle and it closed above our initial targets. This strategy route, which represents permanent capital AUM, continues to gain scale and now totals more than $310 million in AUM. In contrast to the struggles many managers have been facing with regard to generating realizations. Our flagship drawdown business has seen a pickup in realization activity for LPs, which is a crucial driver of fundraising for our latest vintage flagship infrastructure fund, which is now in the market.
As of 1Q 24, we have already secured over $1 billion of commitments for the new fund, and we are making progress towards our goal of raising $2.5 billion. We believe the investment opportunity within infrastructure is very attractive and have already started to deploy this capital.
To illustrate, in 1Q 24, we announced a $110 million commitment to a greenfield solar plant in Colombia with a 360 megawatt installed capacity, representing the largest solar farm in the country with $300 million of projected CapEx. Also the first announced investment from this from a toll road concession in the south of Brazil with a 30-year contracts protected against inflation and a 20-year traffic history began operations during 1Q 24, ahead of plan looking at investment returns as of 1Q 20 for the pools, net IRR in USD for our two latest vintage funds was 12.3%, outperforming the Hamersley global infrastructure, medium benchmark and the Dow Jones Brookfield global infrastructure index by 4.1% and 12.4% respectively.
Finally, in 1Q 24, we contributed $50 million or approximately $10 million out of the limited capital exposure of $100 million for approximately $20 million. In order to provide seed capital to Trio, our new and separate energy trading companies, Korea was created to access a high growth opportunity we see in a fragmented sector with compelling fundamentals. We believe Altria's investment scene has the skill set and expertise to help build this business, which has significant synergies with our infrastructure portfolio companies.
Factory of fluid seed capital investments holds a 67% stake in CDS, which began its operations. This April. Other shareholders includes four well respected minority partners with recognized expertise in energy trade over time. Our goal is to develop career into an asset management business with the intention to raise private credit vehicles to fund both power generators and consumers with energy banks contracts. Our credit vertical continues to generate strong and consistent returns to our investors.
As of 1Q 20 for our three largest strategies, Lat-Am, high yields, Lat-Am, local currency and Chile and fixed income have each outperformed their relevant benchmarks for all reported periods. One Q. 24, one year three years, five years. And since inception specifically, our long-term high-yield strategy with $3.6 billion in AUM has outperformed its relevant benchmark by more than 370 basis points since inception in early 2000. In the last 12 months, we raised over $900 million for our credit products, including approximately $300 million in 1Q 24. Fee earning AUM grew more than 19% organically from one year ago and more than 4% sequentially.
In addition to the three aforementioned strategies for Altria's diversified credit platform with approximately $6 billion in AUM offers funds in private credit, infra, private credit and receivables. Private credit strategies continue to see strong momentum globally and expanding this vertical both organically and potentially through M&A remains a key priority.
To illustrate, we are currently raising a US-dollar denominated LatAm focused private credit fund with a first closing expected for the second quarter of this year. We hope to have more news on this soon.
Turning now to public equities, let me take a moment here to congratulate Pavel, a Chevy or one of the founder and head of Piraeus public equities for our P&L of funds, for which Pablo has been the portfolio managers since since inception, focus on small and medium-sized companies in Chile, fuel and will reach its 30th anniversary this March with impressive performance along the way, including a 19.6% return in the past 12 months and a 13.5% annualized return since inception, which translates into a 45 times multiple for capital invested in day one. This investment platform with $2.8 billion in AUM, offers a range of products, including pan LatAm, large and small caps, as well as Chile and large and small caps and private investments in public equities or pipes.
With regard to five, we were very pleased to launch our pipe Chile this quarter and closed end fund with an initial $55 million raise in 1Q 24 and which we believe is well positioned to scale.
Focusing on our next vertical, real estate fundraising continues a solid path. Over the past 12 months, we generated over 1 billion of organic inflows and total AUM reached $3.8 billion for perspective, as of 1Q 23, AUM totaled 1.6 billion. This organic growth included a strong 1Q 24 with 235 million of new capital raise beyond the attractive organic growth.
We continue to pursue what we believe to be great opportunities to consolidate the real estate investment trust market in the region in November 2023, we closed our new partnership with Bancolombia, adding a $1.4 billion real estate investment trust and best in class distribution capabilities in the Colombian market. One month later, we announced the agreement to acquire Credit Suisse real estate business in Brazil for CSHG. real estate, a platform with $2.4 billion in assets under management. Altogether, we have grown our real estate vertical to pro forma AUM of over $6 billion with approximately 90% important.
Finally, let's do a quick overview of our newest platform, global private market solutions or GPMS. This new vertical focuses on serving clients as a gateway to private markets on a global scale through proprietary and third party products on the proprietary fronts. We currently offer primaries, secondaries and co-investment strategies across various drawdown funds and listed vehicles, which are permanent capital. In addition to separately managed accounts or SMAs with a 10 to 15 year track record. These three strategies, primaries, secondaries and co-investments have generated consistent and strong returns with pool IRRs in Euros of 18%, 20% and 20% since inception.
And as of 2Q 23, respectively, on a pro forma basis, it manages over $8 billion in fee earning AUM. In addition, to the recently acquired business as one Q. 24 partner managed 1.9 billion of fee earning AUM in third party funds, of which $1.5 billion was through feeder funds that direct Latin American cast to Global Private Markets business, we have been active in for over a decade. The feeder fund business has raised over 300 million in the last 12 months with approximately $60 million raised in 1Q 24. In aggregate, our GBMS. platform is being launched with over $10 billion in fee earning AUM and represents a complementary pillar of growth as we serve as a gateway for Latin American investors, two private markets on a global scale.
Before I hand the call over to Ana to give you more details on the numbers for the quarter, let me take a quick moment to give another perspective on the diversification of our vectors of growth prior to our IPO, close to $7 billion of our total $8 billion of fee earning AUM or over 85% serve global clients. Looking to invest in Penn Plaza and alternatives today, pro forma for the pending CSHG. real estate deal of our $34 billion in fee earning AUM, approximately 35% continues to be sourced from global clients.
Looking to invest in Pan LatAm alternatives, 35% is sourced from local clients seeking to invest in regional strategies. 25% is from local investors focus on local alternative products. And finally, 5% comes from local clients investing in global alternatives. I believe this clearly illustrates the amazing job This team has been doing on executing our growth plans on diversifying our business.
Now, I'll turn the call over to Ana.

Ana Russo

Thank you, Alex, and good morning, everyone. It was indeed a great start of the year as Fletcher continues to deliver steady and strong results as we grow and diversify our platforms. It is important to maintain and enhance the comparability of our KPI and metrics with those of our peers. And with that in mind, we reclassified two line items on our non-GAAP P&L, which had no significant impact on our reported results.
First, rebates were originally under the expense line placements, the amortization and rebates and now directly deduct some fee revenues as a contra revenue item, making our fee revenues more comparable with peers. This has no impact on reported fee-related earnings, but slightly increased our reported FRE margin by around 2.3 percentage points in first quarter 24 and 1.6 percentage points in 2023.
Certain realized gains and losses were reclassed below distributable earnings, and this makes our die even closer to a cash basis. Further details on these two reclassifications can be found on our earnings presentations, which among other things highlight that $1.5 million of unrealized gains that were moved from net financial income and expense to a new line called unrealized gain losses on AFS below gain would have decreased 2020 14 contributed earnings per share by only CapEx, as mentioned by Alex, following the completion of the acquisition of the private equity solutions business from Aberdeen.
We have now launched a new vertical global private market solution for GPM. This vertical with top pharma fee earnings. Aum over 10 billion also includes $1.9 billion from our third party distribution business, which was previously under advisory industry, which as detail on our earnings presentation that moving many assets in advisory and distribution will be reallocated to other asset classes with that. But just platform will be based in Pittsburgh, private equity infrastructure, credit, real estate, public equities and global private markets.
Let's now review the results for the first quarter, Q1 2024 G related earnings of $35.1 million was up 13% versus Q1 2023 with a margin of 58% reflect an increase of 2.3 percentage points compared to last year. After adjusting for the expense reclassification noted earlier, Q1 2020 for FRE was in line with Q4 23 when excluding the seasonal and onetime impact from fourth quarter of 2023, as our FRE continues its growth, total fee revenues in Q1 24 increased by $4.5 million or 8% from Q1 23 to $6.6 million. This increase was mainly driven by growth in credit fee earning AUM as a result of net inflows and appreciation in our credit funds, which drove an approximate 20% increase related to it.
And year over year fee revenue also benefited from the November 20th to the closing of our partnership with Bancolombia and commitments and deployments in Private Equity Fund seven, which continues to fund rates, excluding Q4 2020 to be onetime impacts, our fee revenue continued to grow sequentially. This onetime impacts were one crystallization of incentive fees of $4 million in our private and public equity verticals, and two one-time management's team catch-up of $2.5 million for private equity.
Total operating expenses for personnel expenses, plus G&A were two and to $4.8 million for the quarter, mostly in line with Q1 2013 adjusted to reflect the reclassification noted earlier, but this molybdenum distributor earnings of $31.3 million in Q1 24, equating to $0.21 per share, $7.7 million lower than the first quarter of 2023, fully driven by $10 million of performance related earnings in Q1 23.
We also crystallized $26.6 million of performance related earnings in Q4 23, which drove the variance versus the current quarter. In addition to the one-time impact of FRE mentioned mentioning before, additionally, corporate income tax rose this quarter to $2.8 million when compared to $1.1 million in Q1 23, mainly due to the larger contribution from our business in Chile, Brazil and Co. We declared dividend per share of $0.18 for Q1 2014, which reflects an 85% payout ratio.
As mentioned previously, beginning 2024, we expect to distribute 85% of our distributable earnings, excluding performance related earn unrealized gain from energy trading platform, net of taxes up to $100 million in order to fund M&A obligations and pay down debt going forward. We'll continue to evaluate our distribution policy with a focus on one being a stable and growing dividend, driven by cumulative earnings and to maintaining our balance sheet strength with an appropriate amount of leverage and ability to pursue acquisitions and reduce debt on the our March 2024 balance sheet shows $33.4 million of debt with the majority reflecting our long-term financing line and $10 million from our revolving credit facility.
This debt was incurred to fund the first tranche of our acquisition of real estate business from Credit Suisse, including related expense, future obligations will be funded by a combination of cash debt and equity in regard to equity, based on our pending closing M&A we expect to issue less than 4 million shares throughout the year, which would result in less than 156 million shares in aggregate at the year end based on our FRE target for 2024. This implies an FRE between $1.8 and $1.12 per share between 10% and 12% higher than 2023 FRE per share of $0.99.
However, the full year benefit of the closing M&A will only take place in 2025, where our FRE target ranges between 202 hundred and $25 million. That gives us an FFO per share between $1.25 and $1.40 already include any addition expect the share issuance for our compounded growth between 2023 and 2025. In FRE per share, we'll be up to 40% net accrued performance fees were up almost 20% versus Q1 23, reaching $514 million with over $300 million coming from our two most mature fund Infrastructure Fund three currently of the catch up phase and private equity fund five alpha under hybrid compute.
Despite strong underlying performance quarter over quarter, net accrued performance fee decreased by 4%, mainly by share price of our publicly listed companies and currency. This accrual now represents $3.41 per share. As we progress in the year, we expect our management fee revenues to be supported by ongoing strong earning AUM inflows across the platform, particularly in credit driven by inflows and performance fundraising and real estate deployment, infrastructure five, in addition to new acquisitions.
As a result, we remain confident in reaching our $170 million of FRE goal for this year, assuming a margin between 56% and 58%. This is slightly lower. Margin reflects the nature of our newly acquired and pending acquisitions, we expect FRE growth to be back end loaded towards the second half of 2024 due to the combination of organic growth and the timing of the closing of our acquisitions.
I will now turn back to Alex for closing.

Alexandre Saigh

Thank you, Ana. One last thing before we start the Q&A in light of our great 1Q 24 results, multiple organic growth initiatives, the closing of our acquisition of the private equity solutions business from Aberdeen, and a good progression towards the closing of the CSHG. real estate deal, I'm even more confident we will reach both our financial and AUM targets. We are comfortable in getting our fee-related earnings to at least $170 million this year, all the way to more than $200 million in 2025 as we embark on our next chapter of growth, we look forward to sharing more details with you at our next PAX Investor Day expected for later this year.
We thank you for your time. I'm now happy to take your questions.

Question and Answer Session

Operator

(Operator Instructions) Your first question comes from the line of Craig of Bank of America.

Good morning. It's Craig cigar from Bancomer as shown here. Marc, I hope you're both doing well. Thank you, and thanks for participating. And we'll we're well here. Thanks a lot for brands. We don't get down on. Our first question is on fund raising. You raised 1.1 billion on the quarter. You're on the way to the $5 billion target this year based on recent client conversations and marketing schedules, how do you expect the remaining roughly 4 billion to come in during the year? And should we expect lumpy flows certain quarters when you have a larger close with private equity seven in infrastructure, five windows.

Alexandre Saigh

Got it. Hi, Greg, how are you? I think I wonder I would divide the $4 billion equally between the next three quarters in our history shows that the third and fourth quarter are a little hotter. We raised a little bit more money I think that's basically human nature thing you get to the second semester really has been it drives that and goals to meet. And so then we also our sales team also have goals to meet. So they actually push a little harder. But the first quarter is normally a little slower because people come back from no end of the year vacation, whatever so that has been our tradition and for the last 20 years, to be honest.
So I think it's going to be more or less the same pattern this year over the last 12 months, we've raised $5.1 billion. So that again this quarter until the second quarter of 23, and I think we're going to maintain the same pace so again, I will divide the $4 billion equally, we have these chunky, as you mentioned, the fundraising for Infrastructure Fund five and five active and seven, but I think they're going to be evenly distributed. As we see our Nigel said, our scheduled roadshows and people that have very, very advanced in the due diligence going to credit to their investment committees et cetera. We definitely see things moving more or less equally over the next three quarters. Is that correct?

Our HIV, thank you up. Just for my follow-up. I mean, you guys have been very active on the M&A front, arguably more active than I think anyone predicted two years ago. And you're clearly consolidating the private markets industry and with TAM. But I wanted to get an update on how your objectives have evolved and how you think about dry powder given cash debt capacity and the stock currency today?

Alexandre Saigh

No. Okay. Thank you. Yes, I think definitely we I think we are we manage and we are trying hard to wish you guys the Chemineer. I can hear you well, but just so that I just sort of sound like other than the line has gone down. So so I'm going back and repeating myself for second.
Yes, we have been managing to consolidate the market in LatAm. I think this is very, very important. As you know, most of our clients are global institutional clients and local institutional clients that they want to have a smaller number of relationships globally and locally. So we would like to be that one relationship in Lat-Am, one or two relationships in LatAm.
And we want to offer these clients not only one product of one asset class, but several blood products of one asset class and products of several other asset classes as well as you saw our diversification, I think we are very well placed with what we already acquired, putting us in a very good position to continue expanding organically and the most of what we did over the life of this or earnings fee-related earnings increase over the last four quarters were organically driven, given that we did not close any major acquisitions last year, we signed, but we did not close and we closed the Aberdeen, our global private market solution business acquisition in April. So it did not it was not included a full quarter of 24.
So with that, I think we are very well-placed, we might do other minor acquisitions, but not major joint market still pending for us to come in to go into is Mexico. Within LatAm. We do, of course, sell our products to Mexican institutional investors. But we do have an asset management business there with local products in Mexico as we now have in Colombia, Chile and Brazil there, I think we're looking to do it together to get into that market and trying to find the right way and the right asset class, as we mentioned in previous calls, I think real estate it is one that actually does favor our entrance there because they have invest when they have a reasonably sizable market of real estate investment trusts around $50 billion real estate investment trust market. So that's the that would be the move. But nothing nothing as major.
I think at the Credit Suisse real estate business or the Aberdeen global private market solutions business correct. As far as dilution of shares, I think we are not keen to join her call. I think he tried to give you guys and all of us fee related earnings per share. And we did end 2023 with a fee related earnings per share of $0.99 or $1. And I think we talked to personally Greg about that and I think you have now, given you say like it would be great if you guys gave a fee related earnings per share for that, of course, would include not only the fee-related earnings in absolute dollar amounts, but also your guys' projections, our shares issuance. And so the fee-related earnings per share combined those two numbers.
So 24, we're expecting one way to one 12 saw an increase over the $0.99, which is the one 70 million divided by the number of shares that we expect to have by the end of the year because we're going to issue some shares to do acquisitions between now two big acquisitions that we did between now and the end of the year. So that's approximately three 4 million shares. You add the number share that we have today in the base then you know, you use it was $70 million number. It gives one a way towards 12. As you know, this year, we are managing actually to close on the acquisitions earlier than we expect. So we see that the probability of us reaching the $170 million number is increasing as we walk along the year.
Now one of the year, and I'll give you more news in the second quarters in the second quarter we do actually have the crisis real estate funds transferred to us. I think that volatility will increase even more and we get these notes. That's why I'm saying here that now I'm saying that at least $170 million of fee-related earnings this year, not a target I'm seeing at least now because of everything that I said when we look into 25.
And why do we use what we like to use a fee-related earnings per share 25 because we are issuing the shares to pay for the acquisitions. It's very important that we do pay with acquisitions could then we retain those are very good managers now because these shares that these managers receive the set of the matters that are selling their businesses has a longer lockup of five years. I need to use that they could use more cash, but it's also very strategic for you for us to use the shares, but we have to issue the shares, give the shares to those people.
And then the results don't come in day one, but the shares dilution come in day one. So when I look into 2025, when I have the full benefits of the whole year of the results of these businesses that we bought in our P&L running through our P&L and the 220 25, $1 million of FRE guidance. And again, the chances that we're going to hit or are becoming higher and higher as we close. These acquisitions is $1.25 to $1.40 per share FRE per share. So when we compare the $0.99 of FFO per share in 2023 and $1.25 to $1.40, if we could see Norway, 30, 40% increase over two years or whatever, 15, 20% increase per year on a compounded basis. And I'm saying here that at least we're going to do these numbers because of everything that we have not been able to do. So it is a I think that hopefully that by giving an FRE per share target as well, will help you guys everybody to see our expectation of share dilution?

Ana Russo

That's correct, Alejandra.

Thank you, Frank.

Operator

William, Itau BBA.

Good morning, everyone. Thank you for the color and taking my questions. So I would just like to confirm some informations about the two recently announced terminations so on regarding the averaging one, I have a question to When should we expect it to showing our FRE numbers?
So can I consider already the two last month months of the second quarter of this year, or will it be will there be any deferment to the numbers and just confirming on the CS real estate acquisition, if I can only expect to see FRE improvements regarding this one in 2025 William, thank you very much for your question. This is Alex again here. A Yes for the May and June. A question on the Aberdeen numbers. So we did close this last Monday, the 28th of April. So as of 1st of May, we will then incorporate those numbers in our P&L, but going to run through our P&L. And yes, as you know, the operating business has a positive FRE, remembering that we mentioned that's just going over. I don't want to be redundant with it. We're just going over to kind of refresh our minds here is an $8 billion of fee-paying AUM business. If we consider that it has around 30, it's 35 a bit a basis of it.

Alexandre Saigh

No, no. Go ahead.

What is your saying whenever I minus my is my markets here with us, and I think he can continue here. So so when I do the math, yes, 30 to 40 basis points, 8 billion of fee-paying AUM. That gives you a guidance of the fee paid WM. accretion with that 30% less than a 30% margin.

Ana Russo

So we have approximately number two, looking to a full year impact about 11 million. That's what we're talking about. A three basically looking to offer four rigs that we are talking about like a $5.5 million, approximately half of it in terms of a quarter base.
But as Alex mentioned, it's the two months that we could consider as of May, which is going to be already accounting in our region as you restrict and therefore, your second question, it's I think conservatively, we are expecting the fee-related earnings from the Credit Swiss real estate business as of 25 or end of 24, which basically insignificant for 25 onwards. So conservatively that would that's what I suggest to use.
William, we are in the middle of the process of transferring the funds from the credit administration to our administration. As you know, we have to do the shareholders' meeting and we are now going through the process. The process is going fine. We got all of these. Of course, all the conditions precedent were we're in place. So the so we started these shareholders agreements a process and everything again is moving, okay, but it's very hard to say where we're going to land. So conservatively, I would say 2025, I'll give you guys updated on that as we move along the quarter. But I would I would start with 2025 as a baseline.

Okay. Okay. Very clear.

Operator

PHS, Goldman Sachs.

Hi, everyone. Good morning. Thank you for the call. Some my questions on expenses, we saw an increase in both personnel and G&A expenses this quarter. If you could give us a little bit more color on what happened there and we should if we should expect that as a normalized level going forward.
And maybe as a second question on Lou, should this be reflecting Aberdeen acquisition in the last two months of this quarter 2Q now that it's closed and that certainly should add more variables to the equation. But what are you expecting in terms of FRE margin going forward? Thank you.

Ana Russo

Hi, good morning, this is Adam. So I just want to refer as well to our deck and just so we are clear with the numbers we are looking at. So our personnel expense line go from Q1 2023 or 16.8 to $60 million, and our G&A has an increase of from 7.6 to 8.8. So when we look into overall, there is a slight increase of 0.4 overall when we talk about operating expenses. But in terms of personnel and personnel expenses, there is a positive impact or likely as we guide was the mention of that, these could be on a proxy for the next for the next quarter.
As we mentioned last quarter, $16 million includes our equity compensation program is likely and also varies, as you know, as we progress in our business, some outsourcing from personnel expenses to G&A, Allison, our G&A includes, as we mentioned this quarter, more investment on the reason we have a higher marketing and commercial activities, which is reflected in G&A. This is sometimes when we're looking to the year is seasonal because there are some quarters that have been up. We have more activities than the other, so you can see that there are and related expenses.
And on top of that this quarter we have we are accounting for a full week expenses compared to the first quarter 2023 of Bancolombia, which impacts both revenue and expenses line as well. So this also includes some things when we talk about inorganic expense increase.
I think the second question was on the FRE margin on a full look into. So what we have mentioned during the actually on my speech that we think that the margin could be between 56% and 68% for the year. That mostly is accounting for the nature of the new business we are in including we are acquiring, which has a lower FRE margin than our current business. That's the reason we also when I mentioned about going forward, we think that there is a consolidation in our favor. What this is in the future, these margins should actually progressively going up. But for this year, we think about it between 56 and 58.
What has happened over the last years that the actuaries and this is Alex here. And again, thanks for your question and thanks for participating. And we had as when we when we went public a margin of around 60% or 60.9 61. And then as we as you know, that did the one near the acquisition, the margins came down to around 55, 56. And then we did of course, I know run after the synergies, margins went back up to close to 60, and then we did other acquisitions, margins came down a little bit.
And then last year margins were around 61%. Again, as you know, as you may recall, we have not closed on any acquisitions last year. So it was a year of integration that we managed to push the margin for the whole year of 2023 back to over 60. So this year. I think next year 2025, I think it's going to be the same fast and this year is going to be a little stressed downward pattern. I just mentioned 56 to 58 because the actions we are taking on these acquisitions, we have redundancies in the first moments and we have a little lower margin in the first moment because they know that the businesses that we acquired were run by these other firms that own them, Credit Suisse and Aberdeen differently than we had lower margins. And as we put them into our business and incorporates a we gain synergies. So I definitely see that we're going to go back to the 60% margins as we look into 25 onwards.
But this year, specifically because of these two acquisitions margin, a little bit compressed downward. But we already identified this as though to be honest, this is what we do for living in our private equity shop?
No, we did over 300 acquisitions. We consolidated more than I don't know how many sectors. I probably know the story there. And so we feel very comfortable in this model of doing acquisition. And then we have integration systems, integration of processes, integration of culture and people. And then we bring margins back up is something that idea of the field for several of our portfolio companies in private equity asset class. And what I'm doing now here with the same team, Marco Ricardo, Ben Yeoh and earn and whatever she's so we feel comfortable in this with this model with this model and feel comfortable we're going to get back to the 60% margin next year and going forward just for the sake of clarity here, this is Marco.

As you build up your model and you look to your presentation on page 13 where you have asset by asset and a food. We have re-classed the asset. And now you see GPMS. there with EUR1.9 billion. What you're going to see in the next quarter is we've got to aggregate 8 billion to that 1.9 to at least EUR8 billion. And the the average fee-paying AUM, it's 50 to 60. And the margin is between 30 and 40. So what you're going to see is it is 60 basis points and the margin, the FRE margin is 30 to $0.4. So I will be who will be important to provide full clarity here as you build up your model.

Alexandre Saigh

And I think as a final comment here, Beatrice, I think the long answer to your question, what's of value. But I think I would like to add another comment here before we turn to another question. And the whole idea was back then prior to IPO, the IPO, I think is to have other asset classes that for factory are significant and has a scale and therefore also has the margins. So with a private equity was already there, we already have the reasonable big asset class at that time, it was around 45% of the AB. and CB. webinars around 11, so basically doubled more than doubled infrastructure. The same. There's no sizable and we reach more size. And with the new vintage funds that infrastructure fund five, even more so than we've built a very significant credit vertical that's around $6 billion today and with fundraising should end the year with around 7 billion of fee-paying AUM there in credit where we have a good amount of private credit for E. for private credit, mid market, high yield, Brazil, private credit. Now we have a dollar denominated Lat-Am private credit and all of these products, we launched, of course, though ag receivables discount private credit fund in Brazil. We launched, of course, with the intelligence of our Chile and partners. So that's going to become was 7 billion. And I see that asset class also moving head of 10 together with a private equity or 10 infrastructural 10, then comes the real estate and we did several acquisitions there. And with the DBI. acquisition that we did and also the Credit Swiss real estate acquisition that we did already a six $7 billion asset class. And I see that as also going to over 10, we have?
No, we haven't even touched Mexico, as I mentioned already here on this call today, the real estate investment trust market in Mexico is a $50 billion market. And I think there's a very ripe for us to participate in that market.
Finally, analogy, PMS. already starting with over $10 billion, so another So that's an asset class number five, but I see no $10 billion plus in the near future with very, very good margins because that kind of the numbers that I gave you gets scale and we manage them to push push margins back to the 60%. So private equity infrastructure, credit, real estate and GPMS. And so that's what we're trying to do instead of having one or two asset classes that were significant for us. Private equity, again, 45% of 8 billion. Infrastructure was also around 25% of the 8 billion at IPO, we have five asset classes that I see 10 billion size going forward with very good margins and very scalable in that. So on the data that shows that was the whole strategy to go into other asset classes that we have the very large tangible addressable market that we can become significant that we can scale up with a magic number that I gave you $10 billion plus. And with that margins come up again to the 60% FRE margin. So that's the whole that's the vision. And I think we're there. Now it's more execution. I think we already have our major asset classes acquisitions done as I responded to Craig earlier in this call here today. Thank you for your interest.
And sorry about the long answer.

So thank you all very that you're thinking are going on.

Operator

Ricardo, BTG Pactual.

Morning, everyone. I have a couple of questions on my side. First, we saw that during the quarter management fee yield over the fee-earning AUM declined around 12 bps to 1.07% in Q1. So I wanted to understand what happened there. If it's something the size of makes a distinction because of adjustment in certain segments and what a sustainable level would be assuming the Aberdeen acquisition and without just first to see what happened right? And also now that the average acquisition is approved. I imagine that capturing all the top line synergies should take some time.
Right? So I wanted to understand a little bit more on what environment the Company is right now in terms of inflows in terms of AUM growth, especially for this year. Thank you.

Alexandre Saigh

Okay. Thank you very much, Ricardo. Thanks for participating here in our call. Okay, sodium, the management fee yields, as you saw here in a page that for everybody to be in the same pages. Page 13 of the presentation. Yes, I think it's a question of mix So answering your question, as you as we we gave the guidance that we were going to raise around $5 billion in 2023, we raised $4.8 billion. We gave those numbers in our fourth fourth quarter 2013 call in February and the speaker and we raised within that populated and more real estate than we expected more credit than we expected and that those two asset classes.
If you look here through Page 8 through Page 13, I'm sorry, you'll see that these two asset classes do have a relatively lower fee than the other asset classes as compared to private equity and infrastructure as we do. And we raised a lot of infrastructure as well, but we have to deploy that one for real estate and for credits because of as we raised the money, we already start charging fees because we charge on the NAV. Most of these funds, our listed funds or which in the case of no real estate investment trusts, the IFTE.s in Brazil, as you know, and if credit as you raise the money, is you already start charging fees on that amounts.
The infrastructure we did raise and private actors or substantial amount of money as well. But you have to invest that money to charge fees because we charge on invested. So as we then invest away throughout 2020 for the money that was raised in 2023, then we will see the margins pick up a little bit because of that data sorry, the average effective management fee rate.
But going to your just your other question, which is important here, as we do the GTMS. acquisition that has, as Marco mentioned a couple of minutes ago, a lower fee. Where do we land with all these? You know, we're going to our view is that we're going to land 2024 with a very similar effective management fee rate that we have here today because we're going to be investing, as I mentioned, private equity and infrastructure that we raised that has a little higher fees, but we will then incorporate GPMS. that have a little lower fees. So as we do our projections here Ricardo, we're going to land 2024 was similar numbers that you saw here on page 13.
Because these are No. one. So events you're pushing a little bit the market, the effective management fee rate up for the GPMS. good pushing the effective management fee rate, a little tough on the AUM growth for GBMS. we were very conservative. So we didn't project much for this year because it's a carve out business. So we know as a whole can of it thinking on a business that you're carving out from another business is different than buying the business by itself because you have more complications there on the on the system side on the integration side, et cetera, and we had, I think from congratulating you on a here and her team, a flawless execution of that Monday, everybody was up and working under our systems.
They were already having our nose meant managing to collect all of their prior data. We have over 14 terabytes of information transfer from our the average into our system level versus a great preparation that not only I congratulate the team, but I also think the R&D team that actually work with us. So digitally, there was no, really great guys with a very positive agenda. And wanting to make this thing actually do go as fast as possible, very organized, a firm and very prepared the firm the averaging. But so we don't project much, however, as we did talk to the investors, and he is interesting to say that 100% on the investors approved the change of control 100% nice and tight to get 100% in anything, right?
So all of the investors were in favor and supporting. We could not fund raise during that period up to this Monday, Chicago because we have not closed the deal. However, of course, you are there talking to LPs and to investors and asking them to approve the change of control. We also ask them their appetite for no not supporting us in the near future, and we got very positive results from those conversations. So we were very pleased that not only date, one of them approved the change of control.
But the feedback that we got from them was very positive note, if you guys come out of the market, we will support you blah-blah-blah. It has to do as well with the fact that secondaries and primaries and co-invest maybe secondary C is a hot product at the moment, right, credit real estate in Brazil because interest rates are projected to come down and our GPMS. maybe secondaries, right, because we are here. The secondaries, as you know, now is, I guess, is actually giving liquidity to general partners and LPs that are willing to come out of funds given that DPI. has been slower globally, these GPs and LPs are looking for liquidity and that's how a secondary fund comes in and provides that liquidity.
So that's why I sought after products way because it's the moments for secondaries for credit because of the high interest rates real estate in Brazil because interest rates are coming down and you probably followed our real estate investment trusts were trading at a small discount a year year and a half ago of 10% to 15% of the trillion of premium and number three, secondary stray. So the of course, they liked the team because 100% of them approve the change of control.
Of course, they said, we're going to support us, which was very, very good. And also it has to do with the fact that it's a hot product and this market environment that we're living Okay. Now as the COVID happened, we are going to be able to do official fundraising because we couldn't we were prohibited by the regulatory authorities, and we're going to have a better view and I'll keep you guys posted, but we were very pleased as far as our projections are concerned.
Again, just to repeat, we were conservative and we did not project much fundraising for this product this year for complement one topic here, bear in mind that most of the CPNE. one is paying fees over NAV and the natural appreciation of the assets we'll incorporate into into the revenue of the business. So that's also within because the unit has been performing quite well with 20% returns on secondaries and co-investments and about 16% in terms of primary is the data that has a meaningful contribution to that?

And I guess, Scott, if I may just a quick follow-up here, and I know it's out there. We saw that during the second quarter, the level of deployments in private private equity and infrastructure declined a little bit. So it was like I was previously around $100 million and was around 400 megawatts of our stake in Q4. So I wanted to understand if that is something that dislocation that happened only for a quarter and we should see the pace quarter to the previous quarters going forward or are we should see like a kind of a more structured deceleration in terms of the plan?

Alexandre Saigh

No, it is just it is just a coincidence that it happened in this quarter. What you just described the hiccup, there's nothing more to it to be honest, and I think there is in general, you're going to see that the first quarters are a little slower. And again, no ask me why. But since the big huge major factor there. If people get close to the end of the year, they want to close the deal. They have goals needs and not only the seller wants to sell the wireless wire and the advisors, one of the other piece of every week, a push into the right direction to close the deal. And then the first quarter is normally quieter and thus that's more or less the past, even on the privatizations and concessions, maybe the government have the same the same kind of human nature of trade. They don't do much concessions and privatizations in January and February. I think it has to do with everything that I said, so that the year start picking up as of March April, it's a natural circumstance, nothing nothing to report. There is besides it's something natural, nothing, nothing structural going on.

Okay. Thank you.

Operator

This concludes the question-and-answer session. I would now like to turn it back to Alex Saigh for closing remarks.

Alexandre Saigh

Well, thank you very much. I think we'll have the final message here again, is slow and 44 shares have voted number one, two three message here, growing FIFRE. per share, very healthily this this year versus mix. And again, the FRE per share for this year. I want to wait two, one, $12 per share compared to $0.99 last year is affected by the fact that we issue the shares, but we don't get the full benefit of the of the acquired assets. So net-net, as we look into next year, 2025 that we have the full year of the acquired assets are running through our P&L and of course, the reflecting them in our FRE we go we're projecting a $1.53 per share and to one 40 and $40 per share, which is the the two hundreds, 200, $25 million of FRE numbers that I gave you guys. And I'm very confident with those numbers.
But even if we look at these numbers here, the one 42, 25 versus the $0.99, and we are increasing our 40 per share by 40% between these two years, 24, 25. And so we're comfortable there. We're comfortable we're going to hit the numbers. I think you'll see the FRE per share. I think answers all the questions on potential dilution for acquisitions and going back to the strategic path instruments of using shares for acquisitions, which is not a question of just capital or capital structure is strategically important for us to retain the manager, the portfolio manager that come along with these acquisitions as we do lock up the shares for five years, et cetera. So we have no, it is a very important instruments, compensation retention and acquisition instruments that even if we had owned and where possible in the world in our balance sheets, I think we would still use some shares in order to retain those those people as we are a very people-driven business.
So thank you very much again for your time. And I know there was a very, very busy day today. So you guys being here in our call is an honor to us because other of our peers are and other companies are releasing their results. So again, thanks for your patience. Thanks for your support and hope to see you guys in person. Thank you much.

Operator

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.