Vinci Partners Investments Q1 2024 Earnings Call Transcript

Quartr
Provided by Quartr
May 9, 2024

There are 7 speakers on the call.

Operator

Good afternoon and welcome to the VINCI Partners First Quarter 2024 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.

Operator

Please go ahead, Anna.

Speaker 1

Thank you, and good afternoon, everyone. Joining today are Alessandro Oarta, Chief Executive Officer Bruno Zaremba, Private Equity Chairman and Head of Investor Relations and Sergio Pazos, Chief Financial Officer. Earlier today, we issued a press release, slide presentation and our financial statements for the quarter, which are available on our website at ir. Vinciapartans.com. I'd like to remind you that today's call may include forward looking statements, which are uncertain and outside of the firm's control and may differ from actual results materially.

Speaker 1

We do not undertake any duty to update these statements. For a discussion of some of the risks that could affect results, please see the Risk Factors section of our 20F. We will also refer to certain non GAAP measures, and you'll find reconciliations in the release. Also note that nothing on this call constitutes an offer to sell or solicitation of an offer to purchase any interest in any VINCI Partners fund. On results, VINCI generated fee related earnings of R53.6 million or BRL1.01 per share and adjusted distributable earnings of BRL49.6 million or BRL0.93 per share for the Q1 2024.

Speaker 1

We declared a quarterly dividend of $0.17 on the dollar per common share, payable on June 7 to shareholders of record as of May 23. With that, I'll turn the call over to Alessandro.

Speaker 2

Thank you, Anna. Good afternoon and thank you all for joining our call. We are very pleased to join you today as we announce results for the Q1 2024. I would like to start by highlighting the following: we posted another quarter with double digit growth in fee related earnings pushed by strong fundraising across private markets products over the last 12 months and advisory fees in the Q1. VINCI continues to deliver results facing challenging conditions where several asset managers in Brazil focused on single strategies have suffered to stay in business.

Speaker 2

We are truly proud of the platform that we have built over the last 15 years. I have no doubt that the combination between proprietary relationships across each funding base, strong track record across different market cycles and a broad product offering was key to achieving such results. Bruno and Sergio will go over specifics for the earnings result and fundraising pipeline in a few minutes but I couldn't leave out of my remarks something that makes me personally very proud. You must have seen that VINCI was very active on M and A over the last few months. Let me cover what we expect from each transaction and what we look forward to accomplishing with additional M and A as we are just getting started.

Speaker 2

1st, early in March we announced our combination with Compass, a leading asset manager and investment advisor in Latin America with strong brand recognition, consistent performance and more than $37,000,000,000 in AUM distributed across IP and S, credit and public equities. We believe this transaction is a significant milestone in our history and a turning point from what VINCI could be in the next few years. We will leverage the complementary strengths of both firms and position VINCI as the premier gateway to alternative asset management in Latin America creating a leading player with more than $50,000,000,000 in assets under management. The combination will also extend VINCI's geographic presence with offices in 8 different countries including 7 in Latin America. Moreover, the transaction will enable VINCI to tap into Compass unmatched distribution platform with long term relationships with more than 1700 LPs across institutional and high net worth investors.

Speaker 2

We believe we have the tools to push additional growth for the combined company from cross selling and developing new products across both firms becoming the ultimate one stop shop in Latin America for alternative investments. VINCI will be able to offer local, regional and global solutions to local, regional and global clients. We are extremely excited with the prospects of this business combination and have already been looking to capture value since day 1 of signing. We are already working with a global consulting firm to support us throughout this integration journey. Our aim is to enhance value by aligning our structures and operations effectively.

Speaker 2

Our primary objectives include optimizing our corporate structure to seamlessly accommodate and integrate both entities in terms of strategies, office locations, leadership and more. Although we are still going through the process, progress has been promising and remarkable cultural and strategic alignment between executives from both firms is already evident. These early indicators are excellent and we are eager to continue capitalizing on insights coming from this process once this transaction is closed. We have also started to identify short term opportunities to fundraise for AVINCI's products in countries across Latin America, such as private equity and public equities and we are working with the Compass team on those initiatives. We have also held teachings from Compass Group to our distribution teams to leverage our distribution capabilities in Brazil with the objective of growing product availability to our local clients.

Speaker 2

Given the complementary mix of products and distribution geographies, there is plenty of short term revenue synergies opportunities which we are not waiting on the closing to attack. In terms of closing, we are working on the regulatory approvals and should be able to close between the 3rd and 4th quarters. Thus Compass should have important contributions in our numbers starting in 2025. Moving forward, we announced just a few weeks ago the acquisition of Mav Capital, an alternative asset manager with a focus in agriculture assets across private credit funds. Mav Capital is led by a highly seasoned team with more than 20 years of experience.

Speaker 2

The team manages roughly BRL550 1,000,000 in assets through 5 investment funds with lock ups of up to 10 years. MAV's flagship strategy is focused on agribusiness and has 2 vintages between 20212023. By synergizing Mab's profound expertise with VINCI's distribution capabilities we anticipate significant expansion in subsequent vintages. By bringing the MAAVE team into the fold we are not just broadening our range of offerings, we are also deepening our roots in the agribusiness space. And why agribusiness?

Speaker 2

Brazil boasts numerous competitive advantages and holds a prominent position as a key global player. Locally, the agribusiness sector and related activities significantly contribute to the country's GDP. Moreover, the investment funds industry in Brazil has largely overlooked this sector, leaving it highly underserved. With that said, we perceive a substantial opportunity for growth in the coming years. By leveraging top tier human capital, we are positioning VINCI to emerge as a front runner in this segment.

Speaker 2

In concluding my remarks on M and A, allow me to outline what you can anticipate from VINCI in the coming years. Over the past years, we are actually focused on several opportunities in Brazil spanning across all strategies with a keen eye for a transformative transaction in Latin America. The transaction with Compass stands as a significant milestone positioning VINCI with a notable presence across Latin America countries in terms of both strategies, commercial presence and office locations. This robust foundation is pivotal for the next phase of our M and A agenda. Now, when we think about acquisitions in Latin America, we are focusing on a local to local basis.

Speaker 2

We are committed to actively exploring opportunities across multiple countries to complement and expand our strategies with a newfound emphasis on small to mid sized managers who were previously off our radar. Leveraging Compass' expertise and extensive network, we aim to expand our regional platform and add more critical mass in alternative asset management content to our presence in LatAm countries. Markets like Mexico and Chile present promising targets for expansion and consolidation. With Mexico's projected growth trajectory in the coming years, we are dedicated to positioning VINCI favorably to capitalize on this prospective growth. In Brazil, our journey is far from over.

Speaker 2

Investments such as the Mav Capital deal are instrumental in fortifying our foothold in what we perceive as a compelling market opportunity as we remain steadfast in our pursuit of such ventures. In conclusion, I would like to convey the following message. Despite the challenges posed by a turbulent global market, marked by uncertainties in interest rates impacting asset performance and fundraising opportunities across various strategies. We have demonstrated resilience and patience performing well across the board. Hence this environment, we remain committed to enhance our platform on a daily basis, focusing on providing our clients the best solutions.

Speaker 2

While we contend with short term uncertainty stemming from interest rate cuts in the US, Brazil continues its trajectory towards achieving single digit nominal rates by year end 2024. Last week, Moody's released a report changing the outlook of Brazil's sovereign credit to positive. This optimism reflects Brazil's dedication to economic reforms, proactive response to global challenges such as the COVID-nineteen pandemic and improving macroeconomic fundamentals, including decreasing inflation and interest rates and a strong and growing trade balance. Historically, following a positive outlook, an upper grade typically follows within 6 months on average. Should this projection materialize, we would find ourselves 1 notch away from an investment grade rating in Muris, potentially serving as a pivotal catalyst for increased foreign investment in Brazil.

Speaker 2

At VINCI, we remain extremely committed to generating strong risk adjusted returns to our clients and shareholders. We navigate this challenging and uncertain market with caution and prudence, but fueled by enthusiasm for this forthcoming chapter in our history. With that, I would like to turn the call over to Bruno.

Speaker 3

Thank you, Alessandro, and good afternoon, everyone. I'll start by covering our fundraising efforts. Starting with IPNS, our VINCI strategic partner strategy, or VSP, raised approximately BRL500 million this quarter. Through VSP, we offer allocation services across the alternative asset space to investors, a trend we believe has great potential to grow as local institutions raise their allocation to alternatives. Currently, our IP and S business is mostly allocated to liquid assets.

Speaker 3

We are pleased to observe the growing traction of this strategy now on the alternative side and anticipate further opportunities in the future. Moving on, let me provide some color on our upcoming initiatives in private markets over the short term. This quarter, as predicted, we do not have relevant contributions for the Private Markets Funds as we had a few big closes at the end of 2023. However, we will continue to work across several fronts in the next few quarters. VCP4 and VICC both should hold final closes this year.

Speaker 3

VCP4 is set to see additional capital activated in AUM over the Q2, while we continue to work on additional local and international investors until the expected close of the fund in the second half of twenty twenty four. With one successful investment already under its belt and capital deployment gaining momentum, we anticipate announcing new acquisitions in the coming quarters, capitalizing on a very good environment to allocate capital with limited dry powder and competition for assets when compared to previous vintages. For VICC, we are experiencing good action with international investors and already have good visibility for the next commitments. We anticipate the Fund reaching its BRL 2,000,000,000 target sometime in the second half of the year. Deployment activity for VICC has been very robust, evidenced by the signing of 2 transactions earlier in the year to develop greenfield assets focused on solar distributed generation across Bahia, Rio de Janeiro, Goias and Sao Paulo.

Speaker 3

We have a diverse pipeline ready for execution in the coming quarters. And adding up these 2 signed transactions with the approved investments by the IC of the fund, VICC has reached 40% of the fund already vested. It is interesting to mention that this quicker than expected deployment pace for VICC was met with higher than anticipated level of returns for projects at IC approval. Therefore, we couldn't be happier with VICC's development so far. It's noteworthy that both funds feature retroactive fee clauses, meaning new commitments will retroactively apply fees from the Fund's inception.

Speaker 3

This should contribute to management fees in the upcoming quarters as final commitments are secured. Now wrapping up our discussions on private market initiatives. In private credit, we've resumed fundraising for VICI Credit Infra. The fund, which has already secured BRL1.4 billion in 2022 from 2 anchor institutional investors, holds significant promise for additional fundraising from additional capital pools. We anticipate attracting capital from both institution and retail clients through our locators and distributors channel.

Speaker 3

With strong visibility for additional capital subscriptions in the Q2, we are targeting an AUM of around BRL 2,000,000,000 for this fund by the end of 2024. Moving to VICI SBS, we are in the final stages of structuring for the first closing of Vintage 4, slated for the upcoming months. Their first two vintages are fully allocated and have impressive track records. Fund 3 has surpassed the 70% deployment threshold and is marked at a 41% gross IR in US dollars. This standout performance should be a catalyst for raising capital for the 4th vintage.

Speaker 3

Today, VINCI SPS's 3rd vintage fund screens in the top tier of global opportunistic credit funds, which serves as a testimony of the exceptional work being done by Massimo Mifan and team. We should sign first commitments in June, supported by re up from previous vintages and local high net worth individuals. Adding to that, we expect commitments from international investors in the Q3, where we should officially hold the first closing for the funds. This will be the 1st vintage raise with international capital for VINCI SPS. Our existing LP relationships are expressing strong interest in investing, and ongoing discussions with Ares indicate promising prospects for VINCI SBS.

Speaker 3

We will keep investors updated as we evolve through the fundraising. Moreover, in alignment with Alessandro's earlier remarks, our collaboration with the Compass team to integrate selected VINCI funds onto their platforms holds significant potential. We anticipate exciting opportunities emerging from this collaboration. We elected to start this effort with VCP4, followed by Monaco in Equities, VICC and VINCI SPS. An interesting tidbit of this initial effort was our ability to gauge the structuring work of the Compass team across a live deal.

Speaker 3

The level of access to regional peace, organization and effort put out by the teams in Chile and Mexico has been amazing. And really highlights what we can achieve as a combined entity in the future. Moving on to net inflows across our liquid funds in public equities and IP and S. Over the past quarters, we navigated through considerable market volatility, which has impacted flows mainly in our IP and S vertical. However, as reiterated in recent communication, VICI invests in maintaining robust relationships with our clients, which are proprietary and enduring.

Speaker 3

We have been consistently outperforming the rest of the asset management industry in Brazil in fundraising efforts, amidst an environment where we see a number of competitors suffering from outflows. When facing more favorable market conditions, we anticipate a resurgence in capital raising for equities in Ipiran NS. Our investment funds boast an impressive long term track record, positioning us favorably for this anticipated uptick. For example, our flagship fund in public equities, Vintimozaico, has consistently outperformed its benchmark since inception, delivering a remarkable 5 41% return compared to the Boveas Index, 113%. In summary, armed with strong funds and a history of solid performance, we stand ready to capitalize on improving conditions and reignite inflows.

Speaker 3

To conclude my remarks, I wanted to cover in more detail our financial income and GP commitment returns. This quarter, we introduced a slide in the earnings presentation highlighting the company's GP commitments. You can find that in Slide 14 at our earnings presentation. As we have discussed in our Investor Day back in October, as capital is called against our GP commitment in closed end funds, the liquid balance of our cash allocation will drop against an increase in GP commitment allocation. As of the Q1, we have approximately BRL 1,100,000,000 committed to VINCI Partner Funds as GP committed, which will be called upon for capital deployment throughout their investment horizon.

Speaker 3

These funds are strategically allocated to investment offerings, higher returns compared to the average portfolio returns of our liquid products. As these funds divest from assets and return capital in the future, we anticipate significant contribution to our financials. Investment gains will be realized as GP investment income, subsequently reflected in our distributable earnings. In the short term, as cash from the liquid portfolio is transferred to GP commitments across closed end funds, the realized return on this liquid portfolio will become unrealized return on the GP commitments, becoming realized once capital is returned to the balance sheet. If we realize the current portfolio at fair market value at this moment, we would have roughly BRL12 1,000,000 in realized European income.

Speaker 3

That number is not meaningful yet as many of our closed end fund commitments are still early in their investment periods, and public REITs have encountered market challenges in recent years. However, as this commitment season, you can expect this figure to become increasingly more meaningful each year.

Speaker 4

We wanted to highlight this potential, as we do for our managerial accrued performance fees, as we believe it will be an important component of our future earnings potential. And with that, I will turn it over to Sergio to go through our results. Thank you, Bruno. Before you delve into financials, I'd like to address a recent managerial adjustment we have made. This quarter, we executed a strategic realignment across our segments.

Speaker 4

We are signing BRL2.3 billion in AUM from our hedge funds business to IP and S while allocating the remainder BRL534 million in AUM to our Public Equities division. The objective with this realignment was to form a dedicated public equities vertical, while sending open ended macro commingle funds vehicles from the prior liquidity strategies umbrella to IPNS. IPNS already boosted a dedicated strategy for managing macro commingled funds. Thus, we are consolidating these funds that were previously under liquidate structures within IPNS under the commingo strategy umbrella. Our pro form a numbers for past quarters and the last 12 months have been adjusted to reflect these managerial shifts accordingly.

Speaker 4

This adjustment underscores our commitment to transparency and ensures precise financial reporting. Now, let's start by covering management and advisory fees. Fee related revenues totaled BRL107 1,000,000 in the quarter, up 6% on a year over year basis. Management fees were flat on a year over year basis, yet they exhibit positive growth trend going forwards when adjusted by retroactive fees that occurred in the Q4. We continue to have a mix effect on revenues.

Speaker 4

Private market management fees posted another quarter to growth, increasing 7% on a year over year basis. This is a direct result of the strong fundraising across private markets over the last 12 months. As mentioned by Bruno, the pipeline is stacked for Private Markets products over the short- to medium term, which should improve management fees. On top of that, BCP4 and VICC have retroactive fees clause. Therefore, new capital commitments will charge fees from the start of the fund.

Speaker 4

As an example, BCP4's start date is June 2022. Therefore, new subscriptions will charge almost 2 years of management fees. These are non recurring effects that will contribute to revenue growth over the next 2 quarters. On the other hand, we had a negative impact on revenues coming mostly from IP and S. In 2023, we suffered from outflows in our pension plan strategies, mostly by retail clients.

Speaker 4

These clients have an investment portfolio where they have flexibility to reallocate assets between managers without triggering tax implications, which adds to volatile inflows based on short term performance. These funds carry a higher level of fees than the average fee for the segment, thus affected by segment's ROA when we look at each on a year over year basis. However, with nominal rates reaching single digit figures and the outlook for future real rates stabilizing, we anticipate a shift in investor sentiment from outflows to inflows. This shift presents a significant opportunity for growth, especially given the favorable conditions in both private markets and liquid assets. Since our IPO, we have yet to witness all the pieces aligned at their full potential.

Speaker 4

We believe the convergence of a strong private MAX landscape with a conductive environment for liquid assets could prove to be transformative. Move on, advisory fees had once again a great quarter. Over the past 12 months, advisory fees amounted to BRL46 1,000,000, representing a twofold increase compared to the Q1 of 2023. This significant growth underscores the remarkable momentum within our Corporate Advisory segment. Turning to FRE results.

Speaker 4

In the Q1, FRE totaled BRL 54 million or BRL0.01 per share, representing a 12% year over year increase on a per share basis. Looking at last 12 months figures, FRE reached BRL213 million or BRL3.96 per share, up 11% on a per share basis. FRE continues to grow, pushed by strong fundraising for private markets products and a higher level of advisory fees. When considering our short term FRE, we anticipate an upward trajectory. This projections is supported by several factors, including new commitments in private markets, the impact of retroactive fees and the robust pipeline for our advisory service.

Speaker 4

Now let me spend some time covering expenses. Margins have increased by 130 basis points on an year over year basis. However, we anticipate marginal movement in margin for 2024 compared to 2023, likely indicating a slight expansions. Looking ahead to 2025, with several products already fully raised and an improved economic landscape, we may experience traction in margins due to the high operating leverage of our platform. A closer examination of costs reveals a controlled trajectory.

Speaker 4

Expenses have increased by 4% year over year. As we consistently emphasize, cost control remains key across all market cycles, particularly in challenging environments. By exercising prudent cost management, we position ourselves to accelerate the growth of FRE and DE during more favorable conditions. Shifting to PRO results, performance fees remain at a relatively modest level. Bear in mind that most of our open end funds charge performance fees semiannually in June December.

Speaker 4

The 1st and third quarters usually are weaker ones of performance fees. We have approximately BRL17 1,000,000,000 in performance eligible AUM across IP and S and public equities. When favorable conditions arise, this could be a relevant earnings stream. For Private Markets Funds, gross accrued performance fees reached close to BRL300 1,000,000 in the Q1. However, it's important to note that most of these funds have not yet entered the carry season as they are still in the early stages of divesting from assets.

Speaker 4

Consequently, significant performance fees from these funds are not expected until late 2025 beyond. As an illustrative exercise, if we were to realize this performance, we would potentially see close to BRL135 1,000,000 in performance related earnings, equating to approximately BRL2.50 per shares. It's crucial to acknowledge that these funds are still in their maturation phase and have yet to sell a significant portion of their assets, indicating a potential for this figure to increase over time. To wrap up, I do like to cover our distributable earnings. Adjusted distributable earnings totaled BRL50 1,000,000 in the Q1 of 2024 or BRL0.93 per share, down 15% year over year on a per share basis due to the weaker performance of the liquid portfolio, which impacted financial results.

Speaker 4

The widening of the real interest rate curve throughout the quarter negatively affects our adjusted distributable earnings totaled BRL235 million or BRL4.38 per share. In closing, I would like to reiterate that we anticipate a positive outlook for FRE over the upcoming quarters, which should consequently bolster our distributable earnings. The ongoing fundraise efforts for our Private Markets segment are expected to be an important foundation for short term growth. With that, I would like to close our remarks and open the call for questions. Once again, we would like to thank you for joining our call.

Speaker 4

Please, operator, you can proceed with the questions. Thank you.

Operator

You. If you wish to ask a question, please press the button raise hand. Wait while we pull for a question. Our first question comes from Tito Labarta with Goldman Sachs.

Speaker 5

Hi, good evening, everyone. Thank you for the call and taking my question. I had a question on your fee related revenues. If you look at management fees in particular, down in the quarter, kind of flattish year over year. You mentioned here in the press release that private markets continue to do well, but you're facing some headwinds from IPNS.

Speaker 5

Just double click on both of those a little bit. On the private market side, we did see the fees as a percentage of the AUM come down a little bit. What's driving that? And also, just how do you see those headwinds in the IP and S? Do you think that continues?

Speaker 5

Could that be a headwind for the rest of the year? How dependent is it on rates coming down significantly, right? We saw a leak fall only 25 bps yesterday, do you need to see that come down a lot more to see IPNS recover? Thank you.

Speaker 2

Hi, Tito. Thank you very much. That's Alessandro. Thank you very much for your question. I will cover the part of IPNS of your question, then Bruno will go more on the other part related to the private markets fees and etcetera.

Speaker 2

Regarding IPNS as you know and as we continue to have the movement that we saw in the last few quarters that follows overall I would say trend in the Brazil Market where the most liquid portion of our IPNS funds. We suffer some redemptions basically people moving the money to order more short term fixed income type of investments. We are seeing this movement reducing, so it's in a daily basis we see this redemption being less and less to the point that we expect this to be neutral going forward and with the interest rates going down in a pace that now it's reaching close to single digit interest rate, nominal interest rates, We'll see this movement, we expect this capital to come back. But this is really a more a consequence of this movement regarding interest rates at a high level and some of this flows, more retail flows redeemed from this type of funds go into more exempt type of fixed income instruments. So regarding IPNS, we do not anticipate strong movements ahead.

Speaker 2

On the opposite, we believe this movement is in the final stretch and probably as soon as we see interest rates in a single digit, even high single digits, we see new money coming back to this type of investments and funds.

Speaker 3

Okay, Thierry. This is Bruno. Talking about the revenue side. So the Q1 of 'twenty 3 and the Q4 of 2023, both of them had retroactive impacts on the on the revenue base. So those are VCP and VICC, right?

Speaker 3

So in the Q1 of 'twenty three, we had about 2,000,000 dollars BRL impact. In the Q4 of 'twenty three, we had about $6,500,000 BRL impact. The Q1 of 24 was a clean quarter, so we didn't have any impact in terms of AUM being activated in those two funds. We are working with several investors regarding additional commitments for both strategies. As I mentioned in the prepared remarks, we expect to have hopefully VCP having more capital activated now in the Q2, if not in the second quarter, certainly in the beginning of the Q3.

Speaker 3

So either 1 or the 2 quarters could have impacts coming from new capital being deactivated. But the main difference in the Q1 of 2024 was that it was a clean quarter. We didn't have any new commitments coming for the retroactive fee paying funds during the 1st 3 months of the year.

Speaker 5

Okay, great. That's helpful, Bruno and Alessandro. Just one follow-up, I guess, also on the fee related revenues. So on the advisory fees, I mean, we grew down in the quarter, but still we have very strong year over year. How do you think about those going forward?

Speaker 5

Is this a base that we can maybe consider? Or was there anything specific to the quarter that kept the fees relatively high?

Speaker 3

Yes, of course. So the pipeline for the advisory business is pretty good at this point. We are working we had a very good Q1, as you said. We're working on several transactions for the 2nd Q3 of this year. But again, it's very difficult to say when the transaction is going to close.

Speaker 3

I think for the year, we talked about a number between $30,000,000 $40,000,000 for 2024. It seems at this point in time that we're going to hit that range, but it's difficult to say when exactly the revenue is going to fall. The Q1 was a little bit stronger. 2nd quarter depends on when the deals close. But I would say the outlook for 2nd and third quarters at this point with the deal flow that we have in the pipeline looks good.

Speaker 3

So we feel for the year that $30,000,000 to $40,000,000 is a good range to work with in terms of advisory revenues for corporate advisory revenues for 24.

Speaker 5

Okay, perfect. Very clear. Thanks, Bruno.

Speaker 3

Thanks, Tito, for the questions.

Operator

Next question from Riccardo Buschpigo with BTG Pactual.

Speaker 6

Hi, everyone. And thank you for the opportunity of making questions. I have 2 here on my side. First, can you please give us an update in terms of the key private market fundraising events that we could see in Q2? And if you could also comment on, on on what have been seen for so far in terms of inflows for liquid and IPNS strategies also be helpful, particularly for Q2.

Speaker 6

And for my second question, if you could please explain what drove the unrealized GP investment income that you booked in the quarter. We saw there was like a deterioration in macro conditions. We even had like a negative effect in our liquid portfolio. So I wanted to understand the rationale for the unrealized portion. Thank you.

Speaker 3

Okay, Carlos. So the first question that you mentioned regarding pipeline of private market products in the second quarter. So we have we are as I mentioned to in the in the prior question, We have been working VCP and VICC for new commitments. We expect them to happen over the next couple of quarters for some additional capital to come in. VCP, there is a chance that we might have commitments rolling in the Q2.

Speaker 3

We're working on a few soft circle commitments to activate them in the Q2. At this point in time, I would say probably the probability is like 3 quarters, 75% that we have in the Q2. If not, it's going to move towards the Q3. We expect to have in the second quarter, we're working towards that goal to have the 1st subscription documents being signed for SPS 4. So this is going to be focused on re ups mainly from funds 1, 2 and 3.

Speaker 3

We are targeting at least $500,000,000 for SPS 4. So it's going to be a big increase in terms of the size. Remember that SPS as a whole when we purchase SPS, the total AUM was 400,000,000. So we're talking about the Force Fund being at least a little bit higher than the total AUM that the platform carries today. And the reception of that product in the market has been quite positive.

Speaker 3

So we are very excited about SPS 4. And then for the reminder of the year, we have additional commitments for VICC, which we expect to close until the end of the year. We have, as we mentioned, VINCI Credit Infra. We can have big tickets coming from that fund and some coming from a retail placement that we are working towards activating at some point in the next few months. We raised the 1st vintage residential development funds during the Q1 of the year that has already started to return capital and is doing very well.

Speaker 3

So we expect to do potential second installment of that fund in the second half of the year, probably with a few 100,000,000 dollars And then we have the 2nd vintage of our industrial development fund as well slated potentially for the second half. So this would be, I would expect, the main products that do work on the private market side until the end of the year. We might have also VIR5 coming this year, but it's still uncertain if we're going to be able to fit VR5 still in 2024 because the fund is still a little bit below the threshold

Speaker 2

from allocation

Speaker 3

standpoint to be able to come back. So we depend on getting minimum sizes in terms of percentage allocation to be able to come back with the funds. So the second question, Ricardo, was on unrealized gains, right? So could you please rephrase the question so I have exactly what you want to need, what you need through the information there?

Speaker 6

Oh, yeah. Like, first of all, thank you for the answer. My question was that you booked R9 1,000,000 in GP investment income in a moment where we saw like more challenging macro environment. We even saw like more negative performance from the liquid portion of the portfolio. So I wanted to understand what was the rationale for booking $9,000,000 in these unrealized gains?

Speaker 3

The unrealized gains are the effect of the mark to markets of the funds, right? So they depend on performance for the funds that we have allocated and committed from the balance sheet. So there are a couple of portions there. One is mark to market on the liquid REITs. If I'm not mistaken, the second the Q1 was positive in that front.

Speaker 3

And the other one is the mark to market of our closed end funds. The closed end funds, they typically are reevaluated once a year, usually at the end of the year where we have the formal audit of the funds. We reevaluate the shares of the closed end funds. I would expect that impact to be more relevant in the end of starting the end of 24. So we're going to have capital being called by VCP.

Speaker 3

We're going to have the reevaluation of other closing funds. I think we had also some impact from the our Water and Sewage Fund recently. So those are the 2, I would say, components. One is the mark to market of the listed REITs on a quarter to quarter base. And the second one is the mark to market of the closing funds that's likely going to happen at the end of the year when we do the audits for the funds.

Speaker 2

And Ricardo, Ricardo, it's Alessandro. Being more specific, the largest contribution to this unrealized gain on the GP commitments came from some commitments in one of our infrastructure fund that was being kept at par and that was the first mark of the fund.

Speaker 6

Makes sense. Thank you.

Operator

I would like to turn the floor back to Mr. Alessandro Horta for the closing remarks. Please, Mr. Horta, you can

Speaker 2

proceed. Thank you. I'd like to one more time to thank you all for your continued support and interest in VINCI. We continue to be very optimistic in delivery growth while providing stable results. We are highly dedicated in preparing our integration with Compass, what will open a huge opportunity for us in the years ahead.

Speaker 2

So with that, I'd like to thank you again and a good night for all.

Operator

This does conclude today's presentation. We thank you all for your participation and wish you a very good evening.

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Earnings Conference Call
Vinci Partners Investments Q1 2024
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