Q1 2022 Vinci Partners Investments Ltd Earnings Call

The outcome of this fund raising.

Should have a very important impact for Vinci in terms of FRE and subsequently distributable earnings in the medium term.

Barrow our platform continues to deliver solid results from our core business with a relevant upside coming from financial income due to our significant exposure to fixed income bonds in the company's cash position.

The fundamentals of the business remain intact. Despite short term headwinds for nice sharp interest rate tightening cycle. We believe the shift of allocation towards alternative investments. We may a secular trend that we are more than able to capitalize upon as we offer the full suite of alternative investments op.

For investors in Brazil.

In addition, global allocations to Brazil continued to be substantially under weighted when compared to historical averages. This is true across all our asset classes from equities to private equity the current strong commodity market backdrop should be favorable to Brazil as it.

Benefits, our trade balance exchange rates and GDP growth, we see continuous strong feedback from lp's regarding a potential rebalance of their portfolio towards the country.

When we look into our FRE only for our asset management segments taken out are more cyclical financial adviser vertical and our new efforts in retirement services, which I will discuss in a few moments we are looking into almost 10% year over year growth and a 51% margin.

Our core business remains solid and we should see substantial growth in coming years, as we activate fees for private markets bonds raise it throughout this year.

Across our platform, we see strong additional growth opportunities with all our listed vehicles fully deployed at this point and ready to come back to market, our strong value proposition for our <unk> clients and a strong performance liquid funds.

The platform is ready to further accelerate growth as no no interest rates peak in Brazil.

Additionally, we believe there is a significant opportunity for inorganic growth through M&A.

We are seeing an acceleration in the pipeline for M&A and are currently evaluating several potential opportunities.

We are very proud of this quarter's outcome considering the market conditions encountered recently, we believe first quarter results are testimony to the power of our platform validating the resilience of our business in the most challenging and volatile of macro scenarios.

Sure Fin Ally's my remarks, I would like to go over a very exciting announcement that we made today of our new segments.

<unk> retirement services we.

We believe some of the biggest challenges as well as one of the many opportunities in the Brazilian financial market is the education and the right incentive for investors to Blaine and build investment portfolios to achieve their long term pension target returns.

Based on our extensive knowledge in asset allocation and management combine it with our long term vision, we decided to create a new segment within the company Vinci retirement service R. V. R. S.

V. R. S will be a new segment, we've seen Vinci and we work to provide solutions for investors through robust and efficient technological tools, which the financial market currently lacks deeply alongside alternative distribution vehicles.

In conjunction with the service providers will provide investor education on the importance of our long term allocation to achieve expected results for this new initiative, we have appointed a specialized team in this sector focus on promoting innovation in these markets.

E. R. S will be led by Vanessa L band is our partner and former CEO of Bradesco Seguros and Bradesco asset management we.

We believe the pension plans industry in Brazil is an extremely attractive sector with over one trillion. We is in total addressable market of which almost 90% is in the hands of the incumbent banks.

We are ready to leverage our platforms powers and expertise in asset allocation to develop a tech enabled segment, which in our opinion has the potential to be extremely relevant to our company in the medium and long term gives.

Given the long term vision it potential we see for these initiatives. In addition to the digital nature and high growth profile, we expect from the <unk> in the coming years, we believe Vrs merits I Standalone segment. Therefore, we have opened a fifth segment in our segment earnings.

Section of the release, so shareholders can track our evolution in terms of AUM revenues and costs for the new initiatives separately from our all other already mature asset management segments with that I will turn it over to Bruno to go over our financial results.

Thank you Alessandro and good afternoon, everyone.

Starting on slide nine we ended the quarter with 57 billion Reais in AUM.

Up 3% year over year.

During the first quarter, we had $1 1 billion Reais and capital return from <unk>. After a successful run of the mandate one for this fund in 2015.

By our infrastructure team.

The objective was to restructure the fund's portfolio and return capital to obese, which was successfully completed this quarter.

The excellent performance in this restructures adds to the already stellar track record of our infrastructure team.

We closed in the first quarter, our follow on offering for one of our listed Reits via the ones in the office sector, which contributed with 250 million Reais in perpetual capital commitments for our real estate AUM.

The offering was done through a bank kind transaction such as the one we did in our shopping mall REIT recently.

As local markets have not been favorable for primary issuances, so far in the REIT segment.

Our real estate team has been extremely active and a pioneer in the REIT market for this type of stock transaction.

Being able to raise a weigh them even in a tougher market environment for our primary offerings.

We continue to see additional opportunities to raise capital through such structures in coming quarters.

Moving onto slide 11, we go over accrued performance fees in our private markets funds.

Performance see receivable increased to $104 6 million reais in the first quarter.

3% increase quarter over quarter, driven primarily by appreciation in our VIP three strategy that currently totals $84 6 million realizing performance fees are 81% of total fees.

As a reminder, vg had eight bit area is at the end of the quarter and performance edge ywam coming from private markets funds student investment period.

That can further contribute to our accrued performance fees as these funds answered their divestment periods. We've continued to see this as a significant long term upside for distributable earnings and dividends.

In Slide 13, we go over management and advisory revenues in the quarter.

Management fee revenues were up 7% year over year, following strong fund raising across private markets and I P. N S segments through 2021.

Management fees for the last 12 months totaled 422 malaria is up 33% year over year.

Advisory fees accounted for $3 7 million in the quarter and totaled $55 4 million Reais over the last 12 months up 98% against the prior 12 month period.

Advisory fees are more volatile in nature as they are recognized when deals close. So we can have quarters with greater contribution from advisory while others will build mostly upon our management fee revenues.

As discussed in our fourth quarter earnings call in 2021, we had a banner year in adviser, which will be difficult to replicate in 2022. However.

However, we believe the growth in origination for new mandates will allow us to develop the business organically in the long term.

In slide 14, we have our operating expenses for the quarter and last 12 months total expenses represented 48 million reais in the quarter down 4% year over year.

Over the last 12 months expenses were up 21% a limited expansion when compared to the growth in fee related revenues in the same period, even with the new costs related to becoming a public company in 2021.

Our robust platform and management teams allow us to raise a wham with very little added costs, which translates into higher margins as we expand the business.

On slide 15, we present, our fee related earnings FRE was $43 8 million or 78 cents per share representing a decrease of 13% year over year.

FRE in the first quarter was directly impacted by a lower advisory revenue quarter, when compared to the first quarter of 2021 a stellar quarter for advisory.

When we consider only our asset management businesses FRE would have been $44 5 million reais or a 9% increase year over year.

FRE totaled 260 malaria is in the last 12 months, a 38% growth against the prior periods.

FRE margin for the last 12 months was 51% an increase of 190 basis points against the prior 12 months periods.

Management fees remained the main contributor to revenues accounting for 81% of total revenues over the last 12 months reiterating the relevance of FRE in the company's business model.

Next in Slide 16, PRA was $2 1 million reais in the quarter down 68% year over year.

In the first quarter of 2021, we had an extraordinary performance contribution coming from international exclusive mandates in our Ips segment.

This becomes evident when we look into the detailed results for the Ips segment in slide 24 of this presentation, which says you will cover in more detail in a few moments.

Another point to highlight is that most of our domestic open ended funds charge performance fee Semiannually in June and December does first and third quarters are usually expected to post lower levels of performance fees seasonally.

B are you over the last 12 months totaled $19 1 million Reais down 47% over the prior period, primarily due to the recognition of positive nine meter re is an unrealized performance fees over the course of the last 12 months of first quarter of 'twenty, one as opposed to a negative 5 million.

Your eyes of unrealized performance fees. This years first quarter last 12 months.

Realized performance fees were basically flat.

Shifting to slide 17, we go over our realized <unk> vast when in financial income.

We had 27 million <unk> realized income this quarter coming from gains in our liquid funds portfolios and dividend distributions of the company's prepared third position in listed Reits.

As we've discussed in the fourth quarter earnings call financial income should be an important driver for distributable earnings growth in 2022 as most of our cash a locations are exposed to fixed income bonds related to the CDI rates.

Capital continues to be deployed as commitments to funds are private markets funds, but draw downs happen overtime, allowing for capital to earn short term rates in the meantime.

Turning to slide 18, adjusted distributable earnings totaled 57, 7 million reais in the quarter or run rate <unk> and <unk> per share up 22% year over year.

After tax distributable earnings totaled 243 million Reais over the last 12 months up 77% against the same prior period.

Even facing a challenging macro scenario, we were able to grow our distributable earnings significantly this reinforces our ability to generate cash flow. Thanks to our diversified business model translating into dividends and adding value to our shareholders.

Finally, slide 19, which door cash and investment balance we finished the first quarter with $1 4 billion reais in cash and that investments or $24 58, reais per share or approximately $5 per share in cash position.

So far the company has committed 451 million reais into private markets funds of which 132 million Reais were committed in the first quarter of 2022 with close to 60% of total commitments have him being called by the funds.

During the first quarter, we call media resources into new launches across our private market strategies, such as our city vast men in our markets backed security funds in credit, which is now at least as equal to <unk> III.

We also seeded the first close for VSP or a new fund of funds strategy for private markets allocations would be an IP NFS amongst others.

For a more detail. Please see slide 33 of this presentation.

And with that I'll turn it over to Sasha to go through our segments.

Thank you Bruno.

Turning to our segment highlights as you can see in slide 21, our platform remains highly diversified.

Which we believe should be main contributor to the resilience of our business.

49% of our F. R E. In the last 12 months came from our private Remoxy studies, followed by <unk> with 20% <unk>.

S with 18% and financial advisory contributing with 13%.

The same level of diversification is reflected in our segment to distributable earnings.

Moving on to each of the segments, starting with our private market strategies on his life to any tool.

F. R E totaled 106, eight <unk> in the last 12 months up 21% over the prior period.

Following strong fund raising over the last 12 months across real estate credit and infrastructure.

<unk> was flat year over year as previously mentioned this quarter, we had $1 1 billion highs in capital return coming from <unk> <unk>.

A successful run of the mandates won into any 15 by our infrastructure team.

This quarter, we also had a six each of quarters for our office REIT Venal Z.

Adding 250, <unk> input beddow capital to our platform through a big Guy in that transaction.

Why are the marks are excused struggling.

<unk> guided transactions, having being an important contributor to our <unk> business.

As it presents an alternative to raise capital order Dan primary issuances.

As mentioned by Alessandro.

These prepared remarks, we are on track for our fund raising pipeline in private Denmark funds over the course of the next four to six quarters.

Which should impact substantially growth for private markets F. R. E. As these funds get a higher fees than our average management fee rate.

Moving on to Slide 23, we posted solid returns in our liquidity strategies.

<unk> for the first quarter was up 2% year over year and DRAM was resilient in the last 12 months, considering the significant and constant outflows suffered by the asset management industry in Brazil over the last quarters.

The significant rising interest rates I align with a tougher macro scenarios led to a strong vote to flows in the public equities industry.

Due to our Investor base, and our long term track record.

Sheep funds.

Able to sale thoughts of those uncertainties without any relevance redemptions and solid numbers.

Our results prove once again that we are resilient faced a challenging market scenario ending back to food, where any favorable market conditions.

With that said, we expect to improve our AUM as interest rates return to a healthy level.

We believe we are at the end of the rising cycle.

Rates, which could be an important indicator of our future fund raising in liquids.

Moving on to our Ips business on Slide 24 F. R E totaled $40 million of ice in the last 12 months in a stable increase of 73% against the prior period.

Following outstanding fund raising across our separate Monday strategy over the last 12 months.

As a balloon anticipated when talking about the PRA results, yeah, if our IP and as in the first quarter 'twenty. One accounted for 5 million. He is a result of extra generic pharmacy revenues coming from international mandates in the quarter, which does not take place in the first quarter of 2022.

Segment totaled $54 million over the last 12 months, a 35% increase against the prior period.

Reassuring the strong trends, we had in our IP and that's the vertical recently.

We are noticing an exciting pipeline for separate mandates this year, placing <unk> in a great position to repeat its success in 2022.

Turning to slide 25 financial Advisory reported modest results in the first quarter 2022.

As we mentioned before advisory fees carry a significant level of seasonality, depending on time for deal closings and market conditions.

Nonetheless, we are seeing an exciting pipeline of deals ahead of us that we plan to ASIC routes throughout the next quarters.

F. R E for financial Advisory was $27 7 million highs over the last 12 months, representing a 9% to 7% increase over the prior period, thanks to the outstanding year for advising into any to anyone.

Finally, moving on to Slide 26, you had include.

Our new business segment, Vince retirement services as Alexandre mentioned, we are in the process of developing this business line. Therefore, we are only seeing expenses for the time being.

Once the business grows we should see important contributions from from these segments in terms of AUM and revenues from management fees.

We are extremely excited about this new growth initiative and we used to share with you results from this new vertical every quarter from now on over a separate segment results.

As we go through our segments it becomes evident that our core business remains solid with healthy margins for mature asset management businesses.

Management fees remained a quad indicators of our business model.

We for most of our AUM coming from a long term oriented in vessel base and subject to long term lockups.

We believe one of the key factors to our resilience and strong results since the IPO come from our diversification across asset classes, which protect the business in adults and tumultuous market conditions.

Combined we feel personality factors. We can also provide interesting upsides the pain during the quarter such as their promise and advisory fees and also our cash position translate into financial income.

We have an important contract cycle effect over marketing our cash imbalance.

As it benefits from the rising interest rates, becoming a crucial factor of our dividend distribution throughout 2022.

As we are over the course of this year recycling private capital and raising the next family of longer term funds, which should drive fuel AUM growth for the following years.

That's it for today's presentation once again wed like to thank you for joining our call.

That I would like to open the call for questions Anna.

Thank you Sachin.

Our first question comes from just a lump absolutely Goldman Sachs.

Please go ahead.

Alright. Thank you Anna good evening, Alessandro Buena answers yeah. Thank you for the call and taking my question.

I guess my question following up on you mentioned you have a nice pipeline of fundraising for private markets are about 10 billion.

Over the next four to eight quarters.

Any more color.

Terms of when that can begin to contribute to a M. Do you think it's closer to the four quarters like where you would that benefit at any point. This year do you think and then on the back of that how do you think about your ability to deploy that capital, particularly given sort of the current market environment.

And just where do you think you can see opportunities in this current environment. Thank you.

Okay. Tito this is Greg thanks for the question.

So the typical private market funds.

It has a characteristic of being very backward weighted.

In regards to the fee structure of the fund at least in our case right most of our products, we charge on committed capital.

So we have.

We tend to have.

The impact being more felt towards the end of the process because we charge.

Refractive.

Management fees right from people that entered.

Towards the end of the fundraising process.

So they.

The main products that aren't aligned today they are in the market.

Are there similar ones that we mentioned in the last call. So we continue to have.

The expectation obviously before the next few months during its first close.

We have our climate change fund, which is getting very good reviews in the market that we expect to have closes.

The second half of the year.

Have a couple of credit funds one of them, we just announced that we do the lithium of the fund.

And we will come back eventually we follow ons, we have another one which is the bigger one.

Which we are negotiating to put on line during the second or the third quarter of this year, which also has a very strong.

Amcor in that process.

Have other products in the real estate side, one that's related to agriculture and crops.

We have laws are being kind transactions in real estate there are under negotiation. So the pipeline is really very full.

The big product they have longer.

Fundraising cycles, and this should impact more a 'twenty.

'twenty three.

So, although we should see some impact in <unk>.

I need to.

We would expect the bulk of the revenue impact will be felt in 2023 as we charge those retroactive management fees.

Backing up to the first close of these funds, which should happen in the next few months.

Great. Thank you Bruno that that's helpful.

If I can ask Jess.

Sorry on the deployment side, you had a second question to Atlanta.

Yeah. We are I mean, we are in an excellent environment for capital deployment, So capital availability in Brazil continues to be very scarce. So the amount of capital B a raise in Brazil. This hasn't really changed over the best 10 years or so I think we had a peak year in 2011.

Perhaps but after that the fund raising was very very.

Very disciplined overall.

Across the board I would say probably in all of the <unk>.

I'll divert so the capital allocation opportunities that we see in the market today are exceptional I think the market correction, Australia, even more alternatives. We are structuring additional additional products that we should.

Come on line in the second half different strategies that we don't have today.

To take advantage of the market displacements.

Some of them in the liquid side of the business.

So we see we see a very strong opportunity to deploy the capital as it becomes available to.

To the platform.

Okay.

Great. Thank you Bruno that's helpful and maybe just any color you can provide on the new retirement strategy when can that begin to be a contributor to the fees.

Well, yeah, if you can quantify that a little bit more.

Thank you Tito that's alessandra.

Did you address a vertical now we are in.

The level and the moment of a problem and product discover together some clients.

We're trying to validate the Hy Bon is.

And making the prototype of the products right now so estimates the validated we are already building barrel.

Technical <unk>.

I would say side of their products together with the technology matters.

So probably we will achieve that impact more next year than this year, but probably be already launched SMS.

The product of course, we start with a few clients in the channels because that will use both the distribution channels that we have today a new ones.

But we'll see this impacting more in terms of AUM and revenues I believe next year and so on but there is a very scalable business. So we can start.

Slowly with some more cheap I'd say.

Both access and then scaling up as soon as we gather more and.

And what products and et cetera.

Yes, I think just to complement bruno against that.

Hello.

We feel that this market.

As you very well.

When compared to the rest of the market in Brazil, generally still very early in the cycle going forward, but we believe the private patients even before from a cycle standpoint. So.

It's a one trillion.

Addressable markets when you think about the the open at a private plans in Brazil would you.

Still almost 90% in the hands of income, but the top five banks in the country. So there's really a lot of opportunity for us to add value to the clients to generate our alternatives are.

Solutions for their long term retirement plans and as Alessandro mentioned, we want to do this.

From a tax standpoint, so allow the.

Clients to work alongside with us in their asset allocation.

Contribute with different products that are currently available to them.

Still a very very immature markets.

Most of the fixed income hedge fund type of allocation and we believe we as a content provider in the alternative space, we can add value to the clients in the medium to long term basis, and it's really a very very much of a market with a big addressable markets.

Yes.

Great. Thank you Bruno Thank you Alessandro.

Our next question comes from Chicago.

This is Tom.

Please go ahead.

Hi, good afternoon, everyone and thank you for the opportunity of making passions.

Here on my side, given the challenging macro scenarios scene for asset managers, especially smaller asset managers. They believe this creates a good opportunity to buy a new asset manager if a different expertise in a different asset class or perhaps with with our brands.

Different region. Thank you.

Thank you Alessandro.

Completely a true your observation.

With the market a little bit more difficult, we are seeing our pipeline for M&A.

Populated strongly in recent months.

We are.

Evolving.

With this analysis and we are probably seeing zelle.

Very good possibility of completed M&A in the next few months.

Pension private markets.

Where we are looking for as we mentioned before additional capabilities.

Under our already very comprehensive private market business lines and this is of course new.

<unk>.

I would say strategies.

Or.

Even regions and et cetera, but that now more advance it and looking for a new strategies inside private markets and as you mentioned.

The current scenario Brazil.

Helping us to really populate our M&A pipeline. So we are very optimistic that we would find probably.

In next few months.

Interesting.

Opportunities for us.

Yeah.

Thank you very clear.

Yeah.

We are showing no further questions at this time I'd like to turn the conference back over to Charlie.

Final remarks.

So thank you very much for your continuous support and even with a very challenging scenario. We are very happy with the performance of the company and their perspective and opportunity for the rest of the year. So I'd like to thank you again and thank you for attending our call.

This concludes today's conference call. Thank you.

You may now disconnect.