Vinci Compass Investments' Q3 2025: Contradictions Emerge on FRE Margins, TPD Alts Inflows, and IP&S Contributions

Date of Call: None provided

Financials Results

• Revenue: Total fee-related revenues BRL 238 million in Q3 (management fees BRL 202 million); capital formation and appreciation BRL 19 billion; no YOY revenue comparison provided
• EPS: Adjusted distributable earnings BRL 1.16 per share, representing a 28% nominal increase YOY and 7% growth on a per-share basis
• Gross Margin: FRE margin 32.3%, the highest level year-to-date in 2025

Guidance:

• FRE margins expected to remain in the low-to-mid 30% range near term, targeting 38% by 2028.
• Verde acquisition expected to close by end-November and to add several hundred basis points to margins starting full-year 2026.
• Continued fundraising momentum: BRL 19 billion capital formation this quarter and additional commitments expected across Credit, Global IP&S and SPS IV.
• Macro outlook: easing rates (anticipated Selic cuts) and market-friendly policy shifts in the region expected to support re‑rating and inflows into alternatives.

Business Commentary:

* FRE Margin Improvement: - Vinci Compass reported a record FRE margin of 32.3% in Q3 2025, which is the highest level achieved year-to-date. - The improvement was driven by platform growth, operational leverage from strong fundraising in funds, and disciplined cost execution.

• Strong Asset Appreciation and Fundraising:
• The company generated BRL 19 billion in capital formation and appreciation, leading AUM to reach BRL 316 billion.
• Growth was ascribed to broad-based asset appreciation, easing rate bias across emerging economies, and increased interest from foreign investors.

• Expansion in Private Credit and SPS IV:
• Vinci Compass secured significant commitments in private credit, including the first Brazilian pension plan commitment to SPS IV.

• The expansion is attributed to the uncorrelated nature of the strategy, low penetration in institutional portfolios, and an increasing appetite for private market solutions.

• Product Performance and Client Engagement:

• VCP III companies delivered solid operational results, with aggregate EBITDA growth of 16% year-over-year.
• The performance is attributed to strong client engagement, disciplined deployment of funds, and strategic investments in companies like Agibank and Arklok.

Sentiment Analysis:

Overall Tone: Positive

• Management highlighted hitting milestones (Investor Day, Verde acquisition), delivering a 32.3% FRE margin ("highest level year-to-date"), BRL 19bn capital formation and optimism on fundraising and margin expansion (target 38% by 2028); repeatedly described momentum and constructive macro backdrop.

Q&A:

• Question from William Buonsanti Barranjard (Itau BBA): You noted the first Brazilian pension plan commitment to SPS IV — how fast could this new demand come, what cross-sell opportunities arise, and how big is this pocket for Vinci Compass?
  Response: Management expects further pension commitments to SPS IV with meaningful upside given low current penetration, but timing and exact size are uncertain.

• Question from William Buonsanti Barranjard (Itau BBA): FRE margins improved Q-on-Q — should we treat this new level as a base for next quarter or expect deceleration (e.g., lower advisory fees)? How should we think about margin evolution?
  Response: Margins should remain in the 30%+ range (Q4 slightly smaller but above 30%); seasonality helped Q3, cost-reduction and operating leverage support continuation and Verde will add several hundred basis points when fully integrated.

• Question from Lindsey Shima (Goldman Sachs): Global IP&S inflows were strong — how much was due to TPD alternatives, what should we expect for upfront fees next quarter, and how do you see IP&S inflows going forward?
  Response: TPD alts drove a large portion (roughly BRL 2bn impact including a large ~$300m commitment); Q4 may moderate but management expects constructive medium-to-long-term inflows and product rotation into new alternative verticals and discretionary solutions.

Contradiction Point 1

FRE Margins Improvement Expectations

It involves changes in financial forecasts, specifically regarding FRE margins expectations, which are critical indicators for investors.

Is the current FRE margin improvement sustainable for the next quarter, or could other factors slow it down? - William Buonsanti Barranjard (Itau BBA)

20251114-2025 Q3: We expect to maintain margins in the 30s without the Verde acquisition, and possibly reach the mid-30s with Verde's inclusion. - Bruno Sacchi Zaremba(CFO)

Has the improvement in FRE margins stabilized enough to serve as a baseline for next quarter, or will factors like lower advisory fees in the next quarter slow this improvement? - William Buonsanti Barranjard (Itaú Corretora de Valores S.A., Research Division)

2025Q3: We expect margins to remain in the 30% range for Vinci standalone. With the Verde acquisition, we expect several hundred basis points of margin impact, pushing margins to a mid-30 level. - Bruno Sacchi Zaremba(CFO)

Contradiction Point 2

TPD alts Inflows and Future Growth

It directly impacts expectations regarding future growth and financial performance, particularly in relation to TPD alts inflows.

What portion of Global IP&S inflows is due to TPD alts, and how should we view future IP&S inflows and the role of TPD alts? - Lindsey Shima (Goldman Sachs)

20251114-2025 Q3: TPD alts had a BRL 2 billion positive impact this quarter. The fourth quarter might be slower, but overall, the picture is constructive. - Bruno Sacchi Zaremba(CFO)

How much of the strong Q3 Global IP&S inflows were from TPD alts, and how should we view this segment and broader IP&S inflows moving forward? - Lindsey Shima (Goldman Sachs)

2025Q3: TPD alts had a BRL 2 billion positive impact this quarter. The fourth quarter may be slower, but liquid flows started strong. Medium to long-term growth is optimistic. - Bruno Sacchi Zaremba(CFO)

Contradiction Point 3

FRE Margin Improvements

It involves differing expectations regarding the timeline and factors influencing FRE margin improvements, which are crucial for financial forecasting and investor expectations.

Should the new FRE margin level be used as a base for the next quarter, or are there factors that could slow improvement? - William Buonsanti Barranjard (Itau BBA)

20251114-2025 Q3: There is some seasonality in expenses, with the third quarter being lighter. Some costs related to the combination are starting to reduce. We expect to maintain margins in the 30s without the Verde acquisition, and possibly reach the mid-30s with Verde's inclusion. - Bruno Sacchi Zaremba(CFO)

When will the FRE margin reach a low 30s run rate, and how much will cost control initiatives contribute? - Lindsey Marie Shema (Goldman Sachs Group, Inc., Research Division)

2025Q2: We expect to migrate to a low 30s FRE margin rate by the second or third quarter of next year, aided by cost control initiatives and integration benefits. - Bruno Zaremba(CFO)

Contradiction Point 4

IP&S Inflows and Contributions

It involves differing explanations regarding the contributors to strong Global IP&S inflows, which impact the company's growth and investment strategy.

What portion of Global IP&S inflows was due to TPD alts, and how should we expect this to evolve, along with the overall IP&S inflows? - Lindsey Shima (Goldman Sachs)

20251114-2025 Q3: We see tailwinds from increased institutional contributions in Chile and Mexico, higher interest from high-net-worth individuals, and low penetration in Brazil. - Alessandro Morgado Horta(CEO)

What net inflow level is reasonable to expect in the second half? How should we forecast GP income and financial results considering the J-curve effect? - Guilherme F. Grespan (JPMorgan Chase & Co, Research Division)

2025Q2: We expect over the next year to have around BRL 200-300 million of additional commitments flowing from the liquid funds into the closed-end funds, impacting net income. - Bruno Zaremba(CFO)