Patria Investments, the Latin American alternative asset management titan, delivered a solid first quarter in 2024. However, beneath the surface of their earnings call lies a potential catalyst that could unlock a significant surge in Fee Related Earnings (FRE) per share. This article will explore Patria's strategic approach, leveraging predictable investor behavior and an aggressive M&A strategy, which could potentially drive a 40% FRE per share growth by 2025.

During the earnings call, CEO Alex Saigh repeatedly emphasized a "human nature" factor influencing Patria's fundraising and deployment cycles. Saigh observed a consistent pattern over 20 years: a slower first quarter as investors and governments return from vacations, followed by a frenzy of activity in the third and fourth quarters, driven by year-end goals and performance targets.

This predictable surge in activity, particularly in the latter half of the year, presents a unique opportunity for Patria. Saigh confidently predicted that the remaining $4 billion of their $5 billion fundraising target for 2024 will be secured across the next three quarters, with stronger performance expected in the third and fourth quarters.

Patria's aggressive M&A strategy further amplifies the potential impact of this "human nature" factor. The company has been actively acquiring firms to consolidate the Latin American private markets industry. While initially dilutive to shares, this strategic approach positions Patria to reap significant rewards from these acquisitions in 2025 and beyond.

Patria closed 2023 with $0.99 FRE per share. Their projection for 2024 is a modest increase to $1.08 to $1.12, primarily due to share dilution from M&A activities. However, the real potential unfolds in 2025. As the full impact of their acquisitions flows through the P&L, Patria's target for 2025 is a staggering $1.25 to $1.40 FRE per share, representing a potential 30% to 40% surge from their 2023 baseline.

Several key factors contribute to this potential surge:

While not explicitly stated, Patria likely factors the "human nature" pattern into their M&A strategy. By closing major acquisitions in the first half of the year, Patria gains time to integrate these businesses and prepare them for the anticipated fundraising surge in the latter half. This creates a potent virtuous cycle where acquisitions fuel fundraising, further facilitating more acquisitions.

This strategy, however, does carry risks. Integrating acquired companies requires time, effort, and meticulous execution to achieve targeted synergies. However, Patria boasts a proven track record of successful integrations, and their extensive experience in consolidating various sectors through their private equity arm gives them a distinct advantage.

Patria's success hinges not on complex algorithms or cutting-edge technology, but on their deep understanding of human behavior in the investment world. By recognizing and leveraging this predictable pattern of investor behavior, Patria is not merely riding market trends; they are actively shaping them. This, combined with their aggressive M&A strategy, has the potential to unlock extraordinary returns for investors.

"Fun Fact: The name "Patria" is derived from the Latin word for "homeland." This reflects the company's deep roots in Latin America and their commitment to fostering growth and development in the region."