Vinci Partners has officially closed its combination with Compass, establishing a leading alternative asset manager in Latin America. With $54 billion in AUM, the platform serves over 2,600 LPs, including Compass’ $41 billion AUM reflecting 10% growth in 2024. The integration process has been smooth, with joint operations in Sao Paulo and New York.

VCP IV secured its first commitment from a Mexican LP post-integration, showcasing the expanded reach and potential of the combined platform. Cross-selling opportunities are expected, with indications for the first close of SPS IV in the fourth quarter. A call on November 25th will provide further insights into the integration and strategic vision.

Additionally, Vinci Partners recently acquired Lacan, a timberland investment management organization with R$1.5 billion in AUM. This move allows Vinci to launch its forestry strategy, complementing its existing investment solutions. Lacan’s expertise in sustainable forestry practices and extensive experience strengthen Vinci’s real asset investments portfolio.

The acquisition of Lacan is structured with cash payments upon closing and additional considerations over four years, dependent on fundraising and management fee revenues. This strategic move is expected to positively impact AUM and segment results in the fourth quarter and beyond, with immediate accretive effects on FRE and DE per share. Vinci solidifies its position as a leading player in Latin America’s alternative investment landscape. Brazil’s economy is thriving post-pandemic, with a stable stock market in reais since 2021. Vinci has prioritized fundraising efforts in Brazil, anticipating a capital raising surge. IP&S segment faces outflows due to interest rate hikes. Vinci Retirement Services sees inflows post-platform launch. Vinci Credit Infra fund receives commitment from Latin American LP.

Vinci launches new investment strategies in Brazil, partnering with top asset managers. Mio Vinci Partners expands retirement offerings, collaborating with BlackRock on new equity index funds. VRS aims to innovate Brazil’s pension market with technology solutions. Vinci Credit Infra fund raises R$215 million in Q3, optimistic about future commitments.

Vinci Credit Infra fund receives strong demand across distribution channels, aiming for target of R$2 billion. New receivable investment fund FIDC raises R$100 million, well-received by investors. VICC infrastructure fund reaches R$1.5 billion in commitments, deploying capital with positive pipeline. VCP IV private equity strategy gears up for final fundraising rounds in Q4.

Integration with Compass brings positive outcomes, securing commitment from Mexican LP for VCP IV. VCP III announces partial divestment of portfolio company, Farmax. Private equity fund successfully divested assets, returning over 80% of initial capital with 27% IRR in under three years post-acquisition. VCP III portfolio companies show strong growth in revenues (30%) and EBITDA (29%) annually. SPS IV fund attracting global investors with historical 20% net annualized return, aiming for significant FRE growth in 2025.

Lacan in fundraising process for fourth vintage, integrating investment team and strategy onto distribution platform. Management and advisory fees totaled R$112.7 million, with advisory fees generating R$6 million in revenues. Year-to-date advisory fees close to R$28 million, exceeding annual target of R$30 million. Management fees grew by 9% year-over-year due to strong commitments in private markets.

FRE results show 14% year-over-year increase to R$169 million year-to-date. Third quarter FRE reached R$53.8 million, up 7% per share. Margins improved by 100 basis points year-over-year, reaching 52% year-to-date. Nonoperational expenses include M&A costs related to MAV and Compass acquisitions, expected to increase in fourth quarter.

Performance fees primarily recognized in public equity segments due to challenging local market conditions. Gross accrued performance fee in private market funds at R$380 million by third quarter. Adjusted distributable earnings totaled R$57.1 million in third quarter, a 12% increase year-over-year per share. Distributable earnings saw a boost this quarter with R$15.2 million generated, marking a 26% increase from the previous year. The firm remains optimistic about fee-related earnings and growth opportunities, emphasizing shareholder value through organic and inorganic growth. Questions from investors and analysts touched on the Lacan acquisition and expense trends.

In response to questions about Lacan, the firm expressed enthusiasm for the market’s potential, aiming to reach around $1 billion in AUM for the vertical. The focus is on Brazil for now, with plans to expand regionally and globally in the future, potentially targeting countries like Uruguay, Paraguay, and Chile. The firm is looking to attract international LPs and capitalize on carbon market opportunities.

Regarding financial performance, the firm explained that the increase in personnel expenses and G&A was mainly due to non-organic effects, such as salary corrections in line with inflation and higher health plan costs. The acquisition of MAVs also had an impact on year-on-year figures, but underlying trends remained stable. The firm highlighted the importance of local institutional investors’ interest in VCP IV, with expectations to close the fund by the end of the year. Interest from international investors remains strong, with a balanced mix of local and international LPs in the fund. In Brazil, the asset class is gaining recognition, attracting more LPs for future vintages. VCP IV aims to generate potential carry in local currency, offering certainty in returns. Positive inflow in equities from international investors reflects growing interest in undervalued Brazilian securities. Vinci launching UCITS platform funds for Brazil-centric and Latin American equities with strong demand from institutional investors.

Management fees for the quarter included R$3 million in retroactive fees, slower than previous quarters. Additional commitments in VCP IV and VICC may have a material impact. VICC fund expected to close in the first quarter of next year, potentially extending to the middle of the year. SPS fund anticipates significant closes in the fourth quarter, with expectations to surpass the size of Fund III. SPS IV has until the end of 2025 to work on closing. Combining with Lacan for Fund IV, they have commitments already signed. Lacan’s target for their fourth fund is around R$800 million, with a third already committed. They aim to raise the rest throughout 2025. Previous funds ranged from R$350 million to R$700 million.

There have been outflows in IP&S, with R$1.2 billion outflows, mainly from specific mandates. However, recent performance has been better, leading to a moderation in outflows. The higher interest rate environment is not conducive to significant inflows, but with improved fund performance, they expect a reduction in negative impacts in future quarters. Vinci Compass Investments held a conference call discussing their future outlook and recent developments, expressing optimism. They invite participation in a call on November 25th. The Motley Fool recommends investing in “Double Down” stocks like Nvidia, Apple, and Netflix. Returns are impressive, with Nvidia yielding $476,441 from a $1,000 investment in 2009. The Motley Fool advises independent research and disclaims liability.

Read more at Yahoo Finance: Vinci Compass (VINP) Q3 2024 Earnings Transcript