Vinci Compass Investments Ltd. Q3 FY2024 Earnings Call

Good evening and welcome to the Vinci Partners Third 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. Please go ahead, Anna.

Thank you and good afternoon, everyone. Joining us 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 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. On results, Vinci generated fee-related earnings of R$53.8 million or R$1.02 per share and adjusted distributable earnings of R$57.1 million or R$1.08 per share for the third quarter 2024. We declared a quarterly dividend of $0.16 on the dollar per common share payable on December 5th to shareholders of record as of November 20th. With that, I'll turn the call over to Alessandro.

Thank you, Anna. Good evening, and thank you all for joining our call. We are very pleased to join you today as we announce results for the third quarter 2024. To kick things off, let's start with a brief overview of our results for the quarter. Vinci reached R$70 billion in AUM, posting an 8% year-over-year growth. Our efforts in raising capital for private market funds continue to boost our AUM and FRE with highlights this quarter to a little over R$0.5 billion in additional commitments, including the first coming from a global investor in our Credit Infra strategy. We also saw positive net inflows in our public equity strategy, which we will provide more details further in the call. While during this quarter, growth was more measured, we anticipate a strong finish to the year. We expect final closings for VCP IV, securing additional commitments for VICC and Credit Infra and completing the first closing for SPS IV. While interest rates in the U.S. are on a downward trajectory, Brazil Central Bank is expected to implement modest rate hikes to continue to keep inflationary expectations under control. Despite these circumstances, Vinci continues to excel, especially when it comes to fundraising in private markets, standing resilient in a market where many asset managers limited to single strategies have struggled to remain competitive. In that sense, we are getting to a point where the recognition of the brand and attractiveness of the platform has put us in a different position from other local and regional players. We had seen a similar evolution in the U.S. and European alternative asset markets with the sector displaying bigger concentration around the larger names, and we are starting to witness the same phenomenon in our Latin America market. Moving on to our segment earnings. Distributable earnings reached R$57 million in the quarter, reflecting a 12% year-over-year increase on a per share basis. These results highlight our firm's robust trajectory and position us well to continue delivering value and growth. Shifting to some very exciting news since the end of the quarter. Last week, we announced the closing of our combination with Compass. This begins a historic transformation for our firm that will redefine our future. The combination with Compass marks the official establishment of a leading pan-regional alternative asset manager with a first-class diversified product offering across all major strategies where local, regional, and global investors can find a full suite of products. With the combined platform of Vinci and Compass, we have established one of the leading content providers for alternative investments in Latin America. This strength, paired with the extensive distribution capability we possess, creates a formidable presence across the region. Together, we serve a vast and diverse client base of more than 2,600 LPs, spanning both institutional and high net worth investors. Compass brings $41 billion in AUM as of September 2024, reflecting a significant 10% growth year-to-date from $37 billion at the close of 2023. This strong expansion underscores the dynamics and strength of Compass' platform, now part of our combined vision to deliver unparalleled investment solutions across Latin America. The combined platform managed $54 billion in AUM as of September 2024. As we disclosed when we signed the transaction in March, we needed to secure regulatory approvals across multiple Latin American countries, each with its own processes and requirements. We are pleased to report that the required steps for closing unfolded smoothly and according to our anticipated timeline. The integration process has been progressing exceptionally well, underscoring the strong cultural alignment and shared vision between our teams. We have been working together in close partnership, leveraging each other's strengths and expertise to create a cohesive united platform. For instance, we have already seamlessly combined operations into a single consolidated office in both Sao Paulo and New York cities where both companies previously had independent locations. A significant milestone resulting from this integration is VCP IV's most recent achievement, securing its first commitment from a Mexican LP following successful roadshows across Chile and Mexico by our integrated teams from Vinci and Compass. This accomplishment is a direct outcome of the combined efforts and the extended reach of our joint platform, illustrating the real value and growth potential that this integration brings to our investment network and strategic initiatives. We expect many more cross-selling opportunities in the future with commitment indications for the first close of SPS IV to be held in the fourth quarter. Join us on November 25th for an extraordinary call where we will delve deeper into the combination, provide integration and synergies updates, and outline our strategic vision for our combined platforms as we move forward. Moving on to a more recent announcement, the acquisition of Lacan earlier this week. This acquisition will allow Vinci to launch its forestry strategy. We believe forestry is a complementary investment strategy to our current roster of solutions and for which we have a positive long-term view. Lacan is a prominent timberland investment management organization in Latin America with R$1.5 billion in AUM distributed across three vintages with the fourth currently in fundraising. Their deep expertise in this area makes them the ideal partner for this expansion, with a proven track record that sets them apart, and we are excited to offer our clients a new investment strategy. Lacan's team manages 130,000 hectares of planted land and an additional 31,000 hectares of preserved areas. Their extensive experience and commitment to sustainable forestry practices align perfectly with our vision of impactful long-term investment. This acquisition brings Lacan's people into Vinci's fold, led by Founder Luiz Augusto Candiota and a senior leadership team that has successfully managed multiple forestry assets for over a decade. With a diversified portfolio that includes greenfield and brownfield projects in eucalyptus, pine and native forest, Lacan's presence strengthens our capabilities in real asset investments and provides a new avenue for growth. This strategy provides us with the potential for sustainable value creation in an underserved market, and we believe that with Lacan's seasoned team on board, there will be additional opportunities to expand this strategy into other Latin American markets in the future. We structured the transaction with a cash payment upon closing, which took place last Monday, and additional cash considerations in a period of up to four years, contingent upon fundraising and incremental management fee revenues. We expect the acquisition to favorably impact our AUM and segment results for the fourth quarter and into 2025, and the transaction is expected to be immediately accretive to FRE per share and DE per share. To finalize my remarks, I would like to reinforce that this transaction marks not just milestones; they mark the beginning of a new era for Vinci Partners, establishing us as the gateway to alternative investments in Latin America. We believe these movements solidify Vinci's status as a leading full-service player in Latin America, uniquely positioned to capitalize on the region's high growth potential for alternative investments. This is one of the topics we want to convey in our call on November 25th, and we hope to see you there. We will discuss the key aspects of our M&A activity so far, delve into further details on the Compass business, team, and integration process, and provide our strategic vision for the coming years as we grow into Latin America. Thanks again for joining our call. With that, I would like to turn the call over to Bruno.

Thank you, Alessandro, and good evening, everyone. I'll start by covering our fundraising efforts. Starting with public equities. We saw positive net inflows this quarter coming primarily from institutional investors. Our Mosaico Strategy secured additional commitments from an offshore institutional investor, a sovereign wealth fund with a longstanding relationship with Vinci. We share with this investor the view that Brazilian equities are extremely undervalued from a historical perspective against more developed markets and are currently at an interesting entry point for medium-to-long term investors. As we have been talking with our investors and prospects, Brazil is currently two standard deviations from the mean when you compare the market's price to earnings multiple to that of the S&P 500. Brazil's economy has been growing strongly post-pandemic, while the stock market has been practically stable in reais since the beginning of 2021. We are thrilled with the growing momentum of this strategy and the strong interest from international investors. For this reason, we have designated it as one of the priorities in our fundraising efforts in collaboration with Compass. As we consistently highlighted in previous communications, we anticipate a recovering capital raising as soon as the market presents an opportunity, fueled by our strong long-term track record and deep enduring relationships with our clients. In contrast, the IP&S segment continues to experience outflows in the third quarter, primarily driven by withdrawals within our separate mandate strategies. The record high real interest rate levels in Brazil have prompted some rebalancing across client portfolios, which led to some review of mandates that were under our control. Meanwhile, our commingled funds, which feature higher fees, have shown redemptions tapering off during the quarter. IP&S remains a more cyclical part of our business with a more direct connection to fluctuations in short-term interest rates. With the recent interest rate hike cycle, it is likely that the group will face headwinds for some additional time. Shifting to our retirement service vertical, we are seeing increasing inflows for Vinci Retirement Services following the launch of our new platform, Mio Vinci Partners, in the first half of the year. We're excited to share that Mio has recently launched several new investment strategies in collaboration with some of Brazil's top asset managers. Among these, three new pension plan funds were created in partnership with Vinci's IP&S and private credit teams, marking a significant expansion of our retirement-focused offerings. In addition, Mio was chosen by BlackRock as its partner for the introduction of its first retirement strategy in Brazil. This new equity index fund, specifically designed for retirement, was successfully launched in September, further strengthening Mio's position in the retirement space and underscoring our ability to attract leading global partnerships. We believe there are significant opportunities for VRS to further penetrate Brazil's traditional pension market by introducing technology innovations that address the market's current fragmentation and lack of integration. The conventional pension model in Brazil is heavily analog, often requiring multiple agents such as managers, insurers, and distributors with limited collaboration among them. This setup restricts investors to a single discretionary strategy per pension fund, making portfolio diversification challenging without holding multiple accounts. We have witnessed a strong feedback to the new solution in the marketplace and are currently participating in several processes to absorb corporate pension plans into our solution. We expect to continue to see growth accelerated in the platform in the coming quarters. Now let's move on to our fundraising efforts in private markets. During the third quarter, we received a new commitment from a Latin American LP into Vinci Credit Infra fund under our private credit segments, marking the first capital subscription from international institutional investors for this fund. This milestone is particularly exciting, and we remain optimistic about future commitments from this channel. In the third quarter, Vinci Credit Infra raised R$215 million, primarily from this LP, but also from our allocators and distributors channel. Demand for the fund remains strong across multiple distribution channels, and we will continue our fundraising effort for Vinci Credit Infra throughout the end of 2024 and into early 2025, bringing it closer to our target of R$2 billion. Within the private credit strategy, we also launched a new strategy this quarter, a new receivable investment fund or FIDC. This fund has been well received by allocators and distributors, with R$100 million raised so far and continuous flows every day. These achievements reflect our effective execution of Vinci's strategic plan to expand in private markets and highlight our ability to navigate complex economic conditions while consistently delivering results. The credit inflow on our platform is in line with trends at Compass, where we're also seeing exceptionally strong fundraising in fixed income and credit products. Now turning to our infrastructure strategy. VICC reached a significant milestone of R$1.5 billion in total commitments, driven by strong interest from allocators and distributors this quarter. This fund has already started to deploy capital and has a robust pipeline for the upcoming quarters. This pipeline is positioned at return levels exceeding the fund's targets, supported by a very favorable investment environment. The market environment continues to be favorable for capital deployment, and the fund remains on track to achieve its targeted total commitments of R$2 billion. We anticipate a final closing for VICC in the first quarter of 2025. VCP IV within our private equity strategy is also gearing up for final rounds of fundraising in the fourth quarter. We continue to receive record-breaking capital subscriptions from local institutions, marking the highest level seen across all VCP vintages. As Alessandro highlighted, the integration and collaboration with Compass has been very productive, and we're already seeing the positive outcomes of this partnership. In October, we secured our first commitment from a Mexican LP within the Compass distribution channel, a significant milestone that represents the initial investment in VCP from this newly integrated distribution network. This client not only indicated a commitment to VCP but also is expected to underwrite SPS IV. This marks an exciting new phase for VCP IV as well as for other Vinci products as we expand our reach and leverage the strength of our combined platform. Still on the topic of VCP, we are delighted to inform you that VCP III has announced its first partial divestment of our portfolio company, Farmax. This divestment, achieved in under three years since the acquisition of the company, will allow the fund to return over 80% of the capital initially invested in the assets at 27% IRR. This transaction underscores the private equity team's vision in leveraging opportunities to drive strong returns and create substantial value to LPs. Portfolio companies in VCP III are growing revenues and EBITDA at an annualized rate of 30% and 29% respectively since the inception of the fund. This should lead to additional opportunities to return capital and interesting levels of return to our investors. Moving on to SPS IV. This fund remains one of the top priorities in our collaboration with the Compass team as we work to integrate selected Vinci funds onto their distribution platform. This vintage is attracting substantial interest from international investors, and we anticipate securing the first round of commitments from both local and international investors in the fourth quarter. The strategy has posted a historical 20% net annualized return in dollars across its first three vintages, which presents a very compelling level of risk return and above what we typically see for opportunistic credit funds in developed markets. Wrapping up, it's clear that momentum is strong across our private market strategies, with all major asset classes actively fundraising for their flagships. SPS IV, in particular, presents a substantial opportunity to boost FRE growth in 2025. Additionally, Lacan is currently in fundraising for its fourth vintage and will immediately integrate the investment team into our distribution platform to help them successfully raise the fund. This includes introducing the strategy to new local institutions such as municipalities as well as reaching our foreign investor base, including both global investors and Latin American LPs from the Compass network. All of these fundraising drivers position us well for continued growth and expanded reach across our private market offerings.

Thank you, Bruno. Let's start by covering management and advisory fees. Fee-related revenues totaled R$112.7 million in this quarter, reflecting a 5% year-over-year increase. Focusing on advisory fees, we had a strong quarter with R$6 million in revenues. Year-to-date, advisory fees have generated close to R$28 million in net revenues, underscoring the solid momentum in our Corporate Advisory segment. We are confident in exceeding our annual target of R$30 million in net advisory fees. Despite a subdued IPO environment, our Corporate Advisory business has consistently delivered strong results. As market conditions improve, we believe we will be well positioned to make an even greater impact on our overall results. Turning to management fees, we observed a 2% year-over-year increase. However, when you take out catch-up fees from both periods, management fees grew by 9% year-over-year, reflecting strong new commitments in private markets. This variation is due to the fact that, while this quarter did benefit from retroactive fees associated with capital raised in VCP IV and VICC, catch-up fees were substantially higher in the third quarter of 2023. Fundraising for VCP IV and VICC in infrastructure will continue to come through in the fourth quarter of 2024. Both funds include retroactive fees clauses, which means new commitments will generate fees from the fund's inception dates. This feature could positively impact our financial results in the coming months. Turning to FRE results. Third quarter year-to-date FRE totaled R$169 million or R$3.19 per share, representing a 14% year-over-year increase on a per share basis. For the quarter, FRE reached R$53.8 million or R$1.02 per share, up 7% on a per share basis. We anticipate a continued upward trajectory in FRE growth, driven by several key factors, new commitments in private markets, the impact of retroactive fees, a strong pipeline in our advisory service, and as Bruno mentioned, the inclusion of Lacan's and Compass figures starting in the fourth quarter. Shifting to expenses. Our year-to-date margins have improved by 100 basis points on a year-over-year basis, reflecting our commitment to cost efficiency and disciplined expense growth. Notably, when excluding the VRS strategy, our margin for the third quarter of 2024 year-to-date stands at 52% compared to 50% for the same period in 2023, representing a solid 200 basis points increase. Our core business continues to hold strong margins and demonstrates remarkable resilience even amidst the challenging conditions of the past couple of years. This accomplishment directly reflects our focused efforts in private markets fundraising and rigorous cost management. Regarding non-operational expenses, this quarter includes some costs related to our M&A activities, mainly attributed to the closing of the MAV acquisition. However, we anticipate a larger amount in the fourth quarter, around R$35 million, primarily due to the closing of the Compass combination and the associated transaction costs and also expenses related to the Lacan acquisition. These are one-time costs solely attributed to transaction costs closed in the third and fourth quarters. Turning to performance results, it's worth noting that most of our open-end funds charge performance fees semiannually, with revenues recognized in June and December. As a result, the first and third quarters typically reflect lower levels of performance fees from our domestic open-end funds. For this quarter, performance fees were primarily recognized in our public equity segments, as the challenging local market conditions have impacted the performance of liquid funds. However, we are well positioned for future growth with over R$16.5 billion in performance-eligible assets under management across IP&S and public equities, offering a substantial potential source of performance fees as market conditions improve. Additionally, gross accrued performance fees in private market funds reached R$380 million by the third quarter. While performance fees from liquid funds may impact earnings in the near term, we expect private markets performance fees to begin materializing as these funds mature, providing a longer-term earnings boost. To wrap up, I would like to cover our distributable earnings. Adjusted distributable earnings totaled R$57.1 million in the third quarter or R$1.08 per share, representing a 12% increase year-over-year on a per share basis. Distributable earnings benefited from realized financial income this quarter. Our liquid cash position generated R$15.2 million in the quarter of 2024, a 26% increase over the prior year. In closing, I would like to once again emphasize the positive outlook for fee-related earnings over the coming quarters and the strong momentum we are experiencing as a firm. We remain committed to generating shareholder value through both organic and inorganic growth opportunities. With that, I would like to close our remarks and open the call for questions. Once again, I would like to thank you for joining our call.

We will begin the question-and-answer session for investors and analysts. Our first question comes from Pedro Leduc with Itau. You can now open your microphone.

Good evening everyone. Congratulations on the quarter. Thank you for taking my question. First, regarding the Lacan acquisition, could you talk a bit more about your ambitions for this vertical in the mid to long term, such as in terms of assets under management, geographic expansion, or potential sub-products? Secondly, I noticed that personnel expenses and other general and administrative costs have increased slightly. They've risen year-to-date as well. I understand there are some non-organic factors at play, but could you provide more details on the expense line, particularly in relation to the fourth quarter and the upcoming year? Thank you.

Hi, Pedro. This is Alessandro. Thank you for your question. I'll take the first portion of your question regarding Lacan. As you mentioned, we are very enthusiastic and excited about the prospects of Lacan. As you know, this is a market where, not just Brazil, but Latin America has a huge competitive advantage. And now with the carbon possibilities for the assets, we can even enhance the interest coming from our investors, not just by the regular returns of the forest assets, but also with the carbon market related to these assets. We do not have a precise target, but we evaluate that we can reach in this vertical without a lot of investment and taking into consideration the capacity of the team today that we can reach around $1 billion of AUM, something near R$6 billion from R$5.5 billion to R$6 billion. In terms of geographies, first, I will talk a little bit more about the source of the capital that today for Lacan is basically local money. We expect that already in the fourth vintage that is under fundraising, we will have some international LPs coming. So we're expanding the base of the LPs. And in terms of investment for now, we will keep the current strategy focused in Brazil because there is a huge space to continue to deploy this capital. But in the future, we think this could be a regional and even global type of strategy. Especially in terms of Latin America, we see there is a potential to expand further than Brazil in other countries. There are a lot of possibilities, for example, Uruguay, Paraguay, Chile, and so.

Okay, Pedro, this is Bruno. Regarding your second question, I think the only outside effect that we had was the incorporation of MAVs that affected the third quarter. So we closed that deal earlier and that had an effect on a year-on-year basis. But other than that, the underlying trends below the acquisition of MAV or on top of the acquisition of MAVs were basically related to inflation. So we had salary corrections that were in line with inflation. And we had some health costs – health plan costs that were a little bit above inflation. But I would say nothing else on a relative or relevant basis that I would point out at this point.

Next question from Ricardo Buchpiguel with BTG. You can open your microphone.

Hi, everyone. And thank you for the opportunity here to ask questions. I have two here on my side. So first, can you please update us on the fundraising for VCP IV and how has the demand been picking up, especially from foreign investors, as I mentioned, was a little bit more of the focus now in this particular product? Also, we notice the first time we saw in the quarter for a few quarters that we have like positive net inflows in the public equity segment. So I just wanted to hear your thoughts if you believe this could mark an inflection point or if the recent market duration we saw in the following months could eventually put this vertical back on the negative territory in terms of inflows? Thank you.

Thank you, Ricardo. This is Bruno. So on VCP IV, we are getting to the finish line. We expect to wrap up the fund by the end of the year. We do have still interest from international investors, and a few of them are in due diligence with us at this point. We would expect them to close by the end of the year. I think the highlight over the past few quarters has been a very strong interest from local institutional investors. So I think this was really a point that we made in the prepared remarks part of the call. It has been, I would say, probably the most significant surprise this time around. This fund is going to have a different balance from a local and international LP standpoint with participation of the two being roughly half-and-half in this fund. Historically, this has been more around 70-plus percent from international investors. I think this has a couple of interesting indications for the future, right? The first is that the asset class is becoming more and more known in Brazil and this is good because it allows us to grow the amount of LPs that we have access to. And hopefully, these LPs that came in, in VCP IV and some of them actually already re-upping from VCP III, they will be satisfied with the strategy and the returns and will come back in future vintages. I think this is an important point. The second important point is that we are able to generate more potential carry in local currency. This is good because it creates more certainty on the carry as we are not against the dollar in this part of the fund. So obviously, with the dollars, you have another variable in regards to future carry results. And having more of the funding in reais, I think that's also positive because it creates more certainty around carry collection in the future. So we expect VCP IV to wrap up by the end of the year. Regarding equities, we did have a positive inflow in the third quarter coming from international investors. I think there has been more and more of a viewpoint internationally that the valuations of Brazilian securities are really very cheap. This is something that we have been discussing with investors quite a lot over the past, I would say, probably a year and a half or two years. And it's starting to resonate in terms of people really understanding and seeing this as an interesting opportunity. We had the first inflow now. We expect, as we also mentioned in the prepared remarks, we expect equities to be one of the leading short-term opportunities with the combination with Compass. So what we're doing now is that we're launching UCITS platform funds for our equity strategies. We are going to have one that is going to be Brazil-centric and aligned with our dividend strategy. We will also launch a new revamped Latin American strategy in equities with the leadership of Roberto, who is our Head of Equities here at Vinci. He's going to lead that effort and we're very optimistic about these two products. So for the Brazilian UCITS fund, there is already some demand from pan-regional institutional investors. They have big exposures to passive index funds and we're going to try to convert part of that into these active strategies. In Latin America, Compass, at some point in time a few years ago, was a very, very big player in Latin equities, and we believe with the combination of our strengths, we can recover that position. This is another part of the effort that we have with Compass on the equity side.

Next question from Beatriz Abreu with Goldman Sachs. You can open your microphone.

Hi, Alessandro, Bruno and Sergio. Good evening. Thanks for the call. I have a couple of questions. The first one on management fees. What was the amount this quarter of retroactive fees, if you could share that? And also, I know that Bruno just talked about the expected additional closings in VCP IV, but if you also could comment about expected closings and the timeline for the other flagship funds that you're fundraising for, that would be great. I'm just trying to get a sense here of how many quarters more should we expect retroactive fees to be kicking in or not in management fees, right? And then my second question is a follow-up on Lacan. So you mentioned that you're looking to raise the fourth vintage already. What are your expectations regarding timing for this? And if you could share maybe the sizes of the last vintages for Lacan just to get a sense of how big that new vintage can get? Thank you.

Thank you for the question, Beatriz. In terms of retroactive fees, this quarter we recorded R$3 million, which was consistent with our expectations. It was a slower period for the funds affected by retroactive fees. In the second quarter last year, we saw a more significant impact, as well as in the third quarter. Looking at the upcoming funds, we anticipate that additional commitments in VCP IV could be significant if they materialize. For VICC, we expect to close that fund in the first quarter of next year, although this timeline could extend depending on demand, potentially delaying it by three months or so, pushing it to the middle of next year. These are the two funds we expect will still have some retroactive impact. For significant closings, the main focus for the fourth quarter is SPS. We've been actively working with investors for the closing of SPS over the past few months and are now beginning to receive the sub-documents for its first close. The last SPS Fund III was around R$1 billion, and we expect the first close of SPS to exceed that amount, which would indicate a strong start for Fund IV. Regarding Lacan, we are collaborating at a time when they have already begun fundraising for Fund IV, with existing signed commitments, some of which are contingent on reaching minimum sizes preferred by international investors. We see a positive outcome from merging with Lacan and leveraging our international distribution platform. We've been raising VICC, a climate-related impact fund, for the past year, and Lacan's Fund IV is also focused on climate issues under Article 9. We plan to explore carbon credits as part of the returns. Our experience with VICC will be beneficial for Lacan IV, possibly attracting limited partners interested in joining. The official target for Lacan is currently set at R$800 million, although we hope to raise more if possible. We already have commitments amounting to about a third of this target, with strong visibility, and we will collaborate with the management team to secure the remainder over 2024 and into 2025.

And Beatriz, that's Alessandro. Just to complement, we have the first three funds, they are 1.5 in total. The first one is around R$350 million or so. The second around R$400 to R$500 million, and the last one around R$600 million to R$700 million.

Next question from Guilherme Grespa with JPMorgan. You can open your microphone.

Hey, good evening everyone. Thank you for the presentation. And congratulations on the results, especially given the market conditions. Just one question on IP&S. We saw again a little bit of outflow there, R$1.2 billion outflows. I think it's the same product that continues to see the outflows, is it the pension strategy, right? If I recall correctly, it's mostly retail-driven. Just want to get your thoughts going ahead, we should have SELIC going up again probably. I tend to imagine it's a headwind to the strategy. So how you guys are seeing the evolution of the AUM of this strategy, if we should continue to see some outflows going forward or if you see at some point a stabilization or even a growth in AUM here? Thank you.

Grespa, this is Bruno. So the trend changed a little bit. In the past, I would say, since the middle of '23 until the middle of '24, we saw a stronger outflow from the commingled funds, so the pension funds and other commingled-type vehicles. In the third quarter, this trend changed a little bit. So we had fewer redemptions from the commingled funds, so pension plans and commingled funds and a bigger impact from very specific mandates that we lost, which were very low fee-paying and that had a bigger impact than we had in other quarters. So on a revenue standpoint, I think the withdrawals that we had in the third quarter are less significant than what we saw before. In the immediate future, we had some big wins in the separate mandate side. It's not very clear if we're going to be able to put all of them in by the fourth quarter, but we are working on that. The mandates have already been won. It's a matter of transferring the funds into our custody. We are working hard to have them all in the fourth quarter. So the separate mandate side, we expect to see at least a moderation on the negative impact. On the commingled funds, although the trend and the higher interest rate environment, as you said, is not positive for this business line, the performance of our funds in the more recent past has been better. As you saw in the financial income line for the third quarter, we had a good third quarter. These funds are basically partially the funds that we sell to our clients. So most of them or all of them, the difference that in the income statement, sometimes we have some hedges that in the funds we don't have. But in general, the performance of the funds has been better. So we would expect with this better performance for the trends in terms of outflows to continue to moderate, although without an environment of more constructive interest rates, it's very, very difficult to see significant inflows in IP&S. I think this is something that we have been waiting for this turning point. We had a couple of quarters over the past 18 months that were a little bit better. I remember the first quarter of '24 was a little better. In the middle of '23, we had another quarter that was a little better in which we had some actual positive inflow. But with the current environment, you're right, it's a strong headwind. So hopefully, we can reduce the negative impact in future quarters. But without a more constructive interest rate environment, it's tough to see a lot of contributions.

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

Dear all, I would like to thank you for your continued support and interest. Again, we would like to express our optimism for the future, and we are very confident with our recent developments. We would like also to reinforce the invitation for our call on November 25th. So thank you again. Have a nice weekend.

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