Vinci Compass Investments Ltd.

Good afternoon and welcome to DaVinci Partners' third quarter 2023 earnings conference call. At this time, all participants are in list and only mode. Later, we'll conduct a question and answer section 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 Ana Castro, Investor Relations Manager. Please, go ahead, Ana.

Thank you and good afternoon, everyone. Joining today are Alessandro Horta, Chief Executive Officer, Bruno Zaremba, Private Equity Chairman and Head of Investor Relations, and Sergio Passos, 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 forward-looking statements, which are uncertain and outside of the firm's control and may differ from actual results materially. We do not undertake any duty to update these statements. For discussion on some of the risks that could affect results, please see the risk factors section of R20F. We will also refer to certain non-GAAP measures and refine reconciliations in the release. Also note that nothing on this call constitutes an offer to sell or solicitation of an offer to purchase an interest in any VINTE partners fund. On results, VINTE generated fee-related earnings of 51.3 million reais or 95 cents per share and distributable earnings of 51.8 million reais or 96 cents per share for the third quarter 2023. We declared a quarterly dividend of 17 cents on the dollar per common share, payable on December 7 to shareholders as of November 22nd. With that, I'll turn the call over to Alessandro.

Thank you, Ana. Good afternoon, and thank you all for joining our call. We are very pleased to join you today as we announce results for the third quarter of 2023. In my opening remarks, I'd like to cover some important topics before Bruno and Sergio go further deep into details on results for the quarter. To start, I want to give some more color on our recently announced partnership with Ares. I truly believe this partnership will set an important milestone not only for our growth trajectory, but for the company's history as a whole. We are very proud to partner with Ares, one of the leading alternative asset managers globally, and believe there will be significant gains for both companies from this partnership. The transaction officially closed less than two weeks ago and we have already made significant progress with the ARIS team. This week we had our first board meeting with the participation of Peter Ogve, partner and head of ARIS Corporate Strategy Group, who has formally taken a seat on the board. We are thrilled to have Aries in our board to share best practices and strategic guidance on investment strategy and business operations to pursue the growth of our platform. In addition to our board, several subcommittees had kicked off, such as the Global Distribution Opportunities for Vinci. In the short term, we will focus on our flagship strategies, which are currently fundraising, VCP4 and VICC across private equity and infrastructure. Going forward, we believe there is substantial opportunity to drive value also for other private market strategies, such as private credit and VINCI SPS. We also commenced discussions for local product distribution for Ares in Brazil and, of course, M&A opportunities. Additionally, we connected several of ours and Ares' heads of strategies to have conversations with the management teams over partnerships and new investment opportunities. We believe a close relationship and proximity between our senior employees could be an important driver to maximize our growth opportunities. We are very excited about the first few weeks of the partnership and about the impact having Ares on board can generate for our platform in coming years. Moving on, I would like to give a brief overview of what we talked about in our investor day. We hosted the event at Nasdaq headquarters and it was a huge success with substantial interaction from analysts on both on-site and webcast attendance. There, we went through Vinci's history, main areas of focus, investment strategies and targets for what we expect Vinci to be at over the medium to long term. We set out a path over the next five years to at least double our distributable earnings power. We believe we are in a strong position to achieve these targets we set out in the investor day materials. The drivers of growth, in our view, are already in place. We have strong secular tailwinds that are driving asset migration to alternative asset classes in Brazil and Latin America, and those should be the main driving forces for growth going forward. We are focusing our efforts across all fronts with the objective to position Vinci as one of the regional winners in alternatives. This is really important for us to be able to take advantage of the market opportunity the best way we can. We believe that partnering with a leading global player such as Ares substantially increases our chances to achieve our long-term goals. I would like to highlight a few key messages from the event. The Brazilian market has operated in a very cyclical manner, especially when it comes to interest rates over the last 15 years. We build our business model to excel when we have favorable market cycles and we have proven to be resilient when facing tougher ones. We are now at an inflection point, leaving a span with difficult markets given the outcome of the COVID crisis and entering a positive scenario with an easy cycle for interest rates starting in Brazil. Over the last positive cycle, we managed to grow the company with a substantial CAGR of close to 30% in AUM. We expect these next few years to present interesting growth opportunities. Furthermore, we are focused on inorganic growth locally and expanding our footprint into other geographies with a focus on Latin America. The investment from Ares puts us in a very competitive position to make transactions that could be meaningful to our growth going forward. We invite investors that want to dive deeper in our targets and learn more about Vinci to watch our Investor Day that is available on our IR website. To close my remarks, I would like to discuss our macroeconomic perspectives and what we experienced this quarter. Last week, the Brazilian Central Bank continued its easing cycle, maintaining the same pace. Nominal rates are now at 12.25%. The cycle started with rates of 13.75% and after three meetings they are down 150 basis points. Expectations for future cuts continue to be at the same pace and we expect nominal interest rates close to the 9% level by the end of 2024. This implies a 475 basis points cut over a year and a half span. This would mean a much more constructive environment for Brazilian assets. We have been actively talking about this likely path over the past quarters and the scenario is developing as our strategy department predicted. However, it's important to note that this quarter we suffered from a short-term adjustment in long-term real interest rates, which had a negative impact on market-to-market and in our liquid portfolio. The short-term impact on real interest rates were not a Brazilian phenomenon, but rather a worldwide one. With the macroeconomic environment in the US and the short-term hike in medium to long-term real rates for treasure bonds, Brazilian bonds followed. This led to the impact on our investment portfolio and a temporary halt in the improvement we had started to see in overall flows during the second quarter. I feel it's important to share this with investors. Our medium to long-term outlook for the easing cycle remains extremely constructive, and we are optimistic on our ability to deliver solid growth over the next few years. However, the short-term trends got a little bit more volatile. I would like to conclude with the following message. When we founded Vinci in 2009, we decided to pursue a business model that could have significant room to scale and the capacity to retain capital in challenging scenarios. We divided our history in three phases. The first phase of our company was structuring, where we built our segments, capabilities and invested heavily in developing our operations. These efforts in the first phase paved the way into the second, which was diversification. In this phase, we already had all major business lines and we worked on creating new products and strategies within these segments. Our third and current phase is scaling. We believe to have a complete array of products ranging from private markets and liquid strategies to business solutions, such as IPNS, with few punctual strategies to complement. VINTE is ready to scale and a favorable environment as we foresee is the fuel needed to really being impactful and taking our company to the next level. With that, I'll turn it over to Bruno to go over our fundraising efforts and pipeline.