A. [Reserved]
B. Capitalization and Indebtedness
Not applicable.
C. Reasons for the Offer and Use of Proceeds
Not applicable.
D. Risk Factors
Summary of Risk Factors
An investment in our Class A common shares is subject to a number of risks, including those relating to our business and industry, the countries in which we operate, the activities of our managed funds and their Portfolio Companies, and risks relating to our Class A common shares. The following list summarizes some, but not all, of the principal risks we face. Please carefully read the information in the section entitled “Detailed Risk Factors” for a more thorough description of these and other risks before making an investment decision.
Certain Factors Relating to Our Business and Industry
•Difficult market and geopolitical conditions can adversely affect our business in many ways, each of which could materially reduce our revenue, earnings and cash flow and adversely affect our financial prospects and condition. We may need to reduce our fixed costs and other expenses in order to maintain profitability, including by cutting back or eliminating the use of certain services or service providers, or terminating the employment of a significant number of our personnel that, in each case, could be important to our business and without which our operating results could be adversely affected.
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•The ongoing military conflicts in Europe and the Middle East, including hostilities involving Iran that commenced in early 2026, continue to heighten global economic and political uncertainty. Any escalation of these conflicts, including disruptions in energy markets and global supply chains, could adversely impact regions where we do business, Portfolio Companies of the funds we manage, and our energy trading business, increasing operational, compliance, and liquidity risks. A period of economic slowdown, which may be across one or more industries, sectors or geographies, could contribute to adverse operating performance for certain of our funds’ investments, which would adversely affect our operating results and cash flows.
•Changes to U.S. trade policy, tariffs and import/export regulations may adversely affect our operating results. Although the majority of our Portfolio Companies serve local or regional markets and we do not currently expect a material direct impact, trade policy actions could adversely affect macroeconomic conditions in the regions in which we operate, negatively impacting portfolio performance, fund-level returns, liquidity, and our fee-related revenues.
•Volatility in capital markets, tightening credit conditions, and intense industry competition could impair our ability to raise and deploy capital, exit investments, and maintain fee levels, which may materially reduce our assets under management, revenues, and ability to pay dividends. If we cannot make the necessary investments to keep pace with rapid developments and change in our industry, the use of our services could decline, reducing our revenues. The revenues that we earn are driven in part by the pace at which our funds make investments and the size of those investments, and a decline in the pace or the size of such investments may reduce our revenues.
•Our Class A common shares may experience significant volatility due to factors that are difficult to predict. The market price of our Class A common shares may be adversely affected by variables such as our fundraising activity, FEAUM, net income, and the performance of our funds. These factors can fluctuate meaningfully and are inherently difficult to forecast on a quarterly basis. Although these metrics may exhibit greater predictability on an annual basis, such longer‑term visibility does not mitigate the potential for short‑term volatility in the trading price of our Class A common shares.
•In addition to traditional physical and transitional risks, climate change can create other risks that are gaining increasing social, regulatory, economic and political relevance globally. Our efforts may not be successful in mitigating the climate-related risks arising from the increased focus, pace, breadth, and depth of regulatory expectations requiring implementation in short time frames across multiple jurisdictions and from changes in public policy, laws, and regulations of climate change and related environmental sustainability matters, which could affect investments strategies, risk profiles and expected returns of investments made by our funds.
•Climate‑related regulatory frameworks, including emerging disclosure, taxonomy and due‑diligence requirements, may also increase our compliance costs, create operational burdens, or require adjustments to our investment processes. In addition, our Portfolio Companies may face increased scrutiny regarding their greenhouse gas emissions, climate transition plans, and resilience to physical climate risks, which could adversely affect their performance, valuations, or access to financing.
•The occurrence of a natural disaster, widespread health epidemic, pandemics or other outbreaks could adversely impact the performance of investments made by managed funds, as well as the results of operations causing a slowdown in capital raising, capital deployment and realization activity.
•Our success depends on retaining skilled senior executives and key personnel, as their expertise, reputation, and business relationships are crucial for investment performance, asset management, and growth. Losing them could negatively impact revenue, profitability, and operational continuity. Cybersecurity threats, system failures, and regulatory risks could jeopardize our operations, financial stability, and reputation, impacting confidential data, investment security, and compliance efforts.
•We face actual and potential conflicts of interest across our business as we expand into new strategies and markets, which also introduces new regulatory, operational, and financial risks.
•We are subject to extensive and rapidly developing regulations globally, including those relating to data privacy, environmental and social impacts (ESG), and potential application of the U.S. Investment Company Act and Investment Advisers Act.
•Changes in international tax frameworks, local tax reforms, adverse interpretations by tax authorities, or our potential classification as a Passive Foreign Investment Company ("PFIC") could adversely impact our effective tax rate.
•We are subject to substantial litigation risks, and poor performance of our funds could obligate us to repay performance allocations previously paid to us.
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•Our due diligence process may not reveal all relevant facts, and our funds invest in illiquid assets and rely heavily on third-party service providers, exposing us to counterparty risks.
•If we fail to maintain effective internal controls over financial reporting, we may be unable to accurately report our results or meet our reporting obligations.
Certain Factors Relating to the Countries in Which We Operate
•Governments have a high degree of influence in Brazil, Chile, Colombia, and in other economies in which we operate. The effects of this influence and political and economic conditions could harm us and the trading price of our Class A common shares. In addition, recent economic and political instability in Brazil, Chile, and Colombia in general has led to a negative perception of these economies and higher volatility in the securities markets, which also may adversely affect us and our Class A common shares.
•Developments and the perceptions of risks in emerging market countries, the United States, Europe, or other regions may harm the economies of countries in which we operate and affect the trading price of our Class A common shares. Crises and political instability in these regions, including increased international trade tensions and protectionist policies, could decrease investor demand for securities offered by companies like ours, including our Class A common shares.
•Inflation and government measures to curb inflation may adversely affect the economies and capital markets in some of the countries in which we operate, and as a result, harm our business and the trading price of our Class A common shares. In the past, high levels of inflation have adversely affected the economies and financial markets of some of the countries in which we operate, particularly Argentina and Brazil, and the ability of their governments to create conditions that stimulate or maintain economic growth.
•Exchange rate instability may have adverse effects on the economies of the countries in which we operate, our business and the trading price of our Class A common shares. Governments in Latin America have implemented various economic plans and used various exchange rate policies, including sudden devaluations, periodic mini-devaluations (during which the frequency of adjustments has ranged from daily to monthly), exchange controls, dual exchange rate markets and a floating exchange rate system.
•Political and social instability, including recent diplomatic conflicts in Venezuela and uncertainties surrounding upcoming elections in Chile, may adversely impact our business, Portfolio Companies, and the economies in which we operate.
Certain Factors Relating to Our Class A Common Shares
•The dual class structure of our share capital, with a ten-to-one voting ratio between our Class B and Class A common shares, concentrates voting control with Patria Holdings (which represents approximately 82.3% of the voting power). This controls all matters requiring shareholder approval and limits your ability to influence corporate matters. We are a Cayman Islands exempted company with limited liability. The rights of our shareholders, including with respect to fiduciary duties and corporate opportunities, may be different from the rights of shareholders governed by the laws of U.S. jurisdictions. In particular, as a matter of Cayman Islands law, directors of a Cayman Islands company owe fiduciary duties to the company and, separately, a duty of care, diligence and skill to the company.
•As a foreign private issuer, we have different disclosure requirements than U.S. domestic registrants, and losing this status would require us to incur significant expenses to comply with the U.S. domestic reporting regime.
•We are subject to the Cayman Islands Economic Substance Act, and failure to satisfy its requirements could result in penalties or require changes to our operations.
Detailed Risk Factors
Certain Factors Relating to Our Business and Industry
The ongoing military conflicts in Europe and the Middle East may have repercussions on the world’s geopolitical and economic scenario
The ongoing conflict between Russia and Ukraine and in the Middle East continue to contribute to heightened global economic and political uncertainty. Governments in the U.S., U.K., and EU have imposed export controls and financial and economic sanctions on certain industry sectors and individuals in Russia. Additional or expanded controls and sanctions could be enacted in the future.
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We do not have a physical presence in Russia or Ukraine, and our direct exposure is not material. However, certain of our investors may have personnel or beneficial owners included on international sanctions lists, and certain of our funds hold indirect minority stakes in assets that might be subject to restrictions under U.S. or other sanctions regimes. These investments represent a de minimis share of assets under management.
In late February 2026, the United States and Israel launched significant military operations against Iran, and Iran has responded with retaliatory actions in the region. Any continuation or expansion of hostilities involving Iran, including broader regional conflict, additional sanctions, disruptions in energy markets or shipping routes, or heightened volatility in global financial markets, could adversely affect global economic conditions and the markets in which we operate. Additionally, conflict in the Middle East, and the resulting disruption of transit through the Persian Gulf and the Strait of Hormuz, continues to disrupt global supply chain flows and impact fuel prices.
Any escalation or expansion of these conflicts, including disruptions arising from energy-related sanctions and disruption or a global energy crisis resulting from restrictions on energy exports, could adversely impact certain regions where we do business and certain Portfolio Companies of the funds we manage. We are also susceptible to adverse developments arising from these geopolitical events due to our energy trading business. Sanctions‑related restrictions on commodities, constraints on cross‑border energy flows, and increased volatility in global energy markets could affect trading conditions, counterparty exposures, and hedging strategies, and may increase operational, compliance, and liquidity risks across our trading activities.
Changes to U.S. trade policy, tariff and import/export regulations may adversely affect our operating results.
The U.S. government has indicated its intent to adopt a new approach to trade policy, which may include the imposition or consideration of tariffs on certain foreign goods and the renegotiation or potential termination of existing trade agreements. Changes in U.S. or global trade policy, tariffs, and trade sanctions could increase costs, disrupt supply chains, reduce demand, and heighten global trade tensions affecting the economies in which we operate. Furthermore, changes in U.S. trade policy could result in other countries adopting retaliatory trade policies.
The majority of our Portfolio Companies serve local markets or regional markets, and as a result, we do not currently expect these developments to have material direct impact on our operations. However, this assessment is based on current portfolio composition and market conditions, which are subject to change. Trade policy actions could adversely affect macroeconomic conditions in the regions in which we operate and in which our Portfolio Companies conduct business. Adverse macroeconomic conditions resulting from changes in trade policy – such as economic activity, shifts in cost structures, or disruptions in cross‑border trade - could negatively impact portfolio performance, fund‑level returns, liquidity and our fee‑related revenues.
Governments have a high degree of influence in Brazil, Chile, Colombia and the other markets in which we operate. The effects of this influence and political and economic conditions could harm us and the trading price of our Class A common shares.
Governments in Brazil, Chile, Colombia, and the other markets in which we operate frequently exercise significant influence over their respective economies through monetary and fiscal policies, including changes in interest rates, tax, wage and price controls, foreign exchange rate controls, capital flow controls, and import and export restrictions. These government actions can affect economic growth, inflation, currency volatility, and overall market stability.
Political crises in Brazil – such as corruption investigations including Operação Lava Jato - have historically contributed to economic deceleration, heightened securities market volatility, diminished investors’ confidence and disrupted capital market. The market for securities offered by companies with significant operations in Brazil, Chile, Colombia and other Latin American countries is influenced by political, economic and market conditions in the region and, to varying degrees, market conditions in other emerging markets. We cannot predict whether ongoing or future investigations or policy shifts will lead to further instability.
Our operations and investments are also subject to broader political risks inherent in emerging markets, including nationalization, expropriation, changes in complex regulatory frameworks and limitations on foreign ownership or investments. Any of these developments could adversely affect the performance and valuation of our Portfolio Companies, impair capital deployment, and negatively impact our assets under management, fee revenues, and overall financial results.
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Volatility in capital markets and constraints on liquidity could impair our ability to raise and deploy capital, exit investments, and meet our financial obligations, each of which could materially reduce our revenue and adversely affect our financial condition.
Volatility caused by political, market, or economic conditions can materially hinder the initiation of new, large-sized transactions and, together with volatility in equity and debt valuations, may adversely impact our operating results.
Mark-to-market valuations of our funds’ investments are subject to fluctuations driven by broader market conditions and uncertainty regarding governmental policy on tax, financial services regulation, international trade, and other matters. These fluctuations may result in volatility in fund net asset values and may cause variability in the revenue, earnings, and cash flow we report from period to period. Such fluctuations can also affect the timing and magnitude of carried interest recognition, management fees tied to net asset values, and the fair‑value measurement of investment holdings with the corresponding effects on our results.
A significant contraction or sustained weakening in the debt financing market — including higher equity requirements, more restrictive covenants, or reduced access to high-yield debt markets — could have a material adverse impact on our and our funds’ ability to complete acquisitions, refinance existing portfolio company debt, or exit investments at attractive valuations. Such a condition could also delay deployment, increase cost of capital, and negatively affect portfolio‑company performance.
Adverse developments affecting financial institutions, such as the bank failures observed in 2023 (including Silicon Valley Bank), have previously contributed to broad liquidity dislocations, reduced bank lending appetite and increased counterparty risk across the financial system. Similar events in the future could generate renewed stress in credit markets, disrupt syndication activity, and constrain the availability of leverage for private‑market transactions.
More broadly, any instability in the banking and financing markets could limit the availability of funds for financing activities or result in less favorable terms, including systemic limitations on access to credit and liquidity sources. Sustained stress in the financing market could therefore reduce investment activity, impair the operating performance and valuation of our Portfolio Companies, and adversely affect our financial results, including lower performance-based fee realizations.
In addition, we have liquidity requirements at a corporate level, including cash needed to fund operating expenses, seed new investment strategies, satisfy fund capital commitments to existing and future funds and service contingent liabilities. Our ability to meet these liquidity requirements depends on timing and availability of cash flows from management and performance fees, as well as cash from external financing. If our liquidity requirements exceed our available liquid assets, we may be forced to defer or scale back strategic investments, sell assets or raise capital on unfavorable terms.
Adverse market or economic conditions may affect our funds or their Portfolio Companies’, cash generation and ability to renew indebtedness or find alternate financing, including delaying of investment realizations and deployment, and management and performance fees. To the extent such conditions may reduce or defer cash available at corporate level, our ability to continue to pay dividends or to pay at historical levels could be affected.
Our business depends in large part on our ability to raise capital from third-party investors. A failure to raise capital from third-party investors on attractive fee terms, or at all, would impact our ability to collect management fees or deploy such capital into investments and potentially collect carried interest, which would materially reduce our revenue and cash flow and adversely affect our financial condition.
Our asset management business depends on our ability to raise capital from third-party investors. In periods of elevated interest rates, risk‑off market sentiment, or broader macroeconomic uncertainty, it may be more difficult to raise new capital for our funds, particularly in strategies targeting local investors. An investment in a limited partner interest in an alternative investment fund is generally more illiquid and the returns on such investment may be more volatile than an investment in securities for which there is a more active and transparent market. In periods of positive markets and low volatility, for example, investors may favor passive investment strategies such as index funds over our actively managed investment vehicles. Similarly, during periods of high interest rates, investors may favor investments that are generally viewed as producing a risk-free return, such as treasury bonds, over investments in our products, particularly if the spread between the products declines. Alternative investments could also fall into disfavor because of concerns about liquidity and short-term performance. In particular, such concerns could be exhibited by public pension funds, which have historically been among the largest investors in alternative assets.
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Furthermore, institutional investors have generally been exerting greater pressure to reduce management and investment fees, whether through direct reductions, fee-holiday structures, deferrals, rebates, or other negotiated concessions. Competitive fundraising dynamics may further intensify these pressures. A failure to successfully raise capital, or a reduction in fee terms, could materially reduce our revenue and cash flow. Moreover, if our funds are unable to deploy capital at a pace sufficient to offset realizations, fee-related revenues may decline due to lower invested capital or lower fee‑earning AUM. Reduced deployment levels may also delay fee commencement for new vintages or new strategies, affecting the timing and predictability of management‑fee revenue.
Our funds invest in illiquid assets for which there is little or no market activity, and the fair value of such investments involves significant management judgment. Realizations at lower values than those reflected in prior fund net asset values would result in reduced gains or losses, a decline in asset management fees, and the reduction of performance allocations.
Rising interest rates coupled with equity and credit market volatility may make it more difficult to find attractive exit opportunities, extend holding periods, or constrain the availability of strategic buyers and financing sources. Prolonged market dislocation may also limit liquidity for secondary sales or delay monetization, negatively affecting fund‑level returns, fee‑earning assets under management, and the timing and predictability of our revenues and cash flows.
We depend on our key senior executives and the ability to attract, recruit, develop and retain qualified employees which is essential to our success and growth. The loss of their services or the failure to attract, recruit, develop and retain other qualified employees would have a material adverse effect on our business, results of operations and financial condition
We depend on the efforts, skill, reputations and business contacts of our key senior executives, the information and deal flow they generate during the normal course of their activities and the synergies among the diverse fields of expertise and knowledge held by our professionals. Accordingly, our success will depend on the continued service of these individuals, who are not obligated to remain employed with us. Some key senior executives have left the firm in the past and others may do so in the future, and we cannot predict the impact that the departure of any key senior executives will have on our ability to achieve our investment objectives. For example, the governing agreements of many of our funds, such as limited partnership agreements and private placement memoranda, generally provide investors with the ability to terminate the investment period in the event that certain “key persons” in the fund do not provide the specified time commitment to the fund or our firm ceases to control the general partner. The loss of the services of any key senior executives could have a material adverse effect on our revenues, net income and cash flows and could harm our ability to maintain or grow assets under management in existing funds or raise additional funds in the future. We have historically relied in part on the interests of these professionals in the investment funds’ performance fees and incentive fees to discourage them from leaving the firm.
Furthermore, in order for us to successfully compete and grow, we must attract, recruit, develop and retain the necessary personnel who can provide the needed expertise across the entire spectrum of our intellectual capital needs. While we have a number of senior executives and other key personnel who have substantial experience with our operations, we must also develop our personnel to provide succession plans capable of maintaining continuity in the midst of the inevitable unpredictability of human capital. However, the market for qualified personnel is competitive, and we may not succeed in recruiting additional personnel or may fail to effectively replace current personnel who depart with qualified or effective successors. We must continue to hire additional personnel to execute our strategic plans. Our effort to retain and develop personnel may also result in significant additional expenses, which could adversely affect our profitability. Despite the existence of multiple long term compensation and career development programs in place, we cannot assure you that our qualified employees will continue to be employed by us or that we will be able to attract and retain qualified personnel in the future and the failure to retain or attract key personnel could have a material adverse effect on our business, financial condition and results of operations.
The asset management business is highly competitive with numerous competitors with greater resources
The asset management business is highly competitive with a large number of both local and international managers, many of which have greater scale and capital resources. Competition in the industry is intense across a variety of dimensions including, but not limited to, investment performance, the quality of service provided to clients, product and asset class offerings and expertise, fees and fund terms, geographic focus, brand recognition and business reputation.
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Furthermore, if we are unable to attract new clients or retain existing clients, our assets under management and revenues, earnings, and cash flows could decline, impacting our ability to support our investment teams and investment products, and adversely impacting our ability to service our clients, further impacting our ability to attract new investors.
We compete for investments as well as investor capital with a large number of other entities, including but not limited to various regional and global traditional and alternative asset management firms, to commercial banks, investment banks, sovereign wealth funds, as well as corporate and private investors. Additionally, developments in financial technology, or fintech, such as Artificial Intelligence (AI), and distributed ledger technology, or blockchain, have the potential to disrupt the financial industry and change the way financial institutions, as well as asset managers, do business. A number of factors serve to increase our competitive risks:
•many of our competitors may have greater financial resources with which to invest in their business, retain staff, create or acquire new strategies, and reinvest in the infrastructure of their business;
•competitors' investment performance may be superior to that of our investment products and/or may have lower fee structures;
•investor demand for the types of investment products and strategies we offer may diminish due to factors outside our control such as shifting geopolitical, economic and macro factors;
•some of our competitors may have greater access to a variety of funding sources, allowing them to pursue and take advantage of a wider range of investment opportunities;
•some competitors may operate in jurisdictions with less regulation and greater flexibility to undertake and execute certain businesses or investments;
•as we look to expand the global and regional reach of our business, many competitors may have greater investment expertise, infrastructure and scale in the regions and investment strategies in which we seek to expand;
•some of our competitors may adopt new technologies and expand capabilities more rapidly, providing them with competitive advantages in terms of operating efficiency and/or investment performance and new product offerings;
•barriers to entry in the investment management industry tend to be low;
•some of our competitors for certain investments may, as corporate buyers, be able to achieve synergistic cost savings with respects to an investment, which may provide them with a competitive advantage in bidding for an investment;
•the highly competitive nature of the industry means it may be difficult to retain and recruit talented investment professionals and employees if other managers have greater resources and/or are willing to pay a higher level of compensation and benefits or otherwise provide a more attractive work environment.
Investor investment preferences can change over time in response to shifting asset allocation objectives, macroeconomics, geopolitics and other factors outside of our control.
There is a risk that our fees and fund fees in the alternative investment management industry will decline as return profiles shift over time, new products and strategies are developed, new competitors emerge, and overall competitive dynamics of the industry change, including a greater number of competitors who seek to compete on price and costs.
Our organizational documents do not limit our ability to enter into new lines of businesses, and expansion into new investment strategies, markets, lines of business may introduce new risks and uncertainties into our business.
Our plan is to continue to grow our investment businesses and expand into new investment strategies, asset classes, and geographic markets. Our organizational documents do not limit us to the investment management business and we have pursued and may continue to pursue growth through the acquisition of investment management companies, as well as other businesses, in addition to various other strategic initiatives such as, but not limited to, joint ventures and/or majority or minority stakes in various businesses. To the extent we make strategic investments or acquisitions, or undertake other strategic initiatives such as entering a new line of business, our business will potentially face a variety of additional risks and uncertainties, including risks associated with (1) the required investment of capital and other resources, (2) the possibility that we have insufficient expertise to engage in such activities profitably or without incurring inappropriate amounts of risk, (3) the diversion of management’s attention from our core businesses, (4) the assumption of the liabilities of any acquired business, (5) the disruption of our existing businesses, (6) the complexity of combining or integrating operational and management systems and controls, (7) compliance with additional regulatory requirements and (8) the broadening of our geographic footprint, including the risks associated with conducting operations in several jurisdictions.
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Entry into new lines of business may subject us to new laws and regulations with which we are not familiar, or from which we are currently exempt, and may have the potential to lead to increased litigation, as well as higher levels of tax and regulatory risk. For example, we have undertaken business initiatives to offer credit funds and publicly-traded real estate funds (known in Brazil as a Fundo de Investimento Imobiliário, or “FII”) and to increase the number and type of investment products we offer to family offices and high net worth individuals. These activities have and will continue to impose additional compliance burdens on us and could also subject us to enhanced regulatory scrutiny and expose us to greater reputational and litigation risks. In addition, if a new business generates insufficient revenues or if we are unable to efficiently manage our expanded operations or to successfully overcome the challenges we may face in expanding into new businesses our results of operations will be adversely affected. Our strategic initiatives may include, among other things, initiatives seeking to expand our and our Portfolio Companies’ management and operational capabilities, and entry into joint ventures, which may require us to be dependent on, and subject us to liability, losses or reputational damage relating to, systems, controls and personnel that are not under our control.
If we are unable to consummate or successfully integrate new business initiatives, including acquisitions or joint ventures, we may not be able to implement our growth strategy successfully.
Our growth strategy is based, in part, on the selective internal development of new investment solutions as well as the acquisition of complementary investment strategies and investment managers and related businesses which we believe will be additive to our financial results and growth over time. The success of this strategy will be dependent upon a variety of factors including, but not limited to: (1) the availability of suitable acquisition opportunities and our ability to negotiate acceptable transaction terms, (2) the level of competition from competitors, many of which may have greater financial resources and/or superior investment performance and other attributes, (3) our ability to successful identify new business initiatives, build the necessary infrastructure, and fund new product development, (4) our ability to obtain the requisite approvals and licenses from the relevant governmental authorities and to comply with applicable laws and regulations without incurring undue costs and delays, (5) our ability to identify and enter into mutually beneficial relationships with venture partners, and (6) our ability to generate attractive investment returns in both existing and acquired investment strategies. Moreover, even if we are able to identify and successfully complete an acquisition, we may encounter unexpected difficulties or incur unexpected costs associated with integrating and overseeing the operations of the new businesses. If we are not successful in implementing our growth strategy, our business, financial results and the market price for our Class A common shares may be adversely affected.
Changes in relevant tax laws, regulations or treaties or an adverse interpretation of these items by tax authorities could adversely impact our effective tax rate and tax liability.
All jurisdictions in which we operate have enacted transfer pricing rules, and tax authorities globally continue to increase scrutiny of cross-border transactions and related-party arrangements. Ongoing developments in international tax frameworks – such as changes in tax laws, regulations, administrative guidance, or bilateral or multilateral treaties — could adversely impact our deductibility of expenses, allocation of taxable profits and taxation of our legal entities, funds and Portfolio Companies. For further details, see “Item 5 Operating and Financial Review and Prospects—A. Operating Results” and the notes to our audited consolidated financial statements included elsewhere in this annual report.
Adverse interpretations or enforcement positions taken by tax authorities, including those related to transfer pricing, permanent establishment, withholding taxes, indirect taxes, or controlled‑foreign‑corporation rules, could result in increased tax liabilities, higher compliance costs, or protracted tax disputes. Any such developments could materially impact our effective tax rate, cash tax obligations, and financial results.
Our effective tax rate and tax liability is based on the application of current income and revenues tax laws, regulations and treaties. These laws, regulations and treaties are complex, and the manner in which they apply to us and to the funds and other investment vehicles we manage is sometimes open to interpretation. Furthermore, applicable tax authorities may have differing interpretations and guidance with respect to certain tax matters specific to the industry in which we operate (including multi-jurisdictional aspects). Significant management judgment is required in determining our provision for income taxes, our deferred tax assets and liabilities and any valuation allowance recorded against our net deferred tax assets. Although management believes its application of current laws, regulations and treaties to be correct and sustainable upon examination by the tax authorities, the tax authorities could challenge our interpretation resulting in additional tax liability or adjustment to our income and revenues tax provision that could increase our effective tax burden.
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Nonresident investors may enjoy certain tax benefits for investing in private equity funds in Brazil (under Brazilian Law No. 11,312/06) that may not be maintained if changes in tax rules occur or an adverse interpretation of such laws by tax authorities and/or courts prevails. In recent years, the Brazilian Federal Revenue Service has been reviewing its interpretation and questioning the commonly used investment structures utilized for private equity investments in Brazil by nonresident investors and, in certain cases, has initiated tax claims related to the alleged failure to withhold income taxes due to the non-compliance with requirements of the tax benefits. If the law establishing such tax benefits is not maintained or an adverse interpretation by tax authorities and/or courts regarding such benefits prevails, our after-tax returns could be adversely affected, which might affect our ability to raise capital, capital return and consequently affect our prospects and results of operations.
Furthermore, all the jurisdictions in which we operate have enacted rules on transfer pricing that require transactions to be conducted on arm’s-length terms. Brazil did not comprehensively adopt the arm’s length terms until December 28, 2022, when Provisional Measure No. 1,152/2022, later converted into Law No. 14,596/2023, was enacted to adapt the Brazilian transfer pricing rules to fully adopt the arm’s length standard. These provisions became effective as of January 2024, except for taxpayers who chose to apply these rules in 2023.
We regularly obtain advice regarding, inter alia, transfer pricing from external tax advisors. We seek to ensure that transactions conducted between and among us and our subsidiaries, including, but not limited to, provision of marketing, investor relations, investment advisory and business support services, are made on a commercial basis and consistent with the arm’s length principle as set forth under the Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations issued by the Organization for Economic Co-Operation and Development (the “OECD Guidelines”), as well as local legislation of the entities involved in the controlled transactions. However, we are subject to the risk that tax authorities in the jurisdictions in which we operate could dispute our practices, which could adversely affect our business.
As a consequence of globalization and growing world trade, tax authorities worldwide have increased their focus on transfer pricing with respect to cross border transactions, as part of protecting their respective country’s tax base. In the event the tax authorities in the jurisdictions where we operate consider the pricing not to be on arm’s-length terms and were to succeed with such claims, this could result in an increased tax cost, including tax surcharges and interest.
There can be no assurance that we will not be a passive foreign investment company (“PFIC”), for any taxable year, which could subject United States investors in our Class A common shares to significant adverse U.S. federal income tax consequences.
Under the Internal Revenue Code of 1986, as amended (the “Code”), we will be a PFIC for any taxable year in which either (1) 75% or more of our gross income consists of “passive income”, or (2) 50% or more of the average quarterly value of our assets consists of assets that produce, or are held for the production of “passive income.” For this purpose, subject to certain exceptions, passive income includes interest, dividends, rents, gains from the sale or exchange of property that gives rise to such income, gains from the sale of partnership interests and gains from transactions in commodities. We do not believe we were a PFIC for our 2024 taxable year. However, there can be no assurance that the Internal Revenue Service (the “IRS”), will agree with our conclusion. Moreover, our PFIC status is a factual determination that is made on an annual basis. Whether we will be a PFIC in 2025 or in any future year is uncertain because, among other things, our PFIC status depends on the composition of our income and assets and the market value of our assets from time to time (which may be determined, in part, by reference to the market price of our Class A common shares). In addition, it is uncertain whether certain types of income we derive are characterized as passive income for purposes of determining our PFIC status. Accordingly, there can be no assurance that we will not be a PFIC for any taxable year.
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If we were a PFIC for any taxable year during which a U.S. Holder (as defined in “Item 10. Additional Information—E. Taxation—Material U.S. Federal Income Tax Considerations for U.S. Holders”) held our Class A common shares (assuming such U.S. Holder has not made and maintained a timely election described under “Item 10. Additional Information—E. Taxation—Material U.S. Federal Income Tax Considerations for U.S. Holders”), gain recognized by the U.S. Holder on a sale or other disposition (including certain pledges) of the Class A common shares would be allocated ratably over the U.S. Holder’s holding period for the Class A common shares. The amounts allocated to the taxable year of the sale or other disposition and to any year before we became a PFIC would be taxed as ordinary income. The amount allocated to each other taxable year would be subject to tax at the highest rate in effect for individuals or corporations, as appropriate, for that taxable year, and an interest charge would be imposed on the tax on such amounts. Further, to the extent that any distributions received by a U.S. Holder on its Class A common shares during a taxable year exceed 125% of the average of the annual distributions on such Class A common shares received during the preceding three years or the U.S. Holder’s holding period, whichever is shorter, those distributions would be subject to taxation in the same manner as gain. U.S. Holders should consult their tax advisors concerning our potential PFIC status and the potential application of the PFIC rules.
Our business is highly dependent on information systems, technology infrastructure, and third‑party service providers, and cybersecurity incidents, system failures, or other disruptions could result in data loss, business interruptions, regulatory actions, reputational harm, and financial losses, which could have a material adverse effect on our business and results of operations.
Our operations rely extensively on the availability, reliability, and security of our information systems and technology infrastructure, including our financial, accounting, communications, and other data processing systems. We also depend on external service providers for certain critical aspects of our business, including fund administration, market information and data, technology platforms, data centers, processing, and other supporting functions, many of which are cloud‑based. In addition, the continued operation of our multiple offices across several countries, as well as the infrastructure supporting those locations, is critical to our day‑to‑day business activities and may bring conflict across jurisdictions, and impose strict requirements on data collection, use, storage, transfer and reporting.
These systems and service providers are subject to a variety of risks, including cybersecurity incidents, system outages, processing errors, service disruptions, capacity limitations, natural disasters, acts of terrorism, vandalism, sabotage, and other events beyond our control. We face ongoing and evolving data privacy risks and cybersecurity threats, which have increased in frequency and sophistication and, in some instances in the past, have included attempts to gain unauthorized access to our proprietary or confidential information, destroy or manipulate data, disrupt or degrade systems, or divert or steal funds. These threats may arise from a wide range of sources, including cybercriminals, nation‑state actors, hacktivists, or insider actions, whether malicious or inadvertent. As an alternative asset management firm, we hold significant amounts of sensitive and confidential information relating to our investors, funds, Portfolio Companies, and potential investments, which may increase our exposure to these risks. Moreover, the integration or use of artificial intelligence (“AI”) in our or our third‑party service providers’ operations may introduce new or unforeseen cybersecurity risks and challenges. For additional information regarding our cybersecurity risk‑management framework and incident‑response processes, see “Item 16K. Cybersecurity”.
Failures, vulnerabilities, or disruptions affecting our systems or those of our third‑party service providers—whether resulting from a cyberattack, failure to timely update or enhance systems, an inability to accommodate business growth, or an interruption in services or facilities—could result in the loss, misuse, or unavailability of data; interruptions to our operations; increased operational and remediation costs; liability to our funds, investors, employees, or counterparties; litigation; and damage to our reputation. Our disaster recovery and business continuity plans may not be adequate to address all such risks, and insurance coverage or other safeguards may be unavailable or insufficient to fully offset the resulting losses.
We are subject to a growing number of laws and regulations across multiple jurisdictions relating to cybersecurity, data privacy, and the protection of personal information, including requirements to notify affected individuals and regulators of certain data breaches, which impose increasing time, resources, and compliance costs. Any failure to comply with these requirements, or to provide timely and appropriate notifications, could result in regulatory investigations, fines, penalties, enforcement actions, negative publicity, and a loss of confidence by investors and clients. In addition, our Portfolio Companies also rely on secure data processing and information systems, and a compromise or disruption of those systems could adversely affect their operations and reduce the value of our investments. Certain Portfolio Companies or assets, including strategic or infrastructure assets or those operating in jurisdictions with less developed legal protections for data and intellectual property, may face heightened risks of theft, compromise, or government‑mandated restrictions, which could further increase our exposure to these risks.
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We may not be able to successfully manage our intellectual property and may be subject to infringement claims.
We rely on a combination of contractual rights, trademarks, trade secrets, copyrights, domain names and software to establish and protect our business. Third parties may challenge, invalidate, circumvent, infringe or misappropriate our intellectual property, including at the administrative or judicial level, or such intellectual property may not be sufficient to permit us to take advantage of current market trends or otherwise to provide competitive advantages, which could result in costly redesign efforts, the discontinuance of certain service offerings or other competitive and operational harm. Others, including our competitors, may independently develop similar technology, duplicate our services or design around our intellectual property, and in such cases, we could not assert our intellectual property rights against such parties.
Further, our contractual arrangements may not effectively prevent disclosure of our confidential information or provide an adequate remedy in the event of unauthorized disclosure of our confidential information. We may have to litigate to enforce or determine the scope and enforceability of our intellectual property rights, trade secrets and know-how, which is expensive, could cause a diversion of resources and may not prove successful. It is not possible to guarantee that non-disclosure and confidentiality agreements, or invention assignment agreements, have been concluded with all parties who may have or have had access to our trade secrets or proprietary information, or who have otherwise participated in the development of our intellectual property assets. Also, because of the rapid pace of technological change in our industry, aspects of our business and our services rely on technologies developed or licensed by third parties, and we may not be able to obtain or continue to obtain licenses and technologies from these third parties on reasonable terms or at all. The loss of intellectual property protection, the inability to obtain third-party intellectual property or delay or refusal by relevant regulatory authorities to approve pending intellectual property registration applications could harm our business and ability to compete. With respect to trademarks, loss of rights may result from term expirations, owner abandonment and forfeiture or cancellation proceedings before the Brazilian Patent and Trademark Office (Instituto Nacional da Propriedade Industrial) (“INPI”) or authorities in other relevant jurisdictions. In addition, if we lose rights over registered trademarks, we would not be entitled to use such trademarks on an exclusive basis and, therefore, third parties would be able to use similar or identical trademarks to identify their products or services, as well as claim that our use of such marks infringes their intellectual property rights, which could adversely affect our business.
Rapidly developing and changing global privacy laws and regulations could increase compliance costs and subject us to enforcement risks and reputational damage.
We, the funds we manage, and their Portfolio Companies are subject to various risks and costs associated with the collection, processing, storage and transmission of personally identifiable information (“PII”), and other sensitive and confidential information. This data is wide ranging and relates to our investors, employees, contractors and other counterparties and third parties. Our compliance obligations include those relating to the Cayman Islands Data Protection Act and Brazilian laws such as the Brazilian General Personal Data Protection Law (Lei Geral de Proteção de Dados Pessoais) ("LGPD"), a comprehensive personal data protection law establishing general principles and obligations that applies across multiple economic sectors and contractual relationships and Brazilian bank secrecy laws, as well as obligations relating to data collection and privacy laws in jurisdictions in which we operate, including, for example, the GDPR in Europe, the Data Protection Act in the UK, the Hong Kong Personal Data (Privacy) Ordinance, and equivalent laws in other countries such as Dubai, Colombia, Uruguay, United States, Chile, among others.
Global laws relating to foreign data collection and privacy are rapidly increasing in the scale and depth of their requirements, and are also often extra-territorial in nature. Any additional privacy laws or regulations enacted or approved in the jurisdictions in which we operate could seriously harm our business, financial condition or results of operations. In addition, a wide range of regulators are seeking to enforce these laws across regions and borders. Furthermore, we frequently have privacy compliance requirements as a result of our contractual obligations with counterparties. These legal and contractual obligations heighten our privacy obligations in the ordinary course of conducting our business in all jurisdictions where we operate.
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While we have taken various measures and made significant efforts and investment to ensure that our policies, processes and systems are both robust and in compliance with these obligations, our potential liability remains, particularly given the continued and rapid development of privacy laws and regulations around the world, and increased enforcement action. Any inability, or perceived inability, by us or our Portfolio Companies to adequately address privacy concerns, or comply with applicable laws, regulations, policies, industry standards and guidance, contractual obligations, or other legal obligations, even if unfounded, could result in significant regulatory and third-party liability, increased costs, disruption of our and our Portfolio Companies’ business and operations, and a loss of client (including investor) confidence and other reputational damage. Furthermore, as new privacy-related laws and regulations are implemented, the time and resources needed for us and our Portfolio Companies to comply with such laws and regulations continue to increase and become a significant compliance work stream.
Extensive regulation of our businesses affects our activities and creates the potential for significant liabilities and penalties. The possibility of increased regulatory focus could result in additional burdens on our business.
Our business is subject to extensive regulations, including periodic examinations, by governmental agencies and self-regulatory organizations in the jurisdictions in which we operate around the world. These authorities have regulatory powers dealing with many aspects of financial services, including the authority to grant, and in specific circumstances to cancel, permissions to carry on particular activities. Many of these regulators, government agencies and self-regulatory organizations are also empowered to conduct investigations and administrative proceedings that can result in fines, suspensions of personnel, changes in policies, procedures or disclosure or other sanctions, including the issuance of cease-and-desist orders, the suspension or expulsion of an investment adviser from registration or memberships or the commencement of a civil or criminal lawsuit against us or our personnel.
Moreover, the financial services industry continues to be subject to heightened scrutiny, and regulators are focusing attention on alternatives. In that connection, in recent years the SEC’s stated examination priorities have included, among other things, private equity firms’ disclosure and collection of fees and allocation of expenses, their marketing and valuation practices, allocation of investment opportunities, prevention of insider trading, and policies and procedures with respect to conflicts of interest and compliance measures customized to the actual circumstances. We are regularly subject to requests for information and informal or formal investigations by regulatory authorities with which we routinely cooperate, and which have included review of historical practices that were previously examined. Such investigations have previously and may in the future result in deficiency letters, penalties and other sanctions.
Actions and initiatives by regulators can have an adverse effect on our financial results, including as a result of the imposition of a sanction, a limitation on our or our personnel’s activities, or changing our historic practices. Even if an investigation or proceeding did not result in a sanction or the sanction imposed against us or our personnel by a regulator were small in monetary amount, the adverse publicity relating to the investigation, proceeding or imposition of these sanctions could harm our reputation and cause us to lose existing clients or fail to gain new clients.
We are exposed to certain risks that are particular to investing in emerging and other markets.
In maintaining significant investment exposure, in emerging markets in Latin America, we are subject to political, economic, legal, operational and other risks that are inherent to operating and investing in these countries. These risks range from difficulties in settling transactions in emerging markets due to possible nationalization, expropriation, price controls and other restrictive governmental actions. We also face the risk that exchange controls or similar restrictions imposed by foreign governmental authorities may restrict our ability to convert local currency received or held by us in their countries into U.S. dollars or other currencies, or to take those dollars or other currencies out of those countries.
Political developments in Latin America, including government deadlock, material changes to the constitution, political instability and civil strife could impact our operations and have a material adverse effect on our business, financial condition, and results of operations. For instance, on January 3, 2026, the United States launched a series of strikes against Venezuela and captured and removed former President Maduro and his wife, Cilia Flores, from the country. Following the U.S. strikes, Venezuela announced a state of national emergency, and the Vice President, Delcy Rodriguez, has been elevated to the Presidency of Venezuela.
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We rely on complex exemptions from statutes in conducting our asset management activities.
We regularly rely on exemptions from various requirements of the U.S. Securities Act of 1933, as amended (the “Securities Act”), the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”), the U.S. Investment Company Act of 1940, as amended (the “Investment Company Act”), the Commodity Exchange Act and the U.S. Employee Retirement Income Security Act of 1974, as amended, in conducting our asset management activities. These exemptions are sometimes highly complex and may in certain circumstances depend on compliance by third parties whom we do not control. If for any reason these exemptions were to become unavailable to us, we could become subject to regulatory action or third-party claims and our business could be materially and adversely affected. For example, the “bad actor” disqualification provisions of Rule 506 of Regulation D under the Securities Act ban an issuer from offering or selling securities pursuant to the safe harbor rule in Rule 506 if the issuer or any other “covered person” is the subject of a criminal, regulatory or court order or other “disqualifying event” under the rule which has not been waived. The definition of “covered person” includes an issuer’s directors, general partners, managing members and executive officers; affiliates who are also issuing securities in the offering; beneficial owners of 20% or more of the issuer’s outstanding equity securities; and promoters and persons compensated for soliciting investors in the offering. Accordingly, our ability to rely on Rule 506 to offer or sell securities would be impaired if we or any “covered person” is the subject of a disqualifying event under the rule and we are unable to obtain a waiver. The requirements imposed by our regulators are designed primarily to ensure the integrity of the financial markets and to protect investors in our investment funds and are not designed to protect the holders of our Class A common shares. As a result, they may restrict our activities and impose substantial compliance and operational burdens.
We are subject to increasing scrutiny from certain investors with respect to the societal and environmental impact of investments made by our funds, which may constrain capital deployment opportunities for our funds and adversely impact our ability to raise capital from such investors.
In recent years, certain investors, including public pension funds, have placed increasing importance on the potential negative impacts of investments made by the private equity and other funds to which they commit capital, including with respect to environmental, social, and governance matters. Certain investors have also demonstrated increased demands and expectations with respect to existing investments, including by urging asset managers to take certain actions that could adversely impact the value of an investment, or refrain from taking certain actions that could improve the value of an investment. At times, investors have conditioned future capital commitments on the taking or refraining from taking of such actions. Increased focus and activism related to environmental, social, governance, and similar matters may constrain our capital deployment opportunities, and the demands of certain investors, including public pension funds, may further limit the types of investments that are available to our funds. In addition, investors, including public pension funds, which represent an important portion of our funds’ investor bases, may decide to withdraw previously committed capital from our funds (where such withdrawal is permitted) or to not commit capital to future fundraises as a result of their assessment of our approach to and consideration of the social and environmental cost of investments made by our funds. To the extent our access to capital from investors, including public pension funds, is impaired, we may not be able to maintain or increase the size of our funds or raise sufficient capital for new funds, which may adversely impact our revenues.
In addition, environmental, social, and governance matters and concerns relating to the use of misleading labels and marketing materials in relation to investment products have been the subject of increased focus by regulatory authorities in the EU. For example, in 2021 requirements under Regulation (EU) 2019/2088, also known as the Sustainable Finance Disclosure Regulation ("SFDR"), came into force. The SFDR was introduced to improve transparency in the market for sustainable investment products, to prevent greenwashing and to increase transparency around sustainability claims made by, among others, fund and asset managers. In 2022, the EU Taxonomy Regulation (Regulation (EU) 2020/852) entered into force. The Taxonomy Regulation establishes a framework for classifying whether an economic activity is “environmentally sustainable.” As a result of these and other legislative initiatives, we may be required to provide additional disclosure to EU-based investors in our funds with respect to environmental, social, and governance matters.
Furthermore, global sustainability disclosure standards are rapidly evolving following the creation of the International Sustainability Standards Board ("ISSB") and the issuance of IFRS S1 – General Requirements for Disclosure of Sustainability‑related Financial Information and IFRS S2 – Climate‑related Disclosures. The voluntary adoption of these standards began in January 2024, and mandatory adoption is scheduled for January 2026. This global shift may significantly increase the level of detail, structure, and consistency expected by investors — including public pension funds — regarding how sustainability‑related risks and opportunities affect enterprise value.
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In addition, the ISSB has already initiated new standard‑setting projects — expected to evolve into future IFRS S3, S4 and potentially others — covering biodiversity, ecosystems, and nature‑related risks and opportunities, as confirmed during the ISSB meeting held on January 28, 2026. These emerging standards may expand reporting obligations beyond climate to additional environmental and social dimensions, increasing both the breadth and granularity of required disclosures for investment managers and private equity sponsors.
Although we strive to improve our assessment and monitoring of environmental, social, and governance matters regarding our different funds and their investments, in order to pertinently address regulatory and investor expectations, we may fail to do so successfully. Our approach intends to timely identify and address financially material environmental, social, and governance matters. However, we are subject to increasing scrutiny and enhanced requirements on such matters, which may result in constraints to certain capital deployment opportunities for our funds and adversely impact our ability to raise additional capital.
We are subject to substantial litigation risks and may face significant liabilities and damage to our professional reputation as a result of litigation allegations and negative publicity.
In recent years, the volume of claims and amount of damages claimed in litigation and regulatory proceedings against the financial services industry in general have been increasing and are generally expected to continue to increase in the future. The investment decisions we make in our asset management business and the activities of our investment professionals on behalf of Portfolio Companies may subject the companies, funds and us to the risk of third-party litigation arising from investor dissatisfaction with the performance of those investment funds, alleged conflicts of interest, the suitability or manner of distribution of our products, the activities of our funds’ Portfolio Companies, including labor, tax, criminal and environmental claims related thereto, as well as a variety of other litigation claims.
In addition, authorities may, in some cases, apply legal doctrines such as piercing the corporate veil or enact legal statutes that impose joint and several liability or secondary liability, holding controlling shareholders and other companies of an economic group jointly liable for labor, social security, consumer related and environmental obligations, even in the absence of fraudulent conduct. Accordingly, our Portfolio Companies and our funds may be subject to judicial and administrative proceedings related to debts, contingencies or liabilities related to our Portfolio Companies as a whole, and we may ultimately be liable for those debts, contingencies and liabilities if we do not successfully defend ourselves in such proceedings.
The costs and effects of pending and future litigation, investigations or similar matters, or adverse facts and developments related thereto, could materially affect our business, financial position and results of operations. From time to time we, our funds and our funds’ public Portfolio Companies may be subject to securities class action lawsuits by shareholders, as well as class action lawsuits that challenge our acquisition transactions and/or attempt to enjoin them.
In addition, to the extent investors in our investment funds suffer losses resulting from fraud, gross negligence, willful misconduct or other similar misconduct, investors may have remedies against us, our investment funds, our senior managing directors or our affiliates under the relevant securities laws. While the general partners and investment advisers to our investment funds, including their directors, officers, other employees and affiliates, are generally indemnified to the fullest extent permitted by law with respect to their conduct in connection with the management of the business and affairs of our investment funds, such indemnity does not extend to actions determined to have involved fraud, gross negligence, willful misconduct or other similar misconduct.
The activities of our capital markets services business may also subject us to the risk of liabilities to our clients and third parties, including our clients’ shareholders, under securities or other laws in connection with transactions in which we participate.
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If any private lawsuits or regulatory actions were brought against us and resulted in a finding of substantial legal liability, it could materially adversely affect our business, financial condition or results of operations or cause significant reputational harm to us, which could seriously harm our business. We depend to a large extent on our business relationships and our reputation for integrity and high-caliber professional services to attract and retain investors and to pursue investment opportunities for our funds. As a result, allegations of improper conduct by private litigants, regulators, or employees, whether the ultimate outcome is favorable or unfavorable to us, as well as negative publicity and press speculation about us, our investment activities, our lines of business or distribution channels, our workplace environment, or the private equity industry in general, whether or not valid, may harm our reputation, which may be more damaging to our business than to other types of businesses.
Further, disputes might arise in relation to the business activities of the funds managed by Patria, or certain of the Portfolio Companies of the funds managed by Patria, or the performance of the service providers thereunder. To the extent that any client of our funds, Portfolio Companies, or their service providers disagrees with us on the quality of the products or services, terms and conditions of the payment or other provisions of such services, we may face claims, disputes, litigation or other proceedings initiated by such clients against us. We may incur substantial expenses and require significant attention of management in defending against these claims, regardless of their merit. We could also face damage to our reputation as a result of such claims, and our business, financial condition, results of operations and prospects could be materially and adversely affected.
Misconduct or other improper activities, including non-compliance with regulatory standards or insider trading by our employees, consultants or subcontractors could harm us by impairing our ability to attract and retain clients and subjecting us to significant legal liability and reputational harm. Fraud and other deceptive practices or other misconduct at our funds’ Portfolio Companies could similarly subject us to liability and reputational damage and also harm performance.
Our employees, consultants and subcontractors could engage in misconduct or other improper activities, including non-compliance with regulatory standards and/or requirements and insider trading. We are subject to a number of obligations and standards arising from our asset management business and our authority over the assets managed by our asset management business. The violation of these obligations and standards by any of our employees, consultants and subcontractors would adversely affect our clients and us. Our business often requires that we deal with confidential matters of great significance to companies in which we may invest. If our employees, consultants and subcontractors were to improperly use or disclose confidential information, we could suffer serious harm to our reputation, financial position and current and future business relationships. We are also exposed to risks in connection with any insider trading violations by employees or others affiliated with us. Detecting or deterring employee misconduct is not always possible, and the extensive precautions we take to detect and prevent this activity may not be effective in all cases. If one of our employees, consultants and subcontractors were to engage in misconduct or other improper activities or were to be accused of such misconduct or other improper activities, our business and our reputation could be adversely affected.
In recent years, regulatory authorities across various jurisdictions, have increasingly focused on enhancing and enforcing anti-bribery laws. While we have developed and implemented policies and procedures designed to ensure strict compliance by us and our personnel with such laws, such policies and procedures may not be effective in all instances to prevent violations. Any determination that we have violated the anti-bribery laws or other applicable anti-corruption laws could subject us to, among other things, civil and criminal penalties or material fines, profit disgorgement, injunctions on future conduct, securities litigation and a general loss of investor confidence, any one of which could adversely affect our business prospects, financial position or the market value of our Class A common shares.
In addition, we may also be adversely affected if there is misconduct by personnel of Portfolio Companies in which our funds invest. For example, financial fraud or other deceptive practices at our funds’ Portfolio Companies, or failures by personnel at our funds’ Portfolio Companies to comply with anti-bribery, trade sanctions, anti-harassment or other legal and regulatory requirements, could subject us to, among other things, civil and criminal penalties or material fines, profit disgorgement, injunctions on future conduct and securities litigation, and could also cause significant reputational and business harm to us. Such misconduct may undermine our due diligence efforts with respect to such Portfolio Companies and could negatively affect the valuations of the investments by our funds in such Portfolio Companies. In addition, we may face an increased risk of such misconduct resulting from our emphasis in making investments in Latin America.
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Poor performance of our investment funds would cause a decline in our revenue, income and cash flow, may obligate us to repay performance allocations previously paid to us, and could adversely affect our ability to raise capital for future investment funds.
In the event that any of our investment funds were to perform poorly, our revenue, income and cash flow would decline because the value of our assets under management would decrease, which would result in a reduction in management fees, and our investment returns would decrease, resulting in a reduction in the performance allocations and incentive fees we earn. Moreover, we could experience losses on our investments of our own principal as a result of poor investment performance by our investment funds. Furthermore, if, as a result of poor performance of later investments in a carry fund’s life, the fund does not achieve certain investment returns for the fund over its life, we will be obligated to repay the amount by which performance allocations that were previously distributed to us exceed the amount to which the relevant general partner is ultimately entitled.
Investors and potential investors in our funds continually assess our investment funds’ performance, and our ability to raise capital for existing and future investment funds and avoid excessive redemption levels will depend on our investment funds’ continued satisfactory performance. Accordingly, poor fund performance may deter future investment in our funds and thereby decrease the capital invested in our funds and ultimately, our management fee revenue. Alternatively, in the face of poor fund performance, investors could demand lower fees or fee concessions for existing or future funds which would likewise decrease our revenue.
We Face Actual and Potential Conflicts of Interest Across Our Business
As our business expands across multiple strategies, asset classes, geographies and investment vehicles, we are increasingly exposed to actual and potential conflicts of interest. These conflicts may arise in connection with the allocation of investment and co‑investment opportunities, the use of material non‑public information (“MNPI”), the valuation of investments, the allocation of fees and expenses, and the provision of services by our affiliates to our funds or Portfolio Companies.
Certain of our funds and investments vehicles may pursue overlapping or complementary investment strategies and may target similar targets, issuers or industries, while also operating under differing investment mandates, profile, fee structures, or incentive arrangements. As a result, an investment opportunity may be suitable for more than one fund or vehicle. Decisions regarding allocation often require the exercise of judgment and discretion, and may be challenged by investors or regulators. In addition, differences in fee or incentives arrangements may create incentives to allocate investment or co‑investment opportunities to certain funds or investors over others. We also have broad discretion in determining whether and how to offer co‑investment opportunities, and the terms of co‑investment vehicles may differ from those of our funds, which may give rise to additional conflicts.
We may cause different funds or investment vehicles to invest in the same portfolio company or in different classes of securities of that company, which may create conflicts if the company experiences financial distress or if the interests of the funds diverge.
Our policies and procedures, including information‑barrier arrangements designed to manage MNPI and other regulatory requirements, may limit the sharing of information or investment ideas across our businesses and reduce potential synergies. The increasing use of alternative data and AI‑enabled tools may heighten the risk of inadvertently receiving or using MNPI, which can restrict trading or investment activity for certain funds and create additional conflicts.
We do not control the day‑to‑day operations of Portfolio Companies, and misconduct or compliance failures at the portfolio company level may not be detected or prevented by us. Such events could expose us and our funds to regulatory scrutiny, litigation or reputational harm. Any failure, or perceived failure, to appropriately identify, manage or disclose actual or potential conflicts of interest could result in regulatory action, fines, litigation, reputational damage or adverse effects on our ability to raise additional capital, retain investors or grow our business.
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The historical investment performance attributable to our various investment strategies and products should not be considered as indicative of future performance of those strategies and products or of prospective returns from ownership of our Class A common shares.
The historical and potential future investment returns of the various investment strategies and products we manage are not directly linked to returns on our Class A common shares. Therefore, any positive performance of the investment products that we manage are not necessarily correlated to returns to be expected from an investment in our Class A common shares. However, poor performance of the investment products we manage could result in a decline in our assets under management and revenue due to either negative investment performance and/or decreased demand for or increased redemptions from our various investment strategies. This would have a negative effect on our financial results and potentially the returns a shareholder might experience from an investment in our Class A common shares.
Moreover, with respect to the historical returns of our investment funds:
•we may create new funds in the future that reflect an asset mix and investment strategies when compared to our current investment products. These new funds may differ from our current funds in terms of their geographic and industry exposure and mix, which could result in investment returns that differ from those of our existing strategies;
•economic and various other conditions can at times be conducive to generating attractive investment returns, but there can be no assurance that such conditions will repeat or that our current or future investment funds will benefit from a favorable investment environment;
•the rates of returns of our carry funds reflect unrealized gains as of the applicable measurement date that may never be realized, and the ultimate returns realized could differ significantly from unrealized returns reported on any given applicable measurement date;
•competition for investment opportunities could make it more difficult to source or find attractive investment opportunities that meet the return objectives of our investment products;
•historic investment performance may have benefited from favorable investment opportunities and investment environments at different points in time, attributes which may not repeat in the future or otherwise be available; and
•with respect to closed end funds, newly established funds may generate low returns during the period in which they deploy their capital and until those investments have the potential to mature.
Prospective returns for any current or future investment product or strategy may vary considerably from the historical internal rate of return generated by any particular fund, product or strategy. In addition, future returns will be affected by the applicable risks described elsewhere in annual report, including risks that may be specific and unique to each applicable investment product.
The due diligence process that we undertake in connection with investments by our investment funds may not reveal all facts and issues that may be relevant in connection with an investment.
When evaluating a potential business or asset for investment, we conduct due diligence that we deem reasonable and appropriate based on the facts and circumstances applicable to such investment. When conducting due diligence, we may be required to evaluate important and complex issues, including but not limited to those related to business, financial, credit risk, tax, accounting, Environmental, Social and Governance ("ESG"), anti-corruption, Anti‑Money Laundering ("AML"), legal and regulatory and macroeconomic trends. With respect to ESG, the nature and scope of our diligence will vary based on the investment, but may include a review of, among other things: air and water pollution, diversity, employee health and safety, accounting standards and bribery and corruption. Outside consultants, legal advisers, accountants and investment banks may be involved in the due diligence process in varying degrees depending on the type of investment. The due diligence investigation that we will carry out with respect to any investment opportunity may not reveal or highlight all relevant facts (including fraud, money laundering and/or corruption) or risks that may be necessary or helpful in evaluating such investment opportunity and we may not identify or foresee future developments that could have a material adverse effect on an investment, including, for example, potential factors, such as technological disruption of a specific company or asset, or an entire industry. Further, some matters covered by our diligence, such as ESG, are continuously evolving and we may not accurately or fully anticipate such evolution. In addition, when conducting due diligence on investments, including with respect to investments made by our funds, we rely on the resources available to us and information supplied by third parties, including information provided by the target of the investment. The information we receive from third parties may not be accurate or complete and therefore we may not have all the relevant facts and information necessary to properly assess and monitor our funds’ investment.
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Our asset management activities involve investments in relatively high-risk, illiquid assets, and we may fail to realize any profits from these activities for a considerable period of time or lose some or all of our principal investments.
Our investment funds invest in securities that are not publicly traded. In many cases, our investment funds may be prohibited by contract or by applicable securities laws from selling such securities or a period of time. Our investment funds will generally not be able to sell these securities publicly unless their sale is registered under applicable securities laws, or unless an exemption from such registration is available. The ability of many of our investment funds, particularly our private equity funds, to dispose of investments may depend on the public equity markets. For example, the ability to realize value from an investment may depend upon the ability to complete an initial public offering of the portfolio company in which such investment is held. Even if the securities are publicly traded, large holdings of securities can often be disposed of only over a substantial length of time, exposing the investment returns to risks of downward movement in market prices during the intended disposition period. Moreover, because the investment strategy of many of our funds, particularly our private equity, infrastructure, credit and real estate funds, often entails our having representation on our funds’ public portfolio company boards, our funds may be restricted in their ability to effect such sales during certain time periods. Accordingly, under certain conditions, our investment funds may be forced to either sell securities at lower prices than they had expected to realize or defer—potentially for a considerable period of time—sales that they had planned to make. We have made and expect to continue to make significant principal investments in our current and future investment funds. Contributing capital to these investment funds is risky, and we may lose some or the entire principal amount of our investments.
Investors in many of our investment products, mainly, but not limited to, open-end and interval funds, as well as separately managed accounts, have the right to redeem their investments in our funds or, in the case of separate accounts, terminate our management of such account on short notice. Lastly, investors in many of our other investment funds have the right, under certain conditions, to cause those investment funds to be dissolved. The occurrence of any of these events have the potential to lead to substantial decreases in our assets under management and related revenues and earnings.
Investors in certain of our funds, mainly in, but not limited to our credit and public equities strategies, may redeem their investments on a periodic basis subject to the applicable fund’s specific redemption provisions. These funds have the potential to periodically experience declines in value due to either general declines in value in the markets in which they invest, or poor investment performance. These conditions have the potential to result in a rise in the pace of redemptions and asset outflows from our investment strategies, resulting in a reduction in our assets under management and related revenues and earnings. In addition, to the extent an investment strategy deploys leverage and sustains declines in value, such declines could have the potential to result in the forced liquidation of assets at unattractive values in order to meet margin calls.
To the extent appropriate and permissible under a fund’s governing documents, we may choose to limit or suspend investor redemptions, in order to protect against the adverse impact of having to sell assets at unfavorable prices in order to meet redemptions or, in some instances, margin calls. A suspension or limit on investors' ability to redeem from a fund could have a negative impact on our reputation with investors in our funds, as well as with investors in our Class A common shares. This could result in declines in the value of our Class A common shares.
The governing agreements of many of our investment funds provide that, subject to certain conditions, third party investors in those funds have the right to remove the general partner of the fund or to accelerate the termination date of the investment fund without cause by a specified percentage vote. Were this to occur, this would result in a reduction in our assets under management and related management fee and performance fee revenues and earnings we would earn from such investment funds. In addition, the governing agreements of most of our investment funds, including limited partnership agreements and private placement memoranda, provide that in the event certain “key persons” in our investment funds do not meet specified time commitments with regard to managing the fund, then investors in certain funds have the right to vote to terminate the investment period by a specified percentage vote in accordance with specified procedures, or accelerate the withdrawal of their capital on an investor-by-investor basis.
Furthermore, performance allocations and incentive fees could be negatively impacted as a result of our inability to maximize the value of investments we manage during the monetization or liquidation of investments in a given fund.
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Third-party investors in our investment funds with commitment-based structures may not satisfy their contractual obligation to fund capital calls when requested by us, which could adversely affect a fund’s operations and performance.
Investors in all of our funds make capital commitments to those funds that we are entitled to call from those investors at any time during prescribed periods. We depend on investors fulfilling their commitments when we call capital from them in order for those funds to consummate investments and otherwise pay their obligations (for example, management fees) when due. A default by an investor may also limit a fund’s availability to incur borrowings and avail itself of what would otherwise have been available credit. We have not had investors fail to honor capital calls to any meaningful extent. Any investor that did not fund a capital call would generally be subject to several possible penalties, including having a significant amount of its existing investment forfeited in that fund. However, the impact of the forfeiture penalty is directly correlated to the amount of capital previously invested by the investor in the fund and if an investor has invested little or no capital, for instance, early in the life of the fund, then the forfeiture penalty may not be as meaningful. Third-party investors in private equity, infrastructure, credit and real estate funds typically use distributions from prior investments to meet future capital calls. In cases where valuations of investors’ existing investments fall and the pace of distributions slows, investors may be unable to make new commitments to third-party managed investment funds such as those advised by us. If investors were to fail to satisfy a significant amount of capital calls for any particular fund or funds, the operation and performance of those funds could be materially and adversely affected.
Risk management activities may adversely affect the return on our funds’ investments.
Risk‑management activities, including the use of derivatives such as forward contracts, options, swaps, and other hedging instruments, are used from time to time to manage exposure to market risks. These activities may, however, adversely affect the returns of the investments.
The effectiveness of such strategies depends on our ability to anticipate market movements, the degree of correlation between derivative instruments and the underlying exposures, and the creditworthiness of counterparties. Even when implemented to reduce market risk, hedging transactions may result in lower overall performance than if no hedging had been undertaken and may limit potential gains when the value of hedged positions increases.
In addition, hedging activities may give rise to other risks, including liquidity risk arising from collateral or margin requirements, increased transaction and operational costs, and, in certain cases, regulatory changes that could increase the cost or complexity of using derivative instruments.
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Our infrastructure, direct private equity and real estate funds are subject to the risks inherent in the ownership and operation of infrastructure, private equity and real estate and the construction and development of infrastructure, private equity and real estate.
Investments in our infrastructure, private equity and real estate funds will be subject to the risks inherent in the ownership and operation of infrastructure, private equity and real estate and real estate-related businesses and assets, including the deterioration of infrastructure, private equity and real estate fundamentals. These risks include but are not limited to, those associated with the burdens of ownership of real property, general and local economic conditions, changes in the supply of and demand for competing properties in an area (as a result, for instance, of overbuilding), fluctuations in the average occupancy and room rates for hotel properties, operating income, the financial resources of tenants, changes in building, environmental, zoning and other laws, casualty or condemnation losses, energy and supply shortages, various uninsured or uninsurable risks, natural disasters, changes in government regulations (such as rent control or operational licenses), changes in real property tax rates, changes in income tax rates, changes in interest rates, the reduced availability of mortgage funds which may render the sale or refinancing of properties difficult or impracticable, increased mortgage defaults, increases in borrowing rates, changes to the taxation of business entities and the deductibility of corporate interest expense or other applicable tax exemptions or benefits, negative developments in the economy that depress travel activity, environmental liabilities, contingent liabilities on disposition of assets, acts of god, terrorist attacks, war, climate change and other factors that are beyond our control. Climate-related risks include both (1) physical risks, such as rise in temperature, sea-level rise, changes in precipitation patterns, fluctuations in water levels or more frequent occurrence of extreme temperatures, droughts or other extreme meteorological phenomena, such as cyclones or hurricanes and (2) transitional risks, such as changes in laws, regulations, policies, obligations, social attitudes and customer preferences relating to the transition to a lower-carbon economy, which could adversely impact our business and prospects. In addition, if our infrastructure, private equity and real estate funds acquire direct or indirect interests in undeveloped land or underdeveloped real property, which may often be non-income producing, they will be subject to the risks normally associated with such assets and development activities, including risks relating to the availability and timely receipt of zoning and other regulatory or environmental approvals and licenses, the cost and timely completion of construction (including risks beyond the control of our fund, such as weather or labor conditions or material shortages) and the availability of both construction and permanent financing on favorable terms. In addition, our real estate funds may also make investments in real estate projects and/or otherwise participate in financing opportunities relating to residential real estate assets or portfolios thereof from time to time, which may be more highly susceptible to adverse changes in prevailing economic and/or market conditions and present additional risks relative to the ownership and operation of commercial infrastructure, private equity or real estate assets.
Climate change can create transition risks, physical risks and other risks that could adversely affect us.
Climate-related risks can be an aggravating factor for the types of traditional risks that we encounter in the ordinary course of business, including without limitation the risks described in this “Risk Factors” section. Climate change may impact our market share through physical and transition risks. Risks associated with climate change are gaining increasing social, regulatory, economic and political relevance globally.
We strive to monitor increased regulatory compliance with climate-related risks that may result from the increased focus, pace, breadth, and depth of regulatory expectations requiring implementation in short time frames across multiple jurisdictions and from changes in public policy, laws, and regulations, of climate change and related environmental sustainability matters, such as the newly approved Sistema Brasileiro de Comércio de Emissões ("SBCE"), which introduces additional uncertainty for Portfolio Companies, as key regulatory definitions, reporting requirements, and enforcement mechanisms that are still being developed and are expected to be finalized by 2026. However, our efforts may not be successful in mitigating such climate-related risks. Climate-related risks are assessed considering internationally recognized sustainability standards and frameworks.
Based on the current global regulatory and market dynamics, we continue evolving how we assess climate-related risks across our business and the investments made by the funds we manage. Throughout a defined process, climate-related issues are considered in our investments where we assess climate-related risks at different moments and in different levels of depth in the due diligence stage of new investments. In our investments, we also seek to monitor KPIs related to GHG emissions, climate-related risks, and other climate change considerations.
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Although it is not possible at this time to predict how new laws or regulations would impact our business, any future requirements imposing carbon pricing schemes, carbon taxes, emission control, or emission reduction obligations on the operations or activities performed by us, our Portfolio Companies or third parties hired to support our business may significantly impact our activities, such as increased compliance costs, impact on supply chain, implications for our employees’ health, among others, which could limit our ability to pursue certain business opportunities and invest in certain business segments, products and services, each of which could adversely affect our business, financial condition and results of operations. Additionally, failure to comply with such laws and regulations could result in liabilities or penalties that could significantly impact our operation and financial condition.
Certain of our investment funds may invest in securities of companies that are experiencing significant financial or business difficulties, including companies involved in bankruptcy or other reorganization and liquidation proceedings. Such investments are subject to a greater risk of poor performance or loss.
Certain of our investment funds may invest in business enterprises involved in workouts, liquidations, spinoffs, reorganizations, bankruptcies and similar transactions and may purchase high-risk receivables. An investment in such business enterprises entails the risk that the transaction in which such business enterprise is involved either will be unsuccessful, will take considerable time or will result in a distribution of cash or a new security the value of which will be less than the purchase price to the fund of the security or other financial instrument in respect of which such distribution is received. In addition, if an anticipated transaction does not in fact occur, the fund may be required to sell its investment at a loss. Investments in troubled companies may also be adversely affected by Brazilian laws relating to, among other things, fraudulent conveyances, voidable preferences, lender liability and a bankruptcy court’s discretionary power to disallow, subordinate or disenfranchise particular claims. Investments in securities and private claims of troubled companies made in connection with an attempt to influence a restructuring proposal or plan of reorganization in a bankruptcy case may also involve substantial litigation. Because there is substantial uncertainty concerning the outcome of transactions involving financially troubled companies, there is a potential risk of loss by a fund of its entire investment in such company. Moreover, a major economic recession could have a materially adverse impact on the value of such securities. Adverse publicity and investor perceptions, whether or not based on fundamental analysis, may also decrease the value and liquidity of securities rated below investment grade or otherwise adversely affect our reputation.
Investments in infrastructure, private equity, real estate and certain other assets may expose us to increased environmental liabilities that are inherent in the ownership of real assets.
The ownership or management of physical, tangible assets—such as infrastructure facilities, energy generation plants, real estate properties, logistics assets or other operational sites—held within our funds or investment vehicles may increase our risk of civil liability under environmental laws that impose, regardless of fault, joint and several liability for the cost of remediating contamination and compensation for damages.
In addition, changes in environmental laws or regulations or the environmental condition of an investment may create liabilities that did not exist at the time of acquisition. Even in cases where we are indemnified by a seller against liabilities arising out of violations of environmental laws and regulations, there can be no assurance as to the financial viability of the seller to satisfy such indemnities or our ability to achieve enforcement of such indemnities.
This civil strict liability regime — that seeks recovery of environmental damage — is distinguished from administrative and criminal liabilities, which require identification of willful misconduct or fault and can result in sanctions by issuance of notices of violation by environmental agencies or conviction for environmental crime, briefly explained as follows. This means certain of our Portfolio Companies are subject to various federal, state and municipal laws and regulations relating to the protection of environment, including pollution, disposal of materials and chemical substances, protected areas, contamination of soil and groundwater, among other impacts to the environment. These laws and regulations are enforced by various governmental authorities.
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Noncompliance with those laws and regulations may subject the violator to administrative and criminal sanctions, in addition to the obligation to repair or compensate for damages caused to the environment and to third parties. In this regard, we may also be exposed to liability for environmental violations arising from inadequate environmental management by third parties engaged to carry out activities related to the construction, operation, or maintenance of certain Portfolio Companies. Such activities may involve, for example, the improper disposal of construction waste, the mishandling of hazardous substances—such as fuels, solvents, paint materials, or wastewater—or failures to comply with required environmental controls and procedures. Even if the wrongful act is committed exclusively by a contractor or service provider, Brazilian, Colombian and Chilean environmental law adopts a strict and joint liability framework, which may result in our being held responsible for damages arising from the conduct of such third parties. Moreover, the piercing of the corporate veil of a company may occur to ensure sufficient financial resources for the recovery of environmental damages under the civil liability regime.
Our investments in infrastructure assets may expose us to increased risks that are inherent in the ownership of real assets.
Investments in infrastructure assets may expose us to increased risks that are inherent in the ownership of real estate assets, such as:
•Ownership of infrastructure assets may present risk of liability for personal and property injury or impose significant operating challenges and costs with respect to, for example, compliance with zoning, environmental or other applicable laws;
•Infrastructure asset investments may face development and construction risks including, without limitation: (1) labor disputes, shortages of material and skilled labor, or work stoppages; (2) slower than projected construction progress and the unavailability or late delivery of necessary equipment: (3) less than optimal coordination with public utilities in the relocation of their facilities; (4) adverse weather and climate-related conditions and unexpected construction conditions; (5) accidents or the breakdown or failure of construction equipment or processes; (6) catastrophic events such as explosions, fires, terrorist activities and other similar events; and (7) delays in the issuance of the licenses and approvals needed for the development of the infrastructure. These risks could result in substantial unanticipated delays or expenses (which may exceed expected or forecasted budgets) and, under certain circumstances, could prevent completion of construction activities once undertaken. Certain infrastructure asset investments may remain in development or construction phases for a prolonged period and, accordingly, may not be cash-generative for a prolonged period. Recourse against the contractor may be subject to liability caps or may be subject to default or insolvency on the part of the contractor. Investments under development or investments acquired to be developed may receive little or no cash flow from the date of acquisition through the date of completion of development and may experience operating deficits after the date of completion. Market conditions may change during the course of construction that make such development less attractive than at the time it was commenced. In addition, there are risks inherent in the construction work that may give rise to claims or demands against a fund’s portfolio company. When completing an acquisition or making an investment in a project to be developed, value may be ascribed to infrastructure projects that do not achieve successful implementation, potentially resulting in a lower than expected internal rate of return over the life of the investment or in a total loss of the capital invested in such infrastructure project;
•The operation of infrastructure assets is exposed to potential unplanned interruptions caused by significant catastrophic or force majeure events. These risks could, among other effects, adversely impact the cash flows available from investments in infrastructure assets, cause personal injury or loss of life, damage property, or instigate disruptions of service. In addition, the cost of repairing or replacing damaged assets could be considerable. Repeated or prolonged service interruptions may result in permanent loss of customers, litigation, or penalties for regulatory or contractual noncompliance. Chile lies on the Nazca tectonic plate, making it one of the world’s most seismically active regions. Our financial and operating performance in Chile may be adversely affected by force majeure events, such as natural disasters. Natural disasters such as earthquakes and floods may cause widespread damage which could impair the asset quality of our loan portfolio and could have an adverse impact on the economy of the affected region. Force majeure events that are incapable of, or too costly to, cure may also have a permanent adverse effect on an investment;
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•The management of the business or operations of an infrastructure asset may be contracted to a third-party management company unaffiliated with us. Although it would be possible to replace any such operator, the failure of such operator to adequately perform its duties or to act in ways that are in our best interest, or the breach by an operator of applicable agreements or laws, rules and regulations, could have an adverse effect on the investment’s financial condition or results of operations. Infrastructure investments may involve the subcontracting of design and construction activities in respect of projects, and as a result our investments, are subject to the risks that contractual provisions passing liabilities to a subcontractor could be ineffective, the subcontractor fails to perform services which it has agreed to perform and the subcontractor becomes insolvent; and
•Infrastructure projects may have a substantial environmental impact. Land acquisition is often a significant issue when building a new project. Community and environmental groups may raise protests, which may be successful in attracting publicity and persuading governments to take action. Infrastructure projects may attract strong opposition from environmental groups for allegedly generating greater levels of air or water pollution, poor visual impact, effects on local population, flora and fauna, etc. Further, there can be no guarantee that all costs and risks regarding compliance with environmental laws and regulations can be identified. Standards are set by these laws and regulations regarding certain aspects of health and environmental quality, and they provide for penalties and other liabilities for the violation of such standards, and establish, in certain circumstances, joint and several obligations to remediate and rehabilitate current and former facilities and locations where operations are, or were, conducted or where materials were disposed of. New and more stringent environmental and health and safety laws, regulations and permit requirements or stricter interpretations of current laws or regulations could (1) impose substantial additional costs on potential infrastructure investments, (2) create liabilities which did not exist at the time of an acquisition and that could not have been foreseen and (3) otherwise place a fund investment at a competitive disadvantage compared to alternative forms of infrastructure. Required expenditures for environmental compliance have adversely impacted investment returns in a number of segments of the infrastructure industry. Certain industries will continue to face considerable oversight from environmental regulatory authorities and significant influence from non-governmental organizations and special interest groups. Compliance with such current or future environmental requirements does not ensure that the operations of certain invested companies will not cause injury to the environment or to people under all circumstances. Moreover, failure to comply with any such requirements could have a material adverse effect on a fund investment, and there can be no assurance that certain fund investments will at all times comply with all applicable environmental laws, regulations and permit requirements. Past practices or future operations of certain fund investments could also result in material personal injury or property damage claims. Any noncompliance with these laws and regulations could subject the infrastructure funds and their properties to material penalties or other liabilities. In addition, infrastructure funds may be exposed to substantial risk of loss from environmental claims arising from certain of their investments involving undisclosed or unknown environmental, health or other related matters. In addition, certain infrastructure assets held by specific funds may be subject to enhanced environmental and social requirements imposed by particular international investors, which operate over and above the obligations established under local legislation. These requirements include adherence to globally recognized frameworks such as the IFC Performance Standards, which set expectations related to the assessment and management of environmental and social risks (PS1), labor and working conditions (PS2), resource efficiency and pollution prevention (PS3), community health, safety and security (PS4), land acquisition and involuntary resettlement (PS5), biodiversity conservation and sustainable management of living natural resources (PS6), Indigenous Peoples (PS7), and cultural heritage (PS8). Compliance with such frameworks may require more robust due‑diligence processes, expanded stakeholder engagement, and the implementation of mitigation and monitoring measures that exceed local regulatory requirements, which may increase operating costs, heighten project complexity and lead to delays or limitations in the development or operation of certain assets.
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Infrastructure investments often involve an ongoing commitment to a municipal, state, federal or foreign government or regulatory agencies. The nature of these obligations expose us to a higher level of regulatory control than typically imposed on other businesses and may require us to rely on complex government licenses, concessions, leases or contracts, which may be difficult to obtain or maintain. Delay in obtaining or failure to obtain and maintain in full force and effect any regulatory approvals, or amendments thereto, or delay or failure to satisfy any regulatory conditions or other applicable requirements could prevent operation of a facility or sales to third parties or could result in additional costs to our infrastructure Portfolio Companies. Infrastructure investments may require operators to manage such investments and such operators’ failure to comply with laws, including prohibitions against bribing of government officials, may adversely affect the value of such investments and cause us serious reputational and legal harm. Revenues for such investments may rely on contractual agreements for the provision of services with a limited number of counterparties, and are consequently subject to counterparty default risk. The operations and cash flow of infrastructure investments are also more sensitive to inflation and, in certain cases, commodity price risk. Furthermore, services provided by infrastructure investments may be subject to rate regulations by government entities that determine or limit prices that may be charged. Similarly, users of applicable services or government entities in response to such users may react negatively to any adjustments in rates and thus reduce the profitability of such infrastructure investments.
Investments by our funds in the power and energy industries may involve various operational, construction, regulatory and market risks.
The development, operation and maintenance of power and energy generation facilities involves many risks, including, as applicable, labor issues, start-up risks, breakdown or failure of facilities, lack of sufficient capital to maintain the facilities and the dependence on a specific fuel source and supply chain disruptions. Power and energy generation facilities in which our funds invest are also subject to risks associated with volatility in energy prices, the price of fuel sources and the impact of unusual or adverse weather conditions or other natural events, as well as the risk of performance below expected levels of output, efficiency or reliability. In addition, solar and wind renewable generation assets may be subject to curtailment imposed by grid operators due to system constraints or insufficient market demand, which can further reduce actual production. The occurrence of any such items could result in lost revenues and/or increased expenses. In turn, such developments could impair a portfolio company’s ability to repay its debt or conduct its operations. We may also choose or be required to decommission a power generation facility or other asset. The decommissioning process could be protracted and result in the occurrence of significant financial and/or regulatory obligations or other uncertainties.
Our power and energy sector Portfolio Companies may also face construction risks typical for power generation and related infrastructure businesses. Such developments could result in substantial unanticipated delays or expenses and, under certain circumstances, could prevent completion of construction activities once undertaken. These risks may also include delays in obtaining or maintaining required permits, licenses and environmental approvals from relevant authorities. Delays in the completion of any power project may result in lost revenues or increased expenses, including higher operation and maintenance costs related to such portfolio company.
The power and energy sectors are the subject of substantial and complex laws, rules and regulation by various federal and state regulatory agencies. Failure to comply with applicable laws, rules and regulations could result in the prevention of operation of certain facilities or the prevention of the sale of such a facility to a third party, as well as the loss of certain rate authority, refund liability, penalties and other remedies, all of which could result in additional costs to a portfolio company and adversely affect the investment results. Any governmental policy changes encouraging or discouraging resource extraction could have the effect of changing energy prices, which could have a negative impact on certain of our investments. In addition, in recent years, there has been an increased focus by investors and other market participants on energy sustainability and increased activism, including through divestment of existing investments, with respect to sustainability-focused investing by asset managers, which could have a negative impact on our ability to exit certain of our energy investments or adversely affect the expected returns of new investment opportunities.
Our businesses that invest in the energy industry also may focus on investments in businesses involved in oil and gas exploration and development, which can be a speculative business involving a high degree of risk, including: (1) the use of new technologies; (2) reliance on estimates of oil and gas reserves in the evaluation of available geological, geophysical, engineering and economic data for each reservoir; and (3) encountering unexpected formations or pressures, premature declines of reservoirs, blowouts, equipment failures and other accidents in completing wells and otherwise, cratering, sour gas releases, uncontrollable flows of oil, natural gas or well fluids, adverse weather conditions, pollution, fires, spills and other environmental risks.
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In addition, the performance of the investments made by our credit and equity funds in the energy and natural resources markets are also subject to a high degree of market risk, as such investments are likely to be directly or indirectly substantially dependent upon prevailing prices of oil, natural gas and other commodities. Oil and natural gas prices are subject to wide fluctuation in response to factors beyond the control of us or our funds’ Portfolio Companies, including relatively minor changes in the supply and demand for oil and natural gas, market uncertainty, the level of consumer product demand, weather conditions, climate initiatives, governmental regulation, the price and availability of alternative fuels, political and economic conditions in oil-producing countries, the supply of such commodities and overall domestic and foreign economic conditions. Increases in interest rates or adverse credit market conditions may also increase the financing costs of our Portfolio Companies. These factors make it difficult to predict future commodity price movements with any certainty.
Certain of our Portfolio Companies in the power and energy industries may enter into power purchase agreements (“PPAs”). Payments by power purchasers to our Portfolio Companies pursuant to their respective PPAs may provide the majority of such companies’ cash flows. There can be no assurance that any or all of the power purchasers will fulfill their obligations under their PPAs or that a power purchaser will not become bankrupt or that upon any such bankruptcy its obligations under its respective PPA will not be rejected by a bankruptcy trustee. The failure of a power purchaser to fulfill its obligations under any PPA or the termination of any PPA may have a material adverse effect on the investment of any of our funds in a project that has such PPAs as the major provider of cash flows for that investment.
Finally, certain investments by our funds in the power and energy industries may be particularly sensitive to weather and climate-related conditions. For example, solar power generators rely on the frequency and intensity of sunlight, wind turbines rely on the frequency and intensity of the wind experiencing possible performance variability.
The financial projections of our funds’ Portfolio Companies as well as our own projections could prove inaccurate.
The capital structure of a fund’s portfolio company is generally set up at the time of the fund’s investment in the portfolio company based on, among other factors, financial projects prepared by the portfolio company’s management. These projected operating results will normally be based primarily on judgments of the management of the Portfolio Companies, which are also used as a basis for our own financial projections. In all cases, projections are only estimates of future results that are based upon assumptions made at the time that the projections are developed. General economic conditions, which are not predictable, along with other factors, may cause actual performance to fall short of such financial projections. Because of the leverage we typically employ in our investments, this could cause a substantial decrease in the value of our equity holdings in the portfolio company. The inaccuracy of financial projections could thus cause our funds’ performance as well as our own overall performance to fall short of our expectations.
Contingent liabilities could harm fund performance.
We may cause our funds to acquire an investment that is subject to contingent liabilities. Such contingent liabilities could be unknown to us at the time of acquisition or, if they are known to us, we may not accurately assess or protect against the risks that they present. Acquired contingent liabilities could thus result in unforeseen losses for our funds. In addition, in connection with the disposition of an investment in a portfolio company, a fund may be required to make representations about the business and financial affairs of such portfolio company typical of those made in connection with the sale of a business. A fund may also be required to indemnify the purchasers of such investment to the extent that any such representations are inaccurate. These arrangements may result in the incurrence of contingent liabilities by a fund, even after the disposition of an investment. Accordingly, the inaccuracy of representations and warranties made by a fund could harm such fund’s performance.
Our funds may be forced to dispose of investments at a disadvantageous time.
Our funds may make investments of which they do not advantageously dispose of prior to the date the applicable fund is dissolved, either by expiration of such fund’s term or otherwise. Although we generally expect that our funds will dispose of investments prior to dissolution or that investments will be suitable for in-kind distribution at dissolution, we may not be able to do so. The general partners of our funds have only a limited ability to extend the term of the fund with the consent of fund investors or the advisory board of the fund, as applicable, and therefore, we may be required to sell, distribute or otherwise dispose of investments at a disadvantageous time prior to dissolution. This would result in a lower than expected return on the investments and, perhaps, on the fund itself.
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We are subject to risks in using prime brokers, custodians, counterparties, administrators and other agents.
Many of our funds depend on the services of prime brokers, custodians, counterparties, administrators, financial institutions and other agents to carry out certain financial, securities and derivatives transactions. The terms of these contracts are often customized and complex, and many of these arrangements occur in markets or relate to products that are not subject to regulatory oversight.
Our funds are subject to the risk that the counterparty to one or more of these contracts defaults, either voluntarily or involuntarily, on its performance under the contract. Any such default may occur suddenly and without notice to us. Moreover, if a counterparty defaults, we may be unable to take action to cover our exposure, either because we lack contractual recourse or because market conditions make it difficult to take effective action. This inability could occur in times of market stress, which is when defaults are most likely to occur.
In addition, our risk management process may not accurately anticipate the impact of market stress or counterparty financial condition, and as a result, we may not have taken sufficient action to reduce our risks effectively. Default risk may arise from events or circumstances that are difficult to detect, foresee or evaluate. In addition, concerns about, or a default by, one large participant could lead to significant liquidity problems for other participants, which may in turn expose us to significant losses.
Although we have risk management processes to ensure that we are not exposed to a single counterparty for significant periods of time, given the large number and size of our funds, we often have large positions with a single counterparty. For example, certain of our funds have credit lines. If the lender under one or more of those credit lines were to become insolvent, we may have difficulty replacing the credit line and one or more of our funds may face liquidity problems.
In the event of a counterparty default, particularly a default by a major investment bank or a default by a counterparty to a significant number of our contracts, one or more of our funds may have outstanding trades that they cannot settle or are delayed in settling. As a result, these funds could incur material losses and the resulting market impact of a major counterparty default could harm our businesses, results of operation and financial condition.
In the event of the insolvency of a prime broker, custodian, counterparty or any other party that is holding assets of our funds as collateral, our funds might not be able to recover equivalent assets in full as they will rank among the prime broker’s, custodian’s or counterparty’s unsecured creditors in relation to the assets held as collateral. In addition, our funds’ cash held with a prime broker, custodian or counterparty generally will not be segregated from the prime broker’s, custodian’s or counterparty’s own cash, and our funds may therefore rank as unsecured creditors in relation thereto.
The counterparty risks that we face have increased in complexity and magnitude as a result of disruption in the financial markets in recent years. For example, in certain areas the number of counterparties we face has increased and may continue to increase, which may result in increased complexity and monitoring costs. Conversely, in certain other areas, the consolidation and elimination of counterparties have increased our concentration of counterparty risk and decreased the universe of potential counterparties, and our funds are generally not restricted from dealing with any particular counterparty or from concentrating any or all of their transactions with one counterparty. In addition, counterparties have in the past and may in the future react to market volatility by tightening underwriting standards and increasing margin requirements for all categories of financing, which may decrease the overall amount of leverage available and increase the costs of borrowing. See “—Extensive regulation of our businesses affects our activities and creates the potential for significant liabilities and penalties. The possibility of increased regulatory focus could result in additional burdens on our business.”
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If we were deemed to be an “investment company” under the Investment Company Act, applicable restrictions could make it impractical for us to continue our business as contemplated and could have a material adverse effect on our business, results of operations and financial condition.
We intend to continue to conduct our operations so that the Company will not be deemed to be an investment company under the Investment Company Act. Rule 3a-1 under the Investment Company Act generally provides that an entity will not be deemed to be an “investment company” for purposes of the Investment Company Act if: (1) it does not hold itself out as being engaged primarily, and does not propose to engage primarily, in the business of investing, reinvesting or trading securities and (2) consolidating the entity’s wholly owned subsidiaries (within the meaning of the Investment Company Act), no more than 45% of the value of its assets (exclusive of U.S. government securities and cash items) consists of, and no more than 45% of its net income after taxes (for the past four fiscal quarters combined) is derived from, securities other than U.S. government securities, securities issued by employees’ securities companies, securities issued by qualifying majority owned subsidiaries of such entity and securities issued by qualifying companies that are controlled primarily by such entity.
We believe that we are engaged primarily in the business of providing asset management services and not in the business of investing, reinvesting or trading in securities. We also believe that the primary source of income from each of our businesses is properly characterized as income earned in exchange for the provision of services. We hold ourselves out as an asset management firm and do not propose to engage primarily in the business of investing, reinvesting or trading in securities. Accordingly, we do not believe that the Company is an “orthodox” investment company as defined in the Investment Company Act and described in clause (1) in the first sentence of the preceding paragraph. Furthermore, the Company’s assets, consolidated with its wholly owned subsidiaries (within the meaning of the Investment Company Act), consist primarily of (1) property, plant and equipment, (2) fee receivables for services rendered, (3) intangible assets that are not securities, (4) goodwill, and (5) other assets that we believe would not be considered securities for purposes of the Investment Company Act. Therefore, we believe that, consolidating the Company’s wholly owned subsidiaries (within the meaning of the Investment Company Act), no more than 45% of the value of its assets (exclusive of U.S. government securities and cash items) consists of, and no more than 45% of its net income after taxes (for the past four fiscal quarters combined) is derived from, securities other than U.S. government securities, securities issued by employees’ securities companies, securities issued by qualifying majority owned subsidiaries of the Company and securities issued by qualifying companies that are controlled primarily by the Company. Accordingly, we do not believe the Company is an inadvertent investment company by virtue of the 45% test in Rule 3a-1 under the Investment Company Act as described in clause (2) in the first sentence of the preceding paragraph. In addition, we believe the Company is not an investment company under section 3(b)(1) of the Investment Company Act because it is primarily engaged in a non-investment company business.
However, our subsidiaries have a significant number of investment securities, and we expect to make investments in other investment securities from time to time. We monitor these holdings regularly to confirm our continued compliance with the assets and income test described above. The need to comply with this test may cause us to restrict our business and subsidiaries with respect to the assets in which we can invest and/or the types of securities we may issue, to sell investment securities, including on unfavorable terms, to acquire assets or businesses that could change the nature of our business or to potentially take other actions that may be viewed as adverse to the holders of our Class A common shares, in order to conduct our business in a manner that does not subject us to the registration and other requirements of the Investment Company Act.
If anything were to happen which would cause the Company to be deemed to be an investment company under the Investment Company Act, we might lose our ability to raise money in the U.S. capital markets and from U.S. lenders, and additional restrictions under the Investment Company Act could apply to us, all of which could make it impractical for us to continue our business as currently conducted. This would materially and adversely affect the value of your Class A common shares and our ability to pay dividends in respect of our common shares
If we are required to register under the Investment Advisers Act, our ability to conduct business could be materially adversely affected.
The U.S. Investment Advisers Act of 1940, as amended (the “Investment Advisers Act”), contains substantive legal requirements that regulate the manner in which “investment advisers” required to register under the Investment Advisers Act are permitted to conduct their business activities. Within the Patria group we do not have a significant number of entities registered as investments advisers, however we believe that we, together with our subsidiaries that are not registered under the Investment Advisers Act (the “Non-RIA Subsidiaries”), to the extent any such entities act as investment advisers within the meaning of the Investment Advisers Act, qualify for exemptions from registration thereunder, including exemptions for non-U.S. investment advisers whose only U.S. clients are private funds that are generally managed outside the United States and for non-U.S. investment advisers with only a small number of U.S. clients with limited assets under management.
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Although exempt from registration under the Investment Advisers Act, we or certain of our Non-RIA Subsidiaries may still be required to file reports with the SEC as “exempt reporting advisers” pursuant to the terms of the registration exemption on which they rely. Provisions of the Investment Advisers Act that apply only to registered investment advisers do not apply to exempt reporting advisers. However, exempt reporting advisers are subject to some of the requirements and regulations of the Investment Advisers Act, including, among other things, fiduciary duties to advisory clients, recordkeeping and regulatory reporting requirements, disclosure obligations, limitations on agency cross and principal transactions between an adviser and its advisory clients, anti-corruption rules relating to investors associated with U.S. state or local governments, and general anti-fraud prohibitions. In addition, the SEC is authorized under the Investment Advisers Act to require exempt reporting advisers, including those affiliated with us or our subsidiaries, to maintain records and provide reports, and to examine these advisers’ records.
While we believe our current practices do not require us or any of our Non-RIA Subsidiaries to register as an investment adviser under the Investment Advisers Act, if a regulator were to disagree with our analysis with respect to any portion of our business, we or a Non-RIA Subsidiary may be required to register as an investment adviser and to comply with the Investment Advisers Act. Registering as an investment adviser could adversely affect our method of operation and revenues. For example, registered investment advisers under the Investment Advisers Act are subject to burdensome compliance requirements with respect to, among other things, reporting and recordkeeping, custody of client assets, advertising and performance information, conflicts of interests, restrictions on affiliate transactions, advisory contracts, and aggregation and allocation of client trades. It could be difficult for us to comply with these obligations without meaningful changes to our business operations, and there is no guarantee that we could do so successfully. If we were ever deemed to be subject to, and in noncompliance with, Investment Advisers Act requirements, we could also be subject to various penalties, including administrative or judicial proceedings that might result in censure, fines, civil penalties, cease-and-desist orders or other adverse consequences, as well as private rights of action, any of which could materially adversely affect our business.
In the past, we identified material weaknesses in our internal control over financial reporting and, if we fail to maintain effective internal controls over financial reporting, we may be unable to accurately report our results of operations, meet our reporting obligations and/or prevent fraud.
In the past, we have identified material weaknesses in our internal control over financial reporting, and we cannot provide assurance that significant deficiencies or material weaknesses in our internal control over financial reporting will not be identified in the future. In addition, if we fail to maintain the adequacy of our internal control over financial reporting, as accounting standards are modified, supplemented or amended from time to time, we may not be able to conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002. For further information, see “Item 15. Controls and Procedures—D. Changes in Internal Control Over Financial Reporting.” If we fail to maintain an effective internal control environment, we could suffer material misstatements in our consolidated financial statements, fail to meet our reporting obligations or fail to prevent fraud, which would likely cause investors to lose confidence in our reported financial information. This could, in turn, limit our access to capital markets, harm our results of operations, and lead to a decline in the trading price of our Class A common shares. Additionally, ineffective internal control over financial reporting could expose us to increased risk of fraud or misuse of corporate assets and subject us to potential delisting from Nasdaq, regulatory investigations and civil or criminal sanctions.
We are subject to the Sarbanes-Oxley Act, which requires, among other things, that we establish and maintain effective internal control over financial reporting and disclosure controls and procedures. Under the current rules of the SEC, we are required to perform system and process evaluation and testing of our internal controls over financial reporting to allow management to assess their effectiveness. Our testing may in the future reveal deficiencies in our internal controls that are deemed to be material weaknesses or significant deficiencies and render our internal controls over financial reporting ineffective. If we or our management identifies material weaknesses or significant deficiencies in our internal controls over financial reporting that are deemed to be additional material weaknesses, the market price of our Class A common shares may decline and we may be subject to investigations or sanctions by the SEC, the Financial Industry Regulatory Authority, Inc. (“FINRA”), or other regulatory authorities as well as result in litigation.
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Certain Factors Relating to the Countries in Which We Operate
Inflation and government measures to curb inflation may adversely affect the economies and capital markets in some of the countries in which we operate, and as a result, harm our business and the trading price of our Class A common shares.
In the past, high levels of inflation have adversely affected the economies and financial markets of some of the countries in which we operate, particularly Argentina and Brazil, and the ability of their governments to create conditions that stimulate or maintain economic growth. Moreover, governmental measures to curb inflation and speculation about possible future governmental measures have contributed to the negative economic impact of inflation and have created general economic uncertainty and heightened volatility in the capital markets. As part of these measures, governments have at times maintained a restrictive monetary policy and high interest rates that has limited the availability of credit and economic growth. In 2023, elevated interest rates in Brazil contained the rise of inflation, but after initially beginning to cut interest rates, the Brazilian Central Bank reversed course part way through 2024 and began to raise interest rates again in response to persistent inflation. Uncertainty remains as to the continued inflationary pressures resulting from the indirect impacts of conflicts, such as the ongoing wars in Israel and Ukraine, on global supply chains.
According to the National Consumer Price Index (Índice Nacional de Preços ao Consumidor Amplo) (“IPCA”) which is published by the Brazilian Institute for Geography and Statistics (Instituto Brasileiro de Geografia e Estatística) (the “IBGE”), Brazilian inflation rates were 4.3%, 4.8% and 4.6% for the years ended as of December 31, 2025, 2024 and 2023, respectively. Brazil may experience high levels of inflation in the future and inflationary pressures may lead to the Brazilian government’s intervening in the economy and introducing policies that could harm our business and the trading price of our Class A common shares. One of the tools used by the Brazilian government to control inflation levels is its monetary policy, specifically relating to interest rates. An increase in the interest rate restricts the availability of credit and reduces economic growth, and vice versa. During recent years there has been significant volatility in the official Brazilian interest rate, which ranged from 14.25% on December 31, 2015 to 2.00% on August 5, 2020. This rate is set by the Monetary Policy Committee of the Brazilian Central Bank (Comitê de Política Monetária) (“COPOM”). On March 17, 2021, COPOM began to rapidly raise the SELIC rate, first to 2.75% and then by the end of the year to 9.25% on December 8, 2021. In 2022, COPOM continued to raise the rate, reaching a peak of 13.75% on August 3, 2022, where it remained stable. On August 2, 2023, COPOM reversed this trend by lowering the SELIC rate to 13.25%, and continued a pattern of reductions ultimately reducing it to 10.50% on May 8, 2024. Nevertheless, renewed inflationary pressures-driven in part by fiscal concerns stemming from persistent budget deficits and increased government spending-prompted the Brazilian Central Bank to reverse course and resume hiking rates in September 2024, with the SELIC rate reaching 15.00% in mid-2025. As of the date of this annual report, the SELIC rate stands at 14.75% per annum, a level maintained since March 19, 2026, with the next monetary policy decision scheduled for April 29, 2026, reflecting the challenges of controlling inflation amid a strong economy, historically low unemployment levels, and fiscal imbalances requiring tighter monetary policy to maintain economic stability.
In addition, Argentina has been considered highly inflationary under IFRS Accounting Standards. Although inflation rates in certain of the other countries in which we operate have been relatively low in the recent past, we cannot assure you that this trend will continue. The measures taken by the governments of these countries to control inflation have often included maintaining a tight monetary policy with high interest rates, thereby restricting the availability of credit and retarding economic growth. Inflation, measures to combat inflation and public speculation about possible additional actions have also contributed materially to economic uncertainty in many of these countries and to heightened volatility in their securities markets. Periods of higher inflation may also slow the growth rate of local economies that could lead to reduced demand for our products and services as well as those of our Portfolio Companies’ businesses. Inflation is also likely to increase some costs and expenses of our Portfolio Companies’ businesses, which they may not be able to fully pass on to customers and could adversely affect our operating margins and operating income.
Political, legal, regulatory and economic uncertainty arising from social unrest in Chile and the resulting social reforms could adversely impact our business.
Certain of our operations are dependent on the Chilean political and social environment. Thus, our results of operations could be negatively impacted by unfavorable political, legal, regulatory, economic and diplomatic developments, social instability or unrest, as well as dramatic changes in public policies, including expropriation, nationalization, international ownership legislation, interest rate caps and tax policy.
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During October 2019, growing public concern over perceived social inequality led to a rise in social unrest. The social unrest caused commercial disruptions throughout the country, especially in Santiago and other major cities, including Valparaíso and Concepción. In response to these events, the former government implemented a social agenda intended to increase basic pensions, expand social health coverage, and reduce and stabilize tariffs for some public services (such as public transportation and electricity) distributed to regulated customers.
Furthermore, after three weeks of nationwide protests, the Chilean government announced in November 2019 that it would initiate a process to draft a new constitution for Chile. When the government announced the process of enacting a new constitution, there was increased volatility in the Chilean stock market and exchange rate fluctuations that resulted in a weakening of the Chilean peso against the U.S. dollar. The share prices on local banks and bond spreads suffered significant declines in the market. After a prolonged drafting process, the draft of the new constitution was rejected by a large majority of voters (around 62%). Due to the rejection of the draft, a new constitutional process began. In December 2023, a second draft of the constitution was put to the vote and more than 55% of voters elected to reject the constitutional amendment. As a result, the constitution drafted in 1980 remains in force. Although the Chilean government has publicly stated that it will not launch a new constitutional reform process, it is uncertain whether this process will not be initiated again at a later date or by a different government. There can be no assurance as to whether a new constitutional reform process, or any amendments to the Chilean constitution implemented as a consequence of such a process, will not have a material adverse effect on our business, financial condition or results of operations.
In addition, we cannot assure you that the social unrest will not reappear in Chile and that violent crimes and insecurity will not further increase in the future and, therefore, we can offer no assurance that it will not have a negative impact on economic growth, the overall Chilean business environment and our results of operations and financial condition. In this regard, in recent years we have seen a surge in certain violent crimes and insecurity in Chile, some of them related to drug trafficking and organized crime, which have raised concerns among the population and the Chilean government. Accordingly, the Chilean congress has approved new legal bodies and the current administration is implementing plans which seek to reinforce public security both at Chilean borders and in specific cities with high criminality indices.
Further, there can be no assurance as to the policies and reforms that the current and future governments and the Chilean congress may propose or take in order to address both social demands or criminality, while their impact on Chile’s economic and fiscal situation, growth, stability, outlook are still uncertain. Likewise, we cannot assure you that the coming presidential primary elections scheduled for June 2025 and the presidential elections to be held in November 2025 will result in reasonable economic and social policies. In this regard, given the emergence of more radical political stances in Chile and abroad over the last decade, we cannot rule out that potential candidates representing such ideas will be elected in Chile and, if that happens, we cannot assure that there will be consistent and adequate political counterweights in Congress. Therefore, we are not able to currently predict the effects that any future policies or reforms in other economic and social fields may have on the Chilean economy, the banking activity and our business, financial condition and results of operations.
Our growth, portfolio asset quality and profitability may be adversely affected by macroeconomic and political conditions in Chile.
A substantial number of our investment portfolio assets and companies are located in Chile. Chile’s economy has experienced significant volatility in recent decades, characterized, in some cases, by slow or regressive growth and declining investment. This volatility resulted in fluctuations in the investment levels and in the relative economic strength of various segments of the economies in which we operate. The Chilean economy may not continue to grow at similar rates as in the past, or future developments may negatively affect Chile’s overall levels of economic activity.
Negative and fluctuating economic conditions, such as slowing or negative growth and a changing interest rate and inflationary environment, may impact our profitability by reducing our Portfolio Companies operational margins and leading to decreased demand for their products and services. Negative and fluctuating economic conditions in Chile, including as a result of fiscal and monetary adjustments during 2023 and 2024 could also result in increased public debt and instability in Chile’s banking system and the Chilean economy as a whole, particularly since commercial banks’ exposure to government debt is high in Chile.
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Our revenues are also subject to risk of loss from unfavorable political and diplomatic developments, social instability, international conflicts, and changes in governmental policies, including expropriation, international ownership legislation, and tax policies. Fluctuations in copper prices, including as a result of potential downturns in Chinese demand, may give rise to volatility in the Chilean financial markets and cause further economic instability in the country. Natural disasters such as earthquakes and floods may cause widespread damage which could also impair the asset quality of our loan portfolio and could have an adverse impact on the economy of the affected region. Our growth, portfolio quality and profitability may be adversely affected by volatile macroeconomic and political conditions in Chile. Any material change to United States trade policy with respect to Chile could also have a material adverse effect on the economy, which could in turn materially harm our financial condition and results of operations.
Exchange rate instability may have adverse effects on the economies of the countries in which we operate, our business and the trading price of our Class A common shares.
Our functional currency is the U.S. dollar. Currencies in the countries in which we operate, including in Latin America have been historically volatile and been devalued frequently over the past few decades. Throughout this period, governments in Latin America have implemented various economic plans and used various exchange rate policies, including sudden devaluations, periodic mini-devaluations (during which the frequency of adjustments has ranged from daily to monthly), exchange controls, dual exchange rate markets and a floating exchange rate system. Although long-term depreciation of currencies in Latin America is generally linked to the rate of inflation in those countries, depreciation of the currencies occurring over shorter periods of time has resulted in significant variations in the exchange rate as against the U.S. dollar and other currencies.
The real/U.S. dollar exchange rate reported by the Central Bank was R$4.84 per US$1.00 on December 31, 2023 which reflected a 7.2% appreciation of the real against the U.S. dollar during 2023 due to fluctuating macroeconomic conditions. The real/U.S. dollar exchange rate reported by the Central Bank was R$6.19 per US$1.00 on December 31, 2024, which reflected a 27.9% depreciation of the real against the U.S. dollar during 2024 due to fluctuating macroeconomic conditions. The real/U.S. dollar exchange rate reported by the Central Bank was R$5.50 per US$1.00 on December 31, 2025, which reflected a 11.1% appreciation of the real against the U.S. dollar during 2025 due to fluctuating macroeconomic conditions. As of April 27, 2026, the real/U.S. dollar exchange rate reported by the Central Bank was R$4.97 per US$1.00, an appreciation of 9.7% of the real since December 31, 2025. In addition, the Chilean peso has also been subject to significant devaluation in the past and may be subject to significant fluctuations in the future. The observed Chilean peso exchange rate appreciated approximately 10% in 2025, depreciated 13.7% in 2024 and depreciated 2.9% in 2023. The Chilean peso appreciated in 2025 primarily due to weaker U.S. dollar conditions, easing global interest rate pressures, and stronger commodity prices, particularly copper. However, there can be no assurance that the currencies in the countries in which we operate will not appreciate or further depreciate against the U.S. dollar or other currencies in the future.
A devaluation of the Brazilian real, Chilean peso or other relevant currencies relative to the U.S. dollar could create inflationary pressures in those countries and cause their respective governments to, among other measures, increase interest rates. Any depreciation of the currency may generally restrict access to the international capital markets. It would also reduce the U.S. dollar value of our results of operations. Restrictive macroeconomic policies could reduce the stability of the economies in which we operate, including the Brazilian economy, and harm our results of operations and profitability. In addition, domestic and international reactions to restrictive economic policies could have a negative impact on those economies. These policies and any reactions to them may harm us by curtailing access to foreign financial markets and prompting further government intervention. A devaluation of local currencies relative to the U.S. dollar may also, as in the context of the current economic slowdown, decrease consumer spending, increase deflationary pressures and reduce economic growth.
On the other hand, an appreciation of local currencies relative to the U.S. dollar and other foreign currencies may deteriorate the local foreign exchange current accounts. Depending on the circumstances, either devaluation or appreciation of the local currencies relative to the U.S. dollar and other foreign currencies could restrict the growth of the local economy, and affect our business, results of operations and profitability.
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We are subject to significant foreign currency exchange controls and currency devaluation in certain countries in which we operate.
Certain Latin American economies have from time to time experienced shortages in foreign currency reserves and their respective governments have in the past responded by adopting restrictions on the ability to transfer funds out of the country and convert local currencies into U.S. dollars. This may increase our costs and limit our ability to convert local currency into U.S. dollars and transfer funds out of certain countries, including for the purchase of dollar-denominated inputs, the payment of dividends or the payment of interest or principal on our outstanding debt. In the event that any of our subsidiaries are unable to transfer funds to us due to currency restrictions, we are responsible for any resulting shortfall.
For instance, during 2022, the Argentine government tightened restrictions on capital flows and imposed exchange controls and transfer restrictions, substantially limiting the ability of companies to retain foreign currency or make payments outside of Argentina. As a consequence of the reimposition of exchange controls, the spread between the official exchange rate and other exchange rates resulting implicitly from certain capital market operations usually effected to obtain U.S. dollars has broadened significantly. Although such restrictions were loosened, similar actions may occur in the future, including by central banks of other countries, and we may not be able to adequately address such restrictions. As a result, if we are prohibited from transferring funds out of a country in which we operate, our results of operations and financial condition could be materially adversely affected. In addition, the devaluation of the Argentine peso since the end of 2015 led to higher inflation levels, significantly reduced competitiveness, real wages and consumption and had a negative impact on businesses whose success is dependent on domestic market demand and supplies payable in foreign currency. Further currency devaluations in any of the countries in which we operate could have a material adverse effect on our results of operations and financial condition.
Certain of our Portfolio Companies may face restrictions and penalties, and may be subject to proceedings, under the Brazilian Consumer Protection Code in the future.
Brazil has a series of strict consumer protection laws, referred to collectively as the Brazilian Consumer Protection Code (Código de Defesa do Consumidor) (the “Consumer Protection Code”). These laws apply only to instances where there is a supplier, on the one part, the supply of a product or provision of a service under the contract and an end user, on the other part. If the person or entity acquires supplies that will be used in its manufacturing process, it should not be considered “end user” of the respective inputs. Brazilian courts may find that the rules of the Consumer Protection Code apply to instances of exception where a company acquiring the products for its supply chain are considered vulnerable in the areas of technology, finance and law. They include protection against misleading and deceptive advertising, protection against coercive or unfair business practices and protection in the formation and interpretation of contracts, usually in the form of civil liabilities and administrative penalties for violations. In addition, the Consumer Protection Code provides a series of contractual clauses that may be found to be legally insufficient to reduce or limit a supplier’s liability towards consumers; involve a waiver or disposal of rights; transfer liability to third parties; establish obligations on consumers that are non-equitable or abusive, or that lack good faith, among others.
These penalties are often levied by the Brazilian Consumer Protection Authorities (Órgãos de Proteção e Defesa do Consumidor) (“PROCONs”) – local consumer bodies, which oversee consumer issues on a district-by-district basis. Companies that operate across Brazil may face penalties from multiple PROCONs, as well as from the National Secretariat for Consumers (Secretaria Nacional do Consumidor). Should the consumer protection agencies identify a violation of the Consumer Protection Code, said authorities could impose the penalties set forth in section 56 of the Consumer Protection Code (the most common is a fine that varies from R$800.00 up to R$9.5 million, depending on the size of the company, the advantage obtained as result of the practice and the seriousness of the infraction). Consumers may also file civil lawsuits seeking compensation for damages. Companies may settle claims made by consumers via PROCONs by paying compensation for violations directly to consumers and through a mechanism that allows them to adjust their conduct, called a conduct adjustment agreement (Termo de Ajustamento de Conduta) (“TAC”).
Brazilian public prosecutors may also commence investigations of alleged violations of consumer rights and require companies to enter into TACs. Companies that violate TACs face potential enforcement proceedings and other potential penalties such as fines, as set forth in the relevant TAC. Brazilian public prosecutors may also file public civil actions against companies who violate consumer rights or competition rules, seeking strict adherence to the consumer protection laws and compensation for any damages to consumers. In certain cases, certain of our funds or Portfolio Companies may also face investigations and/or sanctions by the Brazilian Federal Antitrust Agency (Conselho Administrativo de Defesa Econômica), in the event our business practices are found to affect the competitiveness of the markets in which we operate.
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In addition, certain of our funds and Portfolio Companies may also be subject to legal proceedings by current and/or former consumers alleging breaches of rights granted by the Consumer Protection Code. Even if unsuccessful, these claims may cause negative publicity, entail substantial expenses and divert the time and attention of our management or the management of certain of our Portfolio Companies, materially adversely affecting our results of operations and financial condition.
We are subject to review by taxing authorities, and an incorrect interpretation by us of tax rules and regulations may have a material adverse effect on us.
Our activities require the use of estimates and interpretations of complex tax rules and regulations and are subject to review by taxing authorities and/or courts. We and funds managed by us are subject to the income and investment tax laws of Brazil, Chile and the other jurisdictions in which we operate. These tax rules are complex and subject to different interpretations by the taxpayer, relevant governmental taxing authorities and courts, leading to disputes which are sometimes subject to prolonged evaluation periods until a final resolution is reached. In making investment decisions or in establishing a provision for income tax expense and filing returns, we must make judgments and interpretations about the application of these inherently complex tax rules. If the judgment, estimates and assumptions we use in making our investment decisions or in preparing our tax returns are subsequently found to be incorrect, there could be a material adverse effect on us. The interpretations of Brazilian and Chilean taxing authorities and/courts and the other jurisdictions in which we operate are unpredictable and frequently involve disputes, which introduces further uncertainty and risk leading to increased tax burden.
Changes in taxes, including the corporate tax rate, in the countries in which we operate, may have an adverse effect on us and our Portfolio Companies.
Changes in tax laws, regulations, related interpretations, and tax accounting standards in the jurisdictions where we operate may result in a higher tax rate on our earnings, which could significantly reduce our profits and cash flows from operations.
The Chilean Government enacted various tax reforms in 2014, 2016 and 2020 in order to finance greater social expenditures. The most relevant change was the rise of the corporate tax rate to 27% in 2018. On October 24, 2024, the congress approved a new tax reform aimed at increasing tax revenues by 1.5% of gross domestic product ("GDP"). This reform includes measures to strengthen the tax authorities’ powers to combat tax avoidance and evasion, such as changes to Chile’s GAAR provisions, corporate reorganizations, the statute of limitations, and audit powers and procedures. The government has announced that it will propose another tax reform in 2025 to finance social spending, which is expected to include a comprehensive reform of Chilean income taxes. We cannot predict at this time if these reforms or discussions will have a material impact on our business or Portfolio Companies or if further tax reforms will be implemented in the future. In addition, the effective corporate tax rate of our Portfolio Companies located in Chile could rise in the future, which may have an adverse impact on our results of operations.
In Brazil, Congress is advancing tax reform proposals, with the federal government signaling its intent to enact some of these changes soon. In December 2023, Constitutional Amendment No. 132/2023 was passed, initiating an overhaul of Brazil’s consumption tax system. This reform, set to begin in 2026 and take full effect by 2033, replaces five existing taxes with two value-added taxes: the Tax on Goods and Services (IBS), managed by states and municipalities, which merges ICMS and ISS, and the Contribution on Goods and Services (CBS), managed federally, replacing PIS, COFINS, and IPI. A Selective Tax (IS) will also apply to goods and services considered harmful to the environment or public health.
In January 2025, Congress passed Supplementary Law No. 214 to regulate IBS, CBS, and IS. Financial services, including asset management, will begin to be taxed under this system in 2026. Since the IBS tax rate and calculation method remain undefined, we are evaluating the potential impact. Any increase in ISS-equivalent rates could raise tax costs and affect profitability.
Brazil is also considering income tax reform. Law No. 14,754, enacted in December 2023, introduced new taxation rules for local investment funds and offshore investments. Additional changes may follow, including Bill No. 1,087, proposed on March 18, 2025, which seeks to impose a 10% withholding tax on dividends paid by Brazilian companies to foreign shareholders starting in 2026. While foreign investors may recover part or all of this tax, the specifics remain unclear. The bill is under review and could be amended, with further tax reform measures possible.
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The Brazilian government frequently enacts tax reforms that affect businesses and investors. These could result in higher tax burdens for us and our funds and Portfolio Companies, with potential consequences for financial markets and borrowing costs. Changes in how tax authorities interpret taxable events, rates, and calculations could significantly impact funds, investors, and financial performance. While most tax increases follow a calendar-year rule or a 90-day transition period, unexpected changes may still occur, posing compliance and financial risks.
Elsewhere, our subsidiaries in Colombia, Chile, Uruguay, the United Kingdom, Hong Kong, Mexico and the United States are subject to their respective tax laws, including income taxes, indirect taxes, and withholding taxes on dividends and cross-border transactions, which may affect their financial performance. Some of these subsidiaries benefit from special tax regimes or incentives, the interpretation and application of which may vary between us and the tax authorities. For instance, we rely on the Uruguayan Free Trade Zone (FTZ) regime, which grants exemption from national taxes on qualifying activities. Our ability to continue operating under this framework depends on the renewal of essential contractual arrangements and compliance with FTZ requirements.
Changes in tax laws or interpretations affecting the jurisdictions where we operate could increase our tax burden and reduce cash flows. While tax treaties help mitigate double taxation, future tax reforms or regulatory shifts could limit their effectiveness, impacting operations and financial results.
Infrastructure and workforce deficiency in Latin America may impact economic growth and have a material adverse effect on us.
Our performance depends on the overall health and growth of the Latin American economy, especially in Brazil and Chile. Brazilian GDP growth has fluctuated over the past years, with growth of 1.3% in 2017, 1.8% in 2018, and 1.2% in 2019, a contraction of 3.9% in 2020 and a growth of 4.6% and 2.9% in 2021 and 2022. In 2023, Brazilian GDP grew by 2.9%. According to the Brazilian Institute for Geography and Statistics (IBGE), Brazilian GDP grew 3.4% in 2024 and 2.3% in 2025.
In 2022 and 2023, Chilean GDP grew by 2.4% and 0.2% with an unemployment rate of 7.9% and 8.5% as of December 2022 and December 31, 2023, respectively. In 2024 Chilean GDP grew 2.5%, with an unemployment rate of 8.1% as of December 2024. According to Chile’s Monthly Economic Activity Index "IMACEC" released on March 1, 2026, Chile’s economic activity increased by 2.5% year‑over‑year in January 2026, reflecting continued recovery at the start of the year, while the unemployment rate for the moving quarter ended January 2026 reached 8.4%, as reported by the National Institute of Statistics (INE) on February 29, 2026.
Growth is limited by inadequate infrastructure, including potential energy shortages and deficient transportation, logistics and telecommunication sectors, general strikes, the lack of a qualified labor force, and the lack of private and public investments in these areas, which limit productivity and efficiency. Any of these factors could lead to labor market volatility and generally impact income, purchasing power and consumption levels, which could limit growth and ultimately have a material adverse effect on us.
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Certain Factors Relating to Our Class A Common Shares
Patria Holdings owns Class A common shares and the majority of our issued and outstanding Class B common shares in addition to some Class A common shares, which together represent approximately 82.3% of the voting power of our issued share capital, and controls all matters requiring shareholder approval. Patria Holdings’ ownership and voting power limits your ability to influence corporate matters.
Patria Holdings controls all matters requiring shareholder approval and beneficially owns 51.9% of our issued share capital through its beneficial ownership of Class A common shares and the majority of our issued and outstanding Class B common shares, and consequently, 82.3% of the combined voting power of our issued share capital. Our Class B common shares are entitled to 10 (ten) votes per share and our Class A common shares are entitled to one vote per share. Our Class B common shares are convertible into an equivalent number of Class A common shares and generally convert into Class A common shares upon transfer, subject to limited exceptions. As a result, Patria Holdings will control the outcome of all decisions at our shareholders’ meetings, and will be able to elect a majority of the members of our board of directors. Patria Holdings’ decisions in areas such as business strategy, financing, distributions, acquisitions and dispositions of assets or businesses may be contrary to your expectations or preferences, and Patria Holdings may take actions that could be contrary to your interests. Patria Holdings will be able to prevent any other shareholders, including you, from blocking these actions. For further information regarding shareholdings in our Company, see “Item 7. Major Shareholders and Related Party Transactions—A. Major Shareholders.”
So long as Patria Holdings continues to beneficially own a sufficient number of Class B common shares, even if Patria Holdings beneficially owns significantly less than 50% of our issued and outstanding share capital, Patria Holdings will be able to effectively control our decisions. For example, if our Class B common shares amounted to 10% of our issued and outstanding common shares and Patria Holdings was the sole owner of all the Class B common shares, Patria Holdings would collectively control 52.6% of the voting power of our issued and outstanding common shares. If Patria Holdings sells or transfers any of its Class B common shares, such shares will generally convert automatically into Class A common shares, subject to limited exceptions, such as transfers to affiliates, to trustees for the holder or its affiliates and certain transfers to U.S. tax exempt organizations. The fact that any Class B common shares convert into Class A common shares if Patria Holdings sells or transfers them means that Patria Holdings will in many situations continue to control a majority of the combined voting power of our issued and outstanding share capital, due to the voting rights of any Class B common shares that it retains. However, if our Class B common shares at any time represent less than 10% of the total voting power of shares in the capital of the Company outstanding, the Class B common shares then outstanding will automatically convert into Class A common shares. For a description of the dual class structure, see “Item 10. Additional Information—B. Memorandum and Articles of Association.”
We are a “controlled company” within the meaning of the rules of the Nasdaq corporate governance rules and, as a result, qualify for and rely on exemptions from certain corporate governance requirements. You will not have the same protections afforded to shareholders of companies that are subject to such requirements.
Patria Holdings beneficially owns the majority of our Class B common shares, representing 82.3% of the voting power of our outstanding share capital. As a result, we are a “controlled company” within the meaning of the corporate governance standards of the Nasdaq corporate governance rules. Under these rules, a company of which more than 50% of the voting power in the election of directors is held by an individual, group or another company is a “controlled company” and may elect not to comply with certain corporate governance requirements. For example, controlled companies:
•are not required to have a board that is composed of a majority of “independent directors,” as defined under the rules of such exchange;
•are not required to have a compensation committee that is composed entirely of independent directors; and
•are not required to have a nominating and corporate governance committee that is composed entirely of independent directors.
We currently rely on these exemptions. As a result, the majority of the directors on our board are not independent. In addition, other than our audit committee, none of the committees of our board consist entirely of independent directors. Accordingly, you will not have the same protections afforded to shareholders of companies that are subject to all of the corporate governance requirements of the Nasdaq.
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We have granted the holder of our Class B common shares preemptive rights to acquire shares that we may sell in the future, which may impair our ability to raise funds.
Under our Memorandum and Articles of Association, the holder of our Class B common shares, Patria Holdings, is entitled to preemptive rights to purchase additional common shares in the event that there is an increase in our share capital and additional common shares are issued, upon the same economic terms and at the same price, in order to maintain its proportional ownership interests, which is approximately 51.9% of our outstanding shares. The exercise by the holder of our Class B common shares of its preemptive rights may impair our ability to raise funds, or adversely affect the terms on which we are able to raise funds, as we may not be able to offer to new investors the quantity of our shares that they may desire to purchase. For more information see “Item 10. Additional Information—B. Memorandum and Articles of Association—Preemptive or Similar Rights.”
Class A common shares eligible for sale may cause the market price of our Class A common shares to drop significantly.
The market price of our Class A common shares may decline as a result of sales of a large number of our Class A common shares in the market (including Class A common shares created upon conversion of Class B common shares) or the perception that these sales may occur. These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate.
As of December 31, 2025, we had outstanding 66,523,122 Class A common shares and 92,945,430 Class B common shares. The Class A common shares sold in our initial public offering are freely tradable without restriction or further registration under the Securities Act by persons other than our affiliates within the meaning of Rule 144 of the Securities Act.
Our existing shareholders or entities controlled by them or their permitted transferees are able to sell their shares in the public market from time to time without registering them, subject to certain limitations on the timing, amount and method of those sales imposed by regulations promulgated by the SEC. If our controlling shareholders, the affiliated entities controlled by them or their permitted transferees were to sell a large number of Class A common shares, the market price of our Class A common shares may decline significantly. In addition, the perception in the public markets that sales by them might occur may also cause the trading price of our Class A common shares to decline.
Sales of a substantial number of our Class A common shares or the perception that such sales may occur could cause our market price to fall or make it more difficult for you to sell your Class A common shares at a time and price that you deem appropriate.
If securities or industry analysts do not continue to publish research, or publish inaccurate or unfavorable research, about our business, the price of our Class A common shares and our trading volume could decline.
The trading market for our Class A common shares depends in part on the research and reports that securities or industry analysts publish about us or our business. If one or more of the analysts who cover us downgrade our Class A common shares or publish inaccurate or unfavorable research about our business, the price of our Class A common shares would likely decline. If one or more of these analysts cease coverage of our Company or fail to publish reports on us regularly, demand for our Class A common shares could decrease, which might cause the price of our Class A common shares and trading volume to decline.
We intend to pay dividends to holders of our common shares, but our ability to do so is subject to our results of operations, cash generation, distributable reserves and solvency requirements; we are not required to pay dividends on our Class A common shares and holders of our Class A common shares have no recourse if dividends are not paid.
In the fourth quarter of 2025 we announced an increase of our fixed quarterly dividend from US$0.15 per share to US$0.1625 per share for the financial year of 2026. However, the declaration and payment of dividends are subject to adjustment, postponement, or cancellation as our board of directors determines to be necessary or appropriate to ensure the conduct of our business, to make appropriate investments in our business and our funds, to comply with applicable law, any of our debt instruments or other agreements, or to provide for future cash requirements such as tax-related payments, clawback obligations, and dividends to shareholders for any ensuing quarter. The declaration and payment of any dividends are at the sole discretion of our board of directors, and may change at any time, including, without limitation, to eliminate dividends entirely.
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Any determination to pay dividends in the future will be made at the discretion of our board of directors (or by resolution passed by a simple majority of the voting rights entitled to vote at a general meeting) and will depend upon our results of operations, financial condition, distributable reserves, contractual restrictions, restrictions imposed by applicable law and other factors our board of directors deems relevant. We are not required to pay dividends on our common shares, and holders of our common shares have no recourse if dividends are not declared. Our ability to pay dividends may be further restricted by the terms of any of our future debt or preferred securities. Additionally, because we are a holding company, our ability to pay dividends on our common shares may be limited by restrictions on the ability of our subsidiaries to pay dividends or make distributions to us, including restrictions that may be imposed under the terms of the agreements governing our funds’ and their Portfolio Companies’ indebtedness. There is no assurance that future dividends will be paid, and if dividends are paid, there is no assurance with respect to the amount of any such dividend. See “Item 10. Additional Information—B. Memorandum and Articles of Association—Dividends and Capitalization of Profits.”
Requirements associated with being a public company in the United States require significant company resources and management attention.
We are subject to certain reporting requirements of the Securities Exchange Act of 1934, or the “Exchange Act,” and the other rules and regulations of the SEC and Nasdaq. We are also subject to various other regulatory requirements, including the Sarbanes-Oxley Act. These rules and regulations increase our legal, accounting and financial compliance costs and make some activities more time-consuming and costly. For example, these rules and regulations to make it more difficult and more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced policy limits and coverage or incur substantial costs to maintain the same or similar coverage. Rules and regulations relating to information disclosure, financial reporting and controls and corporate governance, which could be adopted by the SEC, Nasdaq or other regulatory bodies or exchange entities from time to time, could result in a significant increase in legal, accounting and other compliance costs and make certain corporate activities more time-consuming and costly, which could materially affect our business, financial condition and results of operations. These rules and regulations may also make it more difficult for us to attract and retain qualified persons to serve on our board of directors or as executive officers.
These obligations also require substantial attention from our senior management and could divert their attention away from the day-to-day management of our business.
Our dual class capital structure means our shares will not be included in certain indices. We cannot predict the impact this may have on our share price.
In 2017, FTSE Russell, S&P Dow Jones and MSCI announced changes to their eligibility criteria for inclusion of shares of public companies on certain indices to exclude companies with multiple classes of common shares from being added to such indices. FTSE Russell announced plans to require new constituents of its indices to have at least 5% of their voting rights in the hands of public stockholders, whereas S&P Dow Jones announced that companies with multiple share classes, such as ours, will not be eligible for inclusion in the S&P 500, S&P MidCap 400 and S&P SmallCap 600, which together make up the S&P Composite 1500. MSCI also opened public consultations on their treatment of no-vote and multi-class structures and has determined that it would launch new set of indexes that could give investors an alternative to avoid companies based on voting rights. We cannot assure you that other stock indices will not take a similar approach to FTSE Russell, S&P Dow Jones and MSCI in the future. Under the announced policies, our dual class capital structure could make us ineligible for inclusion in any of these indices and, as a result, mutual funds, exchange-traded funds and other investment vehicles that attempt to passively track these indices will not invest in our shares. These policies are new and it is unclear what effect, if any, they will have on the valuations of publicly traded companies excluded from the indices, but it is possible that they may depress these valuations compared to those of other similar companies that are included. Exclusion from indices could make our Class A common shares less attractive to investors and, as a result, the market price of our Class A common shares could be adversely affected.
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The dual class structure of our share capital has the effect of concentrating voting control with Patria Holdings; this will limit or preclude your ability to influence corporate matters.
Each Class A common share entitles its holder to one vote per share, and each Class B common share entitles its holder to 10 votes per share, so long as the total voting power of the issued and outstanding Class B common shares is at least 10% of the total voting power of shares outstanding. Due to the ten-to-one voting ratio between our Class B and Class A common shares, Patria Holdings, the beneficial owner of the majority of our Class B common shares controls the voting power of our common shares and therefore will be able to control all matters submitted to our shareholders so long as the total voting power of the issued and outstanding Class B common shares is at least 10% of the voting power of shares outstanding.
In addition, our Articles of Association provide that at any time when there are Class A common shares in issue, additional Class B common shares may only be issued pursuant to (1) a share split, subdivision of shares or similar transaction or where a dividend or other distribution is paid by the issue of shares or rights to acquire shares or following capitalization of profits, (2) a merger, consolidation, or other business combination involving the issuance of Class B common shares as full or partial consideration or (3) an issuance of Class A common shares, whereby holders of the Class B common shares are entitled to purchase a number of Class B common shares that would allow them to maintain their proportional ownership interests in us (following an offer by us to each holder of Class B common shares to issue to such holder, upon the same economic terms and at the same price, such number of Class B common shares as would ensure such holder may maintain a proportional ownership interest in us pursuant to our Articles of Association).
Future transfers by holders of Class B common shares will generally result in those shares converting to Class A common shares, subject to limited exceptions, such as certain transfers effected to permitted transferees or for estate planning or charitable purposes. The conversion of Class B common shares to Class A common shares will have the effect, over time, of increasing the relative voting power of those holders of Class B common shares who retain their shares in the long term.
In light of the above provisions relating to the issuance of additional Class B common shares, the fact that future transfers by holders of Class B common shares will generally result in those shares converting to Class A common shares, subject to limited exceptions as provided in the Articles of Association, as well as the ten-to-one voting ratio of our Class B common shares and Class A common shares, holders of our Class B common shares in many situations maintain control of all matters requiring shareholder approval. This concentrated control limits or precludes your ability to influence corporate matters for the foreseeable future. For a description of our dual class structure, see “Item 10. Additional Information—B. Memorandum and Articles of Association—Voting Rights.”
We are a Cayman Islands exempted company with limited liability. The rights of our shareholders, including with respect to fiduciary duties and corporate opportunities, may be different from the rights of shareholders governed by the laws of U.S. jurisdictions.
We are a Cayman Islands exempted company with limited liability. Our corporate affairs are governed by our Articles of Association and by the laws of the Cayman Islands. The rights of shareholders and the responsibilities of members of our board of directors may be different from the rights of shareholders and responsibilities of directors in companies governed by the laws of U.S. jurisdictions. In particular, as a matter of Cayman Islands law, directors of a Cayman Islands company owe fiduciary duties to the company and separately a duty of care, diligence and skill to the company. Under Cayman Islands law, directors and officers owe the following fiduciary duties:
•duty to act in good faith in what the director or officer believes to be in the best interests of the company as a whole;
•duty to exercise powers for the purposes for which those powers were conferred and not for a collateral purpose;
•directors should not improperly fetter the exercise of future discretion;
•duty to exercise powers fairly as between different sections of shareholders;
•duty to exercise independent judgment; and
•duty not to put themselves in a position in which there is a conflict between their duty to the company and their personal interests.
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With respect to the duty of directors to avoid conflicts of interest, our Articles of Association have modified the obligation mentioned above by providing that a director must disclose the nature and extent of his or her interest in any contract or arrangement, and following such disclosure and subject to any separate requirement under applicable law or the listing rules of the Nasdaq, and unless disqualified by the chairman of the relevant meeting, such director may vote in respect of any transaction or arrangement in which he or she is interested and may be counted in the quorum at the meeting. Conversely, under Delaware corporate law, a director has a fiduciary duty to the corporation and its stockholders (made up of two components) and the director’s duties prohibit self-dealing by a director and mandate that the best interest of the corporation and its shareholders take precedence over any interest possessed by a director, officer or controlling shareholder and not shared by the shareholders generally. See “Item 10. Additional Information—B. Memorandum and Articles of Association—Principal Differences between Cayman Islands and U.S. Corporate Law.”
Our Articles of Association restrict shareholders from bringing legal action against our officers and directors.
Our Articles of Association contain a broad waiver by our shareholders of any claim or right of action, both individually and on our behalf, against any of our officers or directors. Subject to Section 14 of the Securities Act, which renders void any purported waiver of the provisions of the Securities Act, the waiver applies to any action taken by an officer or director, or the failure of an officer or director to take any action, in the performance of his or her duties, except with respect to any matter involving any dishonesty, willful default or fraud on the part of the officer or director. This waiver limits the right of shareholders to assert claims against our officers and directors unless the act or failure to act involves fraud or dishonesty.
We may need to raise additional capital in the future by issuing securities, use our Class A common shares as acquisition consideration, or enter into corporate transactions with an effect similar to a merger, which may dilute your interest in our share capital and affect the trading price of our Class A common shares.
We may need to raise additional funds to grow our business and implement our growth strategy through public or private issuances of common shares or securities convertible into, or exchangeable for, our common shares, which may dilute your interest in our share capital or result in a decrease in the market price of our common shares. In addition, we may also use our Class A common shares as acquisition consideration or enter into mergers or other similar transactions in the future, which may dilute your interest in our share capital or result in a decrease in the market price of our Class A common shares. Any capital raising through the issuance of shares or securities convertible into or exchangeable for shares, the use of our Class A common shares as acquisition consideration, or the participation in corporate transactions with an effect similar to a merger may dilute your interest in our shares or result in a decrease in the market price of our Class A common shares.
As a foreign private issuer, we have different disclosure and other requirements than U.S. domestic registrants.
As a foreign private issuer, we are subject to different disclosure and other requirements than domestic U.S. registrants. For example, as a foreign private issuer, in the United States, we are not subject to the same disclosure requirements as a domestic U.S. registrant under the Exchange Act, including the requirements to prepare and issue quarterly reports on Form 10-Q or to file current reports on Form 8-K upon the occurrence of specified significant events, the proxy rules applicable to domestic U.S. registrants under Section 14 of the Exchange Act or the short-swing profit rules applicable to domestic U.S. registrants under Section 16 of the Exchange Act. In addition, we rely on exemptions from certain U.S. rules which permit us to follow Cayman Islands legal requirements rather than certain of the requirements that are applicable to U.S. domestic registrants.
We follow Cayman Islands laws and regulations that are applicable to Cayman Islands companies. However, Cayman Islands laws and regulations applicable to Cayman Islands companies do not contain any provisions comparable to the U.S. proxy rules, the U.S. rules relating to the filing of reports on Form 10-Q or 8-K or the U.S. rules relating to liability for insiders who profit from trades made in a short period of time, as referred to above.
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Furthermore, foreign private issuers are required to file their annual report on Form 20-F within 120 days after the end of each fiscal year, while U.S. domestic issuers that are accelerated filers are required to file their annual report on Form 10-K within 75 days after the end of each fiscal year. Foreign private issuers are also exempt from Regulation Fair Disclosure, aimed at preventing issuers from making selective disclosures of material information, although we are subject to Cayman Islands laws and regulations having substantially the same effect as Regulation Fair Disclosure. As a result of the above, even though we are required to furnish reports on Form 6-K disclosing the limited information which we have made or are required to make public pursuant to Cayman Islands law, or which we are required to distribute to shareholders generally, and that is material to us, you may not receive information of the same type or amount that is required to be disclosed to shareholders of a U.S. company.
As a foreign private issuer, we rely on exemptions from certain Nasdaq corporate governance standards applicable to U.S. issuers, including the requirement that a majority of an issuer’s directors consist of independent directors. This may afford less protection to holders of our Class A common shares.
Section 5605 of the Nasdaq equity rules requires listed companies to have, among other things, a majority of their board members be independent, and to have independent director oversight of executive compensation, nomination of directors and corporate governance matters. As a foreign private issuer, however, we are permitted to follow, and we do follow, home country practice in lieu of the above requirements. See “Item 10. Additional Information—B. Memorandum and Articles of Association—Principal Differences between Cayman Islands and U.S. Corporate Law.”
We may lose our foreign private issuer status which would then require us to comply with the Exchange Act’s domestic reporting regime and cause us to incur significant legal, accounting and other expenses.
In order to maintain our current status as a foreign private issuer, either (1) more than 50% of our Class A common shares must be either directly or indirectly owned of record by nonresidents of the United States or (2)(a) a majority of our executive officers or directors may not be U.S. citizens or residents, (b) more than 50% of our assets cannot be located in the United States and (c) our business must be administered principally outside the United States. If we lose this status, we would be required to comply with the Exchange Act reporting and other requirements applicable to U.S. domestic issuers, which are more detailed and extensive than the requirements for foreign private issuers. We may also be required to make changes in our corporate governance practices in accordance with various SEC and Nasdaq rules. The regulatory and compliance costs to us under U.S. securities laws if we are required to comply with the reporting requirements applicable to a U.S. domestic issuer may be significantly higher than the costs we will incur as a foreign private issuer.
Our shareholders may face difficulties in protecting their interests because we are a Cayman Islands exempted company.
Our corporate affairs are governed by our Articles of Association, by the Companies Act (As Revised) of the Cayman Islands (the "Companies Act") and the common law of the Cayman Islands. The rights of our shareholders and the fiduciary responsibilities of our directors under the laws of the Cayman Islands are not as clearly defined as under statutes or judicial precedent in existence in jurisdictions in the United States. Therefore, you may have more difficulty protecting your interests than would shareholders of a corporation incorporated in a jurisdiction in the United States, due to the comparatively less formal nature of Cayman Islands law in this area.
While Cayman Islands law allows a dissenting shareholder to express the shareholder’s view that a court-sanctioned reorganization of a Cayman Islands company would not provide fair value for the shareholder’s shares, Cayman Islands statutory law does not specifically provide for shareholder appraisal rights in connection with a merger or consolidation of a company that takes place by way of a scheme of arrangement. This may make it more difficult for you to assess the value of any consideration you may receive in such a merger or consolidation or to require that the acquirer give you additional consideration if you believe the consideration offered is insufficient. However, Cayman Islands statutory law provides a mechanism for a dissenting shareholder in a merger or consolidation that does not take place by way of a scheme of arrangement to apply to the Grand Court for a determination of the fair value of the dissenter’s shares if it is not possible for the company and the dissenter to agree on a fair price within the time limits prescribed.
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Shareholders of Cayman Islands exempted companies (such as us) have no general rights under Cayman Islands law to inspect corporate records and accounts or to obtain copies of lists of shareholders. Our directors have discretion under our Articles of Association to determine whether or not, and under what conditions, our corporate records may be inspected by our shareholders, but are not obliged to make them available to our shareholders. This may make it more difficult for you to obtain information needed to establish any facts necessary for a shareholder motion or to solicit proxies from other shareholders in connection with a proxy contest.
Subject to limited exceptions, under Cayman Islands’ law, a minority shareholder may not bring a derivative action against the board of directors. Class actions are not recognized in the Cayman Islands, but groups of shareholders with identical interests may bring representative proceedings, which are similar.
We have anti-takeover provisions in our Articles of Association that may discourage a change of control.
Our Articles of Association contain provisions that could make it more difficult for a third party to acquire us without the consent of our board of directors. These provisions provide for:
•the ability of our board of directors to determine the powers, preferences and rights of preference shares and to cause us to issue the preference shares without shareholder approval; and
•a two-class common share structure, as a result of which Patria Holdings generally will be able to control the outcome of all matters requiring shareholder approval, including the election of directors and significant corporate transactions, such as a merger or other sale of our Company or its assets.
These provisions could make it more difficult for a third party to acquire us, even if the third party’s offer may be considered beneficial by many shareholders. As a result, shareholders may be limited in their ability to obtain a premium for their Class A common shares. See “Item 10. Additional Information—B. Memorandum and Articles of Association” for a discussion of these provisions.
United States civil liabilities and certain judgments obtained against us by our shareholders may not be enforceable.
We are a Cayman Islands exempted company and substantially all of our assets are located outside of the United States. In addition, the majority of our directors and officers are nationals and residents of countries other than the United States. A substantial portion of the assets of these persons is located outside of the United States. As a result, it may be difficult to effect service of process within the United States upon these persons. It may also be difficult to enforce in U.S. courts judgments obtained in U.S. courts based on the civil liability provisions of the U.S. federal securities laws against us and our officers and directors who are not resident in the United States and the substantial majority of whose assets are located outside of the United States.
We have been advised by our Cayman Islands legal counsel, Maples and Calder (Cayman) LLP, that the courts of the Cayman Islands are unlikely (1) to recognize or enforce against us judgments of courts of the United States predicated upon the civil liability provisions of the securities laws of the United States or any state; and (2) in original actions brought in the Cayman Islands, to impose liabilities against us predicated upon the civil liability provisions of the securities laws of the United States or any state, to the extent that the liabilities imposed by those provisions are penal in nature. In those circumstances, although there is no statutory enforcement in the Cayman Islands of judgments obtained in the United States, the courts of the Cayman Islands will recognize and enforce a foreign money judgment of a foreign court of competent jurisdiction without retrial on the merits based on the principle that a judgment of a competent foreign court imposes upon the judgment debtor an obligation to pay the sum for which judgment has been given, provided certain conditions are met. For a foreign judgment to be enforced in the Cayman Islands, such judgment must be final and conclusive and for a liquidated sum, and must not be in respect of taxes or a fine or penalty, inconsistent with a Cayman Islands judgment in respect of the same matter, impeachable on the grounds of fraud or obtained in a manner, and/or be of a kind the enforcement of which is, contrary to natural justice or the public policy of the Cayman Islands (awards of punitive or multiple damages may well be held to be contrary to public policy). A Cayman Islands Court may stay enforcement proceedings if concurrent proceedings are being brought elsewhere.
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Judgments of Brazilian courts to enforce our obligations with respect to our Class A common shares may be payable only in reais. The exchange rate in force at the time may not offer non-Brazilian investors full compensation for any claim arising from our obligations.
Most of our assets are located in Brazil. If proceedings are brought in the courts of Brazil seeking to enforce our obligations in respect of our Class A common shares, we may not be required to discharge our obligations in a currency other than the real. Under Brazilian exchange control laws, an obligation in Brazil to pay amounts denominated in a currency other than the real may only be satisfied in Brazilian currency at the exchange rate, as determined by the Central Bank, in effect on the date (1) of actual payment, (2) on which such judgment is rendered, or (3) on which collection or enforcement proceedings are started against us, and such amounts are then adjusted to reflect exchange rate variations through the effective payment date. The then-prevailing exchange rate may not afford non-Brazilian investors with full compensation for any claim arising out of or related to our obligations under the Class A common shares.
Our Class A common shares may not be a suitable investment for all investors, as investment in our Class A common shares presents risks and the possibility of financial losses.
The investment in our Class A common shares is subject to risks. Investors who wish to invest in our Class A common shares are thus subject to asset losses, including loss of the entire value of their investment, as well as other risks, including those related to our Class A common shares, us, the sector in which we operate, our shareholder structure and the general macroeconomic environment in Brazil and Chile, among other risks.
Each potential investor in our Class A common shares must therefore determine the suitability of that investment in light of its own circumstances. In particular, each potential investor should:
•have sufficient knowledge and experience to make a meaningful evaluation of our Class A common shares, the merits and risks of investing in our Class A common shares and the information contained in this annual report;
•have access to, and knowledge of, appropriate analytical tools to evaluate, in the context of its particular financial situation, an investment in our Class A common shares and the impact our Class A common shares will have on its overall investment portfolio;
•have sufficient financial resources and liquidity to bear all of the risks of an investment in our Class A common shares;
•understand thoroughly the terms of our Class A common shares and be familiar with the behavior of any relevant indices and financial markets; and
•be able to evaluate (either alone or with the help of a financial adviser) possible scenarios for economic, interest rate and other factors that may affect its investment and its ability to bear the applicable risks.
The Cayman Islands Economic Substance Act may affect our operations.
The Cayman Islands has enacted the International Tax Co-operation (Economic Substance) Act (As Revised) (the “Cayman Economic Substance Act”). We are required to comply with the Cayman Economic Substance Act. As we are a Cayman Islands company, compliance obligations include filing annual notifications for us, which need to state whether we are carrying out any relevant activities and, if so, whether we have satisfied economic substance tests to the extent required under the Cayman Economic Substance Act. We may need to allocate additional resources to comply with the requirements under the Cayman Economic Substance Act, and may have to make changes to our operations in order to comply with all requirements under the Cayman Economic Substance Act. Failure to satisfy these requirements may subject us to penalties under the Cayman Economic Substance Act.
The Cayman Islands Tax Information Authority shall impose a penalty of CI$10,000 (or US$12,500) on a relevant entity for failing to satisfy the economic substance test or CI$100,000 (or US$125,000) if it is not satisfied in the subsequent financial year after the initial notice of failure. Following failure after two consecutive years, the Grand Court of the Cayman Islands may make an order requiring the relevant entity to take specified action to satisfy the economic substance test or ordering that it is defunct or shall be struck off.
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