Good day, and thank you for standing by. Welcome to the Patria First Quarter 2021 Earnings Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. I would now like to hand the conference over to our speaker today, Josh Wood, Head of Shareholder Relations. Please go ahead.
Thank you. Good morning, everyone, and welcome to Patria's first quarter 2021 earnings call. Joining on the call today are our Chief Executive Officer, Alexandre Saigh, and our Chief Financial Officer, Marco D'Ippolito. Earlier this morning, we issued a press release and earnings presentation detailing our first quarter 2021 results, 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 Form 20-F annual report filed last month.
As a foreign private issuer, Patria reports financial results using International Financial Reporting Standards, or IFRS, as opposed to US 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 $13.1 million in IFRS net income in Q1 '21. On key non-GAAP measures for the first quarter, fee-related earnings were $17.3 million and distributable earnings were $17 million, or $0.125 per share. In alignment with our policy, we declared a dividend of $0.106 per share, payable on June 16th to shareholders of record as of June 2nd.
With that, I'll now turn the call over to our Chief Executive Officer, Alexandre Saigh. Alex?
Thank you, Josh. Good morning, everyone, and thank you for joining us today. We are very pleased with our first quarter results, which reflect solid execution across our investment platform. We are not only on track but also leveraging current opportunities to deploy and commit larger amounts of capital into new investments, which accelerates our progress on key growth drivers for the firm. Our portfolio companies are performing very well, demonstrating the resilience of our investment approach and our ability to deliver outstanding returns to our LPs through many different environments. In private equity, we are delivering 750 basis points of outperformance relatively to the emerging markets benchmark. Our portfolio companies have capitalized on recent opportunities for consolidation, completing a total of 34 M&A transactions in 2020, for example.
In infrastructure, our investment opportunity is vast, and we have mapped about $80 billion in long-term development needs across Latin America, especially in Brazil, Chile, Colombia, and Peru. We are seeing record levels of government concessions, and Patria is well-positioned to be a selective bidder and win projects with very attractive return profiles. Clearly, the entire world is emerging from a health and economic crisis, and Latin America is emerging along with it. The latest pandemic data shows encouraging trends, suggesting that we may have turned a significant corner, with new cases and death both receding significantly from their highs in late April. There has also been substantial progress in the immunization programs, with over 110 million vaccines given in the region.
There's no question the second wave and recent environment has been difficult for society and many businesses, and regional macro concerns have clearly weighed on Patria's shares in the last few months, alongside other companies with exposure to the region. While we cannot control these externalities, what can we do? We can continue to outperform. I want to emphasize the fundamental resilience of Patria's business model and the impressive investment performance we are delivering. Over three decades, we have been fundraising, deploying capital, and generating attractive, and in most cases, top-quartile returns for our LPs while navigating through many different environments. Over that time, we have faced, dealt, and learned to take advantage of the volatility in Latin America. Our returns have enabled us to raise several vintages.
For example, for our two flagship funds, we are in vintage number six for private equity and vintage number four for infrastructure, and we have been able to scale these funds significantly. Let's focus on the key drivers of the investment life cycle: fundraising, deployment, and performance, and convey why we have such high confidence in our ability to deliver value to our shareholders. In order to raise larger and larger flagship funds every four years, we had to effectively deploy the capital entrusted to us by investors. In our business, periods of volatility can present better opportunities to put money to work. Indeed, we are seeing that play out now.
For private equity in particular, you can see in our presentation that Fund VI is now 68% deployed and reserved, quickly closing in on the 75% threshold that would allow us to launch the fundraising of the next fund. With our investment pipelines as strong as ever, we now see the timing of the private equity fundraising cycle accelerating, we expect to be back in the market later this year with new investment activity transitioning to the new fund sometime in 2022. The most critical element of our long-term success is, of course, investment performance, we believe Patria's approach to investing in the region is really a differentiator. In private equity, we are mostly investing in smaller companies at attractive valuation multiples and building them into market leaders through consolidation and a relentless focus on fundamental value creation.
Our two most recent private equity funds are performing phenomenally. With Fund V at a 32% net IRR in US dollars as it begins its harvesting phase, and Fund VI at a 19% net IRR in US dollars while still in its investment period. In infrastructure, we are not typically buying mature assets, but rather building new platforms or companies from the ground up to fill critical needs for society, which the government often does not have the means to address. Here we are seeing a vast range of opportunities to deploy capital into development projects, and we are in a position of strength to be a selected bidder. Across both strategies, we focus on resilient sectors of the economy that are linked to basic human needs like healthcare, food, transportation, and energy, which have lower correlations to economic cycles and GDP growth.
Over time, we believe our approach has led to more consistent returns and provided stability through market cycles. In our country-specific strategies targeting local investors currently focused in Brazil, the question we hear recently is, with interest rates now reversing course, is the theme of the financial deepening in danger? Here, I think you have to step back and appreciate the magnitude. In Brazil, for example, the interbank rate has ranged from 10%-20% for most of the last 20 years. Since 2016, we saw a plunge from 14%-2%, and now recently reversing back to 3.5% as the central bank looks to tame rising inflation. If anything, a modest rise in rates should continue to stabilize the local currency, which we are currently seeing.
With 18 trillion of negative yielding debt across the globe, we don't see the longer-term trend of low interest rates ending anytime soon, and we don't see moderately higher rates slowing the flow of capital into alternative assets. We think the financial deepening in the region is well intact and will be a long-term trend that impacts Patria positively. I'll wrap up by reiterating these very simple points. Number one, our story for near-term fee-related earnings growth depends on our ability to deploy the remaining capital in our current flagship funds and go back to the market to raise new and larger funds. We have extremely high confidence in our ability to do that, and we are seeing that process accelerate.
Number two, we believe the expansion of our country-specific strategies will be a steady organic growth engine for FRE as well, as these strategies achieve a more material scale over the next few years. Number three, we are actively exploring opportunities to use our IPO capital for strategic M&A, which we view as upsides to an organic growth profile that is already very compelling. Number four, and lastly, and most importantly, we are constantly aware that our growth ultimately depends on one thing, great investment performance. If we continue to deliver strong returns, LPs will commit larger sums of capital to us, and for shareholders, the investment performance can generate substantial levels of performance fees. Considering those factors, it should be no surprise that we believe Patria's stock presents an attractive valuation at current levels, and we believe our financial performance will make that clear over time.
I'll now turn the call over to Marco for a deeper dive on the numbers. Marco, please.
Thank you, Alex. Good morning. Financial performance was solid for the first quarter and very much in line with our expectations. Our key business drivers are all progressing nicely. Fee-related earnings of $17.3 million in Q1 2021 were up 14% from $15.2 million in Q1 2020. Driven by a 20% increase in total fee revenues. Management fees of $31.3 million in Q1 '21 were up 31% compared to Q1 '20, largely driven by fee-earning AUM inflow from Private Equity Fund VI and Infrastructure Fund IV. Personnel expenses of $10.3 million were up from $7 million, mostly due to the shift in compensation structure post-IPO. FRE margin was 57% for the first quarter, reflecting very strong profitability. Patria's FRE margin is among the highest in our broader peer group and exceeds the margins of global managers many times our size on an AUM basis.
Fee-earning AUM for the Q1 2021 rose to more than $8 billion, up 4% from the last quarter and 14% from one year ago. Keep in mind that our reported fee-earning AUM reflects the basis that is generating management fee in the current quarter. Since our flagship fund calls for management fees semi-annually at the beginning and middle of the year, the increase in fee-earning AUM from Q4 to Q1, for example, is most attributable to capital deployed or reserved in the second half of 2020. There is now $2.8 billion of pending fee-earning AUM, which is not yet generating management fees as of the first quarter, and will drive top-line growth over the next several quarters.
In our earnings presentation, we have added some additional details to show you that approximately $500 million has already been committed in the first quarter, mostly from Private Equity Fund VI, which will flow into fee-earning AUM and begin to generate management fee in the second half of 2021. We're seeing attractive opportunities to invest in this environment, and our pipelines are very active. Actual capital deployments to our portfolio companies in the first quarter was $277 million, which includes amounts that were reserved in prior quarters. We noted that Private Equity Fund VI was active in reserving capital for new investments in the first quarter, taking that fund from 51% to 68% committed and moving us much closer to the 75% threshold for launching a new next fundraising campaign.
This acceleration should allow us to go back to the market later this year, sooner than expected, and begin to accrue new capital into our fee-earning AUM sometime next year. Infrastructure Fund IV remains at 56% invested and reserved. We see that fund taking a little longer than private equity to come back to the market, we're also seeing a very active pipeline for deployment with a record level of government concessions expected in the region for this year. Fundraising in the first quarter of $147 million was driven by our first infrastructure core fund, which is recognized as part of our country-specific strategies, as it is a publicly traded evergreen vehicle focused on local investors in Brazil. This type of fund typically must allocate capital quickly, and we have high visibility on the pipeline for this initial capital raise.
We will have the opportunity to grow the fund through follow-on offerings once the initial capital is fully deployed. Demand for our country-specific strategies remains strong, and we expect to have opportunities to raise new capital in credit and real estate vehicle as the year progresses. Turning now to performance fees. The net accrued performance fee balance was $253 million at the end of the first quarter, compared to $276 million last quarter. The decrease was driven by local currency depreciation, a trend which spanned last year and continued into the first quarter of 2021. While this movement was clearly a headwind for our USD-denominated fund performance, the modest impact to our accrual balance demonstrates an impressive resilience.
It is important to recognize that the accrual is a snapshot in time, and with the change of direction in interest rate in April and May, we have now seen a significant stabilizing effect on local currency with the Brazilian real reversing course and appreciating against the US dollar. At current levels, all other things being equal, our March 31 net accrued performance fee would have been approximately $300 million if you accordingly adjusted the unrealized fair value in US dollar terms. That is, of course, a theoretical estimate, it does give you an indication of where the balance could go if the currency remains at today's level or even improves further. We acknowledge that it's easier to be a buyer than a seller in the current environment, but we're seeing good progress toward monetizing our accrual.
As Alex noted, Private Equity Fund 5 performance continues to be outstanding with a net IRR of 32% and $182 million of net accrued performance fee. This is a fund with nine investments, one of which now has an exit agreement at 2.4x invested capital. The companies are mostly mature and two have filed for an IPO. While we need more exits in the fund to realize performance fees, there are multiple opportunities across the portfolio. In Private Equity Fund 3, the net accrual of $45 million is supported by receivables from prior exits and one unrealized publicly traded investment, which we believe remains undervalued at its current share price, with significant potential to improve. Thus, we will always sell investments when it is the right time for our LPs.
How does all this translate to our earnings outlook? What we want to convey more than anything is the outlook for fee-related earnings is completely intact, irrespective of any macro perception about the region. Remember that our capital is locked up, and we enjoy the flexibility to be patient when necessary and also aggressive when the time is appropriate. Near-term FRE growth is substantially driven by the deployment of our pending fee-earning AUM alone. If anything, today's environment is accelerating our growth path as we deploy capital faster and bring forward fundraising. We continue to expect nominal growth in FRE for 2021 compared to $71 million generated in 2020 at margin in the mid-50% range. This should be driven by very strong fee revenue growth north of 20% year-over-year.
While exit transactions may be incrementally more difficult at the moment, we continue to feel great about the quality and the performance of our portfolio. We're still in the first half of the year and see significant opportunity for the backdrop to improve, especially if the economic reflation accelerates in the coming months. While that trajectory may have an impact on the level of performance fee we realize this year versus next, our ultimate performance expectations are unchanged. Altogether, you should take away the message that Patria's growth story is highly intact and exciting opportunities lie ahead. As a newly public company, we recognize that the market is carefully evaluating our ability to execute. We have high conviction that we can deliver, and presuming we do, we see considerable value in our shares at today's price.
Many thanks to all of our shareholders for your support and to potential shareholders, we hope you will also consider joining us as partners on this journey. We are now happy to take your questions.
Our first question comes from Craig Siegenthaler with Credit Suisse. Your line is open.
Good morning, Alexandre, Marco. Hope you're both doing well. I wanted to come back to slide 11. We can see that 41% of Private Equity Fund VI is now reserved for future transactions. My question is all of the binding and reserve capital in the 41% based on transactions that have already been announced? What are the major investments embedded in this 41% and should we expect them to close over the next six months?
Yes. Hi, Craig. This is Alex here. Thanks for your question. I think on the 41%, we have two-thirds of that already not only committed but deployed. In the beginning of the fund, we did take advantage of the COVID where listed stock prices did suffer. We did deploy capital buying the shares of two listed companies. One is a gas distribution network, gas stations. The other one is a healthcare chain. With that, they were not only committed but deployed then. We did commit capital to a healthcare initiative in Latin America, starting in Colombia. It's an integrated healthcare company starting with HMOs, healthcare management organizations in Colombia. There we committed a substantial amount of money. We deployed a part of that. We also then committed to
Others thesis along this second quarter. One into a thesis in the fast-moving consumer goods distribution business, and the other thesis in the cybersecurity business. With that, yes, we are then now beefing up our commitment. By the third quarter, we should have, by the end of actually this quarter, second quarter, surpassed the 75% threshold, which enables us to market and actually have a first close of our next fund, Private Equity Fund VII, and we should have around 40% of the fund deployed. By the end of the year, that 40% should be closer to 50%-60% deployed. I hope I answered your question there.
Great. Alex, that was very clear. Just for my follow-up, the interest rate backdrop is constantly changing in Brazil. It's now looking like rates are going to move higher, maybe faster than we thought three, six months ago. I know most of your clients are outside of Brazil. How does this evolving interest rate backdrop change the domestic migration to equities and alternative thesis, which could impact flows into products like your infrastructure core fund inside of Brazil?
No, thanks for the question again. I think very good question. I think we have to take a look first on the magnitude of things, right? I think to be honest, I think 2% interest rate in Brazil was way too low. We do have some inflation in the country, and of course, during the COVID months, the months that were affected by COVID, of course not. Now, things coming back, economy is rebounding. We do have some inflation, which is good actually for the economy. Central governments, not only Brazil, putting up interest rates to cope with that. We're talking about inflation being, if you extract from the inflation numbers basically in Brazil, the commodity prices increase, that they did increase significantly over the last month. The inflation is basically on target.
We have an inflation targeting system in Brazil, and the midpoint of that is 4%. We see that ex commodity prices, we see that it's pretty much in control. The central bank in Brazil and other countries in Latin America are seeing the same thing, commodity prices pushing up the inflation numbers. When you extract the commodity prices increase, the other items that compose inflation numbers, the indices are pretty much behaved. Nevertheless, of course, inflation versus last year, they had no inflation because of the crisis. The hike up in interest rates is actually, in our view, positive given the magnitude that we're talking about. Now we see in Brazil 5%-6% by year-end. We are now at 3.5%. That also helps that, to be honest, Craig, for us to pass on to prices the inflation on our costs.
On the private equity side, we do invest in very resilient and inelastic in nature businesses, like industries and businesses like healthcare, for example. We also do have a lot of investments in the agri-business that now do follow the commodity prices. We had a really hike up in prices in these businesses because of the, again, increase in commodities, agri-business specifically. On the infrastructure side, even more so because most of the revenues that we have on the infrastructure side are contracted and corrected by inflation. Some inflation for us is actually good. Most of our funds in Brazil, as you mentioned here, our core infrastructure fund, they are denominated in inflation plus returns. Why? Because the revenues of these businesses are contracted and corrected by inflation. Our infrastructure core aims at an inflation plus 6% return.
If inflation goes to four, is around 10 nominal. If inflation is three, is around nine nominal. The 6% above inflation is what investors look for. Normally, the Brazilian Central Bank actually in a same temperature, same pressure, do position interest rates at a 2% above inflation target. Inflation targeting around 3.5, 4, interest rates will be around 5.5, 6. That's what the market actually predicts if you look at the forward yield curve. Actually, it's very, very positive, to be honest, in this magnitude, that it actually gives some oxygen to the economy. Inflation also means that things are coming back, that businesses are coming back, that we've been able to pass on to prices some of the inflation on our costs.
Basically, the increase in commodity prices do affect some raw materials in some industries, not the one that we are exposed to. There's healthcare and other items I'm not really exposed to, raw materials that buy whatever commodities, like iron ore or whatever. Yes, everything looks more natural, more normal with a 4% inflation and a 6% interest rates. Again, our businesses in Brazil in local currency is inflation plus. I forgot to mention our REITs, our real estate investment trusts. They trade at also the same way that infrastructure investment trusts trade, as I just explained. Investors look at that yield at an inflation plus yield. My example for the infrastructure investment trust was inflation plus six. Let's say that it's an inflation plus six again for the real estate investment trust ABC. If inflation goes up, as will the yields.
Because in Brazil, we have rents also corrected by inflation. Again, it's a long answer to your question, but for me, and as I look into the businesses in the magnitude that we are talking about around the four-ish kind of level inflation and the six-ish kind of level interest rate is actually positive for our businesses and for the economy in general.
Thank you, Alex.
Yeah.
Our next question comes from Mike Carrier with Bank of America. Your line is open.
Hey, guys. This is Dean Stephan on for Mike. I know it's always difficult to forecast. Can you provide some additional color around the performance fee outlook for the remainder of 2021? If you expect any performance fees to be generated over the next couple of quarters, and maybe what percent of previously expected performance fees could be delayed into next year?
Thank you very much, Dean, and thanks for participating in our call. This is Alex again here. Our performance fees for 2021 is basically composed by or derived from two funds, Private Equity Fund 3 and Private Equity Fund 5, as you know. On Private Equity Fund 3, our main asset there, which is 90% of the remaining net asset value of the NAV of the fund, is one listed company, which is an imaging diagnostics company. Called Alliar, A-L-L-I-A-R. You can check that if you want to as it is a listed company in the Brazilian Stock Exchange, B3. It had a great quarter. It had a great first quarter of 2021, and the results actually did please investors as the stock went up by 25% versus how that stock closed by the end of 2020.
Great performance there because this company, it is an imaging diagnostic company, but it got negatively impacted by COVID because the elective surgeries were canceled. With a rebound in the fourth quarter and the first quarter, you can see the results of the company coming back up. The results are great, and the stock prices were up. We were expecting to see that because, of course, we are a major shareholder of that company, and we expect this company to actually continue performing extremely well this year as we see the vaccination programs in the region, as mentioned. Over 110 million people already vaccinated. It's a 500 and something million people region, so 20%, and the vaccination programs on a daily basis speeding up. As that happens, and we see actually then a good second and third quarter for that specific company.
In addition to that, as I mentioned in my last question, Dean, with interest rates going up a little bit in Brazil and other regions in Latin America, we have a stabilization or even a strengthening of the currencies in the region because investors, local, international, come back, and they want to invest in the local fixed income market in order to find some yields, which is now something hard to find around the world. The increase in interest rates actually helps to stabilize the currencies in the region or even strengthen. Plus, we have a record-high increase in commodity prices, as you know. If you look at the data, from you can see one data, the other data, but approximately a 50% increase in commodity prices from their lows sometime last year.
That benefits the region as well because some of the economies in the region do benefit from high commodity prices. Copper in Chile, agribusiness iron ore in Brazil, oil in Colombia, BRL 70 a barrel, as you know. All of that is pushing on one side, on the macro side, the rebound in the region, which we look very positively. The commodity prices helping GDP growth, that helps the major economies in the region. The interest rates small hike, which actually stabilizes the currencies in the region, and in addition, actually strengthen the currency in the region since investors come and invest in these currencies in these markets to get some yield. On a micro level, Alliar, which is the imaging diagnostic company for Fund 3, performing extremely well with a 25% rebound on its share price this year.
As we look into the year, we're still here in May, we see that sometime this year, we want to divest from that company. I think it was great that we actually waited to see that rebound. I think we want to wait for the second wave to go through and in third quarter, fourth quarter to do that divestments in order to actually ride all of these positive things that I just mentioned on Alliar stock. Even if we do sell the stock at the current prices, because there's a catch-up in Fund 3, which now we can go offline, explain a little bit that. Most of the resources from the sale of that stock actually goes to pay our performance fee because we have a full catch-up on Fund 3.
Even if we did sell the stock at this moment, it won't affect much the overall number of performance fees for our Private Equity Fund 3. On Private Equity Fund 5, not only the returns are just stunning, as far as I'm concerned, of 32% net IRR in US dollars as of the first quarter of this year. Out of the nine companies, seven of them, I think, are ready to go to an exit mode. Two of them we filed for an IPO. One of them is another healthcare company, an HMO integrated with hospitals. The other one that we actually just filed today or yesterday is a network of gyms, of fitness centers. Both of them, I think, will look into the year and using, again, all of the upsides and good news that I see the region announcing over the next quarters.
Not only will IPO, and the IPO includes some secondary trade for Fund 5, but also during the year, we could do follow-ons and whatever. As I stand right now, I think I'm pretty positive on Fund 3 and Fund 5, Private Equity Fund 3 and Private Equity Fund 5, in generating that performance fee. It might be a case, in third quarter, fourth quarter, if there's another wave of COVID or something strange happens and diverts us from the track that I am describing right now. It has been, as you know, very volatile during the last months. Thank God, the second wave in the region has not been that bad, and the vaccination programs are advancing, but who knows what can come up, another variant of the virus and whatever.
Given the same temperature and the same pressure here, I'm positive on generating these fees this year. I'm very positive on FRE. I know that that was not part of your question, if I can use the answer here to comment on FRE. Marco and I mentioned, I think, during our call today, how we have been able to deploy more capital in our flagship funds, which increases then the fees that we charge, and also how we have been able to control expenses extremely in a disciplined manner. We see an increase in revenues, we see an increase in FRE above our expectations, and we see mid-50 margins. In the first quarter, we posted 57% FRE margin.
Not only I see I'm pretty positive on the FRE side, as I am on the performance fee-related side as well, given what I just said. Finishing up here, I think when we look into the very short term, which is 2022, I mentioned that, but Marco also mentioned, sorry to be redundant and emphasizing this, but as we do deploy more capital and with this kind of very, very strong performance that we are posting for Private Equity Fund 5 and Fund 6, Fund 6 is 18% net IRR in US dollars. We are looking to anticipate the fundraising of Private Equity Fund 7, which now our projections was way back in late 2022, and looking into having that fundraising happen late this year, beginning of next year.
That also will generate fees for us to charge in 2022, which was not expected for us, at least in our projections. All of this, I think there's a great set and group of good news on the performance fees as well. Hope I answered your question. A long answer here, I'm sorry, but hopefully I was able to answer.
Yeah, that was very helpful. Thanks. I guess just as a follow-up, given one of your peers announced the share buyback program yesterday and your comments on the call today about the current stock valuation, just wondering if we can get your thoughts around capital priorities, if you guys have thought about share repurchases, and how you're balancing capital return versus M&A and investment in the business. Thanks.
Yeah, great question as well. I think we have to address that. As we see our share price right now at around $15 per share, it is disappointing, of course, approximately a 15% drop from the IPO price. We all wanted it to be, of course, the other way, right? I think it's too early to make a call on a share buyback program as of today. We have so many amazing opportunities on the M&A front, in addition to everything that I said on the FRE front and the PRE front, the performance earnings front, generating good distributable earnings. We see FRE this year better than our expectations. We see our margins better than our expectations in the mid-50s. We see everything that I just mentioned on the performance fee side. Deploying some of the capital that we raised into these new ventures here.
It's a great momentum for Patria Growth. It will be a great momentum for the stock as you guys follow us and actually see us performing as I just mentioned. I think that the stock, with the organic growth of what I just said, should reflect that sometime soon, hopefully. I would like to actually reserve, as of now, the capital that we raised in the primary issuance for the reasons that we raised it, which was primarily for acquisitions. We have so many interesting things that we are talking and MOUs signed that we are analyzing such great things again. Again, I'm always very sensible to the share price. Of course, we own 60% of the company, six-zero, us Brazilian shareholders and founders here. Any uptick in that price is extremely positive for us, and we'll keep a very open eye on.
As of today, I think it's too early to say given the momentum that we have for Patria on the organic side and given the great opportunities that we have on the M&A side. I'm sensitive, and let's see what happens in the near future, and we might come back to this subject, but not as of now. Thank you.
Got it. That was very helpful. Thanks again.
Our next question comes from Tito Labarta with Goldman Sachs. Your line is open.
Hi. Good morning. Thanks for the call and taking my questions. Maybe a couple questions also. Just first on the accrued performance fees. How much of the decline was related just simply to the FX? With the FX sort of coming back since then, should those accrued performance fees kind of just go back to where you were at year-end? Just to get some color on the FX volatility and the impact. My second question, I guess, just given the underperformance in the stock, has anything changed from in your expectations since the IPO? My sense from what you've been saying on call so far is, maybe FRE ahead of expectations with possible upside, maybe the performance fees a little bit of uncertainty there.
Just want to confirm that that's consistent with how you're seeing, but if anything may have changed since the IPO given the volatility in the market and in your stock. Thank you.
Hi, Tito. This is Marco. Good morning. Related to your first question about net accrued performance fee, I made a comment on my initial remarks. The hypothetical number, if you do not consider the effects of our net accrued performance fee would be at around BRL 300, but that's just a hypothetical number. The straight answer to your question is around $50 million. When you look quarter-over-quarter, you see the detail fund by fund. When you see the number being basically net, that's how much the NAV went up and matched to how much the currency depreciated, that it's around 10% in the quarter. Relative to your second question, all the fundamentals and key drivers of the business continue to be very solid.
If anything, we've been able to deploy capital at a faster pace, that it's resulting on a view that our fundraising prospective for the flagship funds will accelerate. There's also the fact that the underlying portfolio performance has been very solid. I think in part of the fact that we have exposure to sectors that are performing quite well over the pandemic, namely agribusiness and logistics, and base service-related sectors. They are the ones that are receiving most of the cash that have been coming through the governments to help in the pandemics. That, of course, gives us a good perspective in terms of the performance fee. On the fee-related earnings side, we can expect an increasing amount of fee-earning AUM. I indicated in my presentation that during the first quarter, we have deployed or reserved about $500 million.
This amount will flow into our fee-earning AUM only on the second half of the year because of the way we draw the line to charge our fee-earning AUM. That's a very positive news. If you tie that to the information that last year we deployed $1.5 billion, it gives you an indication of how much more money we are deploying over this year that will turn into revenues on the second half. I hope I have answered your question.
Yeah. Maybe I can get the second part of the question here on the general macro view that you mentioned. I think, yes, for the first part, I think of your question, I think we are optimistic on the FRE front. Versus our expectations, yes.
From all the reasons that I think we covered here, further deployment et cetera, very disciplined control and expenses, et cetera. On the performance fee side, I think all of the data points as of today are there. There's a major performance fee coming from our Private Equity Fund 3, where the most important asset there is a imaging diagnostics company, the stock traded 25% up. We also see the real strengthening. As of today, mid BRL 5.20, BRL 5.30 versus BRL 5.50, BRL 5.60. As of 20th of May, I think things are progressing in the right direction in order to realize that performance fee from Fund 3 in a good share of BRL per share. On Fund 5, the companies are performing extremely well.
Of course, it's also very important to say that the sector selection, which is key in our view, in my view, to do well in equities in the region, in Latin America. In Fund V, it's amazing. Not only the companies are doing well, but it starts with the sector selection, healthcare, agribusiness, logistics. All of these sectors were extremely benefited from COVID. On the contrary, they were not negatively affected. They were positively affected. The HMO business that we have, which is a major asset of Fund V, was positively affected because we continued to receiving the payments for our private payers. We just serve the private side of the market. We don't serve the government for this company. Everybody was paying, but there were no elective surgeries.
The margins of the business was extremely benefited last year and continue to be this year. We have a major agribusiness company in this Fund V, which is a distributor of agribusiness products. We buy from Syngenta, from Dow and whatever, and we sell to farmers. Look what happened with the commodity prices, agribusiness prices in Brazil. Farmers, I think, never saw the kind of margin that they're seeing in their business today. Soybean bushels in reais is three times the price that they were three years ago, besides productivity gains. Our business, of course, benefits from that. The businesses that compose Fund V are doing extremely well. At the right time here, we're going to be able to sell them at very good prices and also the strengthening of the real.
I think we position ourselves in a good place to be. As of 20th of May, things are working our way. Of course, when I look at the FRE, I have a lot more certainty because I know how much I'm deploying. The fund's already raised and with the kind of performance we have and see support from LPs for us to raise our Private Equity Fund VII. On the performance fee side, there is also more uncertainties on when you're going to sell it and whatever. Until as of today, things look good for the year. I hope I answered your question as well.
Yes. That's very helpful, Alex and Marco. Thank you very much.
Our next question comes from Robert Lee with KBW. Your line is open.
Good morning. Thank you very much. Thanks for taking my questions. One or two that I had is, I am just curious, and this relates to realizations. I mean, clearly there's a growing secondary market appetite with participation. I know in the past you had kind of discussed that there had been some parties that may be interested in some type of strip transaction that could have potential, I guess, of accelerating some realizations. I mean, can you maybe update us if those kinds of discussions are ongoing or if this maybe is just not the right time to consider something like that? Just curious where that stands.
Hi, Robert. This is Alex. No, thanks for the question. I think it is the right time to consider it. The secondary market, as you know, is very liquid. Huge funds were raised by several very important players in that market. I think we have great assets in, I was mentioning, Private Equity Fund 5. Definitely it's something that we will consider. It's something that we are considering. We were approached by several of these players as they look into everything that I said. They look at the rebound in the region. They look at the strengthening of the currencies because of the commodity prices increases. The effect that commodity prices do have in the economies of the region is beneficial, is positive. They also see the company that we have in our Private Equity Fund 5 exposed to the right sectors.
As I mentioned, healthcare and agribusiness, logistics. We have also in Fund V a last mile foods logistics business, and of course did very well, and it continues to do very well as people stay more home and order more food and et cetera from home. Yes, we were approached, and we will definitely consider, and we are considering. Some of these, we know that GP-led transactions in this market have been increasing more over the years. Don't take me for this data here, but I think last quarter, I think we had more GP-led transactions than LP-led transactions in the secondary market. Yes, I think we were approached. We are considering. It looks good. I think we should pursue seriously in doing something for that. Fund V is a good candidate, given everything that I said. Thank you.
Actually, that was my only question. Thanks for taking the time.
Thanks, Robert Lee.
Again, to ask a question, please press star, then one. Our next question comes from Craig Siegenthaler with Credit Suisse. Your line is open.
Your follow-up. We just wanted to circle back on corporate M&A. Can you remind us your appetite to acquire private markets businesses outside of Brazil and adjacent markets? I'm thinking like Chile, Colombia, Mexico.
Yeah. Hi. Thanks, Craig. The appetite is high. I think we see these adjacent economies, as you call them, going through very interesting moments, different moments in each one of these economies. Yes, diversifying some of the Brazil risk, other currencies, other natures of economies. The answer is yes. I think we're looking into expand our product offering and expand our geographic footprint in the region. We're looking at the same time to expand the product offering for our Brazil-centric products and also targeted to Brazilians in BRL, raising BRL, investing BRL like the REITs, real estate investment trusts, like the infrastructure investment trusts that I mentioned. Also looking to expand throughout the region with other general partners that do manage other products or similar of ours, in these countries that you mentioned.
There are now great managers in the region that are doing extremely well, that would add, I think, extremely well to our portfolio. The answer is yes, I think it composes in our portfolio. It diversifies country risk, diversifies currency risk. These economies by themselves, they're not very correlated with other economies of the world. That's something that we always do show to our limited partners that investing in our funds that have exposure to the countries that you mentioned, Craig. The economies of the region here is not really correlated with the U.S. economy or the European economy. It's a good add for them. They're buying returns with very low correlation. That actually adds to their portfolio. High Sharpe ratios, which everybody looks for, right?
Having Chile, having Colombia, having other countries in the portfolio adds to that whole theme of giving them exposure to the region, not just to a country. The region has economies that are not correlated with where most of our LPs are based U.S., Europe, and Middle East, and Asia. Second, we diversify currency because the currencies of these countries that you mentioned are less volatile than the BRL, which is the Brazilian currency. There's a lot of advantages. Lastly, I think the Brazilian market is more mature and advanced in some shapes. We see going into these countries that we have, I'm generalizing now, assets at more attractive valuations because the industries in these economies have not performed as well as competed or added sophistication to these industries as we see it in Brazil.
There's a great opportunity that through these local managers, you can find businesses at very attractive valuations that can add to a Latin American consolidation. It's pretty positive. We already have a very interesting exposure to these economies. I'll give you one example. Private Equity Fund 5, it should be 60%-65% Brazil and 35%-40% other countries in South America, which basically shows the math of the GDP composition. If you add the GDP of all of the countries in the region, including Mexico, Brazil is around 40% of the region's GDP. South America, around 60% of the GDPs. I'm just doing a plain math here. Our fund is going to be more or less 60%-65% exposed to Brazil.
Some of these companies that I consider part of the 60% do have businesses in other Latin American countries, plus a direct exposure of 35%-40% of the fund to these other countries. We saw a significant plus in better returns because we can go in at better valuations, and diversification of country risk and currency risk, and a bigger appetite from our LPs to having regional exposure versus a country-only exposure.
Thanks.
Thank you, Craig.
There are no further questions. I'd like to turn the callback over to Josh Wood for any closing remarks.
Thank you everyone for joining us today. If you have further questions, please reach out to us at the contact information provided in our earnings presentation and on our website. We look forward to talking with you again soon, and have a great day. Thanks.
Ladies and gentlemen. [crosstalk]
Thanks everybody. Stay safe, and thank you very much.
You may now disconnect.