Why Patria Is Your Next Big Asset Management Win

Patria Investments (PAX) is a fascinating asset management company. For those new to the concept, asset management companies provide investment services in exchange for fees. Essentially, they let you partake in the returns of various assets without investing your own capital. Sounds like a sweet deal, right? You generate fees by managing investments for others—think of it as getting paid to guide someone else's treasure hunt.

The company has very little debt and is projected to be debt-free by the end of this year. Despite this, its valuation has dropped to the lowest level ever since the company went public. At its current share price of $12.90 per share, the company is priced at just nine times its forward fee-related income for 2025. When you account for its accumulated net accrued investment performance fees, it’s actually priced closer to seven times its fee-related income on a per-share basis.

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Why is it so cheap?

Patria focuses on Latin American markets, which are currently out of favor. Unlike some other investment giants mostly invested in the US, Patria specializes in alternative investments like private equity, commercial real estate, and credit in Latin American markets such as Brazil and Colombia. These markets are perceived as riskier, but let’s face it, who doesn’t enjoy a bit of adventure?

The Advantage of Latin America

Latin American markets are expected to enjoy significant growth and demand from investors in the coming decade due to several trends:

Nearshoring:
Many companies are bringing portions of their supply chains closer to their end consumers. For example, American companies are now more likely to bring manufacturing plants to Mexico or Brazil instead of relying on China or Russia.

Geopolitical Tensions:
Increasing geopolitical tensions make Latin America a more attractive investment destination compared to Asia or Eastern Europe.

Untapped Opportunity:
Valuations in Latin America remain very attractive, and the region is expected to replace Asia to some extent in the portfolios of investors.

Patria's Growth Potential

Patria's recent acquisitions and partnerships indicate strong growth potential. The company has recently acquired two REIT asset managers and closed a major deal with the biggest bank in Colombia to start a REIT asset management business in a joint venture. Patria is following the footsteps of Blackstone, which earns the most fees from managing its public unlisted REIT, known as BREIT. Patria has already become the biggest REIT asset management firm in Brazil following these acquisitions, which should accelerate its growth.

Valuation and Dividend Potential

Despite all these positive factors, Patria's share price has not yet reflected its potential. The company’s share price is incredibly low, at about seven times fee-related earnings after adjusting for unrealized performance fees. It’s a market leader in a rapidly growing region, has little debt, and has demonstrated strong growth.

As Patria continues to grow and the market sentiment for Latin American markets improves, its valuation is likely to rise significantly. While waiting for this appreciation, investors earn significant dividend income. Patria distributes about 85% of its fee-related income as dividends, resulting in an expected yield of about 8% based on its forward earnings for 2025.

Conclusion

In summary, Patria Investments is a compelling investment opportunity due to its strong growth potential, attractive valuation, and high dividend yield. It’s a market leader in a rapidly growing region with significant demand for alternative assets. Despite its risks, the potential rewards make it a worthy addition to any investment portfolio. And who knows? Investing in Patria might just be the adventure you’ve been looking for.

Thank you for joining us on ShareEthics.com for this deep dive into Patria Investments. Stay tuned for more insights on conscious companies and sustainable investing. Remember, in the realm of asset management and strategic investing, it's not just about seizing opportunities—it's about creating lasting value!