Q2 2022 Vinci Partners Investments Ltd Earnings Call
The conference will begin shortly. To raise your hand during Q&A, you can dial star 1-1.
FNC partner's second quarter 2022 earnings conference call. At this time all participants are in a listen-only mode. Later we will conduct a question and answer session and instructions will follow at that time. As a reminder this call will be recorded. I would now like to turn the conference over to Anna Castro, investor relations manager. Please go ahead.
Thank you and good afternoon everyone. Joining today are Alessandro Oster, Chief Executive Officer, Bruno Zaremba, Private Equity Chairman and Head of Advanced Relations and Special Chief Financial Officer.
Earlier today, we issued a press release slide presentation in our financial statements for the quarter, which are available on our website at IR.VinciPartners.com.
I'd like to remind you that today's call may include far-looking statements which are uncertain outside of the firm's control and may differ from actual results materially. We do not undertake any duty to update the statements. For discussion of some of the risks that could affect results, please see the Risk Factors section of our 20-s.
We will also refer to some non-GAAP measures and you find reconciliations in the release. Also note the announcement on this call constitutes an offer to sell or solicitation of an offer to purchase an interest in any venture partners fund. With that, I will turn the call over to Alison.
Thank you Ana, good afternoon and thank you all for joining our call. We are extremely pleased to join you all today as we announce results for the second quarter of 2022.
Adjustable distributable earnings totalled 61.1 million REIs in the second quarter or 1.10 REIs per common share when adjusted for non-recurring expenses related to our corporate M&A activities incurred in the quarter. This represented an increase of 11% year over year.
Vinci announced a quarter dividend of 17 cents on the dollar per common share. Since our IPO, Vinci has distributed $1 per common share to shareholders as dividends, proving our resilience and ability to generate significant amounts of cash flow, even in the most challenging macro scenarios.
Considering yesterday's closing share price,
Pinchi partner stock is currently trading at close to 6.5% last 12 months dividend yield.
The yield is secured by a highly visible management fee driven revenue stream and a very conservative investment policy on our balance sheet's cash position.
We continue to deliver solid results quarter after quarter thanks to our asset-light and diversified business model, which translates into substantial amounts of cash flow and an attractive dividend distribution to our shareholders.
Vinci ended the second quarter with 60 billion reais in assets under management or a 62 billion reais performer considering a recently announced transaction with SPS capital.
AUM expansion decoder is a result of
4.6 billion REI's in total fundraising coming from both private and liquid sides of our business.
Fundraising comes from all across our platform, all the more reinforcing the participation of our business.
The second quarter is an evident example of the power of this diversification when we have different pools of capital working together and contributing to our AUM growth.
Our IPNS business raised $2.4 billion in AUM in the quarter. This AUM came from different parts of capital, a combination of our pension plan products and the activation of new exclusive mandates.
Even during a challenging market for inflow in liquids, our IP&S strategy continues to raise capital given the differentiated product offering and allocation services VINCI provides.
In private markets, we raised 2.9 billion REI's in new capital commitments this quarter with highlights to our private equity and credit strategies.
In private equity, we started fundraising for a VCP4, the fourth vintage of our flagship strategy.
The fund was activated as of June 23rd with close to 100% of capital commitments raised so far, being re-ups for existing LPs from previous vintages.
The first round of commitments represents a key milestone for VCP4 as it enables us to leverage our extensive pipeline of opportunities and deploy capital into investments that will build upon our track record, effectively contributing to fundraising efforts in following quarters.
All management fees charged for VCP4's subsequent closings will redirect to the start of the fund in June 2022.
We are working on this fund raising window for VCP4's first close until September and subsequent closes should be held over the next 12 to 18 months.
Moving on to our private credit segment, we are pleased to announce the official launch of its new strategy, Vinci Credit Infra, a fund designed to invest in infrastructure debentures focused on high-grade credit assets in accordance with superior ESG guidelines.
The credit team held the first closing for this product with a total 900 million REI coming mostly from an anchoring local institutional disaster.
We will now broaden the fundraising effort toward the local pools of capital.
The launch of the VQ credit infra marks a decisive turning point for our private market segment.
AUM for our credit strategy has grown by 75% over the last 12 months with the launch of two new products the first listed vehicle with perpetual capital VCRI and venture credit infra mentioned before
This move increases our product offering private market opportunities and solidifies our position as the player of choice for alternatives in Brazil.
This quarter is particularly important as it marks the starting point of our previous announcement 10 billion REI total target fundraising efforts across our private market strategy.
On top of fundraising for private equity and credit that have impacted us over the second quarter, Vinci has been selected by BNDES for seed investments of up to 500 million REIs, each in two of our products across credit and infrastructure.
In total, the BNDs news represents up to 1 billion REIs in future commitments for these two new strategic initiatives.
Particularly for the ICC, our new product in infrastructure, the NDS commitment, increased visibility on the activation of the funds in the second half of the year.
We have been receiving a lot of interest on the ICC, which will be our first climate-driven fund, and the BNDS anchor investment has a substantial positive impact on critical mass for the fund.
We are very happy with the continued advance of ESG-driven initiatives at Vinci.
BNDS also approved a seed investment for Vinci Credit Infra which will be activating the fund second close expected to take place in the second half of the year.
With all that said, this has begun what we believe to be a very successful fundraising cycle for private market strategies.
which will be extremely significant for future FRE results and expansion of the platform across the alternative asset space in Brazil.
In addition to fundraising for closed-end funds, we continue to present substantial long-term opportunities within our platform to raise capital for other strategies.
As an example, our listed vehicles, including REITs in real estate and listed funds in credit and IFRA, are all fully invested and with an extensive pipeline for deployment, thus as soon as market conditions improve, we should expect funds to come back to market with follow-on offerings.
The same goes for our liquid strategies, which have remained resilient in terms of outflows over the last 12 months despite massive redemptions in the local market.
According to public data.
Disclosed by Ambima.
Public equity and hedge fund managers have suffered close to 100 billion reais and outflows only during the first half of the year.
Our liquid products have once again proved their resilience over the overall Brazilian tendency for our flows, giving our long-term oriented investor base as we attest once again the value of our proprietary distribution channels, strong relative performance and direct relationship with investors.
We believe the rising interest rate cycle to be towards its end and expected to see improvement in local markets as a consequence.
As has been the case in prior cycles, we have once more been able to post AUM growth on the back of an interest rate tightening cycle and are now well positioned to capitalize over the coming easing cycle, with a broadened mix of products, attractive long-term track records, and a strong brand. Now let me spend some time on our recently announced transaction with SPS Capital.
our first M&A transaction since the IPO. At the end of July , we announced the acquisition of SPS Capital, one of the top independent special situations asset managers in Brazil, with two billion reais in assets under management.
I'd like to highlight four key pillars of this transaction.
First, the acquisition of the SPS will enhance the platform's reach by adding a new strategy in which we currently do not operate.
Second, we are bringing a high quality team with extensive experience in track record in the special situation sector in Brazil. We believe the combination of SPS track record in the special seats segment with inches distribution capabilities present a great opportunity for fundraising across new vintages and complementary products. We already mentioned the breadth of our project offering and this adds an additional relevant Guys, we are going to be at the Avoid L e. Boy, dot e and
enhance our penetration in this growing segment of the market.
A third highlight of this transaction is the strengthening of our FRE as we are adding to our platform long term AOM with extremely attractive fees.
The transaction is immediately accredited on a low to mid single digit DE per share with an increase to high single digit accretion in the medium which
should come by investing current undeployed capital as there is a management fee step up when capital is deployed.
There are additional sites for new products, goodwill, amortization and additional fundraise for the current flagship strategy.
At last, we see a substantial long-term upside coming from performance fees from Vintage3 and Future Funds.
All Vintages are performing well ahead of the benchmark with total track record posting above 20% net IRRs.
To finalize my remarks, I would like to reinforce the following message.
Since our IPO in the beginning of 2021, we have been facing a challenging macroeconomic scenario with rising interest rates and inflation.
This was a phenomenon experienced not only in Brazil but in the whole world.
We continue to deliver solid results and a resilient growth in the period, despite headwinds pointing the opposite way, a testimony to the power of our platform.
The Brazilian Central Bank indicated that the rising cycle has come to an end.
and we should expect interest rates to reach neutral levels over the next three years.
Our inflation projections are going towards the same direction, with a significant reduction in local inflation rates still in 2022, implying a good outlook for an uneasy interest rates inflation cycle to start in coming quarters.
Brazil already withdrew all fiscal stimulus being ahead of the global curve and is experiencing several upward GDP growth revisions unlike the rest of the world.
All of that reaffirms that we are very confident in Vinci's ability to continue to grow, become more diversified and be a leader in the development of the alternative asset management industry in Brazil.
We have several bottom-up drivers with several relevant closer-ended funds starting the funding cycle.
in addition to the acquisition of another asset allocation platform in SPS.
The opportunity ahead of us continues to be very significant with the currently small penetration of the alternative asset management classes in the Brazilian market presenting a major opportunity to us, an opportunity that is currently being explored by a limited number of competitors.
The performance we had since the IPO, having raised or acquired over 12 billion RIs of AUM in the last 18 months, solidifies our position as a leader in the transformation ongoing in the local asset management industry.
With that, I'll turn it over to Bruno to go over our financial results.
Thank you, Alessandro, and good afternoon, everyone.
Starting on slide 9, we go through AUM roll forwards for the quarter.
Vichy ended the quarter with 60 billion reais in AOM, up 5% year over year.
During the second quarter, we raised 4.6 BRI with 2.9 BRI coming from our private market strategies.
We started fundraising efforts for VCP4 as Alessandro previously mentioned and will continue to do so for the next 12 to 18 months with all fees being charged retroactively to the fund start date.
This quarter we had another transaction affecting our EOM in private equity.
We absorbed a non-fee earning vehicle from the structure of E-Xenos Investment, our final investment in our third vintage flagship fund, VCP3.
Lastly, our credit segment launched its new product, Vinci Credit Infra, raising 900 million REIs backed by an anchor commitment from a local institutional investor.
This fund has also been approved for a 500 million REI commitment from BNDES.
which will impact the fund's second closing expected for the second half of this year.
Moving on to the liquid side of the business.
Vichy reported a 1.7 billion reais net inflowing the quarter driven by strong fundraising in our patient plan strategy within IPNS.
As we have stated in prior calls, we believe Vichy has a great long-term opportunity to grow in private pension allocation in Brazil and we will continue to look for ways to capture this opportunity. For more information, visit www.vichy.org
Our Leaked Strategies AUM remains resilient while navigating through this turbulent market scenario, having witnessed small outflows against what has been substantial market redemption cycle.
however the negative market performance has impacted us in a different way
Our AOM was impacted by depreciation of 1.7 billion RIA's in the second quarter, coming from the mark to market effect of liquid funds tied to the Bovespa index, which dropped almost 20% in the quarter.
So far, the index has recovered about 10% with a better environment for local markets, and we should see a positive mark-to-market impact on AOM for liquids in the third quarter if markets continue to perform better.
Moving on to slide 11 we go over Vincis AOM performer after the acquisition of SPS Capital.
SPS will represent our 8th Asset Management Division and the 5th within our Private Market segment.
consolidating our position as a one-stop shop for alternative investments in Brazil.
This is one more step in our journey of diversification since the inception of InChI.
With SPS we have addressed the strategic and important gap in our asset management portfolio.
that we can now grow into synergistic and complementary funds like we historically did in other private market strategies.
SPS AUM of two binary ISE is distributed across three vintages.
Funds have a long-term structure, up to an 8-year lockup and carry attractive private market style fees.
higher than our current average fee rates.
The transaction with SPS is accretive to VINCI on all fronts, adding a high visibility, long-term, FRE-oriented product with great margins.
Additionally, there is significant upside for PRE in the long term starting vintage 3 and subsequent products.
Moving on to slide 13, we go over accrued performance fees in our private market funds.
Performance fee receivable increased to 146.1 million REIs in the second quarter, a 40% increased quarter-over-quarter driven primarily by appreciation in our VCP-3 strategy that currently totals 126 million REIs in performance fees or 86% of total fees.
Vinci had 9 binary eyes at the end of the quarter in performance eligible AOM coming from private market funds till an investment period that can further contribute to our accrue performance fees as these funds enter their divestment periods.
In addition, we expect SPS capital products to add to the private market's performance potential over time.
Turning to slide 15.
we will cover our fee related revenues.
Revenues from management and advisory fees totaled 96 million REI in the quarter, up 6% quarter over quarter.
Most of the fundraising across private market strategies and a significant amount of the capital raised in IT and Ads was activated in our AUM towards the end of the second quarter and will start to positively impact revenues in a more significant way starting the third quarter.
Total fee related revenues were down 5% year over year as a result of the capital return in SIP and ESG-PSEAGA in infrastructure during the first quarter of 2022.
Another significant impact on management fees year-over-year was the local mark-to-market correction which resulted in over 1.7 billion re-is in AOM depreciation in the quarter.
Since fees are charged over funds and AVs.
We had a significant impact over management see revenues in our liquid funds When we compares to the fees charged over the same quarter of last year with the Bovespa trading at around 130,000 points almost 30% higher than the closing levels of this year's second quarter
In slide 16, we have our operating expenses for the quarter and year to date.
Total expenses accounted for 50.5 million REI in the quarter, down 6% year-over-year.
In the year to date total expenses were 98.6 million REI's down 5% year-over-year.
excluding bonus compensation
Fixed and variable expenses increase slightly over a year due to the inflationary pressure on fixed costs, the return of traveling expenses to pre-pandemic levels, and the investments currently being made in our venture retirement service vertical, which we expect to contribute to revenues in 2023.
Moving on to slide 17 we go over our few related earnings for the quarter and year to date.
FRE totaled 46.9 million REIs or 84 cents per share in the quarter.
Overall trends started to reaccelerate with FRA up 7% quarter over quarter with increases in management and advisory fees.
As previously mentioned, we should expect the majority of the impact in management fees from the recent fundraising to translate into our FRAE results starting the third quarter as most of the AUM was activated at the end of the second quarter.
In addition, we expect contributions from the SPS acquisition to positively impact referee growth in the last quarter of the year once the transaction is closed.
We continue to expect the transaction to close by the end of the third quarter of 2022.
On a year-over-year basis, FRE was down 15% as a result of lower levels of management fee following the previously mentioned capital return of CEP and the depreciation across liquid strategies and the previously mentioned cost pressures.
FRE was 90.7 million REIs or 1 REO and 63 cents over-the-air to date, down 14% year-over-year, driven by higher levels of advisory fees in the first half of 2021 when the team closed as pre-active advisor for B3 listed company Espaçolese.
FRE margin was 49% in the quarter, down 6 percentage points when compared to the same period of last year, impacted partially by higher fixed costs following the rise in inflation rates and previously mentioned investments behind venture retirement services, combined with capital return and mark to market effects on revenues.
Our investment in ZRS has cost us approximately 200 basis points in FRA margins had wins this quarter, as we developed the team and product line to be rolled out in 2023.
As we explain the platform through organic and inorganic growth over the next quarters, margin should have a positive bias as fund raises that are in the pipeline carry substantially higher fees.
than our current average fee.
In addition, the consolidation of SPS capital, which carries a higher FRE margin than our current margins, should also positively drive margins in coming quarters.
Moving on to slide 18, we go over performance-related earnings.
BRE was 2.4 million Reais in the quarter
Over the year to date, PRE totaled 4.6 million REI's down 74% compared to the same period of the year before, a combination of two factors.
In the second quarter of 2021, the platform was positively impacted by an extraordinary, unrealized performance coming from our IP&S International exclusive mandates.
Most of our liquid funds haven't been able to charge performance fees with the correction in local markets in 2022.
due to their high watermark causes.
This is affecting the entire industry in Brazil as high water mark losses are common in liquid farms locally.
Shifting to slide 19, we go over a realized GP investment in financial income.
Zinche had 25 million REI's in realized GP and financial income this quarter up 71% on a year-over-year basis
coming from gains in our liquid funds portfolio and dividend distributions from companies preparatory positioning listed REITs.
Financial income continues to be an important component of distributable earnings in 2022.
As we have discussed in the past, we expect this to remain a relevant trend in coming quarters.
In the medium to long term we should see financial income components in our distributed earnings gradually migrating
towards FRE results as we deploy capital into our private market products and leverage fundraising for this product.
An additional use of CAPTIL is selective MNA as was the case of acquisition of SPS CAPTIL which had an initial cache component.
In the second quarter, Vinci committed an additional 537 million reais across private market products.
this capital will be called overtime as funds deploy capital into new investments
With these more recent commitments we have reached almost a billion of IPO proceeds committed to private market funds leveraging the capital we raised in the IPO to fund additional ALM growth and FRE expansion.
Turning on to slide 20 we go through our adjusted distributed warranty
Our adjusted distributed earnings totaled 61.1 million REI or 1 REI and 10 cents up 11% on a year-over-year basis boosted by realized gains from our financial income.
Just as he totaled 118.8 million reais
2 REI's and 13 cents in the year to date of 16% when compared to the same period last year.
Adjust the DE margins posted another quarter of expansion with 49% in the second quarter an increase of 5.3 percentage points year over year.
We expect to continue to add shareholder value by expanding the distributed earnings results over the quarters as a combination of organic growth through fundraising across our platform and inorganic AOM expansion through acquisitions such as the transaction with SPS capital.
We still have fully deployed listed products that are set to come back to market as soon as market conditions improve and liquid funds that remain resilient facing a challenging market but are well positioned to further grow in a more stable scenario.
In summary, our platform is highly diversified and ready to capture opportunities to enhance long-term value creation to all our stakeholders.
Finally, in slide 21 we show our cash and investment balance.
We ended the second quarter with 1.4 billion REI's in cash and ad investments or 24.37 REI's per share or approximately $5 per share in cash.
with that I'll turn it over to Ségia to go through our segments.
Thank you Bruno.
Turning to our segment highlights.
As you can see in slide 23, our platform remains highly diversified.
which we believe to be main contributor
to the resilience of our business.
53% of our FIE individual dates came from our private market strategies.
followed by IPNX
With 22%
meet these strategies with 21% and financial advisory contributing with 4%.
The same level of diversification is reflected in our segment, distributable earnings.
Moving on to each of the segments, starting with our gravity market stotages on slide 24.
FIE totaled 24.3 million yards in the quarter, down 16% over the prior period.
driven by a combination of the following factors.
a one-off advisory fee contribution in real estate during the second quarter of 2021, and the successful capital return of 1.1 billion Reais in fee-penegya pessiaga during the first quarter of 2022.
The infrastructure vertical is in the process of raising a new strategy, the ICC, which we expect should be more than compensate management fee revenues for this recent kept return.
Segment distributed boron were 57.3 million reais over the year to date.
an increase of 6% compared to the same period last year.
boosted by higher contributions from dividend distribution in our appropriate area position across listed groups.
The total amount was 24 billion yards for the end of the quarter, up to
16% year over year.
driven by strong fundraising in private equity and credit strategies.
As people is disgusted.
Most of these cacti rays were activated at the end of the quarter.
Therefore, we should start to see a positive impact for managing fees across private market strategies from the third quarter going forward.
Moving on to slide 25 we go over results for liquid strategies.
Year related earnings over the year to date totaled 19.9 million REI down 14% when compared to the same period last year.
This decrease was driven by the mark-to-mark effect in equity strategies AUM during the first half of 2022.
have a direct impact on management fee revenues.
Despite the depreciation effects, our liquid storage funds have not been suffering from significant outflows, which means the decrease in AUM is mostly from the observed marked correction.
As ABLE VISTA recovers in the future, we should also see a positive impact on our leakless AUM.
Our sticker and proprietary built investor base has proven, once again, to be valuable assets to our platform.
While the Brazilian asset management industry experiences strong outflows, our open-end funds remain resilient with low levels of credentials.
Moving on to our P&S business on slide 26.
FIE totals 11.5 million reais in the quarter, up 24% on a quarter over quarter basis.
due to our strong fundraising in the pension plans strategy.
As Bruno anticipated when talking about PRE results, we had an extraordinary unrealized performance revenue booked in the second quarter of 2020, coming from international separate Monday.
which is an auto-core in the second quarter of 2022 and impacted our PRE results for IPNS.
Segment B totaled 11.9 million euro in the quarter, down 80% year-over-year, primarily due to higher levels of PRE in the second quarter for 2021.
Turning to slide 27, we covered our results for financial advisory.
FIE or Financial Advisory was 3.3 million RIs in the quarter representing a 525% increase over the prior period.
Revenues for financial advisory carry a certain level of spasmodity.
although uncertain to predict, a device review fee should be more modest in the third quarter, as we expect to be more active towards the end of the year.
Finally, moving on to slide 28, we go over results for the retirement service segment.
Field related burnage for the quarter was negative 1.7 million hz.
over the year to date FIE represents i.e. negative 3.1 million imperial company sfie Reb Police Chocolate
As announced in our last earnings call, we are still in the process of structuring VRS.
Therefore, we are only incurring expenses
Our expectation is that we will start fundraising for this segment in the beginning of 2023.
Given the high expected growth nature of this new business vertical, we will continue to show this as a separate segment, thus investors can keep track of its development.
That's it for today's presentation. Once again, we'd like to thank you for joining our call.
With that, I'd like to open the call for questions.
questions. Operator.
Certainly ladies and gentlemen if you do have a question at this time please press star 11 on your touchstone telephone. One moment for our first question.
And our first question comes from the line of Ricardo Montrígale from BTG. Your question, please. Question 1.
Good afternoon everyone and congrats on the good results. I have two questions on my side. First, can you please talk about what you expect in terms of fundraising and inflows for the second half of the year, both in terms of private market and liquid strategies.
And also we saw a 7 billion loss in energy investment income mainly on realized impact. So I want to understand a little bit more what drove this impact. Thank you.
Ricardo, thank you for your question. That's Alessandro and I'll take the first part of your question and leave Bruno to cover about the investment on the unrealized...
results on the on the investment side. Talking about the fundraising for the second half of the year, we expect to continue the fundraising for the private market products. As Bruno said before during the presentation, we believe that we probably could have a not closing for VCP4 during the second half of the year. So probably we'll have more on that front.
probably we'll have the first closing of the VICC, that's the other important product that we are launching and we have a first closing probably in the second half of the year. Also on the private credit we'll have probably a few new closings and fund raisings for our other products so we are pretty much optimistic about the prospects on the private market side. Talking about the
The liquid side, as you saw, we have been able to continue to raise money on the IP&S, so have a very strong pipeline for IP&S that we probably will activate new mandates during the second half of the year. And we are seeing a more benign environment for equities, so we are seeing that we are not having important redemptions and we are starting to see net inflows. For more information, visit www.fema.gov
So we believe that the prospect for the second half of the year on the average side also will be good. So we are pretty much optimistic about the fundraising activity during the second half on both fronts. On the private side, because we have a very strong pipeline of new products that will probably do subsequent closes or new or first closes during the second half. And also on the liquid side.
Okay, this is Bruno, thank you for the question. So the unrealized investment income mainly has to do with the GP commitment we did on our listed REITs.
So there were a few opportunities of capital raising that happened in the course of the last quarters that were attached to transactions and that were leveraged with additional capital from the market.
So we committed capital to those capital raises, to anchor those capital raises.
to anchor those transactions and since then what happened was that the exchange started interest rate in Brazil widened quite substantially. We obviously had the correction in the stock market and those REITs are trading a little bit below the levels that we invested so that's the the unrealized explanation of the of the income statement. We always expect that over time these prices are going to come back up and we're going to recover these losses.
Thank you, very clear.
Thank you. One moment for our next question.
And our next question comes to the line of Tito Lombardo from Goldman Sachs. Your question, please.
Tiro, are you there?
Let's make sure we are not hearing you at this point.
I think we can go to the next one operator probably. Ok, we lost you.
One moment for our next question.
And our next question comes to the line of Keo Prato from UBS. Your question, please.
Hello everyone, good evening. Thank you for the opportunity for asking questions. I have two on my side, please. The first one is when could we expect this new fundraising, especially in the private market strategy to positively contribute in terms of net management fees going forward? And the second one, if I may, we saw an increase of almost 14% in core. Great. Thank you.
And our next question comes to the line of Keo Prato from UBS. Your question, please. So a question, please.
Hello, everyone. Good evening. Thank you for the opportunity for asking questions. I have two on my side, please. The first one is when could we expect this new fundraising, especially in the private market strategy for next year, please? Okay. Thank you for your question. That's Alessandro speaking here. On the first part of the question regarding when we start to kick in the revenues.
for the fundraising. We will start already on the third quarter because, for example, some closings regarding VCP4, for example, start charging from the first closing. Of course, as we do subsequent closings, we'll have this retroactive, but will be booked in the quarter to come.
That will be the reality for some of the other products including the ICC for example and even the credit fund that they start to invest. We expect some of the, of course not the full effect, but we start having an effect of this fund raising already on the third quarter. Using the corporate expenses more like a seasonality, we are talking about expenses regarding to
travel expenses because during the fundraising of these products we start traveling with the teams after the COVID, we start getting in present with the clients so we are traveling more regarding the fundraising but it's not specific to any important expenses, really more like seasonal and of course we have the decisions, the corrections of the
during the last month or the last half of the quarter. So the impact on these fundraisers, although we did see a mature impact.
in AOM at the end of the quarter. We did see.
quarter-to-quarter acceleration in FRE, FRE growing high single digits against the last quarter, we expect the management's impact to be more pronounced in the third quarter than we saw in the second.
So that's I think that's another factor that just for it to have in our mind. Thank you.
Thank you very much for the time.
Thank you. And one moment for our next question.
And we have, returning to the queue, Tito Lombardo from Goldman Sachs. Your question please.
Hi, try again. I don't know if you can hear me now.
Yes, we can hear you fine. Thank you.
Okay, sorry, I don't know what happened before. But thanks for the call, taking my question. Just curious on a group performance piece, seems to have some increase there in terms of...
the ability to realize performance fees for the rest of the year and going forward.
Okay, so the slide that we present on the on the accrued performance is
that encompasses basically our private market funds right so we have there are two main components we have DCP3
encompasses basically our private market funds right so we have there are two main components we have VCP3. VCP3
The fund is already within the carry parameters so any increase in MOC going forward is going to impact positively our expected performance.
and we have reached full...
allocation in the fund. Now we have a hundred percent of the capital being committed into portfolio companies and this will likely mean as companies go and grow their equity value we should be able to see this line going up. For VCP3 specifically we might see an increase in the beginning of a capital return cycle probably let's say between this year and next year but for us to be able to realize
the carry of that particular fund is going to take a little bit longer because we need to return a hundred percent of the called capital so it takes some time before we're able to start monetizing on those performances. The other component in that slide is our
other assets in the infrastructure fund.
and that asset is closer to being realized and that capital has already been returned. So what we have in that fund is only carry, right? So the point here is really monetizing the assets.
It's something that I think you remember we had an impact in the fourth quarter of last year which was the initial half of that funding realized and we expect this other asset to be realized in the next several quarters probably between two and four quarters we're going to be able to
to realize this
this last task in the fund which will likely have a very interesting
positive impact in our numbers.
Talking about the liquid side, we are a little bit...
dependent on performance of the market in the liquid side. As we have said in the prepared remarks
most of our funds in the liquid side they carry a high water mark cause and obviously the stock market is still
substantially below the highs that we had last year. We are still about 20,000 points below the highs more or less, a little bit more than that. So although we are generating alpha in the funds for us to be able to trigger those performance fees we need to get to the high watermark of the fund so that has some beta components into it.
as we have seen in the past when we look back into 2019.
2018 the liquid side of the business can be a material contributor to performance so we saw very big numbers in 1819.
coming from the performance deciding liquids. That can resume at some point but we would depend on a little bit better market environment.
for us to be able to trigger those high water marks and be able to start charging performance again. So it would be a factor of a little bit more recovery in the market.
and if that happens we should be able to start having more relevant performance from the liquids.
coming into the digital war and use number of the company.
Okay, that's helpful. Thanks Bruno.
Thank you. Once again, if you have a question at this time, please press star 1 1.
And this does conclude the question and answer session of today's program. I'd like to hand the program back to Alessandro for any further remarks.
Thank you very much for your continued support and for attending our call. We are very happy with the results that we got during this quarter and we are very optimistic for the rest of the year. So thank you very much and have a good night.
Ladies and gentlemen, for your participation at today's conference, this does conclude the program. You may now disconnect. Good day.
the results that we got during this quarter and we are very optimistic for the rest of the year. Thank you very much and have a good night.
Ladies and gentlemen, for your participation at today's conference, this does conclude the program. You may now disconnect. Good day.
qu.