Currently trading with a market capitalization of more than $2 billion, Patria Investments is one of the largest alternative investment managers in Latin America. The company received cash from The Blackstone Group Inc. (BX), a massive asset manager with more than $7 trillion in sales.
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The fact that Blackstone is behind Patria Investments will most likely increase the stock demand for Patria’s shares. But, there are more beneficial facts about Patria Investments. The company’s funds seem to be delivering an IRR of more than 27%, and the AUM seemed to increase a lot in the last decade. If Patria Investments continues to report good results, I would expect the company’s sales to creep up in the future.
I dislike the fact that the company was registered in the Cayman Islands. In addition, Patria Investments is expected to be a controlled entity, which most financial investors will not appreciate. Notice that the Board of Directors may not be independent.
Having said that, I believe that Patria Investments could see an increase in its share price in the next coming months. The company reported positive net income, and other competitors are trading at more expensive valuations. In my opinion, once investors get to know about the involvement of Blackstone, the share price will trend higher.
There is another beneficial fact. Right now, many investors are looking to acquire companies or invest in emerging markets like Brazil, China, Mexico, or India. Patria offers access to a significant amount of investments in emerging markets. Therefore, in the coming months, I expect that many traders will buy shares of Patria.
In addition to these secular trends, we believe there is a specific opportunity in Latin America given the very low penetration of private markets’ asset base to GDP in comparison to other more mature markets. Private markets’ asset base in Brazil, for example, represents only 2.4% of the Brazilian GDP compared to an average of 8.3% of GDP globally and between 10% and 30% in countries such as Canada, Singapore, the United States and the United Kingdom. Moreover, we believe that Latin America, given its lower correlation to the U.S. and E.U. economies, represents a favorable diversification alternative for global investors who seek to rebalance their portfolios and increase exposure to emerging markets. Source: Prospectus
Readers need to do their due diligence on Patria Investments. However, in our view, the company currently offers an interesting opportunity. Investors willing to acquire companies in the emerging markets will most likely buy shares of Patria Investments. The fact that Blackstone is also a shareholder will also interest certain investors. Finally, the valuation does not seem that generous for a company with positive net income and growing assets under management.
Disclosure: We don’t hold shares of Patria Investments, and we were not paid to write this article.