Vinci Compass Investments Ltd. (VINP) Q3 2022 Earnings Report, Transcript and Summary

Good afternoon, and welcome to the Vinci Partners Third Quarter 2022 Earnings Conference Call. [Operator Instructions] 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, Anna.

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 and 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 a discussion of some of the risks that could affect results, please see the Risk Factors section of our 20-F. 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 an interest in any Vinci Partners fund. With that, I'll turn the call over to Alessandro.

Thank you, Anna. Good afternoon, and thank you all for joining our call. We are very pleased to join you all today as we announce results for the third quarter of 2022. Adjustable distributable earnings totaling BRL73.2 million in the third quarter or BRL1.32 per common share, an increase of 19% year-over-year. Distributable earnings results are backed by extremely defensive FRE pushed by fundraising across our private market strategies and long-term lockups with a considerable upside coming from our liquid investment portfolio. Our business model has been able to guarantee an extremely healthy growth for our company in one of the most challenging scenarios this past quarters and helped us navigate these times while still delivering growth and attractive dividend distributions to our shareholders. Vinci announced a quarter dividend of $0.20 on the dollar per common share, totaling $1.20 in dividend distribution since our IPO. Considering yesterday's closing share price, VINP stock is currently trading north of 6% last 12 months dividend yield. This yield is secured by a highly visible management fee-driven revenue stream in a very conservative investment policy on our balance sheet cash position. Vinci ended the third quarter with BRL63.4 billion in assets under management, up 9% year-over-year, driven by our fundraising across private market funds in the second and third quarters of 2022 and the recently closed acquisition of SPS. Results for Vinci SPS will be included in our private market segment. This quarter presented a partial impact from a revenue standpoint from Vinci SPS as we closed the acquisition in the middle of the quarter. We'll see revenues from the segment impacting the fourth quarter onwards. On the fundraising side, we had some great news regarding our efforts in private markets this quarter. The first one is the capital raise for our first fund within our recently formed agribusiness strategy, VICA, a partnership between our credit and real estate segments in a joint venture with Chrimata. VICA raised BRL360 million in perpetual capital in this first round of investments with configured the hard cap for this route. Our team experienced great traction from investors with an oversubscribed offer, and we should come back with a new round of investments as soon as the fund is fully invested, which should take place in the first half of 2023. The second one is the mandate won by our Infrastructure segment to manage their sustainable regional development fund or FDIRS. We should see this fund being activated towards the end of the year with AUM starting at BRL750 million. FDIRS has significant potential to grow over the years, considering its predetermined hard cap to invest up to BRL11 billion as the team originates investment opportunities alongside additional capital commitments. This fund presents a combined asset management adviser mandate as we aim to develop and invest in regional projects in coming years. Vinci has been growing AUM at a 27% CAGR since 2018, while the Brazilian market as a whole has been growing at 14% CAGR in the same period. We have been taking significant share of the Brazilian market backed by 2 secular growth trends. First, the shift in allocation to alternatives, mainly for institutional investors that are still extremely under allocated to alternatives and have a total addressable market of about BRL1 trillion in assets. Combining with GP consolidation trend, of which Vinci has been successfully the partner of choice for local institutional investors with our diversified and growing product availability in all the main strategies of the alternative asset space. The combination of our one-stop shop business model with our robust proprietary distribution channel to local institutional investors have been responsible for important achievements in 2022, such as seed investments across our credit and intra-funds, new products anchored by local institutional investors and federal organizations. Now let me spend some time providing an update on fundraising for the next few months. VICC, our climate change fund, Infra, should hold a first close in the fourth quarter backed by commitments from BNDES, other global and local LPs and a seed investment from Vinci's balance sheet. Vinci Credit Infra that held its first closing last quarter should come back in the fourth quarter with a second round of investments also backed by BNDES preapproved investment. Lastly, we have a very exciting pipeline of opportunities for deployment of capital within our recently activated flagship private equity fund, VCP IV. In parallel, fundraising effort for the fund remains strong, and we should see new commitments being activated over the next several quarters. For the first round of investments in VCP IV, we are seeing greater demand from local investors compared to what we experienced in previous vintages. This showcase what we have been discussing for quite some time. Local institutions are increasing their efforts into analyzing alternative investments, and we believe the current trends in this direction are just the beginning. For international LPs, we are seeing here a phenomenon that has affected the U.S. and European listed alternative managers as well. It has been a busy market for fundraising as there are several players coming back to market with new funds. This has been perceived as widely discussed by our peers in their earnings calls and especially true for private equity strategies. This concentration has led to delays in commitment and the calendar in general, is being pushed back 6 to 12 months. With that being said, we are expecting a greater contribution for international investors towards the next quarters until the end of the fundraising process. The aforementioned concentration of new fund launches had dissipated and with Brazilian elections behind us, we expect to see a pickup in demand for our location in general to Brazil. We have a positive view for Brazil's position in the global economic picture. Brazil has been experiencing outstanding performance when compared to international peers recently. Most of the world has been pointing to a decline in growth, mainly as a consequence of a late fight on global inflationary pressures. Market expectations for Brazilian growth on the other hand, has been revised upwards since early 2022 and are now pointing towards 3% GDP growth in the year. There are a few reasons for this outstanding performance. The Brazilian Central Bank was the first mover globally to fight inflation. Interest rate hikes started in early 2021 and have ended a couple of months ago. Indeed, when we look at market expectations for inflation in Brazil, they have been collapsing for 2022 and all for the coming years. After 2024, the market now believes that inflation will be very close to the center of the inflation target of 3%. The magnitude of the hike in interest rates necessary to curb the inflationary process caused significant dislocation in both public and private capital markets in Brazil. However, past this harsh environment, there is a bright perspective ahead of Brazil. In 2022, accelerating GDP growth expectation are a clear testimony of that. With the perspective of higher growth and also the proximity of an easing cycle to start for interest rates in 2023, capital markets will likely perform well in the years ahead. Also, as the opportunity cost stumbles, demand for alternative assets as the ones offered by VINCI will likely reaccelerate in the years ahead. The reduction of political life after 2022 Presidential Election and the perspective of a moderate economic policy alongside a more [reformed] Congress will likely be a further tailwind to the scenario of growth and further reduction in interest rates. Combining Brazil's positive economic outlook in the short to medium term with the broadened fundraising pipeline across all our platforms, Vinci sits in a unique position to accelerate growth. While we prepare ourselves for this accepting road ahead of us, we are awarding our shareholder with a predictable, stable and high-quality dividend that at this share price represents an outstanding dividend yield. We at Vinci are extremely committed in generating revenue a to our shareholders through every market side, always leveraging our platform to generate exceeded returns. With that, I will turn it over to Bruno to go over our financial results.

Thank you, Alessandro, and good afternoon, everyone. Starting on Slide 9, we will cover AUM trends for the quarter. Vinci ended the quarter with BRL63.4 billion in AUM, up 9% year-over-year. During the third quarter, we launched our first fund focused on the agribusiness strategy, VICA, raising BRL360 million in a perpetual capital fund structure to become listed in the B3 to a public follow-on offering in up to 5 years. VICA should come back to the market next year for a new round of financing due to the substantial demand we experienced from investors and the extensive pipeline of assets we have identified for this strategy. For the fourth quarter, we expect the first closing for our climate change fund within the Infrastructure segment, VICC, in a second round of investments for Vinci Credit Infra. As a reminder, each fund has a BRL500 million approved commitment from BNDES. For the VICC, that commitment should be partially activated at the first closing, reaching the full commitment as the fund reaches its targeted fundraising. In the case of Vinci Credit Infra, we expect the commitments to be fully activated in the fourth quarter. Concluding our AUM update, it's important to highlight that half of our AUM is comprised by long-term products. This results in a more predictable revenue stream for management fees, which translates into stability in our earnings and dividend distribution. Bear in mind that exclusive separate mandates from our IP&S segment do not formally account within long-term AUM as they don't have formal lockups. However, this is an extremely sticky investor base with a long-term view for its allocations. We have proprietary relationship with these clients. And generally, their goal is to stay with us for the long term. And as a consequence, we have very low churn in these funds. My goal here is to bring awareness to the fact that our actual AUM with long-term objectives is considerably larger, therefore, our management fees are well protected, and this is exactly the stickiness that our AUM displayed over the entire interest rate hike cycle. Vinci in fact grew AUM by approximately BRL9 billion, while interest rates were going from 2% all the way up to 14%. Moving on to Slide 11, we go over accrued performance fees in our private market funds. Performance fee receivables increased to BRL154.8 million in the third quarter, a 6% increase quarter-over-quarter. The VCP strategy currently accounts for roughly 90% of accrued performance fees, representing an appealing upside for future performance fees. At the end of the quarter, Vinci had BRL10 billion in performance eligible AUM coming from private market funds still in investment period that can further contribute to our accrued performance fees as these funds enter their divestment periods. Turning to Slide 13, we will cover our fee-related revenues. Revenues from management and advisory fees totaled BRL102.6 million in the quarter, up 7% quarter-over-quarter. This increase was a result of the fundraising experienced in the latter part of the second quarter, aligned with the partial impact from Vinci SPS management fees as we closed the acquisition in the middle of the third quarter. We should see a continuing positive trend coming in the next quarter onwards. Additionally, to the full quarter impact of Vinci SPS, which is the activation of fees following capital deployment as we currently have about $1.7 billion in AUM coming primarily from the Vinci Credit Infra fund and Vinci SPS third vintage that will contribute with higher fees as these funds deploy capital. Total fee-related revenues were down 13% year-over-year due to strong advisory fees realized in last year's quarter. As for management fees, they were up by 3% year-over-year. This same trend can be observed in fee-related revenues on a year-to-year basis as the growth in management fees were offset by lower levels of advisory fees due to record revenues experienced by our advisory business last year. In Slide 14, we present our operating expenses for the quarter and year-to-date. Total expenses account for BRL53.6 million in the quarter, down 5% year-over-year. In the year-to-date, total expenses were BRL152.2 million, down 5% year-over-year. Excluding bonus compensation, fixed and variable expenses increased 15% year-over-year due to inflationary pressures on fixed costs, the return of traveling expenses to pre-pandemic levels and the investments currently being made in our Vinci Retirement Services vertical, which we expect to contribute to revenues early in 2023. Moving on to Slide 15, we go over our fee-related earnings for the quarter. FRE totaled BRL49.5 million or BRL0.89 per share in the quarter. As previously mentioned, we had a positive impact from fundraising that occurred in the latter part of the second quarter as well as a partial contribution from SPS revenues. These were direct contribution to the 6% increase in FRE observed quarter-over-quarter. On a year-over-year basis, FRE was down 22%, a result of higher levels of advisory fees experienced in the same period last year as a consequence of the strong deal activity observed in 2021. Another contributor was the investment made this year in our new retirement segment, VRS, which should start to earn fees in 2023. Please note that our core business FRE remains healthy year-over-year and should continue to improve each quarter due to 3 main factors. First, the strong fundraising cycle that we have ahead of us across private market products, which we have already started to realize. Second, the full contribution from Vinci SPS revenues, which will happen in the fourth quarter onwards. And third, as already mentioned, we have funds that charge higher fees over invested capital as they increase their capital allocations such as Vinci Credit Infra and Vinci SPS vintages. Both still have significant levels of dry powder that are expected to be invested over the next several quarters. Moving on to margins. FRE margin was 48% in the quarter, down 5 percentage points when compared to the same period last year, mainly a result of higher advisory fees last year and the fixed cost deleverage we have for that vertical, addition to higher fixed costs following the rising inflation rate and previously mentioned investments behind Vinci Retirement Services. Disregarding our investments in VRS, FRE margin would be 50% for the third quarter of 2022, approximately 380 basis points lower than the same year ago period and that is mostly explained by fixed cost deleverage coming from the advisory vertical. As we have been communicating over the last few quarters, margins should improve in the coming years as we reap the benefits of the funding cycle for private market products that carry a higher fee rate than our current average. Moving on to Slide 16, we go over performance-related revenues. PRE was negative BRL500,000 in the quarter compared to a positive BRL4 million in the third quarter of 2021, primarily due to a downward mark-to-market adjustments in FIP Infra Transmissao, which has unrealized performance fees booked in the company's balance sheet. Another significant impact came from the greater contribution from international exclusive mandates in IP&S in the third quarter of 2021. This exclusive vehicles had a stellar 2021 and have not contributed at the same levels this year as international markets are facing some volatility with the S&P, NASDAQ and major credit indexes, posting significant losses in 2022. Over the year-to-date, PRE was BRL4 million, down 81% compared to the same period in the year before. Since our IPO, we have been suffering with volatile markets, therefore, facing challenging environments for charging performance fees, mostly in our liquid strategies. However, it's important to be mindful that we have over BRL16 billion in performance as AUM in liquid products across liquid strategies and IP&S. These funds have been struggling to generate performance fees due to their high watermark clauses, which in practice do not allow us to charge fees in a down market. With markets improving, we expect this revenue stream to be more active and more materially contribute to our earnings at some point in the future. Shifting to Slide 17, we go over our realized GP Investment and Financial income. We had BRL37.5 million in realized GP and Financial Income this quarter, up more than 2,000% on a year-over-year basis coming from gains in our liquid funds portfolio and dividend distributions from the company's proprietary position in listed REITs. As we discussed in the past, we expect Financial Income to remain a relevant contributor to distributable earnings in the coming few quarters as we are currently going through peak interest rates in Brazil. However, please note that local markets gained some traction in the third quarter, which positively affected cash allocation gains in our liquid portfolio, allowing us to post a stronger-than-average quarterly results. We continue to aim to results of at least 80% of the CDI rate for the long term of the liquid portfolio as we continue to keep a balanced and conservative allocation. In the medium to long term, we should see Financial Income component in our distributable earnings gradually migrating towards FRE as we deploy capital in our private market product and leverage fundraising for these products. As of the third quarter, Vinci reached a total GP commitment of roughly BRL1 billion across private markets and closed-end products with a little more than 1/3 already being called. The remainder will be called over time as funds deploy capital into new investments. Leveraging the launch of new and existing products and our ability to raise AUM from these products from third-party investors continue to be the main strategic objectives of our cash balance long term. Turning to Slide 18, we go through our adjusted distributable earnings. Adjusted distributable earnings totaled BRL73.2 million or BRL1.32, up 19% on a year-over-year basis, boosted by growth in management fees and financial income in the quarter. Adjusted distributable earnings totaled BRL192 million or BRL3.45 in the year-to-date, up 17% when compared to the same period last year. Adjusted DE margins posted on the quarter of expansion with 51% in the third quarter, an increase of 4.7 percentage points year-over-year. We expect to continue to add shareholder value by expanding distributable earnings results over the quarters as a combination of organic growth through fundraisings across our platform and inorganic AUM expansion through acquisitions such as the transaction with SPS Capital. Finally, in Slide 19, we go over our cash and investment balance. We ended the quarter with BRL1.4 billion in cash and net investment or BRL25.38 per share or approximately $5 per share in cash position. And with that, I will turn it over to Serge to go through our segments.

Thank you, Bruno. Turning to our segment highlights. As you can see in Slide 21, our platform remains highly diversified, which we believe to be main contributor to the resilience of our business. Regarding the investments made in the VRS segment, 52% of our FRE in the year-to-date came from our private market strategies, followed by IP&S with 22%, Liquid Strategies with 20% and Financial Advisory contributing with 5%. The same level of diversification is reflected in our segment distributable earnings. Moving on to each of the segments starting with our Private Markets strategies on Slide 22. This quarter, we are including our new strategy, Vinci SPC into the Private Markets segment results. FRE totaled BRL26.9 million in the quarter, up 3% over the prior period, driven by the strong fundraising of the last 12 months and the incorporation of SPS Capital. As a reminder, the acquisition of SPS was closed in the middle of the quarter. Thus, we are only being partially impacted by management fees. In the next quarter onwards, we will have the full impact from the SPS business. Private Markets average management fee rate was down year-over-year and quarter-over-quarter due to 2 main factors. First, due to the recent fundraising for Vinci Credit Infra within our credit strategy with BRL900 million in AUM. Fees are charged on invested capital, so we should see an increase in management fees and in the average rate as deployment progresses. Second, in the last quarter, the Private Equity strategy had a significant inflow from a non-fee-earning AUM mandate due to the structuring of a due in VCP III, which also impacts our average fee rate. Closing on average management fee rate, as the reported vintage from SPS Capital is still investing its capital and charges, higher fees on invested capital, so we should see a positive impact for the fee rate in the next quarter onwards. Segment distributable earnings were BRL32.6 million in the quarter, an increase of 19% year-over-year, boosted by higher contributions from dividend distribution in our proprietary position across listed REITs. Total AUM was BRL27.6 billion for the end of the quarter, up 27% year-over-year, driven by strong fundraising private equity, credit and real estate and the additional AUM from the acquisition of SPS. This quarter, we disclosed a press release announcing the successful capital raise for VICA, Vinci Partners first agribusiness fund, a partnership between our credit and real estate segments, adding BRL306 million in perpetual capital to our platform. As previously mentioned by Alessandro and Bruno, momentum is really high for Private Markets. We should see some increase in AUM over the next few quarters as we expect to hold the first closing for VICC, the second close for Vinci Credit Infra and new capital subscriptions for our fourth vintage in our flagship Private Equity strategies. And as most of these funds charge higher than our average consolidated fee, this should drive FRE results and margins in 2023. Moving on to Slide 23, we go over results for Liquid Strategies. Fee-related earnings over the year-to-date totaled BRL29.4 million, down 17% when compared to the same period last year. Total AUM was BRL10.8 billion at the end of the quarter, up hopefully 10% quarter-over-quarter, following market appreciation and another stable quarter for net inflows, reassuring the stickiness of our investor base that remains resilient when facing a more challenging market environment. We expect that with interest rates starting its loosening cycle, we will observe a movement towards Liquid Strategies again, and our platform will be well positioned to capture this shift and translate this trend into AUM and revenues. Moving on to our IPS business on Slide 24, FRE totaled BRL11 million in the quarter, up 14% on a quarter-over-quarter basis, mainly due to our notable fundraising over the last 12 months. Segment DE totaled BRL32.7 million over the year-to-date, down 25% year-over-year, primarily due to higher levels of PRE in the same period last year following strong performance realizations coming from international exclusive mandates. Turning to Slide 25, we cover our results for financial advisory. FRE for Financial Advisory was BRL3.6 million in the quarter, in line quarter-over-quarter and representing a decrease of 76% year-over-year due to the strong deal activity encountered last year. As discussed in previous quarters, revenues for Financial Advisory carry a certain level of seasonality. And although uncertainty to predict, we currently do not expect a stronger level of revenue recognition prior to 2023. Finally, moving on to Slide 26, we go over results for the Retirement Services segment. Fee-related earnings for the quarter was negative BRL1.4 million. And over the year-to-date, FRE represented a negative BRL4.5 million. As disclosed in previous earnings call, we are still in the process of structuring this segment. Therefore, we are only incurring expenses for the time being. We are very optimistic with the future of the segment and should see fundraising starting at the first half of 2023 as the products are launched. In the meantime, we will continue to provide updates on the development of the business and expect to be able to provide a more detailed review for VRS in our fourth quarter 2022 results as major milestones in the project are achieved. 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. Operator?

Thank you. At this time, we will conduct the question-and-answer session. [Operator Instructions] Our first question will come from William Barranjard of ITAU BBA. William, please proceed your question?

And my question here is regarding Liquid Strategies. So, the FRE levels this quarter was lower compared to last quarter and the last year, right? So, I would like to understand this impact from the mark-to-market one-offs. And if the levels we should expect to have similar to this quarter or the last quarter going forward, at least for the next few quarters? And then looking at the total FRE, I would like to understand how you expect it to evolve in the fourth quarter of this year and then next year also? So -- and particularly take a look in how you look at the Advisory segment if the mood is improving or not for the next quarters?

Okay. This is Bruno, I'm going to cover your questions. So, in regards to the Liquids FRE margin, what happened was a combination of some mark-to-market impact and some small redemptions that we had that accumulated over the past few quarters. So, revenues were a little bit down when you compare on a year-over-year basis. And the other thing was that once we had the decline in the Advisory revenue, the cost allocation for the corporate center was rebalanced. So, that means that the other verticals had to cope with more of the corporate center costs. So, it ended up affecting the margin of the Liquid business a little bit more this quarter, right? Going forward, I mean, if you look into the fourth quarter, there was an appreciation in AUM in the third quarter. So, we're likely going to have a little bit more of a tailwind from revenues in Liquids there. But I wouldn't expect margins from Liquids to change materially. I mean, from the levels that we had this quarter, probably improve a little bit, but not substantially, right? In terms of Advisory, what we have been saying is that last year was a very strong year. So, we had around $60 million in revenue. This year, we already -- when we came into the year, we knew that the pipeline was looking a little bit slower for '22. For '23, when we look at the pipeline of deals for '23, the ones that are able to be closed in '23, I would say, probably we are somewhere in the middle between '22 and '21. Difficult to say if it's exactly in the mid or if it's a little bit lower, then the mid were higher, but today, from the vantage point that we have today, the expectation is that we should have a year that should be between '21 and '22 from a revenue standpoint in the Advisory business. So, I don't know if I covered all your questions, but those are the ones that I had here.

Our next question comes from Pedro Leduc of Itau BBA as well. Pedro, you have the mic?

Hello, can you hear me?

Yes, Pedro, we can hear you.

So, first on -- two questions, please. On a more broader perspective, as we look into the next year, you mentioned reduced uncertainty now with elections behind, helping on some products. We certainly agree that the moment is opportune to invest in Brazil looks good. Could you elaborate a little bit on which products you believe will drive the most under business cycle that's now unfolding for us. That will be the first question.

Pedro, this is Alessandro speaking. I'll try to address your questions. Of course, now as we have the elections behind us with the reduction of this uncertainty with interest rates reaching a peak after this tightening cycle, we believe we have coped with the lower, I would say, one of the lowest ever allocations for the international LPs that we talk with. We believe that Private Markets will benefit a lot with that. We continue to be -- we have a very constructive view on the private equity VCP IV fundraising going forward next year. We also are highly optimistic about the prospects of fundraising of our climate change fund that's related to infrastructure. We are having a very good welcome to this product from the international base. And also, we have been discussing a lot of international mandates for equities that will be allocated in Brazil. So these 3, taking the point of view of the international LP community would be the ones that we are believing that we'll see the most of the inflows coming from next year. Talk a little bit about the local, I'd say, LP universe, we are optimistic with the I would say, the recovery of the fundraising activity for the REIT. So, the real estate listed funds, we already saw that a bit with VICA, that's our agribusiness fund that in a way goes to the same type of market. And we saw a recovery in prices in the last quarter for our real estate investment trust the listed SAEs. So, we believe that very soon, we will have a more robust fundraising activity for that. So, I would say that the local institutional clients with that also, and we are already seeing this interest coming back for more long-term yield-related assets, especially in infrastructure. So, we also believe that we have some flows coming from local institutional for infrastructure products going forward to 2023.

On the second, on also a little more broader perspective. We're seeing big banks get hurt in retail credit in Brazil, but doing well in corporate and in agro. So, how are you seeing the broader capital market perspective competitive environment? And how could you shield yourself potentially from a greater role of public banks as BNDES in this next administration?

Okay. That's a very good question. For us, as you know, we have more like uncorrelated, I would say, activity with this, I would say, what's driving the results of the bank that we have been seeing in the last few days especially. But I would say where we would see maybe some competition and from the different approach from the state-owned banks will be more on the private credit side. But we are in a very specific niche of more like a high grade, a very, very long-term type of credit where we should see maybe the BNDES actually a bit more. But even BNDES is not exactly in the same type of structure that we are. So, we are a little bit junior related to BNDES, but it's still very long term with real assets as a guarantee of our loan. So, I would say that there, we could see some petitions but for the allocation, but we not see much since we asked for higher spreads that normally be in [indiscernible] when they go more further on the, I would say, the capital structure of the companies. Talking about the other verticals, to be very honest with you, we do not see that affecting too much. Coming back a little bit on the beginning of your question, we, as you know, on the -- especially on the the funding side, the liability side of our business, where the money comes from, we have a very, very low exposure relatively to the rest of the asset management industry coming from retail investors and from distributors and allocators that this is a little bit more from 10% of our total AUM. So, that's why we do not see this affecting much also the overall activity in capital markets and the flows of money on through retail affecting much of our business. So, I don't know if I answered your question, but that's how we see this developing going forward.

[Operator Instructions] Our next question is coming from Ricardo Buchpiguel of Banco BTG Pactual. Ricardo, please proceed with your question.

I have 2 questions on my side. First, can you please comment what are the next steps to seize all the synergies after the acquisition with SPS Capital? And also, is Vinci studying to buy other asset managers given its high cash position? And if so, in what sort of segments should we expect?

Ricardo, this is Bruno. In regards to Vinci SPS, the structure of SPS is already very lean. So, I wouldn't necessarily see any synergies from a cost or integration standpoint. I think synergies there, I would say, mostly they come from 2 sides. One is on the sourcing and collaborating with the rest of the platform, right? So, as we said in the call, that we announced acquisition, this was a part of the business that was very a gap that was very clear. And what happened was that we were generating a lot of deal flow and potentially having opportunities to deploy capital in a special situation structure, but we didn't have the correct vehicle or the correct capital pool to deploy those opportunities, right, forward? So, I think the one thing that we are noting is that [indiscernible] and team, they have been able to work very closely with other verticals at the firm and already leveraging this partnership potential from a deal flow standpoint, right, deals that we received over time and that were not suitable for our traditional strategies. And the other point, I think we're going to start to see materializing in '23, we are now starting to map out the '23 launches. So, products that are structured products that we should launch in 2023. We have a couple of positive developers in that front. So today, we are budgeting potentially VIR V resuming coming back to market in the second half of '23. And also Vinci SPS vintage for potentially coming to market in the second half of '23. When that happens, I think that there's going to be a lot of potential synergies because the potential addressable market for the strategy will be greatly enhanced, right? We will be able to work with international LPs in the strategy, which we didn't have obviously in the past. We'll be able to work with local distributors to work on partnerships for potential distribution locally. Obviously, tap on our high-net-worth individual vertical as well. So, I think there will be a lot of synergies going forward on the fundraising side and potentially leverage fundraising for that platform, right? In regards to M&A, we continue to analyze potential opportunities. So, we are looking into opportunities that address potential gaps in the strategy that we see that could be addressed by M&A. So, eventually increase our funding capacity. In the asset management side, I think today, given the breadth of the platform, I don't see a lot of additional M&A that we can do to broaden more mix, but we could increase the depth, depending on the type of product. So, we do see a continuing flow of M&A coming our way. We continue to analyze opportunities that can add value not only to be accretive for us in the short to medium term, but also to add value for the platform on a strategic sense in the medium and long term as well. Operator, sorry, do we have any other questions?

Kaio Prato of UBS is online right now. Do you have a question, Kaio?

Yes. I have two quick on my side here. First, on the Financial Income, I just would like to have a view about if we could consider that this level of Financial Income could be sustainable for the next quarters? And moreover, I would like to understand your views about the performance fees going forward. If there is any expectation of any performance fee already for the fourth quarter in any of your strategies? And what can we expect for the following quarters as well?

Kaio, this is Bruno again. So, I think we try to convey that the message during the call, but I would like to take advantage of your question to reinforce it. I think the third quarter Financial Income, obviously, there is a benefit of the from the fact that interest rates are at the peak levels now, right? So obviously, that is an important part of the boost that we received in that line in the third quarter? However, we did have a very good, I would say, drivers of performance within the liquid funds that we were allocated in the quarter. So, we would expect probably a partial sustainability of the number, right? A part of it has to do with a higher rate, part of it has to do with good performance in the funds. I would say not likely that we're going to be able to sustain, obviously, it could happen. But the target is not to have the level of returns that we did in the third quarter, probably a little bit lower, perhaps, I would say probably 10%, 15% lower than we had in the quarter as we had guided to that at least 80% of CDI rates, I think that's a level that we feel comfortable in delivering over the long term, right? So, that's the first question. The second question regarding performance fees, we expect not in 2022 any significant change. I think what happened with the rebound in markets in Brazil is that we have gotten closer to the high water marks although we are not still above them, but I think the gap has reduced in the past quarter and half, I would say, probably. And then looking forward, we do expect a big realization of performance to happen in 2023 from the remaining assets in our FIP Infra funds. So, that is booked in the -- in our balance sheet. We have been working to get that asset up and running, still in a final preoperational phase, but we are getting close to have it up and running. Once it's up and running, we feel it's very liquid assets. So, we would expect it to be realized at some point, hopefully in the first half of 2023. That will have a potential interest impact in the results, north of BRL15 million in our distributable earnings number because we have a combination of performance and GP commitments in the fund. So, the combination of the 2 should have an interesting bump in our DE once that transaction closes. And then thinking about the liquid side, and I was talking with Sergio the other day here, this was a line that was a big contributor to us in 2019 and 2020. We had PREs that were very relevant and even more so at the time because FRE was not as big as today. So, on a relative basis to our distributable earnings, the contribution was even more significant. And this is something at some point we'll resume, right? We are in a moment where the markets are not allowing us to charge performance on these funds on a more significant way. But one that once that happens, they could be material contributors to our DE. Hopefully, that starts to happen again some point in 2023.

Thank you, Kyle. At this time, I would like to hand it back to Alessandro Horta for some closing remarks.

So, I would like to thank you all for your continued support and we hope to talk to you again in the next quarter. So, have a good night, and thank you again.

Thank you, Alessandro. Thank you for everyone's participation today. This does conclude the program, and you may now disconnect.