Hello, thank you for standing by, and welcome to Patria's third quarter 2022 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'll need to press star one one on your telephone. Please be advised that today's conference may be recorded. I would now like to hand the conference over to your speaker today, Josh Wood, Head of Shareholder Relations. Please go ahead.
Thank you. Good morning, everyone, and welcome to Patria's third quarter 2022 earnings call. Joining today are our Chief Executive Officer, Alex Saigh, our current Chief Financial Officer, Marco D'Ippolito, as well as our incoming Chief Financial Officer, Ana Russo. Earlier this morning, we issued a press release and earnings presentation detailing our results for the third quarter, 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 latest Form 20-F annual report.
Note that no statements on this call constitute an offer to sell or solicitation of an offer to purchase an interest in any Patria fund. As a foreign private issuer, Patria reports financial results using international financial reporting standards, or IFRS, as opposed to U.S. 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 IFRS measures are included in our earnings presentation. On headline metrics, Patria generated fee-related earnings of $31.7 million and distributable earnings of $29.7 million, or $0.20 per share for 3Q 2022. We declared a quarterly dividend of $0.171 per share, payable on December 7th to shareholders of record as of November 15th.
Before I turn the call over to Alex, I wanna highlight that last week we announced Patria's first Investor Day event to be held on Monday, December 5th, in New York. We look forward to seeing many of you there in person to engage with our leadership team, and the event will also be webcast live, with registration available on our IR website. Since we'll be giving you a comprehensive update on our multi-year outlook at this event, please note that we will defer most commentary on forward-looking topics beyond 2022 to the Investor Day. With that, I'll now turn the call over to Alex.
Thank you, Josh, and good morning, everyone. Patria continues to perform very well through a year where the world has faced significant uncertainty. We delivered $0.20 of distributable earnings per share in the third quarter, bringing us to $0.64 per share for the year to date, all driven by steady and predictable fee-related earnings. FRE per share is up 54% year to date in 2022. Given our 85% payout ratio, a shareholder buying around the current share price could expect an annualized dividend yield north of 5% from fee-related earnings alone, an attractive proposition in just about any market environment. Our fundraising progress continued in the third quarter, with more than $500 million of new capital inflows across multiple products, bringing us to more than $2.7 billion raised for the year to date.
Valuations were generally up in the third quarter, taking our net accrued performance fee balance up to $428 million and driving nearly $450 million in positive impact to AUM. Lastly, we added some great talent to our team, welcoming Ana Russo to the firm as our Incoming CFO, and we are excited for the perspective and value she brings to Patria. She will also introduce herself to you shortly here on the call. Before expanding on our platform, I want to first touch on the broader Latin America macro landscape and the highly differentiated economic backdrop emerging in our part of the world. It pays to diversify, and right now Latin America is making a solid case to attract allocations. A busy political cycle is coming to an end as the region's largest economy, Brazil, has just gone through general elections.
In early October, the composition of the new Brazilian Congress came to light, and both the Chamber of Deputies and the Federal Senate now have the most conservative and business-friendly stance since the return of democracy in the 1980s. State governors, also elected last month, have the same profile. Along with an independent judiciary branch, a free press, and solid market foundations that speaks of a functional liberal market democracy. By the way, that is the prevalent situation in most of Latin America. As for the presidential contest, there were no unknowns. The runoff had former President Lula facing the incumbent President Bolsonaro. Lula won an outcome that was largely anticipated by markets since he has led the polls over the past month. Patria's successful business model and investment strategies are not predicated on the particularities of the campaign program of any country leader in any specific geography.
that being said, there are rational grounds to assert that President Lula is likely to implement the same sort of effective policies and reforms that yielded him a job approval rating of over 80% when he stepped down on January 1st, 2011, after serving two four-year terms. Lula managed to reduce abject poverty in the country by 51%, whereas Brazil's GDP in U.S. dollars climbed to $2.2 trillion from $510 billion. Public indebtedness fell to 62% of GDP from 76%, whereas international reserves soared to $289 billion from $38 billion. Admittedly, Lula benefited a lot from the unfolding commodity super cycle, but it is worth noting that over the past couple of years, the relative prices of primary products has increased significantly as well.
Lula leads a broad center-left coalition that will try to enact an ambitious agenda with a focus on sustainable development and inclusive growth while preserving fiscal and monetary discipline, thus updating the script followed in his past administrations. Zooming out to take the broader Latin American perspective, we see evidence from recent election cycles in Colombia and Chile, for instance, that strongly suggest that Latin American societies may want change, but they are constantly rejecting extreme departures from the existing status quo. Very importantly, there has been no compromising of prudent economic policies, neither of the friendly stance towards private investment. Lastly, it is worth remembering that there are no geopolitical conflicts in the region, no nuclear weapons, no religious or ethnic clashes, while natural resources are plenty.
As a reference alternative asset manager focused on the region, we believe these factors should continue accruing to the benefit of Patria in our portfolio performance, our ability to attract new capital to our products, and our capacity to successfully divest from assets. Indeed, the year-to-date performance of Latin American assets and markets seems to corroborate this assessment. The Latin America's MSCI index of listed equity in U.S. dollars is up 12% in 2022, while the global index is down 24%. A basket of Latin American currencies that adjusts for each country's GDP size shows an appreciation of 2% against the U.S. dollar, while other global currencies like the euro and the Japanese yen are posting double-digit depreciation. M&A activity in the region has grown by 43%, while in the rest of the world it has stagnated or is decreasing sharply.
These distinctions are important. There's a clear view that while our industry clearly benefits from the powerful long-term trends in asset allocation, it may face some macro headwinds in the short term, and we are certainly seeing that reflected in sector valuations. As you think about Patria, it's important to consider the backdrop in which we operate, and right now, we think Latin America looks quite compelling compared to most parts of the globe. Turning back to our business. I'll go a little deeper on fundraising and then add some color from our asset class verticals. Fundraising in the quarter included a notable closing of Brazil-based capital for our newest private equity fund. We talked a lot about diversifying our platform and product offering, but this is a great example of our efforts to diversify our distribution channels and further democratize alternatives in the region.
This closing of BRL 1 billion focused on the high net worth and qualified retail channel and included more than 7,000 investors with check sizes ranging from more than BRL 1 million all the way down to BRL 10,000. It is a prime example of how we believe we can harness the financial deepening in the region to drive AUM and earnings growth. We targeted $4 billion of fundraising in 2022 across a diverse range of products, and each piece of that target is now well within our sight. While our targeted closing dates should get us there in Q4, it is possible that a piece could slip past the end of the year into early 2023. Over 2022 and 2023 together, we are targeting $6 billion-$7 billion in long-dated closed-end drawdown fund structures.
This is coming not just from our two flagship funds, but also from a growing offering of complementary products targeted at both international and local investor universe, including strategies like growth equity, infrastructure credit, and private credit. That $6 billion-$7 billion doesn't include fundraising in our more perpetual strategies that can constantly fundraise, where we have already seen inflows of more than $1.4 billion so far this year. It also doesn't include our permanent capital strategies, where we now have more than $1 billion in AUM across REITs, real estate investment trusts, and core infrastructure products, and expect to add another $1 billion next year through organic fundraising and additional M&A. Now looking at some highlights across the platform.
For private equity, in addition to the fund closing, we announced the agreement for Lavoro, a leading agricultural inputs retailer in Latin America and the largest in Brazil, to become a U.S.-listed public company. This is an important step forward in the divestment process for Fund V, and a great case study of our success in the agribusiness sector, and the execution of a pan-regional consolidation strategy with more than 20 M&A transactions completed to build the company we see today. In infrastructure, we continue to see an accelerating fundraising cycle as we target a first closing of our next flagship fund in the coming months, more than one year ahead of what we anticipated back at the time of our IPO. We also closed our second infrastructure core vehicle targeted to local Brazilian investors in Q3.
The divestment process continues to move along with some key assets, with an expectation to deliver significant realizations to our limited partners in the next few quarters. Credit continued to show strong relative performance despite historically challenging market conditions in the asset class. The high yield strategy is outperforming its benchmark by an impressive 660 basis points year to date, with about 90% of outperformance attributable to asset selectivity with a yield to maturity of more than 13% at the end of Q3. The local currency strategy is also outperforming its benchmark with a yield to maturity of more than 15%. On a broader basis, these two products are both performing 1,500-2,000 basis points better than the world aggregate bond index, which is down 20% year to date.
Our public equities platform delivered solid performance in Q3 as LatAm equity markets were a clear bright spot relatively to the U.S. and most other world markets. The Chilean small cap strategy, for example, returned 12% in Q3 and outperformed its benchmark by 370 basis points. In real estate, VBI raised more than BRL 100 million to launch a new REITs, a real estate investment trust vehicle focused on credit assets. This continues to be an area where we remain active on the M&A front and believe there is a very replicable permanent capital strategy to be pursued in other key Latin American countries. Let me now turn things over to Marco to give some more details on the numbers. Marco?
Thank you, Alex, and good morning, everyone. Looking first at the P&L results, we generated fee-related earnings of $31.7 million in Q3 2022, and $94.6 million year to date. Up 46% and 67% respectively from the comparable prior year periods. FRE was in line compared to the second quarter, following a similar pattern in the fee revenues and Fee-Earning AUM. A few known factors coincided to limit the uplift that we will typically see moving into the second semester of the year. Our trajectory remains on track for our full year guidance. Our second infrastructure fund reached the contractual end of its fund term in June, and the lack of that fee stream offsets the additional revenue generated by infrastructure deployment in the first half of the year.
Also, as noted, last quarter, there is a fee holiday on the first closing of our latest private equity fund, meaning the private equity deployment in the first half, while still Fee-Earning AUM in nature, is not effectively generating management fees yet. Finally, the outflows from credit in the middle of the year, which have slowed and we believe turned the corner, have resulted in credit Fee-Earning AUM being lower than we hoped at the beginning of the year. Despite these offsetting factors for management fee growth during the year, fee revenues has remained very stable, demonstrating the stability that makes our fee earnings predictable. In the fourth quarter, we expect to deliver similar management fee revenue with the addition of the year-end incentive fee crystallization adding to the FRE results.
This should allow us to deliver our financial guidance of 50% FRE growth, which we first conveyed exactly one year ago through an environment where maintaining guidance has proved difficult for many companies. The FRE margin was 57% for both the quarter and year-to-date period, continuing to run on the higher side of our mid-50s guidance as both personal and administrative expenses have remained relatively consistent with first half levels. Net accrued performance fee rose to $428 million, up from $419 million last quarter, and up 23% since the beginning of the year. The quality of our private equity and infrastructure portfolios continues to support significant embedded value for shareholders, and exit processes continue to move forward for several portfolio companies.
As we look to the fourth quarter, there remains a possibility of a performance fee realization event, with the outcome now being more binary. It's safer to assume an event that crystallizes in 2023, though we would expect to have clarity by the time we announce our Q4 earnings. Turning to AUM. Total AUM was $26.5 billion at September 30, up slightly from the prior quarter, with the inflows in private equity offset by outflows in credit and positive valuation impact offset by currency impact. Total AUM is up 76% from one year ago, reflecting the expansion with Moneda and up 11% year to date. Fee-Earning AUM was $18.6 billion at September 30, compared to 18.8 at June 30, with a quarterly change generally driven by the same factors affecting fee revenue that I mentioned a moment ago.
The contractual fee turnoff of Infrastructure Two is the largest driver. While we also saw some additional net redemptions in credit for the quarter, driven largely by Chilean clients, we're seeing the macro headwinds for those flows settle as we enter Q4, following the strong rejection of the proposed new constitution in Chile. I will close with a quick reminder of my upcoming transition to focus my time more fully on Patria's growth strategy in the coming years as Chief Corporate Development Officer. It has been a privilege to serve as a CFO in these recent years, and I want to assure you that I will continue to be a regular face to Patria's shareholders from the senior leadership team. Bringing Ana Russo to our management team adds a distinctive set of skills that will take our finance and accounting team to the next level as a public company.
In turn, it is going to allow me to best leverage my strengths to achieve our future vision for the growth of the platform. You'll hear a lot more from Ana in the coming quarters, but for now, I will turn to her for just a few quick words. Ana?
Thank you, Marco, and good morning, everyone. It is a pleasure to be here with you on the call today and look forward to meeting you soon in person. I plan to spend this fourth quarter working closely with Marco and the team getting up to speed, and we're off to a great start since my arrival at the beginning of the month. Marco has built a wonderful team, and I'm excited and honored to have the opportunity to step into this leadership role. Obviously, I would defer any business-related questions to Alex and Marco this time. I will turn it back to Alex for the closing words.
Great. Ana, wonderful to have you on board. We are adding important talent to our leadership team for our growth as a public company and positioning our team to really maximize their strengths to drive Patria forward. I want to reiterate thanks to Marco for the incredible job he's done leading Patria through this chapter in a very wide-ranging CFO role. It begs that I pause and reflect on what we have accomplished in the seven quarters since the IPO. We expanded our platform organically and inorganically with paid total AUM up 84% and Fee-Earning AUM up 141% since the end of 2020. Our IPO capital has driven three strategic M&A transactions, giving us a substantial credit vertical, a new public equities and type expertise, a talented growth equity team, and an anchor for real estate in Brazil.
Our fundraising cycle continues to run ahead of our expectations at the IPO, even given the difficult environment here in 2022. Our drawdown funds have deployed $3.2 billion to new investments to drive organic Fee-Earning AUM growth of 27%. Our portfolio is performing very well with two most recent vintages of both private equity and infrastructure funds all accruing performance fees today. An overall performance fee accrual is up 55% since the end of 2020 or up 76% when accounting for the interim realizations. We have also committed to giving you some guidance on our fee-related earnings, where we delivered in 2021. Our real rate, we expect to deliver again in 2022 on 50% growth.
On that note, I'll close by again encouraging you to attend or tune in to the Patria Day event we have coming on December 5th. It's great timing for us to provide a clear vision on what we want to accomplish over the next several years, and we are planning on an engaging program that will showcase our platform with presentations from across our leadership team. I think you will leave with renewed view on what we are today, what we want to become, and the value we can deliver to you as shareholders along the way. We'll now be happy to take your questions.
Thank you. As a reminder, to ask a question, you will need to press star one one on your telephone. Please stand by. We compile the Q&A roster. Our first question comes from Craig Siegenthaler with Bank of America. You may proceed.
Hey, good morning, Alex, Marco. Hope you're both doing well.
Hi, Craig. How are you? Thanks for participating. Here we are.
Nice talking to you, Craig.
So far the Brazilian stock market and the real have reacted pretty positively to Lula's win. Like, you know, that's a positive for the valuation of your portfolio companies, the return translation to USD, and also the realization outlook. I wanna think on this a little deeper. Besides the market impact, do you see any other potential positives or negatives from a Lula administration, you know, especially on the domestic fundraising front? I'm also wondering if infrastructure spending could also be an important catalyst for Patria.
Yes. I think the answer is yes. I think we see that as a catalyst, to be honest. First and foremost, I think if I go back 24 months ago, to be honest, Craig, Bolsonaro as the president, and we were in the middle of COVID and I think he was trying to do a good job, but he was very criticized by civilians and the international community and how he handled COVID, et cetera. I think in the end, I think he did a good job in the vaccination programs. We're up there now, you know, over 90%, et cetera. But I think the country was going through this general criticism around the world of how Mr. Bolsonaro was handling things.
Now we turn to 24 months after that to today. I think investors are a lot more positive about Brazil and because of also on a relative basis. From then, 24 months ago to today, I think when Mr. Bolsonaro came back and had a more positive stance on COVID, the economy is open again and comes the war with Ukraine and the region doesn't have any geopolitical risks, et cetera. Everything that we said over the call and you did see how the markets reacted to all of this very positively. Finally, I think some of our investors were waiting for the election. I think that if Mr. Bolsonaro had won, we would also be in a positive stance.
I think they were more concerned in this, you know, handover process, and I think we talked about that over our dinner in London a couple weeks ago or a month ago. Now I think what we hear from our investors is like, "Okay, the page has turned. Let's move forward." In addition, I think with the international community, I think Mr. Lula does stand as a positive outcome. I think that Mr. Lula will play to the international community audience, where he is gonna focus on two, three things that will which will be very, very well accepted on the environmental front, number one, on the civil rights, number one. Number two, in maintaining fiscal and monetary discipline, number three.
On the first two, he was already there and acting and inviting to be the environmental minister person that is very, very engaged with international community. The international audience, which today is, you know, center left, is already applauding. Mr. Biden in the U.S. already congratulated Mr. Lula, said we can do so many things together. You have the Norwegians coming back and already saying that the funds for the Amazon forest recuperation is already back on $2.5 billion. They had halted that flow of money to Brazil because of Mr. Bolsonaro's stance on the environment. You have Mr. Macron. You have a center left government in Germany also applauding Mr.
Lula, we have China, which, you know, I was very, very impressed with the congrats letter that Mr. Lula received from the leadership in China, saying, you know, now again, you are, you know, the person that we expect to really deepen the relationships with Brazil. Of course, China being left and the left and then whatever, they have the same kind of. The international audience is pretty much aligned with Mr. Lula's speech. Yes, I think that investors now think, of course, liquid securities comes first because they react immediately to a fiscal expense. I think that our fundraising locally and internationally will definitely benefit from that.
On the local front, notably, we did raise a record high for a private equity fund in Brazil in the month of October, prior to the election, even with interest rates at 13.75%. That also now shows us a positive sign, how investors are now willing to invest more in alternatives and of course, with Patria. No, we're positive here. I think the Mr. Lula will do the right thing. He's you know, he's everything but not pragmatic. He's a very pragmatic person, and he'll definitely play for the international community crowd and audience. I think he's already been well accepted, and I think he will continue to be. That plays very well with our investors. Thank you.
Got it. I think the U.S. vice president will be attending his inauguration too. Alex, my follow-up is on Moneda. Credit AUM declined sequentially. You know, that was a mix of negative flows, depreciation, a little FX. I know something's going on in Chile with the pension plans. There is some pent-up redemption demand by something that played out, I think, a year or so ago. Can you just help us with kind of what's going on with Chile? Also help us with the timing and the size of these redemptions, if they're gonna continue.
Yes, of course. We saw the on September 4th, the Chilean society civilians voting against the new constitution. As of that moment, the redemptions had started to diminish significantly. We saw a definite positive move on that front, Craig. I think Chileans were worried about this new constitution that was being proposed by the current president, Mr. Boric. As you know, over 60% of the Chilean civilians and voters voted against the new constitution, and we saw the redemptions basically halt. Now I think, you know, if we continue as we go into 2023 with the same amount of inflows that we had in 2022 or even more, and we don't have those redemptions, then I think we come into 2023 very optimistic.
In addition, we're already seeing some of that money that came out being reinvested in the fund. Investors were worried about the new constitution. The way that the pension fund in Chile works, they have to balance their assets according to an index, which is an average of all of the other pension funds together. For example, a very, very simple example, you have 60% equity and 40% fixed income, and the average of the pension funds is 58% equities and 42% fixed income.
You, as you know, the pension fund that is out of this now 58/42, you have to then redeem from equity funds and invest in fixed income funds and vice versa, because you have to follow the average because your performance is compared with a benchmark, which is the benchmark of the average of the industry. They were actually worried that this could actually affect their performance. In addition, they wanted to have a cash position if they had to have more withdrawals coming forward. With the rejection of the new constitution on September 4th, everything got reverted, you know? They want to have to be more exposed to Chile. They want to be more exposed to our alternative products.
They don't have this issue of keeping cash anymore. Not only the redemptions halted, but we see that. We already saw investors coming back and reinvest in our funds and not only the institutional channel, but the family offices channel. It's you know, it's pretty nice, pretty positive on that front, and I think we see that trend continuing in 2023. Thank you.
Thank you, Alex.
Thank you. One moment for questions. Our next question comes from Ricardo Buchpiguel with BTG Pactual. You may proceed.
Good morning, everyone, thank you for the opportunity of making questions. I have three on my side. First, can you please talk about when the next closing of PE Fund VII and the new infra fund are expected to happen? For my second question, can you please explain what happened to the deployment levels to be flattish quarter- over- quarter, when you look at Q3, and what we should expect in the following quarters? Finally, can you please give more color what drove the loss in financial results this quarter? Thank you.
Thank you very much, and, nice to talk to you, and thanks for participating in our call. I'll, Three questions. Number one, next closings on Private Equity Fund VII and Infra Fund V. Private Equity Fund VII, we did a couple of closings, I think two or three closings during the third quarter, with Brazilian clients, Latin clients, and outside of Latin America clients, mainly U.S. We are now going ahead. I think we're having this multiple closings every month, every six weeks. As soon as we, I, and I think that's how the industry works. I'm not saying anything that is not an industry standard.
As soon as we have enough, you know, volume, around $100 million, $100-something million of investments, we then have a closing, which is a very simple process, to be honest. We keep some of these sub docs, subscription documents, in escrow, and then we know we've reached $100 and $100-something million because there's legal costs associated to do a closing. We then get all these sub docs already signed and do an official closing. That's what we did during the third quarter, I think, with Latin investors, as I said, with U.S.-based investors and with Brazilian investors.
The Brazilian fundraising, which is very interesting as well, as you know, we had a record high fundraising for our private equity fund in Brazil with XP being the distributor. Interesting here is like different than what I just described. In Brazil, when you fundraise for private equity fund or an alternative asset fund like ours, it's like an IPO. You have the beginning and an end. You have 25, it's basically 25 days. You know, which is around 20 working days that you have to fundraise, like an IPO. Start day one, and 20 working days later you have to stop fundraising. With XP, we put on the cover that we're gonna raise around BRL 800 and something million .
There was BRL 1.3 billion demand, so we managed to do the hot issue which is 20% more and reach BRL 1 billion. Still we had another BRL 300 million that we couldn't supply. An excess demand. We're very excited, but we could not take on those BRL 300 million additional. We stopped, I think on day 15, we stopped even doing meetings because we were already at BRL 1.3 billion, and we knew that we couldn't cope with the excess demand. Investors do get, of course, pro-rata, 'cause by the Brazilian regulation as well, it's first come, first served. The guys that came in later would not be served.
At the end, you know, from 20 working days, we had 15 working days of fundraising. The other five, we just canceled the meetings. After a amount of months, which is now if I'm not mistaken around four months, I can do another issuance. Now I'm going through the process that I just described. We're very excited that maybe sometime early next year we're gonna do another one, and I think we can do another one. Because there's now after, you know, everything that I just answered here to Craig's question with Lula already there and things going on in the right direction and the interest rates in Brazil showing that they're gonna, you know, go down in the second semester of next year.
That's what the yield curve actually shows us, the Brazilian yield curve shows us. I think we can do other of these issuances. I'm very, very excited about this. That's on private equity seven. On infrastructure fund V, we haven't started. You know, we're talking to investors. We haven't had a first closing yet. In private equity fund VII, we had a first closing, I think it was March of this year. We're planning to have a first closing sometime this year or early next year. Depends more on bureaucratic issues and it's very interesting. We're having a reverse kind of increase when we're gonna get out with infrastructure fund V. Here it's interesting as well as a general comment.
I know that you didn't ask this, but just as a general comment here, an additional comment. Private equity fund VII and fund VI and fund V, the previous funds, 1/3 of the fund was being raised, 1/3 , so 40% of the fund were raised with North American clients, U.S. and Canadians. And as you know, the U.S. market in particular, you know, is a crowded market and, we're, you know, we're waiting for, you know, for a better moment to raise in the U.S. I think we're gonna get there to the targets in Private Equity Fund VII. But the U.S. underperforming and we are overperforming in other regions of the world, the Middle East, Israel, Asia, Latin America, to compensate for this.
If the U.S. comes back in 2023, which I think it should, then I think we will do even better. On the infrastructure side, we never really raised a lot of money from U.S., Canadian investors to our infrastructure fund. Infrastructure is a real asset, but it's not really a asset class that U.S. pension funds invest in. They're beginning to come into the asset to this asset class. Infrastructure Fund V, around close to 10% of Infrastructure Fund IV, Fund III or even less than that, comes from U.S., Canadian investors. U.S. investors, 'cause what I just said, and Canadians, they like to invest in infrastructure more directly, Canadian pension funds.
That effect that I just mentioned, the overcrowded market in the U.S., does not really affect our infrastructure fund. In that sense, because we don't raise a lot of money from the U.S. market, Canadian market. In addition, it's a sought-after product today because of the inflationary hedge, et cetera. I'm now pretty positive on the infrastructure fund fundraising process as we go along. Going to your any additional comment there? Can I go to your second question?
No, very, very clear on the first question. Thank you.
Now we go to deployment. What did we do here? Of course, there's the strategy and then there's the tactical part of the execution, right? We want to deploy. Last year we deployed around $2.5 billion. It was a very favorable moment for us to deploy because we saw, on more of a tactical approach to deployment, an overshooting of our devaluation of our currency, you know, 5.60-5.80 reais to the dollar. As I mentioned, answering Craig's question, I think there was a general pessimism, exaggerated pessimism with Brazil and Bolsonaro because of what he, you know, his stance on COVID and et cetera. We said, look, I think this is a very interesting moment for us to deploy.
Now, valuations were depressed because interest rates were going up, et cetera, et cetera. We had a very good year of deployment. As we approach into 2022, we actually saw that, you know, things were gonna get better, and they did. The whole, you know, uncertainty about the election, be it Mr. Bolsonaro, be it Mr. Lula, would be over, as it did as well. We said, look, I think this is a very interesting moment for us to divest. We're trying to divest a lot. I think as we do the divestments in the fourth quarter, mainly from our infrastructure funds and our private equity funds, I think we're hitting a very good exchange rates to take the money out and give back U.S. dollars to our investors.
That's BRL 5.20, BRL 5.14. It's interesting that our Private Equity Fund VI, which is our latest private equity fund, and an Infrastructure Fund IV, which is our latest infrastructure fund, the returns in dollar is actually better than reais, which is not very usual because of what I just said. We put money in at BRL 5.60, BRL 5.70 . The dollar now, the real is trading around 5.20. We were also waiting in this quarter, to be honest, on what was going on with the election and, you know, what was gonna happen after the election, Mr. Bolsonaro's stance on passing the baton, et cetera. To be honest, I think, you know, we delayed a little bit the signings of deals that we had in the pipeline.
We turned papers a little slower than we could in order to get to understand what was gonna happen. Now everything I think is fine in our view. As I did answer to Craig, I think we're then coming back to, you know, to the table to sign the deals that we had on the table. We tactically, we did delay things a little bit over the third quarter. Very, you know. Well, the strategy remains the same. Over the last 12 months, we have deployed committed $1.4 billion. We should finish the year with $1.5 billion, 12 months, 2022, $1.5 billion.
Right, on target with where we gave you the expectation that we would commit $1.5 billion from our long dated growth and funds private equity and infrastructure. We're fine there. Tactically speaking, micromanagement, third quarter, we did slow down the pace. We pushed the papers along a little slower. We turned the papers a little slower because of the election. Is that fine for the second question? Can I turn to your third question?
Just a quick follow-up on the second question. We saw that there was the impact from the end of the fee agreement in the infrastructure segment. Should we expect anything similar happening in Q4 or that would impact this year and then or not?
Yeah, no, we don't expect anything in Q4. What we have in 2023, and we'll go over that in more detail in our Patria Day December 5th, that we have a Private Equity Fund IV finishing in June 2023. Private Equity Fund IV finishing in June 2023. Again, a lot of, you know, micromanagement here. We can give you more details offline, but just answering your question very, very precisely, okay? No effect-
Perfect. Thank you.
In the fourth quarter of 2022. Now I'll turn to Marco to answer your third question.
Hi, Ricardo. Hope everything is well with you. Regarding the financial results, I'll split my answer in two. The first piece on the non-GAAP measures on page eight of your presentation, you're gonna see that on the quarter, financial expenses is actually increasing by $100,000. This is very much a reflection of the variance of the assets underneath Patria that are substantially driven by GP commitments. The mark-to-market of the assets will drive some of that variance. If your question relates to the IFRS, then that's on page 22 of your presentation. You will see that most of those expenses are driven by the M&A activity and are non-cash expenses.
I will call the attention particularly to the one that is newer to this because we have some of that expenses accruing as a result of the acquisition of Moneda. Some of them accruing further as a result of the acquisition of VBI. Then there is one particular line that stands for the SPAC, which is the market value of the warrants. Again, these are all non-cash expenses.
Oh, very clear. We saw there was an increase in the non-cash expenses looking at this quarter versus the previous one. Is it mainly to do with the VBI acquisition and the SPAC that you mentioned or is there another effect that we should take into account for versus.
Precisely that.
Okay.
Yeah. I think that precisely VBI.
Thank you. One moment for our next question, and as a reminder, to ask a question, you will need to press star one one on your telephone. Our next question comes from Tito Labarta with Goldman Sachs. You may proceed.
Hi. Good morning, Alex and Marco. Thanks for the call and taking my question. A couple questions also. First on the performance fees. You mentioned, you know, you probably have some more visibility in the coming quarters to be able to realize those and maybe more in 2023. Just so I can understand, anything in particular that you would be waiting for? Is it just more stability in markets? Is any particular events that you're waiting to be able to realize some of these performance fees? I imagine, you know, primarily would be from private equity fund V and infrastructure III. Just any color so we can kind of think about the timing and how much you could potentially realize that you can give will be helpful.
The second question, a follow-up actually on Chile. Just looking at the pension reform that was announced last night. Did they call for a public option to compete with the private fund managers? Just wondering if, you know, have any more color on that, if that can create any potential impact for you there. Thank you.
Okay. Thanks, Tito. Thanks for participating in our call. Thanks for the questions. On performance fee, I think we're doing as planned, to be honest. I think we're getting in both funds that you mentioned, private equity fund V and infrastructure fund III. We see good realizations coming up. We are in the process of selling several assets. A couple of them, to be honest, are very close to signing or very close to closing. First signing then closing. I add the valuations that we expected, which pushes us very close or into the performance fee arena.
Sometime it could happen sometime still this year if I look into where we are in some of the sale processes of these assets. Of course, it might slip into beginning of next year as you know, maybe bureaucratically there's an approval of the potential buyer that you know falls into January or whatever. But I don't see any hiccups in the process. The process continues to actually go through what we expected, non-bindings and then the bindings. For some of these assets that I mentioned, we already got a binding, so now we're negotiating SPAs and et cetera.
Going through the process all the way to, you know, choosing the final bidder, the final winner that will buy these assets and then sign the SPA, the sales and purchase agreement. I'm happy with the process. Again, I'm happy with valuations and I'm happy with the exchange rate. One of the, you know, two of the assets actually they have no dollar-denominated revenues. But whatever, still I'm happy with the whole atmosphere. Going all the way back to Craig's first question, I think of course the election in Brazil, because these assets, one of the assets is very LatAm, the other asset is more Brazil-focused, and the other asset is also more Brazil-focused.
I think, you know, having the election results and having Mr. Bolsonaro pass on the baton peacefully to Mr. Lula, I think also helps. I think it would there was nothing, you know, that would actually interfere. Definitely, going all the way up to the you know investment committees of these potential buyers, I think it helps that everything is well and peaceful in Brazil. For your second question of, I think, you know, I think it's a positive move, I think that from the Chilean government are actually increasing the contributions from 10 to around 16% of the pension fund. In general, the amount of money that these pension funds will manage will be bigger, and bigger is better than smaller.
Like in Mexico, that went from 6%- 12%, so it's bigger amounts. These pension funds are our clients. But we don't have a lot of detail. I'll pass on to Marco here. We don't have a lot of detail of what might go on. Of course, this proposal will have to be negotiated with Congress. Mr. Boric has not been going through right now in very high popularity rates. As you probably know, that his new constitutional amendment was rejected by the population, you know, over 60%. Mr.
Boric faces a very conservative Congress and Senate, which then I think this proposal will be so much negotiated, which is hard for us to say now between what he proposed and what will be accepted by Congress can be something totally different from what is there. In general, I think what I see that everybody likes on both sides of the aisle, as they say here in the U.S., is, you know, a bigger pension fund system, more inclusive, etc., more competitive, which they're all good things. Yeah, Marco.
Thank you, Alex. This is really no news from you know what Boric laid out in his campaign and his narrative about his intentions to do with the pension system. It came out last night, and we are over it, and we'll study and then before having a reaction to it. I think the first note is as Alex mentioned, he called the attention that the system is gonna get bigger, part of it being paid by the employer, part of it being paid by the employee. It will be very inclusive. It's gonna be very populist driven sort of proposal.
I'm not gonna get into a lot of details on the outlook on the economy because that also has another side which is increasing the cost of employment in the region. As a first look for the asset management business is increasing the fight. It's yet to be determined how much of this is gonna be driven by the public initiative and by the private initiative. The proposal is not completely clear on that. Before even getting to further reaction, we will be paying a lot of attention on how the lower and upper house will react, 'cause there's been a number of radical proposals that in the region and in the country that have been simply rejected by the population and by the governors.
Great. That's very helpful. Thanks for all the details there, Alex and Marco.
Thank you. One moment for questions. Our next question comes from William Barranjard with Itaú BBA. You may proceed.
Hello. Good afternoon, Alex and Marco. Thanks for hosting the call. I have a question here regarding the public equities and the credit operations, so basically Moneda operation here. We would like to understand how you see the AUM evolution going forward, if you see the mood improving, especially for equities, and then if you see any performance fees for these operations for the next few quarters. Thank you.
Okay. Yeah, definitely I see a better mood in general, because again, just having the election cycles over in most of the countries in Latin America, that's positive because people just turn their pages. Number one, having the rejection of the constitution in Chile. Number two, having the peaceful transition between Mr. Bolsonaro and Mr. Lula. Number three, and several other factors I think play into us being more bullish on fundraising for this year and next year. In addition to that, you know, reduction in interest rates in Brazil that will probably happen in the second semester of next year, if you know, the world situation permits Brazil to do that. From a Brazil standpoint, I think it's already showing that the central bank in Brazil can do that.
You know that the Brazilian Central Bank over the last two meetings did not raise rates, right? Maintained rates at the same 13.75%. I can add so many other comments here to my answer, which actually favors fundraising. You probably know as well that I think in the month of October, we had the highest inflow in equity funds all over the world. I think $23 billion into listed equity funds. That's more of a global number. It's not just I think Brazil. I think in general, people are not trying to anticipate this comeback of the economies globally.
Specifically, I think LatAm will come out first of this situation because it started first, the raising rates, et cetera, et cetera. Then the election cycle also being over also helps everything that I say. We're bullish. On the other side of the equation, William, is the reduction in the withdrawals. You know, one side is what you mentioned, which is fundraising and new money coming in. The other side of the equation, which in the end is important for the net inflows, is the redemptions. We saw basically the redemptions being halted after the constitution, the new constitution in Chile was rejected by Chileans, of course. Which that also helps the net inflows. It helps it positive. Inflows, good. Rejections stopping.
Bullish on fundraising for 2023. I'll turn over to Marco also on more numbers.
Yeah. I think I'll tie in some of those to our presentation and what we laid down here. Starting with the flows, what we saw especially specifically on the credit and equities is a reduction of the outflows by about 50% relative to the previous quarter. That's considering that the Rechazo was actually, which is the rejection of the constitution, came out only in the middle of the quarter. That's a data point. You know, we cannot call it a trend yet, but it's an important data point. The other important data point is the inflow coming from what you read as advisory distribution that is particularly driven by families, which are normally first movers. I think we have a couple of data points to be positive on that trend.
Finally, the other important data point is about the relative performance and the absolute performance of these two products. The high yield is performing phenomenally, and it's the flagship fund for the credit. It's over 10 percentage points over the last year, which is absolutely impressive in a world where credit has been hammered. Also on the equities, if you look at the Chilean equities is performing in excess of 25% net this year. All that contributes to the flows.
Yeah. The credit fund made 10% better than peers.
Correct.
Yeah.
That's correct. Relative to your question about the incentive fees, I'm glad that you made that question because I wanna drive you through a simple method. It's quite interesting. If you look on page 13 of your presentation, you're gonna see that the incentive fee accrued to date is $4.9 million. The answer to your question is, yes, we expect to see that kicking in in the fourth quarter. If you go back to page 18 and 8 on your presentation on the earnings for the quarter, the year-to-date FRE is on $94.6. The market consensus for the year is on $129.
That means that the gap for the year to go is $34.4. If you look at during the quarter, current quarter, third quarter, we deliver on $31.7, and as we described it earlier in this presentation, we expect this to be very consistent for the upcoming quarter. If you just count that there is an additional incentive fee to kick in that we're showing you on page 13, that is approved to date of $4.9, we'll be ahead of the 50% guidance increase on the FRE for the year.
Thank you, William.
Okay. That's really clear. Thank you, Alex and Marco, for the answer.
No, thank you.
Thank you. I'm not showing any further questions at this time. I would now like to turn the call back over to Alex Saigh, CEO, for any further remarks.
Well, thank you very much for your patience here with us and participating here. I hope to see you all on December 5th for our Patria Day in New York starting 12:30, Josh?
Correct.
12:30, December 5th in New York. In person is better, but if you can't do in person, please tune in online. Very excited. I think we're now having most of the senior members of our team present. We're also gonna have a chance to sit down and have a cocktail at the end of the day, so you guys can have, you know, and talk directly to our senior leaders and have more of an informal meeting by year-end. We're doing our best here to deliver on the numbers here. We're excited that, you know, with all this volatility, we're still up 50% over last year. Excited with 2023 with everything that just happened in the region and mainly in Brazil with the elections.
excited with the performances coming up because of the biddings that we're having for our assets at our marks. Again, hope to see you on the fifth and hope to talk to you soon and see you in person as well. Be well, be safe. Thank you very much. Bye-bye.
Thank you, and enjoy your day.
Thank you. This concludes. You may now disconnect.