F-1/A 1 d30964df1a.htm F-1/A F-1/A
Table of Contents

As filed with the Securities and Exchange Commission on January 25, 2021.

Registration No. 333-251871

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Amendment No. 2

to

FORM F-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

Vinci Partners Investments Ltd.

(Exact Name of Registrant as Specified in its Charter)

 

 

 

The Cayman Islands   6282   N/A
(State or other jurisdiction of
incorporation or organization)
  (Primary Standard Industrial
Classification Code Number)
  (I.R.S. Employer
Identification Number)

Av. Bartolomeu Mitre, 336

Leblon – Rio de Janeiro

Brazil 22431-002

+55 (21) 2159-6240

(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)

 

 

Vinci Partners USA, LLC

780 Third Avenue, 25th Floor

New York, NY 10017

(646) 559-8000

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

 

Copies to:

Manuel Garciadiaz
Davis Polk & Wardwell LLP
450 Lexington Avenue
New York, NY 10017

(212) 450-4000

 

J. Mathias von Bernuth
Skadden, Arps, Slate, Meagher & Flom LLP

Av. Brigadeiro Faria Lima, 3311, 7th Floor
São Paulo, SP 04538-133

+55 (11) 3708-1820

 

 

Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this registration statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.  ☐

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐            

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐            

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐            

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933.

Emerging growth company  ☒

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 7(a)(2)(B) of the Securities Act.  ☐

 

The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

 

 

CALCULATION OF REGISTRATION FEE

 

 

Title of Each Class of
Securities to be Registered
 

Amount to be
Registered(1)

 

Proposed

Maximum

Aggregate

Offering Price

per Class A

common share

 

Proposed

Maximum

Aggregate Offering
Price (2)

 

Amount of
Registration

Fee(3)

Class A common shares, par value US$0.00005 per share (3)

 

15,954,495

 

US$18.00

  US$287,180,910   US$31,331.44

 

 

(1)

Include Class A common shares to be sold upon the exercise of the underwriters’ option to purchase additional shares. See “Underwriting.”

(2)

Estimated solely for the purpose of computing the amount of the registration fee pursuant to Rule 457(a) under the Securities Act of 1933, as amended.

(3)

Calculated pursuant to Rule 457(a) under the Securities Act of 1933, as amended, based on an estimate of the proposed maximum aggregate offering price. Includes the amount of US$31,331.44 that was previously paid in connection with the Registration Statement.

The Registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the registration statement shall become effective on such date as the Commission, acting pursuant to such Section 8(a), may determine.

 

 

 


Table of Contents

The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

 

SUBJECT TO COMPLETION, DATED JANUARY 25, 2021

PRELIMINARY PROSPECTUS

13,873,474 Class A Common Shares

 

 

LOGO

Vinci Partners Investments Ltd.

(incorporated in the Cayman Islands)

This is an initial public offering of the Class A common shares, US$0.00005 par value per share of Vinci Partners Investments Ltd., or Vinci Partners. Vinci Partners is offering 13,873,474 Class A common shares to be sold in this offering.

Prior to this offering, there has been no public market for our Class A common shares. It is currently estimated that the initial public offering price per Class A common share will be between US$16.00 and US$18.00. We have applied to list our Class A common shares on the Nasdaq Global Select Market, or Nasdaq, under the symbol “VINP.”

Following this offering, our existing shareholders, Gilberto Sayão da Silva, Alessandro Monteiro M. Horta, Paulo Fernando Carvalho de Oliveira, together with the other partners of Vinci Partners, will beneficially own approximately 92.5% of the voting power, and 75.0% of our outstanding share capital, assuming no exercise of the underwriters’ option to purchase additional shares referred to below. The shares to be held by Mr. Sayão da Silva are Class B common shares, which carry rights that are identical to the Class A common shares being sold in this offering, except that (1) holders of Class B common shares are entitled to 10 votes per share, whereas holders of our Class A common shares are entitled to one vote per share; (2) holders of Class B common shares have certain conversion rights; (3) holders of Class B common shares are entitled to preemptive rights in the event that additional Class A common shares are issued in order to maintain their proportional ownership interest; and (4) Class B common shares shall not be listed on any stock exchange and will not be publicly traded. For further information, see “Description of Share Capital.” As a result, Mr. Sayão da Silva will beneficially own approximately 77.9% of the voting power, and 26.1% of our outstanding share capital following this offering, assuming no exercise of the underwriters’ option to purchase additional shares. All other partners of Vinci Partners will hold Class A common shares and will beneficially own approximately 14.6% of the voting power, and 49.0% of our outstanding share capital following this offering, assuming no exercise of the underwriters’ option to purchase additional shares.

We are an “emerging growth company” under the U.S. federal securities laws as that term is used in the Jumpstart Our Business Startups Act of 2012 and will be subject to reduced public company reporting requirements. In addition, following the offering, we will be a “controlled company” within the meaning of the Nasdaq corporate governance standards and as such plan to rely on available exemptions from certain Nasdaq corporate governance requirements. Investing in our Class A common shares involves risks. See “Risk Factors” beginning on page 32 of this prospectus.

 

     Per Class A
common share
     Total  

Initial public offering price

   US$        US$    

Underwriting discounts and commissions

   US$        US$    

Proceeds, before expenses, to us (1)

   US$                US$            

 

     

(1)   See “Underwriting” for a description of all compensation payable to the underwriters.

    

We have granted the underwriters an option for a period of 30 days from the date of this prospectus to purchase up to 2,081,021 additional Class A common shares at the initial public offering price, less underwriting discounts and commissions.

Neither the U.S. Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The underwriters expect to deliver the Class A common shares against payment in New York, New York, on or about                 , 2021.

Global Coordinators

 

J.P. Morgan   Goldman Sachs & Co. LLC   BTG Pactual

Joint Bookrunners

 

Itaú BBA   BofA Securities   Credit Suisse    UBS Investment Bank

 

 

The date of this prospectus is                 , 2021.


Table of Contents

LOGO


Table of Contents

LOGO


Table of Contents

TABLE OF CONTENTS

 

 

 

     Page  

Glossary of Terms

     iii  

Summary

     1  

The Offering

     23  

Summary Financial Information

     27  

Risk Factors

     32  

Presentation of Financial and Other Information

     84  

Cautionary Statement Regarding Forward-Looking Statements

     89  

Use of Proceeds

     90  

Dividends and Dividend Policy

     91  

Capitalization

     92  

Dilution

     93  

Exchange Rates

     94  

Market Information

     96  

Selected Financial Information

     97  

Management’s Discussion and Analysis of Financial Condition and Results of Operations

     103  

Regulatory Overview

     138  

Industry Overview

     145  

Business

     165  

Management

     201  

Principal Shareholders

     207  

Related Party Transactions

     210  

Description of Share Capital

     211  

Class A Common Shares Eligible for Future Sale

     230  

Taxation

     232  

Underwriting

     236  

Expenses of The Offering

     247  

Legal Matters

     248  

Experts

     248  

Enforceability of Civil Liabilities

     249  

Where You Can Find More Information

     252  

Explanatory Note To The Financial Statements

     253  

Index to Financial Statements

     F-1  

 

 

We have not authorized anyone to provide any information other than that contained in this prospectus or in any free writing prospectus prepared by or on behalf of us or to which we may have referred you. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. We and the underwriters have not authorized any other person to provide you with different or additional information. Neither we nor the underwriters are making an offer to sell the Class A common shares in any jurisdiction where the offer or sale is not permitted. This offering is being made in the United States and elsewhere solely on the basis of the information contained in this prospectus. You should assume that the information appearing in this prospectus is accurate only as of the date on the front cover of this prospectus, regardless of the time of delivery of this prospectus or any sale of the Class A common shares. Our business, financial condition, results of operations and prospects may have changed since the date on the front cover of this prospectus.

For investors outside the United States: Neither we nor any of the underwriters have done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction, other than the

 

i


Table of Contents

United States, where action for that purpose is required. Persons outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of our Class A common shares and the distribution of this prospectus outside the United States.

We own or have rights to trademarks, service marks and trade names that we use in connection with the operation of our business, including our corporate name, logos and website names. Other trademarks, service marks and trade names appearing in this prospectus are the property of their respective owners. Solely for convenience, some of the trademarks, service marks and trade names referred to in this prospectus are listed without the ® and symbols, but we will assert, to the fullest extent under applicable law, our rights to our trademarks, service marks and trade names.

 

 

Unless otherwise indicated or the context otherwise requires, all references in this prospectus to “Vinci Partners,” the “Company,” the “Issuer,” “we,” “our,” “ours,” “us” or similar terms refer to Vinci Partners Investments Ltd., together with its subsidiaries, following the contribution of all of the quotas of Vinci Partners Brazil (as defined below) to us.

All references to “Vinci Partners Brazil” refer to Vinci Partners Investimentos Ltda., our Brazilian principal holding company whose consolidated financial statements are included elsewhere in this prospectus.

 

ii


Table of Contents

GLOSSARY OF TERMS

The following is a glossary of certain industry and other defined terms used in this prospectus:

“alpha” is a ratio that is intended to represent the performance of a portfolio relative to a benchmark, and is used to describe the value that a portfolio manager adds to or subtracts from a fund’s return.

“ANBIMA” means the Brazilian Association of Financial and Capital Markets Entities (Associação Brasileira das Entidades dos Mercados Financeiro e de Capitais).

“ABVCAP” means the Brazilian Private Equity and Venture Capital Association (Associação Brasileira de Private Equity e Venture Capital).

“AML/CFT” means anti-money laundering and combating the financing of terrorism.

“AUC” means the value of assets under custody held by banks, brokers, digital platforms, independent advisors, pension funds, among others. AUC is a broader metric than AUM (as defined below) and is used in this prospectus to represent the total market opportunity of potential AUM for Vinci Partners.

“AUM” refers to assets under management. Our assets under management equal the sum of: (1) the fair market value of the investments held by funds plus the capital that we are entitled to call from investors in those funds pursuant to the terms of their capital commitments to those funds (plus the fair market value of co-investments arranged by us that were made or could be made by limited partners of our corporate private equity funds and portfolio companies of such funds); (2) the net asset value of our public equity funds, hedge funds and closed-end mutual funds; and (3) the amount of capital raised for our credit funds.

“Brazil” means the Federative Republic of Brazil.

“Brazilian government” means the federal government of Brazil.

“B3” means B3 S.A. – Brasil, Bolsa, Balcão, the São Paulo Stock Exchange.

“CDI Rate” means the Brazilian interbank deposit (certificado de deposito interbancário) rate, which is an average of interbank overnight rates in Brazil.

“Central Bank” or “BCB” means the Brazilian Central Bank (Banco Central do Brasil).

“CMN” means the Brazilian National Monetary Council (Conselho Monetário Nacional).

“COPOM” means the Brazilian Monetary Policy Committee (Comitê de Política Monetária do Banco Central).

“CVM” means the Securities and Exchange Commission of Brazil (Comissão de Valores Mobiliários).

“HNWI” means high-net-worth individuals.

“IASB” means the International Accounting Standards Board.

“IFRS” means International Financial Reporting Standards, as issued by the IASB.

“IRR” means the internal rate of return, which is a discount rate that makes the net present value of all cash flows equal to zero in a discounted cash flow analysis.

“MFO” means multi-family office.

“MOIC” means multiple on invested capital, a ratio intended to represent how much value an investment has returned, and is calculated as realized value plus unrealized value, divided by the total amount invested, gross of expenses and fees.

real,” “reais” or “R$” means the Brazilian real, the official currency of Brazil.

“SELIC rate” means the Brazilian base interest rate (Sistema Especial de Liquidação e Custódia).

“U.S.” or “United States” means the United States of America.

“U.S. dollar,” “U.S. dollars” or “US$” means U.S. dollars, the official currency of the United States.

 

iii


Table of Contents

SUMMARY

This summary highlights information contained elsewhere in this prospectus. This summary may not contain all the information that may be important to you, and we urge you to read this entire prospectus carefully, including the “Risk Factors,” “Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections and our consolidated financial statements and notes to those statements, included elsewhere in this prospectus, before deciding to invest in our Class A common shares.

Our vision is to be the preeminent alternative investment platform in Brazil. We approach capital management based on ethics and experience, targeting superior long-term financial results where our partners are clients and our clients are partners.

Introduction to Vinci Partners

Vinci Partners is a leading alternative investment platform in Brazil, established in 2009. Our 205 full time employees as of September 30, 2020 draw from a wide-ranging network of personal and professional relationships with industry-leading executives, business owners, corporate managers, financial and operational advisors, consultants and attorneys to source, fund, and manage investments. Vinci Partners’ business segments (which we also refer to alternatively as our strategies) include private equity, public equities, real estate, credit, infrastructure, hedge funds, and investment products and solutions, each managed by dedicated investment teams with an independent investment committee and decision-making process. We also have a financial advisory business, focusing mostly on pre-initial public offering, or pre-IPO, and merger and acquisition, or M&A, advisory services for Brazilian middle-market companies (those with annual gross revenue between R$100 million and R$600 million).

We have established a premier independent investment franchise with market leadership across each of our high value-added strategies that we believe provide us with strong competitive advantages. We believe that our business model, focused on high-performance and executed by talented multi-disciplinary teams with a focus on value creation, has enabled us to build one of the most complete portfolios of alternative investment strategies and solutions, which combined with adoption of innovative technologies and increasing integration across our business segments, strongly positions us to capitalize on the future expansion and shifts in asset allocation in the Brazilian investments market. Based on all these factors, we believe:

 

   

We are a leading alternative investment platform in Brazil—With over R$46.1 billion in AUM as of September 30, 2020, Vinci Partners is a leading independent asset manager in Brazil, with a strong growth track record and leading franchises in private equity, real estate, infrastructure and public equities, according to data published by ANBIMA. Since inception, our AUM has grown twenty-three-fold, from R$1.9 billion in 2009 to R$46.1 billion as of September 30, 2020, reflecting a compound annual growth rate, or CAGR, of 34.5%, while increasing 47.4% from 2018 to September 30, 2020 on a last twelve month basis.

 

   

We have a sizable and expanding addressable market—Key market trends and the favorable macroeconomic environment in Brazil, together with our leadership, scale, brand, and competitive advantages, have positioned us to continue to penetrate, grow and expand our large addressable market opportunity in the country, which is expected to reach nearly R$13.8 trillion in assets under custody, or AUC, (including deposits, pension funds and assets under management) by the end of 2024, according to a report by Oliver Wyman titled ‘The Brazilian Investment Landscape—A new era for Brazilian investors’, published in 2019 , which we refer to as Oliver Wyman’s 2019 Report. We believe that AUC as reported by Oliver Wyman’s 2019 Report is a useful indicator of the total market opportunity of potential AUM for Vinci Partners.



 

1


Table of Contents
   

We will benefit from shifts in trends in the industry—Our strong AUM growth has been driven by consistent, strong performance, prudent launches of new investment vehicles, and selective strategic transactions, such as our association with Gas Investimentos in 2010 and with Mosaico Capital in 2017. From December 2018 to September 30, 2020, our AUM increased by approximately R$22.5 billion or 95.1%. The significant decline in the SELIC rate, which is the Brazilian reference interest rate, has initiated what we believe is a structural migration of capital flows to alternative asset classes, and we expect our AUM growth trends to remain strong, due to a combination of the expected persistently low SELIC rate, our enhanced product offering across strategies, the strong historical returns from our funds and the consolidation of our relationships with current and new clients.

 

   

We have an established and recognized track record of returns—Our funds, from both liquid and illiquid strategies (we consider illiquid funds to be those with lock-up and/or capital subscription policies), have been outperforming their corresponding benchmarks either since inception or, in the case of listed funds, since their initial public offering, or IPO. Accordingly, we expect to continue to obtain returns aiming to position Vinci Partners in the top quartile across all products within both liquid and illiquid strategies.

 

 

LOGO



 

2


Table of Contents

 

LOGO

 

   

We have one of the most comprehensive investment platforms in Brazil—We have a large and diversified exposure to attractive asset classes. We have solidified leadership in strategies like private equity, infrastructure, public equities and investment solutions, while simultaneously we have introduced new asset classes such as real estate and hedge funds. These new strategies are growing at accelerated rates, increasing AUM by 152.8% and 84.8%, respectively, from December 31, 2018 to September 30, 2020.

 

   

We are resilient to economic cycles—47.9% of our total AUM as of September 30, 2020 has lock-ups for over five years and 83.0% of our net revenue for the nine months ended September 30, 2020 was driven by fund management. We believe this provides greater visibility to our revenue growth and increased resilience to economic downturns. For instance, we were able to grow our AUM at an annualized rate of 5.3% from 2014 through 2017, during one of the worst economic recessions in Brazil’s history. In addition, we have remained resilient to fluctuations in economic conditions throughout the course of the COVID-19 pandemic, with total AUM of R$46.1 billion as of September 30, 2020, a 32.9% increase compared to total AUM of R$34.7 billion as of December 31, 2019, and total net revenue from services rendered of R$235.3 million in the nine months ended September 30, 2020, a 22.1% increase from total net revenue from services rendered of R$192.6 million in the nine months ended September 30, 2019.

 

   

We have a highly profitable business model—We have a technologically advanced operational platform across our value chain, enabling steady increases in efficiency, productivity, and profitability. Our net profit margin for the nine months ended September 30, 2020 was 49.6% representing a 0.1 percentage point decrease compared to the same period in 2019, and our Adjusted Profit Margin for the nine months ended September 30, 2020 was 38.8%, representing a 3.0 percentage point increase compared to the same period in 2019. Our net profit margin for the year in 2019 was 52.5% representing a 19.6 percentage point increase compared to 2018, and our Adjusted Profit Margin for the year in 2019 was 38.3%, representing an 18.6 percentage point increase compared to 2018 (see



 

3


Table of Contents
 

“Presentation of Financial and Other Information—Special Note Regarding Non GAAP Financial Measures”). Additionally, our fixed costs (general and administrative expenses, less personnel expenses and profit sharing) per average AUM (considering the average calculated based on the average of the beginning and end of each quarter AUM) decreased by 16.2 basis points from December 31, 2015 to September 30, 2020 (calculated using annualized data for the last twelve months ended September 30, 2020), while our annualized gross revenue from fund management per average AUM increased by 6.7 basis points during the same period.

 

   

We have a diverse client base with long-term relationships—We have over 980 clients (excluding direct shareholders of the listed funds managed by Vinci Partners and clients in our financial advisory services segment) as of September 30, 2020, distributed across all our strategies. Our diverse base of clients includes institutional clients both in Brazil and globally, distribution platforms, family offices and multi-family offices or MFOs, high net worth individuals, or HNWIs and investors from capital markets. Our largest funds client represented 2.6% of gross revenue from services rendered (unaudited), while our ten largest funds clients accounted for 17.2% of our gross revenue from services rendered (unaudited) from January 1, 2020 through September 30, 2020. No single client represented more than 3.0% of our gross revenue from services rendered in 2018, 2019 or for the nine months ended September 30, 2020. To maximize reach and client service, we organize our commercial efforts through four client divisions and one additional distribution channel, each with its own independent dedicated team of professionals. As an example of our successful commercial model, over 48.0% of our HNWI investors, excluding our partners, have relationships with Vinci Partners lasting more than five years, as of September 2020. We believe such long lasting client relationships enhance our growth potential at better economics.

 

   

We have a proven ability to raise and deploy capital—We have been successful in raising capital and effective in deploying capital commitments in attractive investment opportunities, which reinforces our ability to source additional capital. Within our illiquid strategies (real estate, credit, infrastructure and private equity) we have raised over R$14.0 billion and deployed approximately R$9.6 billion of this amount since inception. In our private equity flagship strategy specifically, we raised over R$2.2 billion for our second fund within our private equity flagship strategy in 2011 and were able to deploy over 90% within two years; we then raised R$ 4.0 billion (including the amount related to potential co-investments) for our third fund within the same strategy in August 2017 and have already deployed over 45% of the total capital committed to the fund as of September 30, 2020. In real estate, we have completed 9 capital raises totaling R$2.7 billion for new and existing funds since 2019, and have expanded by 4.1x as of September, 2020 our AUM in the strategy since 2017.

 

   

We are known for our commitment to social impact—We have been a signatory to the Principles for Responsible Investment, or PRI, since 2012. We have a dedicated private equity strategy with a dual mandate of generating environmental, social and governance, or ESG, impact as well as market returns, fully integrating ESG in the investment and diligence processes, and we have a credit fund focused on investments in sustainable energy.

Our Founding and Evolution

The team behind Vinci Partners traces its origins to the early 2000’s, when a group of our current partners began investing in the alternative asset space through our first private equity fund or Fund I. In 2004, that group began building an independent principal investment group dedicated to alternative investment strategies for Banco Pactual, one of the leading investment banks in Brazil at the time. In 2006, UBS purchased Banco Pactual and several investment professionals established an independent alternatives business unit within UBS, called UBS Pactual Gestora de Investimentos Alternativos Ltda. or ALIN. In 2009, following UBS’ divestiture of Banco Pactual, Mr. Sayão together with Mr. Horta and a large majority of the other investment professionals from ALIN founded Vinci Partners.



 

4


Table of Contents

We have built highly experienced and multifunctional teams that bring together a valuable mix of investment, operational and financial backgrounds and an in-depth understanding of the local market. Our three founders and our partners have created the philosophy that at Vinci Partners “Partners are Clients, and Clients are Partners”, seeking a balanced alignment of interest by investing alongside our clients under the same fee structures as limited partners, paying full management and performance fees.

Our Operations

We operate an asset-light, highly scalable business model that emphasizes operational efficiency and economies of scale. We leverage our expertise in managing high value added asset classes to serve a diverse group of HNWI and institutional clients in local and international markets, with offices in Brazil and New York. We generate our revenues primarily from (1) revenue from fund management, (2) performance fees, and (3) revenue from advisory. In the nine months ended September 30, 2020 and in the year ended December 31, 2019, 83.0% and 75.4% of our total net revenue, respectively, consisted of net revenue from fund management, which are recurring in nature and highly predictable revenues, being less susceptible to market volatility. In addition, our existing client base represented 61.0% of new inflows since 2018 and 47.9% of our total AUM has a lock-up period of at least five years, as of September 30, 2020.

As of September 30, 2020 and September 30, 2019, we reported R$46.1 billion and R$29.8 billion in AUM, respectively, and during the nine months ended September 30, 2020 and 2019 we reported, respectively, R$248.7 million and R$201.8 million in gross revenue from services rendered, R$235.3 million and R$192.6 million in total net revenue from services rendered, R$116.8 million and R$95.7 million in profit for the year, and R$110.9 million and R$80.7 million in Distributable Earnings, a period-over-period increase of 54.7%, 23.2%, 22.1%, 22.0% and 37.4% respectively. During 2019 we reported R$311.1 million in gross revenue from services rendered, R$296.7 million in total net revenue from services rendered, R$155.6 million in profit for the year, and R$135.2 million in Distributable Earnings, a year-over-year increase of 72.5%, 72.3%, 174.6% and 153.6% respectively, versus 2018.

Business Segments

Private Equity

Vinci Partners considers itself a pioneer in Brazilian private equity and we believe that (as among the largest market participants) it is the only purely Brazilian private equity firm that has maintained independence since inception. Since 2004, our flagship Vinci Capital Partners funds (Fund 1, VCP II and VCP III) have invested R$4.0 billion, across 22 investments in Brazil, as of September 30, 2020. Our private equity strategy has a sector agnostic approach focused on growth equity investments in Brazil. Opportunistically we will also analyze turnaround and greenfield investments. The private equity segment’s main strategic focus is to promote revenue, productivity and profitability growth through significant operating and management changes in portfolio companies. We also take into account non-measurable aspects, such as alignment of the potential investment with ESG goals. Our private equity practice has what we believe to be a proven track record of investing in leading Brazilian companies with approximately R$10.6 billion in AUM as of September 30, 2020. We have a multi-disciplined team of 17 investment professionals. The private equity strategy invests through two sub-strategies: Vinci Capital Partners and Vinci Impact and Return.

Public Equities

Vinci Partners has a long track record and deep experience investing in public equities since inception in 2009 and which was further enhanced through the strategic associations with Gas Investimentos (which was terminated in December 2020) and Mosaico Capital. We focus on holding positions in companies for three to



 

5


Table of Contents

five years following deep analysis and review by our various investment committees, taking into consideration our internal controls. The public equities team is composed of 11 members managing R$12.8 billion in AUM as of September 30, 2020, supported by dedicated research analysts who cover more than 120 companies across a variety of industries. Our public equities strategy invests according to three key sub-strategies: all caps, dividends and total return.

Real Estate

The real estate segment of Vinci Partners is the seventh largest manager of listed REITs in Brazil, known as Fundos de Investimento Imobiliário, or FII, based on Reuters data. Through September 30, 2020, our real estate segment has raised R$4.2 billion, the largest amount of investment among independent asset managers and the fourth largest among all asset managers. We are also one of the fastest growing managers in the space in terms of AUM, with a 27.7% growth year to date, as of September 30, 2020. Our real estate strategy is primarily focused on the acquisition of core, income-generating assets through public real estate funds. Our real estate strategy invests along four sub-strategies: shopping malls, industrial and logistics, offices and financial instruments related to real estate assets. We also implement a strategy related to opportunistic development funds. Our real estate strategy has more than 260,000 investors and has been investing in prime properties in Brazil. Our real estate team currently manages 33 assets with almost 549,000 square meters of gross leasable area, constituting approximately R$4.3 billion of AUM (which reflects growth in AUM due to market performance), as of September 30, 2020.

Credit

We believe we are one of the first independent players to offer Brazilian private credit funds focused on the long-term direct lending business. We have a multi-strategy credit business with significant size and track-record that operates in different segments, industries, and asset classes. We are generally focused on customized credit instruments, structures, and solutions to meet the financing needs of both established and growing businesses, while generating interesting credit opportunities for our investors. The credit team manages over R$2.2 billion in AUM, divided across three specific sub-strategies: high-grade corporate debt, high-yield structured products and senior secured loans and MBS core sub-strategies: Infrastructure Debentures to finance projects, generally with a senior secured collateral package, or infrastructure debt, Senior secured loans with the first lien collateral in real estate assets or a MBS securitizations, or real estate debt, and the third one, referred to as structured credit, focused on secured loans, private debt and a reverse factoring platform.

Infrastructure

Our infrastructure strategy has exposure to tangible assets related to physical infrastructure, through investments in equity, bidding for concessions, and debt investments across several sectors across several sectors, including but not limited to power generation and transmission, transportation and logistics and sports infrastructure (stadiums). Our infrastructure team has a deep local presence and track record of investing in infrastructure in Brazil, having completed over 30 transactions across equity and debt since its commencement in 2010. The team is composed of six dedicated professionals and eight senior advisors/executives seconded to portfolio companies. Our infrastructure strategy seeks control or control-oriented positions and employs active hands-on management of assets and operations. We primarily review brownfield and consolidation opportunities, targeting fragmented industries within sub-strategies. The team currently manages approximately R$1.6 billion in AUM through Vinci Infra II (FIP Transmissão), FIP Energia PCH, and Vinci Energia (VIGT11) funds.

Hedge Funds

Our hedge funds team operates under a multi-manager strategy with several portfolio managers each pursuing independent strategies. We have strong, overarching risk monitoring practices in order to generate



 

6


Table of Contents

superior Sharpe ratio and alpha for our investors. The hedge funds team has existed since Vinci Partner’s inception, now managing R$2.4 billion in AUM. Our hedge funds strategy invests across five principal sub-strategies: nominal interest, inflation, commodities, currencies and equities strategies. The portfolio managers have access to both our macro and equities research dedicated teams. It helps creating a very robust analysis of the markets, contributing to assertive decision-marking. The portfolio has exposure to onshore and offshore markets trading single equities, EM and DM currencies, government bonds and derivatives.

Investment Products and Solutions

Our Investment Products and Solutions team commenced in 2010 and offers clients access to tailored financial products through an open architecture platform, in addition to in-house asset allocation and risk management. Our Investment & Product Solutions segment aims to provide a sophisticated investment strategy with alpha generation according to our clients’ targets. In the execution of these strategies, we take into account risk profile assessment, preparation of investment policies and product selection, among other factors. Investment Products and Solutions manages R$14.9 billion in AUM.

Financial Advisory Services

Our financial advisory services team provides financial and strategic services to business owners, senior corporate management teams and boards of directors, focusing mostly on pre-IPO and M&A advisory services for Brazilian middle-market companies. The financial advisory services team was established in 2009 and is composed of eight advisory professionals. We believe our financial advisory services team serves as trusted senior advisors to clients seeking local and/or product expertise in the Brazilian marketplace. As an independent boutique, Vinci Partners has the flexibility to engage in transactions that often require complex solutions, long-term relationships and alignment of interests with clients.

Our Market

Brazil is a large and attractive market for financial services. The country has the 6th largest population and the 9th largest economy in the world with 211 million people and a GDP of US$1.8 trillion as of 2019, according to the World Bank. According to data published by the Central Bank, real GDP expanded 1.1% during each of 2017, 2018 and 2019. Going forward, we believe the path continues to be for constructive macroeconomic environment, supported by stabilization in the level of inflation, a decline in real interest rates and a recovery in consumer and business confidence indicators, which are important to improve the planning horizon of families and companies and increase the medium-term outlook for economic growth.

We believe the combination of economic growth and expected prolonged periods of sustained low interest rates will create increasingly favorable tailwinds for the asset management industry. For instance, despite the economic contraction experienced by Brazil in recent years, industry AUM grew significantly, at a rate of 14.1% per annum, equivalent to 2.0x the rate of expansion of nominal GDP during the period from 2010 to 2019. Furthermore, we believe the decrease in real interest rates should become one of the most important drivers of continued net inflows and AUM growth. For instance, for the period starting in 2017 until December 2019, industry AUM has increased by 31.7%, equivalent to 3.1x the rate of expansion of nominal GDP during the same period. We believe that in a low interest rate environment, with current reference rates at 2.00% as of September 30, 2020, such AUM growth should continue to accelerate as investors increase their search for more attractive investment opportunities and yield.

Key market challenges—Brazilian market ripe for disruption

The Brazilian asset management industry has been highly inefficient for decades due to high interest rates, limiting incentives for product development by incumbents, and high concentration of investments in the banking



 

7


Table of Contents

sector, which still represents the majority of institutional and retail investments in the country. We believe this has created several important market challenges that create opportunities for disruption: (1) highly concentrated market; (2) bureaucratic, asset-heavy infrastructures; (3) narrow selection of financial products; (4) promotion of inefficient financial products; (5) high-costs and spreads; and (6) poor customer service.

Key market trends

We believe our market will benefit from several trends that will help provide attractive tailwinds including: (1) increasing demand for financial products; (2) disintermediation of incumbent banks; (3) increasing demand for financial education and information; and (4) favorable and highly-aligned regulatory initiatives.

Addressable market opportunities

We believe that we will benefit from these key market trends and the favorable macroeconomic environment in Brazil, and that these trends and this market environment have positioned us to continue to penetrate, grow and expand our large addressable market opportunity in the country, which is expected to reach nearly R$13.8 trillion in AUC (including deposits, pension funds and assets under management) by the end of 2024, according to Oliver Wyman’s 2019 Report. Given our leadership, scale, brand, and competitive advantages, we believe we will benefit from and continue to be a catalyst for:

Continued Growth of the AUC Addressable Market—According to Oliver Wyman’s 2019 Report, the total addressable market of AUC in Brazil was R$7.9 trillion in 2018, up 105% since 2011, representing a CAGR of 11% that is roughly expected to continue at least up to 2024.

Continued Shift of AUM from Banks to Independent Investment Firms—Oliver Wyman’s 2019 Report estimates that the market share of investment AUC for independent investment firms will grow from 7% in 2018 to 25% in 2024. We believe this is a long-term trend that is still in the early stages.

Shift from Fixed Income to More Effective Products—Within the growth of AUM, we believe there is a long-term trend towards shifting the investment mix from lower yielding fixed income products to higher potential yielding products such as equities and alternative asset classes.

Increasing Investment Pipeline and Reinvestment Requirements—Under a renewed growth and political outlook, we expect a significant surge in the investment pipeline to return to the market in coming years, especially in infrastructure. Currently, we expect both state-owned banks and traditional conglomerates to be more constrained to deploy capital due to balance sheet restrictions; thereby creating additional demand for capital to be covered by the broader private markets and less traditional sources of capital.

Competitive Strengths

We have established a premier independent franchise with market leadership across each of our high value-added strategies. We believe that our business model, focused on high-performance and executed by talented multi-disciplinary teams with a focus on value creation, has enabled us to build one of the most complete portfolios of alternative investment strategies and solutions, which combined with adoption of innovative technologies and increasing integration across our business segments, strongly position us to capitalize on the future expansion and shifts in asset allocation in the Brazilian investment market.

We are a leading independent alternative asset manager in Brazil, with a strong track record of growth and market leadership across our several strategies

Since our inception, we have worked tirelessly to become a leading independent investment platform in Brazil, in terms of AUM and product offering, that is well positioned to benefit from long-term trends in the



 

8


Table of Contents

Brazilian asset management industry. Starting with only proprietary capital from our partners, we have been able to grow our AUM base at a CAGR of 34.5% since our founding by expanding our product offering within liquid and illiquid strategies. Additionally, from 2018 through September 30, 2020, we have expanded our AUM by 95.1%. This growth was fueled by the launch of three real estate funds, one credit fund, one infrastructure fund, and one multi-strategy fund within investment products and solutions, in addition to capital calls from illiquid funds and significant growth in net client inflows, accelerated by the decline in the SELIC rate, which is the Brazilian reference interest rate, and an increase in the search for alpha by institutional and HNWI clients in the country.

Vinci Partners is a leading independent asset manager in Brazil in terms of AUM, with leading franchises in private equity, real estate and public equities, according to data published by ANBIMA as of October 2020. We believe we have been able to achieve strong and sustained growth largely due to our solid reputation and credibility from a history of partnerships with companies, financial institutions and entrepreneurs. Across our main strategies we have built premier franchises with unique differentiating strategies to offer to our investors. Showcasing our market recognition, during 2020 and 2019, we have been the recipient of numerous awards, including ranking in first place in the XP Operational Ranking among over 120 funds (May 2019 and June 2019) and receiving an “Excellent” rating by Revista Investidor Institucional (August 2020) for several of our funds, including our credit fund focused on real estate loans Vinci FI Renda Fixa Imobiliário—CP, our multi-strategy funds Vinci Atlas FIC FIM and Vinci Valorem FIM, our equities funds Vinci GAS Dividendos FIA, Vinci Mosaico FIA and Vinci Selection Equities FIA, our open-ended pension fund FIC FIA Caixa Valor RPPS and ranking in second place in the category “Best funds in three years—Real Estate” by InfoMoney-Ibmec (January 2020) for our real estate fund Vinci Shopping Centers FII.

We have an established and recognized track record of achieving returns above benchmarks across our asset classes, putting us in a position of strength to benefit from shifts in asset allocation in Brazil

We believe we offer our clients best-in-class products in terms of investment performance across asset classes. We have been able to establish an impressive track record, achieving returns in the top quartile across all products within both liquid and illiquid strategies. We have developed expertise and credibility across strategies, with our products having a track record of surpassing the respective benchmarks.

We believe that our past success enhances our reputation and market credibility, and will be an asset in sourcing future investment opportunities. The current market environment of sustained lower interest rates in Brazil has accelerated a shift in asset allocation from lower yielding fixed income products into higher risk and return products such as equities, and even more so into higher value-added products such as managed funds, structured products, and alternative investments. We believe that investors are reallocating their portfolios in the search for alpha, and we believe our platform is exceptionally positioned to capture what we expect to be a long-term structural trend because of our range of superior high value-add, or HVA, product offering.

We have a highly profitable business model, supported by one of the most comprehensive platforms in Brazil across diversified and attractive asset classes

We have a team of 205 full time employees as of September 30, 2020, bringing together a wide-ranging network of personal and professional relationships across our multiple stakeholders. We have a diversified business model across high value-added asset classes, including private equity, infrastructure, public equities, hedge funds, credit and real estate, in addition to a specialized division providing tailored investment and product solutions to institutional and HNWI clients. Each investment strategy is managed by a separate and dedicated investment team with an independent investment committee and decision-making process. Through our differentiated business model, focused on generation of high-performance ideas and opportunities across business areas, we have developed an ability to invest proprietary capital (which also comprises capital from



 

9


Table of Contents

partners and employees of Vinci Partners at the time of the relevant capital raising) and that of third-parties with solid profitability in a wide variety of liquid and illiquid strategies.

Our track record of raising long term committed capital base creates a resilient, management fee-centric and asset-light business model

Most of our cash revenues are derived from fund management, which are generated from our AUM. In the nine months ended September 30, 2020 and 2019, and in the year ended December 31, 2019 and 2018, 83.0%, 87.0%, 75.4% and 85.1% of our total net revenue, respectively, consisted of net revenue from fund management, which are recurring in nature and provide highly predictable revenues, being less susceptible to market volatility. In addition, most of our products have long-term capital commitments and over 47.9% of our AUM is either perpetual or locked up for periods of over five years. Structured credit and private equity have formal lock-up policies, while one of our infrastructure funds is quasi-perpetual and our listed real estate funds are perpetual in nature. We believe the long-term nature of our capital commitments and fund management centricity of our revenues helped us create a truly resilient business model. For instance, during Brazil’s 2014 to 2017 economic recession, we were able to grow our AUM from R$18.3 billion to R$21.3 billion. In addition, we have remained resilient to fluctuations in economic conditions throughout the course of the COVID-19 pandemic, with total AUM of R$46.1 billion as of September 30, 2020, a 32.9% increase compared to total AUM of R$34.7 billion as of December 31, 2019, and total net revenue from services rendered of R$235.3 million in the nine months ended September 30, 2020, a 22.1% increase from total net revenue from services rendered of R$192.6 million in the nine months ended September 30, 2019.

We have a track record in creating long term client relationships across diversified and high quality distribution strategies, reinforcing our ability to benefit from ongoing demand shifts in the Brazilian asset management sector

Over our history of managing assets from third party investors, we have been able to build a sophisticated and high quality base of international limited partners within our private market strategies, working with a diverse range of institutional investors from all over the globe. We have built a very diverse client base and have been able to establish highly valuable client relationships, both in Brazil and globally.

We have developed a long-standing track record of scaled product innovation, enabling us to successfully fundraise and deploy capital and access new sources of investable assets

We have built a holistic investment platform supported by our seven strategies: private equity, infrastructure, credit, real estate, hedge funds, public equities, and investment products and solutions. In the last three years, we launched our third flagship growth equity private equity fund (Vinci Capital Partners III), launched our first pure infrastructure fund (FIP Transmissão or Vinci Infra II), and additional funds within our credit and real estate practice.

Within our illiquid strategies, in addition to our successful fundraising for new funds, we have also deployed the capital raised in attractive investment opportunities. Our team, comprised of seasoned and reputable investment professionals, has a proven ability to identify investment opportunities across different asset classes. For example, since 2019 we have successfully completed nine capital raises for new and existing real estate funds, totaling R$2.7 billion, highlighting the success of our funds and the continued demand for our products from investors.

We have also grown our liquid strategies significantly, especially since the end of the prior economic recession and the start in the decline of interest rates. Since 2018, we have expanded our liquid strategies AUM by 131.4%, more than tripling our AUM in public equities and growing rapidly in hedge funds and investment



 

10


Table of Contents

products and solutions. Our liquid AUM base was resilient to the economic downturn that started in 2014, and benefited sizably from the economic recovery. We expect the low interest rates environment to accelerate growth in our liquid strategies in the years ahead, as investor demand for our high value-added products increases with the diminished returns of fixed income products.

We are one of the pioneers in the adoption of responsible investment and ESG integration in our investment decision process in Brazil

We have been a PRI signatory since 2012, and based on the PRI data portal, in 2014 there were only 11 active investment manager signatories in Brazil. We have been evolving our ESG approach year over year, with important improvements on a regular basis. For instance, in 2014 we implemented our Responsible Investment Policy for private equity; in 2017 we engaged a specialized consulting company to develop our ESMS (ESG Management System) for private markets; in 2019 we engaged another ESG consulting company to develop our ESG Model for public markets. In both cases, we leveraged international and local best practices to develop our policies and approach, such as IFC Performance Standards, and the principles for responsible investments from PRI, among others. We are one of the only alternative asset managers in Brazil with an active private market dedicated strategy, through our VIR (Vinci Impact and Return) platform within our private equity segment. In addition, Vinci Partners’ headquarters in Rio de Janeiro is self-sufficient from an energy standpoint, through a build-to-suit solar power plant.

Our business is supported by a technologically advanced operational platform and cloud-based capabilities, enabling us to achieve economies of scale throughout our value chain and positioning our financial profile for sustained margin expansion and lower breakeven thresholds for new product launches

We have dedicated significant resources to developing our technologically advanced operational platform. Over time, we have been able to significantly improve our productivity and AUM capacity. For instance, due to investments in technology and operational capabilities, from 2014 to September 30, 2020, we have been able to more than double our AUM while keeping the number of employees mostly unchanged.

Similarly, such investments in technology and operational systems have allowed us to build a highly scalable and increasingly efficient platform. In the period from December 31, 2015 to September 30, 2020 (based on annualized data for the last twelve months ended September 30, 2020), we have been able to reduce non-compensation expenses per average AUM (calculated based on the average AUM at the beginning and end of each quarter) by 16.2 basis points from 0.29% to 0.13%, demonstrating our ability to significantly increase our AUM without incurring significant additional costs to support our expansion.

We utilize advanced operational systems to support our operations and the seamless execution of our strategy, and are constantly working to innovate and implement the latest technological advances into our business. For example, within our private equity practice, we have started a project to systematize and incorporate software to allow pipeline origination and tracking to be seamlessly integrated across operating platforms, mobile and at the office, and for information to be readily available and stored.

Similarly, we have also developed an investor relations platform and tools that enable us to enhance our ongoing interactions through a single area overseeing all internal and external support to profile and understand our limited partners’ requirements, developing and managing proprietary databases and segmentation of our limited partner base, further driving focus and efforts.

Highly experienced management and investment team supported by our unique partnership philosophy and corporate culture

Our most valuable assets are our people and culture. Our three founders have supported our growth since inception, and currently lead alongside 30 additional partners and a total of 205 professionals managing 261



 

11


Table of Contents

active funds and investment vehicles as of September 30, 2020. The long-term vision of Vinci Partners is to be the best and most relevant Brazilian alternative investment platform combining capital and talent to build value for the clients.

We truly believe that “Partners are Clients, and Clients are Partners”, which is possible because our general partners typically invest alongside our clients, which become our limited partners. This unique approach capital management, based on ethics and experience and targeting superior long-term financial results, is only possible because of our strong set of company values, as outlined below:

 

   

believe in ethics as the best value in a relationship;

 

   

balance common sense with boldness;

 

   

be consistent in the search for results and in the relationship with clients and partners;

 

   

combine flexibility and creativity with structured processes;

 

   

act with entrepreneurship and with an owner’s mindset;

 

   

have discipline in the execution of tasks; and

 

   

be resilient when facing challenges.

Growth Strategies

Our goal is to consolidate our franchise as the leading independent asset manager in Brazil, combining capital and talent to build value for our clients. We will continue to approach our capital management in our own unique way, based on ethics and experience, targeting superior long-term financial results. To achieve this goal and seeking to continue as a fast-growing and profitable company, we have defined our key strategic priorities as follows:

Continue to focus on our core capabilities and expertise across high value-added strategies to take advantage of shifts in asset allocation Brazil

As leaders in high value add categories, we believe we are well-positioned to capture this shift of savings and customer flows from low yielding asset classes into value-added strategies, including equities and alternative investments. From December 2018 to September 30, 2020, we have substantially grown our assets under management by 95.1%, or by R$22.5 billion. We believe we are in a premier position to continue to benefit from this trend, as we will continue to leverage on our:

 

   

distinctive insights into in depth macro and micro economic knowledge and insights;

 

   

deep financial market expertise with strategies for different results and investment monetization;

 

   

complementary expertise of our team members leading to higher quality of investment decisions;

 

   

local presence and wide network creating differentiated deal sourcing;

 

   

broad financial structuring skills with different products and assets; and

 

   

in-house resources generating efficiency and proprietary solutions.

Seek to accelerate our fundraising activities, accessing new pockets of demand, expanding our wallet share across our client base and taking advantage of an increasing supply of private capital in the country

Since our inception, we have successfully launched funds across seven different strategies, allowing us to reach R$46.1 billion in AUM, as of September 30, 2020. We believe that our track-record of deploying capital at



 

12


Table of Contents

attractive rates of return for our investors and launching innovative strategies that cater to the investment demand of our client base will enable us to further enhance a robust fundraising pipeline. For example, within our private equity practice, we are in the process of raising our next fund, Vinci Impact and Return IV (VIR IV), which already had its first closing on October 29, 2020 and has raised R$265.8 million in Brazil through the date of this prospectus, and has obtained US$11.8 million (equivalent to R$66.6 million based on the commercial selling rate for U.S. dollars of R$5.6407 to US$1.00 as of September 30, 2020) of approved commitments from development finance institutions, or DFI. In total, Vinci is seeking to raise up to R$1.0 billion for the VIR IV strategy by March 2021. In addition, we already have planned what we expect to be our next flagship strategy fund, Vinci Capital Partners IV (VCP IV). We will continue to take advantage of the increased flow of assets to the private markets in the country. We expect the increase in investor demand for high value-added strategies, including private capital, represents a sizable opportunity for Vinci Partners.

Continue to develop innovative solutions for our clients, launching new funds and strategies across industry verticals that can be used to capture future increases in underlying demand factors

We believe a key pillar of our growth has been our ability to provide complementary investment strategies and to structure different types of investment funds that address the specific needs of our investor base. We have expanded our product offering to provide increasingly diversified opportunities for investors and a balanced business model that we believe benefits all of our stakeholders. Across each of our strategies, we will continue to develop new strategies and adapt to the increasingly dynamic search for yield and diversification from our client base.

Continue to strengthen our client relationships, developing innovative solutions based on our capabilities and expertise across high value-added asset classes

We will continue fostering our relationships with our clients through the following key pillars:

 

   

Commitment to excellence in investor relations practices, including solid and transparent communication with investors and high standards of risk management and governance;

 

   

Deepening relationships with our limited partners through our wide local and international network of 24 investor relations professionals and specialized teams clustered into geography and investor profile, as of September 30, 2020;

 

   

Increasing our global and local institutional investor outreach through partnerships with key origination channels, including developing joint ventures and increasing our access to digital self-directed and advisory channels with a greater emphasis on end-client visibility;

 

   

Maintaining a unique client approach dedicated to understanding the needs and objectives of our clients, especially under the new economic environment of low interest rates, in which we believe such understanding will be increasingly important in order to reach our clients with an appropriate product offering for their specific investment objectives;

 

   

Automation of our proprietary channels, including the development of our own digital solutions to offer an additional alternative to better reach and serve retail and lower-tier high net worth individuals through a self-service platform; and

 

   

Consolidating our brand as a category leader in alternative investments by continuing a close interactions with our distributors, organizing and participating in live broadcasts on social media channels, client events, maintaining close interactions with independent research houses, monitoring relationships with digital influencers and increasing our penetration in social media and networks.



 

13


Table of Contents

Seek to penetrate new pockets of capital in the Brazilian market by investing across our different channels and strengthening our distribution capabilities, including digitizing access to our end customers

We will seek to accelerate our distribution efforts for certain of our liquid and illiquid strategies where applicable, taking advantage of the increased digitalization of distribution platforms and the disruption of traditional channels, increasing our sales team’s efforts to increase our presence in all available platforms, including:

 

   

Digital Distribution Platforms: Aiming to be present in all major digital distribution platforms. We have established relationships with 25 platforms as of September 30, 2020 and expect to continue to enhance our product offering across these platforms. We aim to be available in all major platforms with a range of Vinci Partners products, including certain illiquid strategies, where applicable, in addition to enhancing our brand awareness;

 

   

Banks and Multi-Family Offices: We aim to offer at least one product in all large banks (private bank, mass affluent and retail) and their insurance and pension platforms. Although not necessarily the case, usually the first step for these distribution agreements is through allocations from a bank’s fund of funds, but our end goal is to establish direct distribution of our products in partnership with the large financial institutions. We then expect that as our products continue to gain scale, we will be able to deploy additional strategies across these channels;

 

   

Research Houses: We expect to remain close to the main research houses to allow in-depth knowledge and visibility of our strategies, portfolio managers and investment products to potentially be recommended to their end-clients; and

 

   

Media and Digital Influencers: We will continue to increase our media exposure, both through general and specialized channels, while also enhancing key contact points in social networks, including through podcasts, live streams and through LinkedIn. We will also monitor selected digital influencers, in our effort to develop new ways for potential end-clients to get to know Vinci Partners and its products.

Position our platform for consolidation opportunities to integrate single manager or single strategy platforms into Vinci Partners

We believe there is a significant opportunity to support our organic growth through consolidation, complementing our platform with selective strategic and tactical acquisitions. We intend to remain highly disciplined in our development strategy to ensure that we are allocating management time and our capital in the most productive areas to foster growth opportunities. Our strategy will focus on opportunities that expand our scale in existing markets, add complementary capabilities, enhance distribution, or provide access to new markets. We have a strong track record of sourcing, executing and integrating transactions and team hires as well as incentivizing investment teams to align their interests with ours. We have developed a distinctive structure capable of integrating other funds or strategies seamlessly. We currently expect that any growth through acquisition would likely take the form of single fund or single strategy managers, specifically sourced to complement Vinci Partner’s product offering and capabilities.

Risk Factors

An investment in our Class A common shares is subject to a number of risks, including risks relating to our business and industry, as well related to the business and industry of the companies in which our funds have investments, risks relating to Brazil and risks relating to the offering and our Class A common shares. The following discussion summarizes some, but not all, of these risks. Please read the information in the section entitled “Risk Factors” for a more thorough description of these and other risks.



 

14


Table of Contents

Risks Relating to Our Business and Industry

 

   

Adverse market and economic conditions could reduce the value or performance of our funds.

Our business and the businesses of the companies in which our funds invest are materially affected by financial markets and economic conditions or events throughout the world, such as interest rates, availability of credit, inflation rates, economic uncertainty, changes in laws, trade barriers and trade tension, commodity prices, currency exchange rates and controls and national and international political circumstances. Future market conditions may be less favorable compared to current and historical market conditions and we could suffer a decrease in our performance and management fees, and a decrease in investment income we earn from our proprietary investments.

 

   

Fluctuations in interest rates, exchange rates and benchmark indices could have an adverse effect on us.

Certain of our funding costs and the returns on certain of our investment funds are tied to certain interest rate indices or other benchmark indices, such as the Brazilian long-term interest rate, or TJLP, the CDI Rate, the SELIC rate, certain inflation indices and certain B3 indices. In addition, carrying costs and the returns on certain of our investment funds based in the United States are tied to or denominated in U.S. dollars, exposing us to risks associated with fluctuations in rate of exchange of U.S. dollars for reais. We may not be able to adequately manage our exposure to these benchmarks, which could lead to increased funding costs, carrying costs or decreased returns for our funds, with a consequent adverse effect on our business, financial condition and results of operations.

 

   

Substantial and increasingly intense competition within our industry may harm our business.

The financial services market is highly competitive. Many of our competitors may have substantially greater resources than we do. These competitors may be able to offer more attractive fees to our current and prospective clients, especially our competitors that are affiliated with financial institutions. Competition could cause us to reduce the performance and management fees and financial services advisory fees we charge for our services and could also result in a loss of existing clients, and greater difficulty in attracting new clients.

 

   

We may not be able to keep pace with rapid developments in our industry.

The financial services market is characterized by rapid technological change, new product and service introductions, evolving industry standards, changing client needs and the entrance of non-traditional competitors. There can be no assurance that we will have the funds available to maintain the levels of investment required to support our projects, and if we are unable to develop, adapt to or take advantage of technological changes or evolving industry standards, our business, financial condition and results of operations could be materially adversely affected.

 

   

We have identified material weaknesses in our internal control over financial reporting.

In connection with the preparation of our consolidated financial statements for the year ended December 31, 2019, we identified a number of material weaknesses in our internal control over financial reporting as of December 31, 2019. The material weaknesses identified relate to our insufficient accounting resources and processes necessary to comply with the reporting and compliance requirements of IFRS and the U.S. Securities and Exchange Commission, or the SEC. We are in the process of adopting a remediation plan to improve our internal control over financial reporting, but there is no assurance that our efforts will be effective or prevent any future material weaknesses in our internal control over financial reporting.

Risks Relating to Brazil

 

   

We could be adversely affected by a protracted economic downturn caused by the COVID-19 pandemic.



 

15


Table of Contents

Our portfolio investments and our business could be materially and adversely affected by the risks related to health crises such as the COVID-19 pandemic. The ultimate extent of the impact of the COVID-19 pandemic or other health crisis, on our business, financial condition and results of operations will depend on future developments, which are highly uncertain, and could also have the effect of heightening many of the other risks to which we are subject.

 

   

The Brazilian federal government has exercised significant influence over the Brazilian economy.

The Brazilian federal government frequently exercises significant influence over the Brazilian economy and occasionally makes significant changes in policy and regulations. We have no control over and cannot predict what measures or policies the Brazilian government may take in the future. We and the market price of our Class A common shares may be harmed by changes in Brazilian government policies, as well as general economic factors.

 

   

Economic uncertainty and political instability in Brazil may harm us.

Brazil’s political environment has historically influenced, and continues to influence, the performance of the country’s economy. Political crises have affected and continue to affect the confidence of investors and the general public, which have historically resulted in economic deceleration and heightened volatility in the securities offered by companies with significant operations in Brazil. Ongoing political uncertainty could harm the Brazilian economy and, consequently, our business and the value of our investments, and could adversely affect our financial condition, results of operations and the price of our Class A common shares.

Risks Relating to the Offering and our Class A Common Shares

 

   

There is no assurance that a market will develop for our Class A common shares.

Prior to this offering, there has not been a public market for our Class A common shares. If an active trading market does not develop, you may have difficulty selling any of our Class A common shares that you buy.

 

   

The concentration of our ownership and voting power with Gilberto Sayão da Silva limits your ability to influence corporate matters.

Immediately following this offering, Gilberto Sayão da Silva will control our company through his beneficial ownership of all of our outstanding Class B common shares, representing 77.9% of the combined voting power of our issued share capital (or 77.0% if the underwriters’ option to purchase additional Class A common shares is exercised in full). So long as Mr. Sayão da Silva beneficially owns a sufficient number of Class B common shares, even if he beneficially owns significantly less than 50% of our outstanding share capital, he will be able to effectively control our decisions.

 

   

As a Cayman Islands exempted company with limited liability, the rights of our shareholders may be different from the rights of shareholders governed by the laws of U.S. jurisdictions.

Our corporate affairs are governed by our Articles of Association and by the laws of the Cayman Islands. The rights of shareholders and the responsibilities of members of our board of directors may be different from the rights of shareholders and responsibilities of directors in companies governed by the laws of U.S. jurisdictions. In particular directors of a Cayman Islands company owe fiduciary duties to the company and separately a duty of care, diligence and skill to the company, whereas under Delaware corporate law, a director has a fiduciary duty to the corporation and its stockholders. See “Description of Share Capital—Principal Differences between Cayman Islands and U.S. Corporate Law.”



 

16


Table of Contents

Recent Developments

Vinci Energia Capital Raising

In January 2021, we concluded a capital raising for Vinci Energia (VIGT) through a follow-on offering of quotas, in the total amount of R$415 million.

Nine Months Dividend

Subsequent to September 30, 2020, Vinci Partners Brazil declared, made provisions for the payment of, and partially paid dividends related to earnings through the eleven months ended November 30, 2020, totaling R$141.3 million. Of this amount, R$117.0 million were related to earnings for the nine months ended September 30, 2020, or the nine months dividend. In addition, Vinci Partners is expected to declare, and make provisions for, the payment of dividends related to earnings for the month of December 2020, prior to the consummation of this offering. The majority of the dividend declared in relation to earnings or retained earnings through December 30, 2020 is expected to be distributed to the former quotaholders of Vinci Partners Brazil by the end of the first quarter 2021, and investors purchasing Class A common shares in this offering will not be entitled to receive any portion of this dividend. See “Dividends and Dividend Policy.”

VIR IV Fund

On October 14, 2020 Vinci Partners firmed a commitment with its latest fund, Vinci Impact and Return IV (VIR IV) pursuant to which Vinci Partners subscribed to quotas in the total amount R$6.8 million as committed capital that will be requested by the VIR IV fund during its investment period. The VIR IV fund strategy is to acquire minority shareholdings in small and medium enterprises in Brazil aiming to generate favorable financial returns and quantifiable ESG impacts. The VIR IV fund already has already closed funding rounds of approved commitments from development finance institutions, raising R$761.8 million in Brazil through the date of this prospectus. Vinci Partners is seeking to raise up to R$1.0 billion for the VIR IV strategy by March 2021.

VILG Fund

In January 2021, Vinci Partners launched a follow-on offering for its listed real estate fund, VILG. Vinci Partners is seeking to raise between R$400 million and R$480 million for this fund by February 2021.

Termination of Revenue-Sharing Agreement with Gas Investimentos

In December 2020, Vinci Partners terminated its revenue-sharing agreement with Gas Investimentos, which had been signed in 2010 in the context of the association with Gas Investimentos. We expect that this termination will begin to generate a positive impact on revenue from services rendered in our Public Equities strategy starting in January 2021. In December 2020, former partners of Gas Investimentos redeemed approximately R$2.8 billion of AUM from this strategy (which represents between 23.9% to 23.7% of the estimated AUM in our public equities strategy as of December 31, 2020, and which had generated lower management fees and performances fees in comparison to the remaining balance of our AUM) opening up additional capacity for Vinci Partners to raise AUM with higher fees within our public equities strategy. The former partners of Gas Investimentos represent less than 1.5% of the estimated AUM in our public equities strategy as of December 31, 2020.



 

17


Table of Contents

AUM Growth

Our AUM is expected to be between R$ 47.3 billion and R$ 47.8 billion as of December 31, 2020, an increase of between 36.5% and 37.8% compared to AUM as of December 31, 2019, respectively and an increase of between 2.5% and 3.6% compared to AUM as of September 30, 2020. AUM increased primarily due to new net inflows and due to appreciation in the market value of assets in our investment products and solutions strategy and public equities strategy.

 

     For the Year Ended
December 31, 2020
 
     Low      High  
    

(estimated)

R$ in millions

 

AUM at period end—Consolidated

     47,286.3        47,761.5  

AUM at period end—Aggregate of Segment AUM (1)

     49,670.2        50,169.4  

Public Equities

     11,720.3        11,838.1  

Investment Products and solutions

     16,347.4        16,511.7  

Private equity

     10,695.1        10,802.5  

Real estate

     4,524.2        4,569.6  

Hedge funds

     2,506.7        2,531.9  

Credit

     2,351.6        2,375.2  

 

(1)

The AUM for each segment may include double counting related to funds from one segment that invest in funds from another segment. Those cases occur mainly due to (a) fund of funds of investment products and solutions segment, and (b) investment funds in general that invest part of their cash in credit segment and hedge fund segment funds in order to maintain liquidity and provide for returns on cash. Such amounts are eliminated on consolidation. The bylaws of the relevant funds prohibit double-charging fees on AUM across segments. Therefore, while our AUM by segment may double-count funds from one segment that invest in funds from another segment, the revenues for any given segment do not include revenue in respect of assets managed by another segment, which means there are no intercompany eliminations on revenues in our results of operations.

Preliminary Results for the Year Ended December 31, 2020

Our financial results for the year ended December 31, 2020 are not yet finalized. The following information reflects our preliminary results for the indicated periods. We have provided ranges, rather than specific amounts, because these results are preliminary and subject to change.

Total net revenue from services rendered for the year ended December 31, 2020 is expected to be between R$328.0 million and R$351.8 million, an increase of between 10.5% and 18.6 % as compared to the year ended December 31, 2019, primarily due to increases management fees and in advisory fees that were offset in part by a decrease in performance fees.

Operating profit for the year ended December 31, 2020 is expected to be between R$208.1 million and R$223.2 million, an increase of between 13.4% and 21.7% as compared to the year ended December 31, 2019, primarily due to an increase in net revenue from services rendered at a higher rate than the increase in operating expenses.

Adjusted fee related earnings, or Adjusted FRE (as defined and further explained below), a non-GAAP financial measure, for the year ended December 31, 2020 is expected to be between R$146.5 million and R$158.9 million, an increase of between 49.3% and 61.9% as compared to the year ended December 31, 2019.



 

18


Table of Contents

Profit for the year ended December 31, 2020 is expected to be between R$163.2 million and R$175.1 million, an increase of between 4.9% and 12.5% as compared to the year ended December 31, 2019.

Adjusted Distributable Earnings (as defined and further explained below), a non-GAAP financial measure, for the year ended December 31, 2020 is expected to be between R$117.2 million and R$128.1 million, an increase of between 20.0% and 31.2% as compared to the year ended December 31, 2019.

Reconciliation of Adjusted FRE to operating profit and Adjusted Distributable Earnings to Profit for the Period

Adjusted FRE and Adjusted Distributable Earnings are non-GAAP measures. In addition to the reconciliation tables provided below, see “Presentation of Financial and Other Information—Special Note Regarding Non-GAAP Financial Measures” for further information on why our management chooses to use these non-GAAP financial measures, and on the limits of using these non-GAAP financial measures.

 

    For the Year Ended
December 31, 2020
 
    Low     High  
   

(estimated)

R$ in thousands

 

Operating profit

    208,099       223,195  

(-) Net revenue from realized performance fees

    (27,583     (29,584

(-) Net revenue from unrealized performance fees

    (9,571     (10,265

(+) Compensation allocated in relation to performance fees

    6,041       6,041  

FRE

    176,987       189,387  

(-) Dividends to Partners, excluding performance fee-related dividends

    30,474       30,474  

Adjusted FRE

    146,513       158,913  

Profit for the period

    163,234       175,074  

(-) Net revenue from unrealized performance fees

    (9,571     (10,265

(+) Income tax from unrealized performance fees

    1,104       1,184  

(+) Compensation allocated in relation to unrealized performance fees

    1,074       1,074  

(-) Unrealized gain from investment income

    (5,992     (6,426

(+) Income taxes on unrealized gain from investment income

    2,037       2,185  

Distributable Earnings

    151,886       162,826  

(-) Dividends to Partners, excluding unrealized performance fee-related dividends

    (34,737     (34,737

Adjusted Distributable Earnings

    117,149       128,089  

Cautionary Statement Regarding Preliminary Results

The results for the year ended December 31, 2020, including the non-GAAP measures referred to above, are preliminary, unaudited and subject to completion, reflect our management’s current views and may change as a result of our management’s review of results and other factors, including a wide variety of significant business, economic and competitive risks and uncertainties. While the preliminary results have been prepared in good faith and based on information available at the time of preparation, no assurance can be made that actual results will not change as a result of our management’s review of results and other factors. Such preliminary results for the year ended December 31, 2020 are subject to finalization and closing of our accounting books and records (which have yet to be performed) and should not be viewed as a substitute for full year end or fourth quarter financial statements prepared in accordance with IFRS. The preliminary results depend on several factors, including weaknesses in our internal controls and financial reporting process (as described under “Risk Factors”)



 

19


Table of Contents

and our ability to timely and accurately report our financial results in the context of our corporate reorganization, the Contribution (as defined below) and this offering. For more information regarding factors that could cause actual results to differ from those described above, please see “Risk Factors” and “Cautionary Statement Regarding Forward-Looking Statements”. There can be no assurance that the underlying assumptions or estimates will be realized; in particular, while we do not expect that our estimated preliminary results will differ materially from our actual results for the year ended December 31, 2020, we cannot assure you that our estimated preliminary results for the year ended December 31, 2020 will be indicative of our financial results for future periods. As a result, the preliminary results cannot necessarily be considered predictive of actual operating results for the periods described above, and this information should not be relied on as such. You should read this information together with the sections of this prospectus entitled “Selected Financial and Other Information” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” our audited consolidated financial statements and unaudited interim consolidated financial statements, in each case included elsewhere in this prospectus.

The preliminary results included in this prospectus have been prepared by, and are the responsibility of, Vinci Partners’ management. PricewaterhouseCoopers Auditores Independentes has not audited, reviewed, compiled or applied agreed-upon procedures with respect to the preliminary financial data contained in these preliminary results. Accordingly, PricewaterhouseCoopers Auditores Independentes does not express an opinion or any other form of assurance with respect thereto. PricewaterhourseCoopers Auditores Independentes does not assume any responsibility for the preliminary results. The report of PricewaterhouseCoopers Auditores Independentes included elsewhere in this prospectus relates to the historical financial information of Vinci Partners Brazil. Such report does not extend to the preliminary results and should not be read to do so.

By including in this prospectus a summary of certain preliminary results regarding our financial and operating results, no representation is made regarding our ultimate performance compared to the information contained in the preliminary results and our actual results may materially differ from those described above and we do not undertake any obligation, unless required by applicable law to update or otherwise revise the preliminary results set forth herein to reflect circumstances existing since their preparation or to reflect the occurrence of unanticipated events or to reflect changes in general economic or industry conditions, even in the event that any or all of the underlying assumptions are shown to be in error.

Our Corporate Structure

Our Corporate Reorganization

We are a Cayman Islands exempted company incorporated with limited liability on September 21, 2020 for purposes of effectuating our initial public offering. Prior to this offering, all of the quotaholders of Vinci Partners Brazil, held, directly or indirectly, 8,730,000 quotas of Vinci Partners Brazil which are all of the quotas of Vinci Partners Brazil, our Brazilian principal holding company whose consolidated financial statements are included elsewhere in this prospectus.

Prior to this offering, all of the quotaholders of Vinci Brazil have contributed the entirety of their quotas in Vinci Partners Brazil to us. In return for this contribution, we have issued (1) new Class B common shares to Gilberto Sayão da Silva and (2) new Class A common shares to all other quotaholders of Vinci Partners Brazil, in each case in a one-to-4.77 exchange for the quotas of Vinci Partners Brazil contributed to us, or the Contribution. Until the Contribution, we had not commenced operations and had only nominal assets and liabilities and no material contingent liabilities or commitments.

After accounting for the new Class A common shares that will be issued and sold by us in this offering, we will have a total of 55,515,574 common shares issued and outstanding immediately following this offering,



 

20


Table of Contents

14,466,239 of these shares will be Class B common shares beneficially owned by Gilberto Sayão da Silva, and 41,049,335 of these shares will be Class A common shares beneficially owned by the other former quotaholders of Vinci Partners Brazil and the investors purchasing in this offering. See “Principal Shareholders.”

Our Corporate Structure

Our group is currently composed of 11 main companies, nine of which are incorporated in Brazil and two of which are incorporated in other countries. Our material operating subsidiaries are: Vinci Gestora de Recursos Ltda., Vinci Equities Gestora de Recursos Ltda., Vinci Capital Gestora de Recursos Ltda., Vinci Assessoria Financeira Ltda., Vinci Gestão de Patrimônio Ltda., Vinci Real Estate Gestora de Recursos Ltda., Vinci Infraestrutura Gestora de Recursos Ltda. and Vinci GGN Gestão de Recursos Ltda. The following chart shows our simplified corporate structure, after giving effect to our corporate reorganization, the Contribution and this offering:

 

 

LOGO

Corporate Information

Our principal executive offices are located at Av. Bartolomeu Mitre, 336, Leblon, Rio de Janeiro, Brazil, 22431-002. Our telephone number at this address is +55 (21) 2159-6240.

Investors should contact us for any inquiries through the address and telephone number of our principal executive office. Our principal website is www.vincipartners.com. The information contained in, or accessible through, our website is not incorporated into this prospectus or the registration statement of which it forms a part.



 

21


Table of Contents

Implications of Being an Emerging Growth Company

As a company with less than US$1.07 billion in revenue during the last fiscal year of Vinci Partners Brazil, we qualify as an “emerging growth company” as defined in the Jumpstart our Business Startups Act of 2012, or the JOBS Act. An emerging growth company may take advantage of specified reduced reporting and other burdens that are otherwise applicable generally to public companies. These provisions include:

 

   

a requirement to have only two years of audited financial statements and only two years of related Management’s Discussion and Analysis of Financial Condition and Results of Operations disclosure;

 

   

an exemption from the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, as amended, or the Sarbanes-Oxley Act, in the assessment of our internal control over financial reporting;

 

   

reduced disclosure about our executive compensation arrangements in our periodic reports, proxy statements and registration statements; and

 

   

exemptions from the requirements of holding non-binding advisory votes on executive compensation and golden parachute arrangements.

We may take advantage of these provisions for up to five years or such earlier time that we are no longer an emerging growth company. We would cease to be an emerging growth company if we have more than US$1.07 billion in annual revenue, have more than US$700 million in market value of our Class A common shares held by non-affiliates or issue more than US$1.07 billion of non-convertible debt over a three-year period. We may choose to take advantage of some but not all of these reduced burdens. Accordingly, the information about us available to you will not be the same as, and may be more limited than, the information available to shareholders of a non-emerging growth company.

In addition, under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards until such time as those standards apply to private companies. Given that we currently report and expect to continue to report under IFRS as issued by the IASB, we will not be able to avail ourselves of this extended transition period and, as a result, we will adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required by the IASB.



 

22


Table of Contents

THE OFFERING

This summary highlights information presented in greater detail elsewhere in this prospectus. This summary is not complete and does not contain all the information you should consider before investing in our Class A common shares. You should carefully read this entire prospectus before investing in our Class A common shares including “Risk Factors” and our consolidated financial statements.

 

Issuer

Vinci Partners Investments Ltd.

 

Class A common shares offered by us

13,873,474 Class A common shares (or 15,954,495 Class A common shares if the underwriters exercise in full their option to purchase additional shares).

 

Offering price range

Between US$16.00 and US$18.00 per Class A common share.

 

Voting rights

The Class A common shares will be entitled to one vote per share, whereas the Class B common shares (which are not being sold in this offering) will be entitled to 10 votes per share.

 

  Each Class B common share may be converted into one Class A common share at the option of the holder.

 

  If, at any time, the total number of the issued and outstanding Class B common shares is less than 10% of the total aggregate number of common shares outstanding, then each Class B common share will convert automatically into one Class A common share.

 

  In addition, each Class B common share will convert automatically into one Class A common share upon (1) any transfer, except for certain transfers to certain affiliates of Mr. Sayão da Silva as described under “Description of Share Capital—Conversion,” and (2) the death or permanent disability of Mr. Sayão da Silva.

 

  Holders of Class A common shares and Class B common shares will vote together as a single class on all matters unless otherwise required by law and subject to certain exceptions set forth in our amended and restated memorandum and articles of association dated January 15, 2021, or the Articles of Association, as described under “Description of Share Capital—Voting Rights.”

 

  Upon consummation of this offering, assuming no exercise of the underwriters’ option to purchase additional shares, (1) holders of Class A common shares will hold approximately 22.1% of the combined voting power of our outstanding common shares and approximately 73.9% of our total equity ownership and (2) Gilberto Sayão da Silva, as the only holder of our Class B common shares will hold approximately 77.9% of the combined voting power of our outstanding common shares and approximately 26.1% of our total equity ownership.


 

23


Table of Contents
  If the underwriters exercise their option to purchase additional shares in full, (1) holders of Class A common shares will hold approximately 23.0% of the combined voting power of our outstanding common shares and approximately 74.9% of our total equity ownership and (2) Gilberto Sayão da Silva, as the only holder of our Class B common shares will hold approximately 77.0% of the combined voting power of our outstanding common shares and approximately 25.1% of our total equity ownership.

 

  The rights of the holders of Class A common shares and Class B common shares are identical, except with respect to voting, conversion, and transfer restrictions applicable to the Class B common shares, as described above. In addition, each holder of our Class B common shares (i) has certain conversion rights, and (ii) is entitled to preemptive rights to purchase additional Class B common shares, in the event that additional Class A common shares are issued, upon the same economic terms and at the same price, in order to maintain such holder’s proportional ownership interest in us. Moreover, the Class B common shares shall not be listed for public trading. See “Description of Share Capital” for a description of the material terms of our common shares, and the differences between our Class A and Class B common shares.

 

Option to purchase additional Class A common shares

We have granted the underwriters the right to purchase up to an additional 2,081,021 Class A common shares within 30 days of the date of this prospectus, at the public offering price, less underwriting discounts and commissions, on the same terms as set forth in this prospectus.

 

Listing

We intend to apply to list our Class A common shares on the Nasdaq, under the symbol “VINP.”

 

Use of proceeds

We estimate that the net proceeds to us from this offering will be approximately US$216.0 million (or US$248.9 million if the underwriters exercise in full their option to purchase additional shares), assuming an initial public offering price of US$17.00 per share, which is the midpoint of the price range set forth on the cover page of this prospectus, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. We intend to use the net proceeds from this offering (1) to fund investments in our own products alongside our investors; (2) to pursue opportunities for strategic transactions; and (3) for other general corporate purposes. See “Use of Proceeds.”

 

Share capital before and after offering

As of the date of this prospectus, our authorized share capital is US$ 50,000, consisting of 1,000,000,000 shares of par value US$ 0.00005 each, after giving effect to the Contribution. Of those authorized shares, (1) 500,000,000 are designated as Class A common shares; (2) 250,000,000 are designated as Class B common shares



 

24


Table of Contents
 

(which may be converted into Class A common shares in the manner contemplated in our Articles of Association); and (3) 250,000,000 are as yet undesignated and shall have the rights as our board of directors may determine from time to time in accordance with Arcticle 4 of our Articles of Association.

 

  Immediately after this offering, we will have 55,515,574 Class A common shares outstanding, assuming no exercise of the underwriters’ option to purchase additional shares.

 

Dividend policy

We intend to pay semi-annual cash dividends on our common shares initially at an amount equal to at least 50% of our Distributable Earnings (as defined under “Summary Financial Information”). We do not have a legal obligation to pay a semi-annual dividend or dividends at any specified rate or at all. Any declaration of dividends will be at the discretion of our board of directors and will depend on our financial condition, earnings, cash needs, regulatory constraints, capital requirements (including requirements of our subsidiaries and the ability of our subsidiaries to pay dividends to us) and any other factors that our board of directors deems relevant in making such a determination. Therefore, there can be no assurance that we will pay any dividends to holders of our common shares, or as to the amount of any such dividends. See “Dividends and Dividend Policy.”

 

Liquidity Restrictions on Pre-IPO Quotaholders

In connection with this offering and the Contribution as described under “Summary—Our Corporate Reorganization,” the pre-IPO quotaholders of Vinci Brazil have agreed to certain liquidity restrictions in respect of the Class A common shares and Class B common shares that they receive in exchange for the Contribution, with such such shares being subject to restrictions on transfer through the fifth anniversary of the date of this prospectus. See “Class A Common Shares Eligible for Future Sale—Liquidity Restrictions on Pre-IPO Quotaholders.”

 

Lock-up agreements

We have agreed with the underwriters, subject to certain exceptions, not to offer, sell, or dispose of any shares of our share capital or securities convertible into or exchangeable or exercisable for any shares of our share capital during the 180-day period following the date of this prospectus. Our directors and executive officers have agreed to substantially similar lock-up provisions, subject to certain exceptions. See “Underwriting.”

 

Risk factors

See “Risk Factors” and the other information included in this prospectus for a discussion of factors you should consider before deciding to invest in our Class A common shares.

 

Cayman Islands exempted company with limited liability

We are a Cayman Islands exempted company with limited liability. The rights of shareholders and the responsibilities of members of our



 

25


Table of Contents
 

board of directors may be different from the rights of shareholders and responsibilities of directors in companies governed by the laws of U.S. jurisdictions. In particular, as a matter of Cayman Islands law, directors of a Cayman Islands company owe fiduciary duties to the company and separately a duty of care, diligence and skill to the company. Under Cayman Islands law, directors and officers owe the following fiduciary duties: (1) duty to act in good faith in what the director or officer believes to be in the best interests of the company as a whole; (2) duty to exercise powers for the purposes for which those powers were conferred and not for a collateral purpose; (3) directors should not properly fetter the exercise of future discretion; (4) duty to exercise powers fairly as between different sections of shareholders; (5) duty to exercise independent judgment; and (6) duty not to put themselves in a position in which there is a conflict between their duty to the company and their personal interests. Our Articles of Association have varied this last obligation by providing that a director must disclose the nature and extent of his or her interest in any contract or arrangement, and following such disclosure and subject to any separate requirement under applicable law or the listing rules of the Nasdaq and unless disqualified by the chairman of the relevant meeting, such director may vote in respect of any transaction or arrangement in which he or she is interested and may be counted in the quorum at the meeting; provided that such disclosure does not modify the duty of interested directors to act bona fide in the best interests of the Company. In comparison, under the Delaware General Corporation Law, a director of a Delaware corporation owes fiduciary duties to the corporation and its stockholders comprised of the duty of care and the duty of loyalty. Such duties prohibit self-dealing by a director and mandate that the best interests of the company and its shareholders take precedence over any interest possessed by a director, officer or controlling shareholder and not shared by the shareholders generally. See “Description of Share Capital—Principal Differences between Cayman Islands and U.S. Corporate Law.”

Unless otherwise indicated, all information contained in this prospectus:

 

   

assumes the implementation of the Contribution, applied retroactively to all of the figures herein setting forth the number of our common shares and per common share data; and

 

   

assumes no exercise of the option granted to the underwriters to purchase up to additional 2,081,021 Class A common shares in connection with this offering.

The number of Class A and Class B common shares to be outstanding after this offering is based on 41,642,100 common shares outstanding as of December 31, 2020 (after giving effect to the Contribution) and excludes 1,197,210 Class A common shares that may be issued following this offering under our Long-Term Incentive Plan. See “Management—Long-Term Incentive Plan.”



 

26


Table of Contents

SUMMARY FINANCIAL INFORMATION

The following tables set forth, for the periods and as of the dates indicated, our summary financial and operating data. This information should be read in conjunction with “Presentation of Financial and Other Information,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements, including the notes thereto, included elsewhere in this prospectus.

The summary financial information has been derived from the unaudited interim consolidated financial statements of Vinci Partners Brazil as of September 30, 2020 and for the nine months ended September 30, 2020 and 2019, included elsewhere in this prospectus, prepared in accordance with International Financial Reporting Standard IAS No. 34 “Interim Financial Reporting,” or IAS 34 and from the audited consolidated financial statements of Vinci Partners Brazil as of and for the years ended December 31, 2019 and 2018, included elsewhere in this prospectus, prepared in accordance with IFRS, as issued by the IASB.

Income Statement Data

 

     For the Nine Months
Ended September 30,
    For the Year Ended December 31,  
     2020     2020     2019     2019     2019     2018  
     US$ (1)     R$     (US$) (1)     (R$)  
     (in thousands, except percentages)  

Total gross revenue from services rendered

     44,093       248,715       201,839       55,151       311,093       180,337  

Total net revenue from services rendered

     41,711       235,280       192,629       52,603       296,717       172,204  

Net revenue from fund management

     34,613       195,241       167,493       39,677       223,808       146,551  

Net revenue from realized performance fees

     2,165       12,212       7,480       8,146       45,949       6,042  

Net revenue from unrealized performance fees

     895       5,046       7,068       2,849       16,071       —    

Net revenue from advisory

     4,039       22,781       10,588       1,930       10,889       19,611  

Personnel expenses and profit sharing

     (9,016     (50,856     (42,259     (11,087     (62,536     (44,193

Other general and administrative expenses

     (5,942     (33,519     (36,910     (8,997     (50,751     (46,562

Operating profit

     26,753       150,905       113,460       32,519       183,430       81,449  

Investment income

     885       4,990       16,048       3,589       20,244       7,464  

Realized gain from investment income

     392       2,211       1,895       1,574       8,876       2,355  

Unrealized gain from investment income

     493       2,779       14,153       2,015       11,368       5,109  

Other financial income

     156       879       690       163       917       1,259  

Finance costs

     (1,705     (9,617     (9,261     (2,212     (12,476     (12,472

Profit before income taxes

     26,088       147,157       120,937       34,059       192,115       77,700  

Income taxes

     (5,381     (30,354     (25,202     (6,468     (36,483     (21,022

Profit for the year

     20,707       116,803       95,735       27,591       155,632       56,678  

Net profit margin (%)

     49.6     49.6     49.7     52.5     52.5     32.9

Adjusted Profit for the year (2)

     16,183       91,281       68,846       20,155       113,688       33,950  

Adjusted Profit Margin (%) (2)

     38.8     38.8     35.7     38.3     38.3     19.7

 

(1)

For convenience purposes only, amounts in reais for the nine months ended September 30, 2020 and for the year ended December 31, 2019 have been translated to U.S. dollars using an exchange rate of R$5.6407 to US$1.00, the commercial selling rate for U.S. dollars as of September 30, 2020, as reported by the Central Bank. These translations should not be considered representations that any such amounts have been, could have been or could be converted at that or any other exchange rate. See “Exchange Rates” for further information about recent fluctuations in exchange rates.

(2)

Adjusted Profit for the year and Adjusted Profit Margin are non-GAAP financial measures that we present for the convenience of investors. See “—Non-GAAP Financial Measures” for a reconciliation of these



 

27


Table of Contents
  measures to their nearest GAAP measure and “Presentation of Financial and Other Information—Special Note Regarding Non-GAAP Financial Measures” for further information on why our management chooses to use these non-GAAP financial measures, and on the limits of using these non-GAAP financial measures.

Balance Sheet Data

 

     As of September 30,      As of December 31,  
     2020      2020      2019      2019      2018  
     US$ (1)      R$      (US$) (1)      (R$)  
     (in thousands)  

Assets

              

Total current assets

     28,367        160,012        27,898        157,364        75,277  

Total non-current assets

     28,215        159,154        27,374        154,408        126,970  

Total assets

     56,583        319,166        55,272        311,772        202,247  

Liabilities and equity

              

Total current liabilities

     15,710        88,613        18,256        102,978        44,671  

Total non-current liabilities

     16,596        93,614        16,677        94,069        89,510  

Total liabilities

     32,306        182,227        34,933        197,047        134,181  

Total equity

     24,277        136,939        20,339        114,725        68,066  

Total liabilities and equity

     56,583        319,166        55,272        311,772        202,247  

 

(1)

For convenience purposes only, amounts in reais as of September 30, 2020 and December 31, 2019, have been translated to U.S. dollars using an exchange rate of R$5.6407 to US$1.00, the commercial selling rate for U.S. dollars as of September 30, 2020, as reported by the Central Bank. These translations should not be considered representations that any such amounts have been, could have been or could be converted at that or any other exchange rate. See “Exchange Rates” for further information about recent fluctuations in exchange rates.

Non-GAAP Financial Measures

This prospectus presents our FRE, FRE Margin, Adjusted FRE, Adjusted FRE Margin, PRE, Adjusted PRE, Distributable Earnings, Adjusted Distributable Earnings, Adjusted Profit for the year, Adjusted Profit Margin for the year and Net Revenue from Fund Management and Advisory as well as Dividends to Partners, Dividends to Partners related to performance fees, Dividends to Partners, excluding performance fee-related dividends, and Dividends to Partners excluding unrealized performance fee-related dividends (each as explained in the footnotes to the table below), which are non-GAAP financial measures, and their reconciliations to the nearest measure as defined by IFRS, for the convenience of investors. A non-GAAP financial measure is generally defined as a numerical measure of historical or future financial performance, financial position, or cash flow that purports to measure financial performance but excludes or includes amounts that would not be so adjusted in the most comparable GAAP measure. For further information on why our management chooses to use these non-GAAP financial measures, and on the limits of using these non-GAAP financial measures, please see “Presentation of Financial and Other Information—Special Note Regarding Non-GAAP Financial Measures.”

 

     For the Nine Months Ended
September 30,
    For the Year Ended
December 31,
 
     2020     2020     2019     2019     2019     2018  
     US$ (1)     R$     (US$) (1)     (R$)  
     (in thousands)  

Operating profit

     26,753       150,905       113,460       32,519       183,430       81,449  

(-) Net revenue from realized performance fees

     (2,165     (12,212     (7,480     (8,146     (45,949     (6,042

(-) Net revenue from unrealized performance fees

     (895     (5,046     (7,068     (2,849     (16,071     —    

(+) Compensation allocated in relation to performance fees

     385       2,173       862       548       3,091       239  


 

28


Table of Contents
     For the Nine Months Ended
September 30,
    For the Year Ended
December 31,
 
     2020     2020     2019     2019     2019     2018  
     US$ (1)     R$     (US$) (1)     (R$)  
     (in thousands)  

FRE (2)

     24,079       135,820       99,774       22,072       124,501       75,646  

(-) Dividends to Partners, excluding performance fee-related dividends (3)

     (3,906     (22,034     (22,969     (4,674     (26,365     (21,157

Adjusted FRE (2)

     20,172       113,786       76,805       17,398       98,136       54,488  

Operating profit

     26,753       150,905       113,460       32,519       183,430       81,449  

(-) Net revenue from fund management

     (34,613     (195,241     (167,493     (39,677     (223,808     (146,551

(-) Net revenue from advisory

     (4,039     (22,781     (10,588     (1,930     (10,889     (19,611

(+) Personnel expenses and profit sharing

     9,016       50,856       42,259       11,087       62,536       44,193  

(+) Other general and administrative expenses

     5,942       33,519       36,910       8,997       50,751       46,562  

(-) Compensation allocated in relation to performance fees

     (385     (2,173     (862     (548     (3,091     (239

PRE (4)

     2,674       15,085       13,686       10,447       58,929       5,803  

(-) Dividends to Partners related to performance fees (3)

     (618     (3,488     (3,920     (2,762     (15,579     (1,571

Adjusted PRE (4)

     2,056       11,597       9,766       7,685       43,350       4,232  

Profit for the year

     20,707       116,803       95,735       27,591       155,632       56,678  

(-) Net revenue from unrealized performance fees

     (895     (5,046     (7,068     (2,849     (16,071     —    

(+) Income tax from unrealized performance fees

     103       582       815       329       1,853       —    

(+) Compensation allocated in relation to unrealized performance fees

     72       405       601       229       1,289       —    

(-) Unrealized gain from investment income

     (493     (2,779     (14,153     (2,015     (11,368     (5,109

(+) Income taxes on unrealized gain from investment income

     168       945       4,812       685       3,865       1,737  

Distributable Earnings (5)

     19,662       110,910       80,742       23,969       135,200       53,306  

(-) Dividends to Partners, excluding unrealized performance fee-related dividends (3)

     (4,271     (24,094     (24,989     (6,655     (37,538     (22,728

Adjusted Distributable Earnings (5)

     15,391       86,816       55,753       17,314       97,662       30,578  

Profit for the year

     20,707       116,803       95,735       27,591       155,632       56,678  

(-) Dividends to Partners (3)

     (4,525     (25,522     (26,889     (7,436     (41,944     (22,728

Adjusted Profit for the year (6)

     16,183       91,281       68,846       20,155       113,688       33,950  

Total net revenue from services rendered

     41,711       235,280       192,629       52,603       296,717       172,204  

(-) Net revenue from realized performance fees

     (2,165     (12,212     (7,480     (8,146     (45,949     (6,042

(-) Net revenue from unrealized performance fees

     (895     (5,046     (7,068     (2,849     (16,071     —    

Net Revenue from Fund Management and Advisory (7)

     38,652       218,022       178,081       41,608       234,697       166,162  

 

(1)

For convenience purposes only, amounts in reais for the nine months ended September 30, 2020 and for the year ended December 31, 2019 have been translated to U.S. dollars using an exchange rate of R$5.6407 to US$1.00, the commercial selling rate for U.S. dollars as of September 30, 2020, as reported by the Central Bank. These translations should not be considered representations that any such amounts have been, could have been or could be converted at that or any other exchange rate. See “Exchange Rates” for further information about recent fluctuations in exchange rates.



 

29


Table of Contents
(2)

Fee related earnings, or FRE, is a metric to monitor the baseline performance of, and trends in, our business, in a manner that does not include performance fees or investment income. We calculate FRE as operating profit, less (a) net revenue from realized performance fees, less (b) net revenue from unrealized performance fees, plus (c) compensation allocated in relation to performance fees. Adjusted FRE is calculated as FRE, less Dividends to Partners, excluding performance fee-related dividends.

(3)

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Factors Affecting the Comparability of Our Results of Operations—Partner Dividends” and “Dividends and Dividend Policy” regarding our historical practice for distributing dividends to our partners. Dividends to partners, or Dividends to Partners, represents a portion of total dividends distributed or declared for distribution by Vinci Partners, related to management fees or performance fees. As set forth in the table above, (a) Dividends to Partners related to performance fees are those dividends that are distributed or declared for distribution to partners in connection with performance related to fund outcomes above their respective benchmarks, (b) Dividends to Partners, excluding performance fee-related dividends are those dividends distributed or declared for distribution to partners other than those related to performance fees, and (c) Dividends to Partners, excluding unrealized performance fee-related dividends are dividends that are distributed or declared for distribution to partners other than dividends for which performance fees are not yet recognized as realized performance fee-related dividends under the relevant accounting criteria (i.e., it is not yet highly probable that the amount of revenue related to such fees will not be changed in the income statement). The following table presents a reconciliation of each of Dividends to Partners related to performance fees, Dividends to Partners, excluding performance fee-related dividends, Dividends to Partners, excluding unrealized performance fee-related dividends and Dividends to Partners to the amount of dividends we report in our financial statements.

 

    For the Nine Months Ended
September 30,
    For the Year Ended
December 31,
 
    2020     2020     2019     2019     2019     2018  
    US$ (a)     R$     R$     (US$) (a)     (R$)  
    (in thousands)  

Dividends paid

    23,017       129,832       60,771       13,514       76,226       45,885  

(-) Dividends not related to management fees or performance fees (b)

    (18,492     (104,310     (33,882     (6,078     (34,282     (23,157

Dividends to Partners

    4,525       25,522       26,889       7,436       41,944       22,728  

Dividends to Partners

    4,525       25,522       26,889       7,436       41,944       22,728  

(-) Management fee-related dividends (c)

    (3,906     (22,034     (22,969     (4,674     (26,365     (21,157

Dividends to Partners related to performance fees

    618       3,488       3,920       2,762       15,579       1,571  

Dividends to Partners

    4,525       25,522       26,889       7,436       41,944       22,728  

(-) Dividends to Partners related to performance fees dividends

    (618     (3,488     (3,920     (2,762     (15,579     (1,571

Dividends to Partners, excluding performance fee-related dividends

    3,906       22,034       22,969       4,674       26,365       21,157  

Dividends to Partners

    4,525       25,522       26,889       7,436       41,944       22,728  

(-) Unrealized performance fee-related dividends

    (253     (1,428     (1,900     (781     (4,406     —    

Dividends to Partners, excluding unrealized performance fee-related dividends

    4,271       24,094       24,989       6,655       37,538       22,728  

 

  (a)

For convenience purposes only, amounts in reais for the nine months ended September 30, 2020 and for the year ended December 31, 2019 have been translated to U.S. dollars using an exchange rate of R$5.6407 to US$1.00, the commercial selling rate for U.S. dollars as of September 30, 2020, as reported by the Central Bank. These translations should not be considered representations that any such



 

30


Table of Contents
  amounts have been, could have been or could be converted at that or any other exchange rate. See “Exchange Rates” for further information about recent fluctuations in exchange rates.
  (b)

Dividends not related to management fees or performance fees are dividends paid to our partners in relation to their participation in the company.

  (c)

Management fee-related dividends are the share of our total Dividends to Partners calculated based on the level of net revenue from fund management and from financial advisory services.

(4)

Performance related earnings, or PRE, is a performance measure that we use to assess our ability to generate profits from revenue that relies on outcomes from funds above their respective benchmarks. We calculate PRE as operating profit, less (a) net revenue from fund management, less (b) net revenue from advisory, plus (c) personnel expenses and profit sharing, plus (d) other general and administrative expenses, less (e) compensation allocated in relation to performance fees. Adjusted performance related earnings, or Adjusted PRE, is calculated as PRE, less Dividends to Partners related to performance fees.

(5)

Distributable Earnings is used as a reference point by our board of directors for determining the amount of earnings available to distribute to shareholders as dividends. Distributable Earnings is calculated as profit for the year, less (a) net revenue from unrealized performance fees, plus (b) income taxes from unrealized performance fees, plus (c) compensation allocated in relation to unrealized performance fees, less (d) unrealized gain from investment income, plus (e) income taxes on unrealized gain from investment income. Adjusted Distributable Earnings, or Adjusted Distributable Earnings, is calculated as Distributable Earnings, less Dividends to Partners, excluding unrealized performance fee-related dividends.

(6)

Adjusted Profit for the year is a performance measure that we use to assess the performance of our business and that we present to provide investors and analysts with information regarding the net results of our business, excluding Dividends to Partners. We calculate Adjusted Profit for the year as profit for the year, less Dividends to Partners.

(7)

Net Revenue from Fund Management and Advisory is a performance measure that we use to assess our ability to generate profits from our fund management and advisory business without measuring for the outcomes from funds above their respective benchmarks. We calculate Net Revenue from Fund Management and Advisory as total net revenue from services rendered less (a) net revenue from realized performance fees and less (b) net revenue from unrealized performance fees.



 

31


Table of Contents

RISK FACTORS

An investment in our Class A common shares involves a high degree of risk. In addition to the other information in this prospectus, you should carefully consider the following risk factors in evaluating us and our business before purchasing our Class A common shares. In particular, you should consider the risks related to an investment in companies operating in Brazil, for which we have included information in these risk factors to the extent that information is publicly available. In general, investing in the securities of issuers whose operations are located in emerging market countries such as Brazil, involves a higher degree of risk than investing in the securities of issuers whose operations are located in the United States or other more developed countries. If any of the risks discussed in this prospectus actually occur, alone or together with additional risks and uncertainties not currently known to us, or that we currently deem immaterial, our business, financial condition, results of operations and prospects may be materially adversely affected. If this were to occur, the value of our Class A common shares may decline and you may lose all or part of your investment. When determining whether to invest, you should also refer to the other information contained in this prospectus, including our audited consolidated financial statements and the related notes thereto. You should also carefully review the cautionary statements referred to under “Cautionary Statement Regarding Forward-Looking Statements.” Our actual results could differ materially and adversely from those anticipated in this prospectus.

Certain Risks Relating to Our Business and Industry

The COVID-19 pandemic and other actual or potential epidemics, pandemics, outbreaks, or other public health crises, may have an adverse impact on our investment portfolio and consequently our business and financial condition.

Our portfolio investments and our business could be materially and adversely affected by the risks (or the public perception of the risks) related to an epidemic, pandemic, outbreak, or other public health crisis, such as the recent outbreak of novel coronavirus (COVID-19). The global spread of the COVID-19 pandemic, which originated in late 2019 and was later declared a pandemic by the World Health Organization in March 2020, has negatively impacted the global economy, disrupted supply chains and created significant volatility in global financial markets. Reflecting this, the COVID-19 pandemic has caused the levels of equity and other financial markets to decline sharply and to become volatile since the onset of the impacts of COVID-19, and the market volatility resulting from the COVID-19 pandemic caused a number of planned public stock offerings and merger and acquisition transactions in Brazil to be postponed or cancelled.

The COVID-19 pandemic and government measures taken in response thereto has caused disruptions in our funds’ portfolio companies’ businesses and could lead to long-term disruptions or closures. For instance, the COVID-19 pandemic has caused work stoppages and increased unemployment, including because of illness or travel or government restrictions in connection with the pandemic. Additionally, the COVID-19 pandemic has resulted in the temporary or permanent closure of many businesses and has required adjustments in how many businesses operate. For example, certain funds in our real estate segment were adversely impacted as a result of shopping mall closures in Brazil lasting over three months. In addition, there is uncertainty surrounding real estate funds with concentrated investments in office space as the real estate market adjusts to shifts in office space demand in response to changes in economic activity and remote working arrangements and longer-term trends in demand for the type and size of office space. These factors have adversely impacted certain of the companies in our investment portfolio and severely disrupted operations and economic conditions generally. In addition, significant market fluctuations driven by the COVID-19 pandemic have resulted in fluctuations in the fair value component of our AUM, and could result in additional fluctuations in our AUM depending on the severity and extent of the ongoing pandemic.

The ultimate extent of the impact of COVID-19 or any other epidemic, pandemic or other health crisis, on our business, financial condition and results of operations will depend on future developments, which are highly uncertain and cannot be predicted with any certainty, which future developments could include new information

 

32


Table of Contents

that may emerge concerning the severity of such epidemic, pandemic or other health crisis and actions taken to contain or prevent their further spread, among others. These and other potential impacts of an epidemic, pandemic or other health crisis, such as the COVID-19 pandemic, could have a material adverse effect on our business, financial condition and results of operations, and it may also have the effect of heightening many of the other risks described in this “Risk Factors” section.

Difficult market and economic conditions can adversely affect our business in many ways, including by reducing the value or performance of the investments that we manage or by reducing the ability of our funds to raise or deploy capital, each of which could negatively impact our net income and cash flow and adversely affect our financial prospects and condition.

Our business and the businesses of the companies in which our funds invest are materially affected by financial markets and economic conditions or events throughout the world, such as interest rates, availability of credit, inflation rates, economic uncertainty, changes in laws (including laws relating to taxation), trade barriers and trade tension (including between the United States and China), commodity prices, currency exchange rates and controls and national and international political circumstances (including wars, terrorist acts or security operations). Future market conditions may be less favorable compared to current and historical market conditions. Adverse conditions in financial markets and the economy can adversely impact our results of operations and financial condition by decreasing our AUM (both directly through a decline in market value or through clients withdrawing investments) and thereby decrease our performance and management fees, as well as by decreasing the investment income we earn from our proprietary investments.

Fluctuations in financial markets and economic conditions are outside our control and may affect the level and volatility of securities prices and liquidity and as a result, the value of our investments and our financial results. In addition, we may not be able to or may choose not to manage our exposure to these conditions and/or events. If not otherwise offset, declines in the equity, commodity and debt in the markets would likely cause us to write down our investments and the investments of our funds. Our profitability may also be materially and adversely affected by our fixed costs and the possibility that we would be unable to scale back other costs within a time frame sufficient to match any decreases in net income relating to a downturn in market and economic conditions.

Unfavorable market and economic conditions may reduce opportunities for our funds to make, exit and realize value from their investments. Challenging market and economic conditions, including those caused by changes in tax laws and other regulatory restrictions, may make it difficult for us to find suitable investments for our funds or secure financing for investments on attractive terms. Such conditions may also result in reduced opportunities for our funds to exit and realize value from their existing investments and lower-than-expected returns on existing investments. Throughout our history, we have exited our portfolio companies through a combination of routes, including selling to strategic buyers, carrying out sponsor to sponsor transactions and through public market exits, including through initial public offerings, or IPOs, and reverse mergers into listed companies. In challenging equity markets, our funds may experience greater difficulty in realizing value from investments. In addition, when financing is not available or becomes too costly, it is difficult for potential buyers to raise sufficient capital to purchase our funds’ investments. Consequently, we may earn lower-than-expected returns on investments, which could cause us to realize diminished or no performance fees, which are typically determined by reference to performance in excess of one or more specified benchmarks.

We generally raise capital for a successor fund following the substantial and successful deployment of capital from the existing fund. In the event of poor performance by existing funds, our ability to raise new funds is impaired. Our fundraising may also be negatively impacted by any change in or rebalancing of fund investors’ asset allocation policies. During periods of unfavorable fundraising conditions, fund investors may negotiate for lower fees, different fee sharing arrangements for transaction or other fees, and other concessions. The outcome of such negotiations could result in our agreement to terms that are materially less favorable to us than for prior funds we have managed. Our current funds, including all our recent private equity funds, have performance

 

33


Table of Contents

hurdles, which require us to generate a specified return on investment prior to our right to receive performance fees. This requirement will likely be in all our future funds, and the hurdle rate could increase for our future funds. In addition, successor funds raised by us when such unfavorable circumstances exist would also likely result in smaller funds than our comparable predecessor funds. Fund investors may also seek to redeploy capital away from certain of our credit or other non-private equity investment vehicles, which permit redemptions on relatively short notice, in order to meet liquidity needs or invest in other asset classes or with other managers. Any of these developments could materially and adversely affect our future revenues, net income, cash flow, financial condition or ability to retain our employees.

During periods of difficult market or economic conditions or slowdowns (which may occur across one or more industries, sectors or geographies), companies or assets in which we have invested may experience decreased revenues, financial losses, credit rating downgrades, difficulty in obtaining access to financing and increased funding costs. These companies may also have difficulty in expanding their businesses and operations or be unable to meet their debt service obligations or pay other expenses as they become due, including amounts payable to us. Negative financial results in our funds’ portfolio companies may result in lower investment returns for our investment funds, which could materially and adversely affect our operating results and cash flow. To the extent the operating performance of such portfolio companies (as well as valuation multiples) deteriorate or do not improve, our funds may sell those assets at values that are less than we projected or even at a loss, thereby significantly affecting those funds’ performance and consequently our operating results and cash flow and resulting in lower or no performance fees being paid to us. Adverse conditions may also increase the risk of default with respect to private equity, credit and other investments that we manage or the abandonment or foreclosure of our real asset investments. Even if economic and market conditions do improve broadly, adverse conditions in particular sectors may also cause our performance to suffer. In addition, low interest rates related to monetary stimulus, economic stagnation or deflation may negatively impact expected returns on all types of investments as the demand for relatively higher return assets increases and the supply decreases. As a result, adverse conditions in financial markets as described above, as well as lower level of transaction activities involving our funds’ investments, which can be unpredictable and outside our control, may negatively impact both the frequency and size of fees generated by our business.

Our performance is subject to the risks of the industries and businesses in which the portfolio companies of our investment funds operate.

Our performance directly ties-in to the payment of fund management and performance fees by our investment funds, which, in turn, are subject to a number of risks inherent to their operations and also to the risk of the businesses and industries in which the portfolio companies of such investment funds operate, as well as advisory fees for financial advisory services, which are subject to transaction closings and realization of IPOs advised by Vinci Partners. Some of these industries are particularly noteworthy for the inherent risks therewith associated, such as infrastructure and real estate. These risks include but are not limited to, those associated with the burdens of ownership of real property, general and local economic conditions, changes in supply of and demand for competing properties in an area (as a result, for instance, of overbuilding), fluctuations in the average occupancy and room rates for hotel properties, operating income, the financial resources of tenants, changes in building, environmental, zoning and other laws, casualty or condemnation losses, energy and supply shortages, various uninsured or uninsurable risks, natural disasters, changes in government regulations (such as rent control or operational licenses), changes in real property tax rates, changes in income tax rates, changes in interest rates, the reduced availability of mortgage funds which may render the sale or refinancing of properties difficult or impracticable, increased mortgage defaults, increases in borrowing rates, changes to the taxation of business entities and the deductibility of corporate interest expense or other applicable tax exemptions or benefits, negative developments in the economy that depress travel activity, environmental liabilities, contingent liabilities on disposition of assets, acts of god, terrorist attacks, war and other factors that are beyond our control. In addition, the acquisition of direct or indirect interests in undeveloped land or underdeveloped real property, which may often be non-income producing, is subject to the risks normally associated with such assets and development activities, including risks relating to the availability and timely receipt of zoning and other

 

34


Table of Contents

regulatory or environmental approvals and licenses, the cost and timely completion of construction (including risks beyond the control of our fund, such as weather or labor conditions or material shortages) and the availability of both construction and permanent financing on favorable terms. Additionally, the investment in energy, manufacturing, transportation, water and sanitation, mining and other infrastructure capital-intensive projects, as well as the development and operation of assets associated with real estate and certain other assets, may expose our investment funds, and, consequently, us, to increased environmental liabilities that are inherent in the ownership of such assets, which under the applicable laws may be imposed regardless of fault.

Changes in the debt financing markets may negatively impact the ability of our investment funds’ portfolio companies and strategies pursued with our balance sheet assets to obtain attractive financing for their investments or to refinance existing debt and may increase the cost of such financing or refinancing if it is obtained, which could lead to lower-yielding investments and potentially decrease our net income.

In the event that our portfolio companies regularly utilize the corporate debt markets in order to obtain financing for their operations, to the extent that credit markets render such financing difficult to obtain or more expensive, this may negatively impact the operating performance of those portfolio companies and, therefore, the investment returns on our funds. In addition, to the extent that conditions in the credit markets impair the ability of our portfolio companies to refinance or extend maturities on their outstanding debt, either on favorable terms or at all, the operating performance of those portfolio companies may be negatively impacted, which could impair the value of our investment in those portfolio companies and lead to a decrease in the investment income earned by us. In some cases, the inability of our portfolio companies to refinance or extend maturities may result in the inability of those companies to repay debt at maturity or pay interests when due, and may cause the companies to sell assets, undergo a recapitalization or seek bankruptcy protection, any of which would also likely impair the value of our investment and lead to a decrease in investment income earned by us.

Our failure to comply with investment guidelines set by our clients could result in damage awards against us or a reduction in AUM, either of which would cause our earnings to decline and adversely affect our business and financial condition.

When clients retain us to manage assets on their behalf, they specify certain guidelines regarding investment allocation and strategy that we are required to observe in the management of their portfolios. Our failure to comply with these guidelines and other limitations could result in clients terminating their investment management agreement with us and forcing an early redemption of their investments in our funds, as these investment agreements generally are terminable without cause on 30 days’ notice, and/or permit our clients to force an early redemption of their investment without prior notice or on relatively short notice. Clients could also sue us for breach of contract and seek to recover damages from us. In addition, such guidelines may restrict our ability to pursue certain allocations and strategies on behalf of our clients that we believe are economically desirable, which could similarly result in losses to a client, early redemption of a client’s quota, or termination of the asset management agreement and a corresponding reduction in AUM. Even if we comply with all applicable investment guidelines, a client may be dissatisfied with its investment performance or our services or fees, and may terminate their asset management agreements, redeem their quotas or be unwilling to commit new capital to our specialized funds or separate management accounts. Any of these events could cause our earnings to decline and materially and adversely affect our business, financial condition and results of operations.

Fluctuations in interest rates, exchange rates and certain benchmark indices could impact our funding costs and the value of our funds, and fluctuations in these rates and benchmarks could adversely affect our funding costs and the returns on certain of our funds, which could have a material adverse effect on our funds’ liquidity, results of operations and financial condition.

Certain of our funding costs and the returns on certain of our investment funds are tied to certain interest rate indices or other benchmark indices, such as the Brazilian long-term interest rate, or TJLP, the CDI Rate, the SELIC rate, certain inflation indices and certain B3 indices. In addition, carrying costs and the returns on certain

 

35


Table of Contents

of our investment funds based in the United States are tied to or denominated in U.S. dollars, exposing us to risks associated with fluctuations in rate of exchange of U.S. dollars for reais. We have no control over fluctuations in interest rates, market indices or exchange rates and we may not be able to adequately manage our exposure to these benchmarks, which could lead to increased funding costs, carrying costs or decreased returns for our funds, which would have a material adverse effect on our business, financial condition and results of operations. See “—Certain Risks Relating to Brazil—Inflation and certain measures by the Brazilian government to curb inflation have historically harmed the Brazilian economy and Brazilian capital markets, and high levels of inflation in the future would harm our business and the price of our Class A common shares” and “—We are exposed to fluctuations in foreign currency exchange rates and may enter into derivatives transactions to manage our exposure to exchange rate risk.”

We have significant liquidity requirements, and adverse market and economic conditions may adversely affect our sources of liquidity, which could adversely affect our financial condition and results of operations.

We expect that our primary liquidity needs will consist of cash required to:

 

   

continue to grow our business lines, including seeding new strategies, funding our capital commitments made to existing and future funds, and otherwise supporting investment vehicles that we sponsor;

 

   

service any contingent liabilities that may give rise to future cash payments; and

 

   

fund cash operating expenses and contingencies, including for litigation matters.

These liquidity requirements are significant and, in some cases, involve capital that will remain invested for extended periods of time. As of September 30, 2020, we had R$4.9 billion of remaining unfunded capital commitments to our investment funds. Our commitments to our funds will require significant cash outlays over time, and there can be no assurance that we will be able to generate sufficient cash flows from realizations of investments to fund them.

In the event that our liquidity requirements were to exceed available liquid assets for the reasons specified above or for any other reasons, we could be forced to sell assets or seek to raise debt or equity capital on unfavorable terms. For further discussion of our liquidity needs, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources.”

Our earnings and cash flow are highly variable due to the nature of our business and we do not intend to provide earnings guidance, each of which may cause the value of interests in our business to be volatile.

Our earnings are highly variable from quarter to quarter due to the volatility of investment returns of most of our funds, other investment vehicles and our balance sheet assets and the transaction and other fees earned from our businesses. We recognize earnings on investments in our funds based on our allocable share of realized and unrealized gains (or losses) reported by such funds and for certain of our recent funds, when a performance hurdle is achieved. During times of market volatility the fair value of our funds and our balance sheet assets are more variable, and as publicly traded equity securities currently represent a significant proportion of the assets of many of our funds and balance sheet assets, volatility in the equity markets may have a significant impact on our reported results. A decline in realized or unrealized gains, a failure to achieve a performance hurdle or an increase in realized or unrealized losses, would adversely affect our profit for the period.

Net revenue from fund management, net revenue from performance fees and net revenue from advisory, which we recognize when contractually earned, can vary due to fluctuations in AUM, the number of investment transactions made by our funds, the number of portfolio companies we manage, the fee provisions contained in our funds and other investment products and transactions by our financial advisory services. In any particular quarter, fee income may vary significantly due to the variances in size and frequency of management and

 

36


Table of Contents

performance fees, or fees received for our financial advisory services. We may create new funds or investment products or vary the terms of our funds or investment products (for example our funds now include performance hurdles), which may alter the composition or mix of our income from time to time.

We may also experience fluctuations in our results from quarter to quarter, including our net revenue from services rendered and profit for the period, due to a number of other factors, including changes in the values of our funds’ investments, changes in the amount of distributions or interest earned in respect of investments, changes in the number of completed transactions (such as merger and acquisition, or M&A, transactions and/or initial public offerings, or IPOs) for our financial advisory clients, changes in our operating expenses, the degree to which we encounter competition and general market and economic conditions. Such fluctuations may lead to variability in the value of interests in our business and cause our results for a particular period not to be indicative of our performance in future periods. It may be difficult for us to achieve steady growth in net income and cash flow on a quarterly basis, which could in turn lead to large adverse movements in the value of interests in our business.

We are entitled to receive performance fees when the return on assets under management, over a given period established in each fund’s private memorandum, exceeds certain return benchmarks or other performance benchmarks. The timing and receipt of performance fees from our investment funds are unpredictable and will contribute to the volatility of our cash flows. Performance fee payments from investments depend on our funds’ performance and opportunities for realizing gains, which may be limited. It takes a substantial period of time to identify attractive investment opportunities, to raise all the funds needed to make an investment and then to realize the cash value (or other proceeds) of an investment through a sale, public offering or other exit. To the extent an investment is not profitable, no performance fees will be received from our funds with respect to that investment and, to the extent such investment remains unprofitable, we will only be entitled to a management fee on that investment. Furthermore, certain vehicles and separately managed accounts may not provide for the payment of any performance fees at all. Even if an investment proves to be profitable, it may be several years before any profits can be realized in cash. We cannot predict when, or if, any realization of investments will occur. In addition, if finance providers, such as commercial and investment banks, make it difficult for potential purchasers to secure financing to purchase companies in our investment funds’ portfolio, it may decrease potential realization events and the potential to earn performance fees. A downturn in the equity markets would also make it more difficult to exit investments by selling equity securities. If we were to have a realization event in a particular quarter, the event may have a significant impact on our cash flows during the quarter that may not be replicated in subsequent quarters. A decline in realized or unrealized gains, or an increase in realized or unrealized losses, would adversely affect our investment income, which could further increase the volatility of our quarterly results.

The timing and receipt of performance fees also vary with the life cycle of certain of our funds. Our performance-paying funds that have completed their investment periods and are able to realize mature investments, sometimes referred to as being in a “harvesting period,” are more likely to make larger distributions than our performance-paying funds that are in their fundraising or investment periods that precede the harvesting period. During times when a significant portion of our AUM is attributable to performance-paying funds that are not in their harvesting periods, we may receive substantially lower performance fee distributions.

Our investment management activities may involve investments in relatively high-risk, illiquid assets, and we and our clients may lose some or all of the amounts invested in these activities or fail to realize any profits from these activities for a considerable period of time.

The investments made by our funds may include high-risk, illiquid assets. We have made and expect to continue to make investments alongside our investors, as the general partner, in our existing funds and certain customized separate accounts and in any new private markets funds we may establish in the future. The private markets funds in which we invest capital generally invest in securities that are not publicly traded. Even if such securities are publicly traded, many of these funds may be prohibited by contract or applicable securities laws

 

37


Table of Contents

from selling such securities for a period of time. Such funds will generally not be able to sell these securities publicly unless their sale is registered under applicable securities laws, or unless an exemption from such registration requirements is available. Accordingly, the private markets funds in which we invest our clients’ capital may not be able to sell securities when they desire and therefore may not be able to realize the full value of such securities. The ability of private markets funds to dispose of investments is dependent in part on the public equity and debt markets, to the extent that the ability to dispose of an investment may depend upon the ability to complete an IPO of the portfolio company in which such investment is held or the ability of a prospective buyer of the portfolio company to raise debt financing to fund its purchase. Furthermore, large holdings of publicly traded equity securities can often be disposed of only over a substantial period of time, exposing the investment returns to risks of downward movement in market prices during the disposition period. Contributing capital to these funds is risky, and we may lose some or the entire amount of our specialized funds’ and our clients’ investments.

The portfolio companies in which private markets funds have invested or may invest will sometimes involve a high degree of business and financial risk. These companies may be in an early stage of development, may not have a proven operating history, may be operating at a loss or have significant variations in operating results, may be engaged in a rapidly changing business with products subject to a substantial risk of obsolescence, may be subject to extensive regulatory oversight, may require substantial additional capital to support their operations, to finance expansion or to maintain their competitive position, may have a high level of leverage, or may otherwise have a weak financial condition.

In addition, these portfolio companies may face intense competition, including competition from companies with greater financial resources, more extensive development, manufacturing, marketing, and other capabilities, and a larger number of qualified managerial and technical personnel. Our portfolio companies may be subject to additional risks, including changes in currency exchange rates, exchange control regulations, risks associated with different types (and lower quality) of available information, expropriation or confiscatory taxation and adverse political developments, which risks may be exacerbated for any portfolio companies that may be organized in jurisdictions outside of Brazil. In addition, during periods of difficult market conditions or slowdowns in a particular investment category, industry or region, portfolio companies may experience decreased revenues, financial losses, difficulty in obtaining access to financing and increased costs. During these periods, these companies may also have difficulty in expanding their businesses and operations and may be unable to pay their expenses as they become due. A general market downturn or a specific market dislocation may result in lower investment returns for the private markets funds or portfolio companies in which our specialized funds and customized separate accounts invest, which consequently would materially and adversely affect investment returns for our specialized funds and customized separate accounts. Furthermore, if the portfolio companies default on their indebtedness, or otherwise seek or are forced to restructure their obligations or declare bankruptcy, we could lose some or all of our investment and also suffer reputational harm.

We may pursue investment opportunities that involve business, regulatory, legal or other complexities.

We may pursue investment opportunities that have unusually complex business, regulatory and/or legal aspects to them. This complexity presents risks, as such transactions can be more difficult, expensive and time-consuming to finance and execute, it can be more difficult to manage or realize value from the assets acquired in such transactions and such transactions sometimes involve a higher level of regulatory scrutiny or a greater risk of contingent liabilities. Any of these risks could materially and adversely affect our business, financial condition and results of operations.

Our funds may face risks relating to undiversified investments.

While we have a policy of maintaining diversification in accordance with fund objectives and, where applicable, mandatory fund allocation rules, there can be no assurance as to the degree of diversification, if any, that will be achieved in any fund investments. Difficult market conditions or slowdowns affecting a particular

 

38


Table of Contents

asset class, geographic region or other category of investment could have a significant adverse impact on a given fund if its investments are concentrated in that area, which would result in lower investment returns. Accordingly, a lack of diversification on the part of a fund could adversely affect its investment performance and, as a result, our business, financial condition and results of operations.

Investments by our funds may in many cases rank junior to investments made by other investors.

In many cases, the companies in which our funds invest have indebtedness or equity securities, or may be permitted to incur indebtedness or to issue equity securities, that rank senior to our clients’ investments in our specialized funds, customized separate accounts or advisory accounts. By their terms, these instruments may provide that their holders are entitled to receive payments of dividends, interest or principal on or before the dates on which payments are to be made in respect of our clients’ investments. Also, in the event of bankruptcy or liquidation of a company in which one or more of our funds hold an investment, holders of securities ranking senior to our clients’ investments would typically be entitled to receive payment in full before distributions could be made in respect of our clients’ investments. After repaying senior security holders, the company may not have any remaining assets to use for repaying amounts owed in respect of our clients’ investments. To the extent that any assets remain, holders of claims that rank equally with our clients’ investments would be entitled to share on an equal and ratable basis in distributions that are made out of those assets. Also, during periods of financial distress or following an insolvency, our ability to influence a company’s affairs and to take actions to protect investments by our funds may be substantially less than that of those holding senior interests, which could adversely affect our business, financial condition and results of operations.

A decline in the pace or size of investment by our funds would result in our receiving less revenue from fees.

The performance fees (including realized and unrealized performance fees) and management fees that we earn are driven in part by the pace at which our funds make investments and the size of those investments. Any decline in that pace or the size of investments would reduce our revenue from transaction and management fees. Likewise, during an attractive selling environment, our funds may capitalize on increased opportunities to exit investments. Any increase in the pace at which our funds exit investments, if not offset by new commitments and investments, would reduce future management fees. Additionally, in certain of our funds that derive management fees only on the basis of invested capital, the pace at which we make investments, the length of time we hold such investment and the timing of disposition will directly impact our revenues. Many factors could cause such a decline in the pace of investment or the transaction and management fees we receive, including:

 

   

the inability of our investment professionals to identify attractive investment opportunities;

 

   

competition for such opportunities among other potential acquirers;

 

   

unfavorable market and economic conditions;

 

   

decreased availability of capital on attractive terms;

 

   

our failure to consummate identified investment opportunities because of business, regulatory or legal complexities and adverse developments in the Brazilian or global economy or financial markets;

 

   

default by the investors of our investment funds on their contractual obligation to pay-in capital calls as requested by us or the third-party managers with whom we invest, impairing the ability to deploy capital at the intended rate;

 

   

terms we may agree with or provide to our fund investors or investors in separately managed accounts with respect to fees such as increasing the percentage of transaction or other fees we may share with our fund investors; and

 

   

new regulations, guidance or other actions provided or taken by regulatory authorities.

 

39


Table of Contents

Given our focus on achieving investment performance that exceeds the performance of our main competitors, and on maintaining and strengthening investor relations, we may reduce our AUM, restrain its growth, reduce our fees or otherwise alter the terms under which we do business when we deem it in the best interests of our investors—even in circumstances where such actions might be contrary to the near-term interests of holders of our Class A common shares.

From time to time if we decide it is in the best interests of all stakeholders, we may take actions that could reduce the profits we could otherwise realize in the short term. While we believe that our commitment to treating our investors fairly is in the long-term interest of us and our shareholders, we may take actions that could adversely impact our short-term profitability, and there is no guarantee that such actions will benefit us in the long term. The means by which we seek to achieve investment performance that exceeds the performance of our main competitors in each of our strategies could include limiting the AUM in our strategies to an amount that we believe can be invested appropriately in accordance with our investment philosophy and current or anticipated economic and market conditions. Additionally, we may voluntarily reduce management fee rates and terms for certain of our funds or strategies when we deem it appropriate, even when doing so may reduce our short-term revenue. For instance, in order to enhance our relationship with certain fund investors, we have reduced management fees or ceased charging management fees on certain funds in specific instances. In certain investment funds, we have agreed to charge management fees based on invested capital or net asset value as opposed to charging management fees based on committed capital.

We have increasingly undertaken business initiatives to increase the number and type of investment products we offer to retail investors, which could expose us to new and greater levels of risk.

Although retail investors have been part of our historic distribution efforts, we have increasingly undertaken business initiatives to increase the number and type of investment products we offer to high net worth individuals, family offices and other mass affluent investors. In some cases we seek to distribute our funds to such retail investors indirectly through feeder funds sponsored by brokerage firms, private banks or third party feeder providers, and in other cases directly to the qualified clients of private banks, independent investment advisors and brokers. In other cases we create investment funds specifically designed for direct investment by retail investors. Our initiatives to access retail investors entail the investment of resources and our objectives may not be fully realized.

Accessing retail investors and selling retail directed products exposes us to new and greater levels of risk, including heightened litigation and regulatory enforcement risks. To the extent we distribute retail products through new channels, including through unaffiliated firms such as digital distribution platforms, we may not be able to effectively monitor or control the manner of their distribution, which could result in litigation against us, including with respect to, among other things, claims that products distributed through such channels are distributed to customers for whom they are unsuitable or distributed in any other inappropriate manner. Although we seek to ensure through due diligence and onboarding procedures that the channels through which retail investors access our investment products conduct themselves responsibly, to the extent that our investment products are being distributed through third parties, we are exposed to reputation damage and possible legal liability to the extent such third parties improperly sell our products to investors. Similarly, the hiring of employees to oversee independent advisors and brokers presents risks if they fail to follow training, review and supervisory procedures. In addition, the distribution of retail products through new channels whether directly or through market intermediaries could expose us to additional regulatory risk in the form of allegations of improper conduct and/or actions by regulators against us with respect to, among other things, product suitability, conflicts of interest and the adequacy of disclosure to customers to whom our products are distributed through those channels.

 

40


Table of Contents

Our inability to raise additional or successor funds (or raise successor funds of a size comparable to our predecessor funds) could have a material adverse impact on our business.

Our current private equity funds and certain other funds and investment vehicles have a finite life and a finite amount of commitments from fund investors. Once a fund nears the end of its investment period, our success depends on our ability to raise additional or successor funds in order to keep making investments and, over the long term, earning management fees (although our funds and investment vehicles continue to earn management fees after the expiration of their investment periods, they are generally at a reduced rate). Even if we are successful in raising successor funds, to the extent we are unable to raise successor funds of a size comparable to our predecessor funds or the extent that we are delayed in raising such successor funds, our revenues may decrease as the investment periods of our predecessor funds expire and associated fees decrease. The performance of our funds also impacts our ability to raise capital, and deterioration in the performance of our funds would result in challenges with regard to future fundraising. The evolving preferences of our fund investors may necessitate that alternatives to the traditional investment fund structure, such as separately managed accounts, smaller funds and co-investment vehicles, become a larger part of our business going forward. This could increase our cost of raising capital at the scale we have historically achieved. Furthermore, in order to raise capital for new strategies and products without drawing capital away from our existing products, we will need to seek new sources of capital such as individual investors.

Our ability to raise new funds could also be hampered if the general appeal of private equity and alternative investments were to decline. An investment in a limited partner interest in a private equity fund is less liquid than an exchange-traded instrument and the returns on such investment may be more volatile than returns on an investment in securities for which there is a more active and transparent market. Private equity and alternative investments could fall into disfavor as a result of concerns about liquidity and short-term performance. Institutional investors in private equity funds that have suffered from decreasing returns, liquidity pressure, increased volatility or difficulty maintaining target asset allocations may materially decrease or temporarily suspend making new investments in private equity funds. Such concerns could be exhibited, in particular, by public pension funds, which have historically been among the largest investors in alternative assets. Many public pension funds are significantly underfunded and their funding problems have been, and may in the future be, exacerbated by economic downturns. Concerns with liquidity could cause such public pension funds to reevaluate the appropriateness of alternative investments, and other institutional investors may reduce their overall portfolio allocations to alternative investments. This could result in a smaller overall pool of available capital in our industry. There is no assurance that the amount of commitments investors are making to alternative investment funds will continue at recent levels or that our ability to raise capital from investors will not be hampered.

In addition, the asset allocation rules or regulations or investment policies to which such third-party investors are subject could inhibit or restrict the ability of third-party investors to make investments in our investment funds. Coupled with a lack of distributions from their existing investment portfolios, many of these investors may have been left with disproportionately outsized remaining commitments to, and invested capital in, a number of investment funds, which may significantly limit their ability to make new commitments to third-party managed investment funds such as those advised by us.

Fund investors may also seek to redeploy capital away from certain of our credit or other non-private equity investment vehicles, which permit redemptions on relatively short notice in order for investors to meet liquidity needs or invest in other asset classes. We believe that our ability to avoid excessive redemption levels primarily depends on our funds’ continued satisfactory performance, although redemptions may also be driven by other factors important to our fund investors, including their need for liquidity and compliance with investment mandates, even if our performance is superior. Investors’ liquidity needs tend to be more pronounced during periods of market volatility. Any such redemptions would decrease our AUM and revenues.

The number of funds raising capital varies from year to year, and in years where relatively few funds are raising capital, the growth of our AUM and associated fees may be significantly lower. There is no assurance that

 

41


Table of Contents

the raising of funds for new strategies or successor funds will experience success similar to our existing or predecessor funds in the future.

If we cannot make the necessary investments to keep pace with rapid developments and change in our industry, the use of our services could decline, reducing our revenues.

The financial services market in which we compete is subject to rapid and significant changes. This market is characterized by rapid technological change, new product and service introductions, evolving industry standards, changing client needs and the entrance of non-traditional competitors. In order to remain competitive and maintain and enhance customer experience and the quality of our services, we must continuously invest in projects to develop new products and features. These projects carry risks, such as cost overruns, delays in delivery, performance problems and lack of client adoption. There can be no assurance that we will have the funds available to maintain the levels of investment required to support our projects, and any delay in the delivery of new services or the failure to differentiate our services or to accurately predict and address market demand could render our services less desirable, or even obsolete, to our clients.

In addition, the services we deliver are designed to process highly complex transactions and provide reports and other information concerning those transactions, all at high volumes and processing speeds. Any failure to deliver an effective and secure service, or any performance issue that arises with a new service, could result in significant processing or reporting errors or other losses. As a result of these factors, our development efforts could result in increased costs and/or we could experience a loss in business that could reduce our earnings or could cause a loss of revenue if promised new services are not timely delivered to our clients or do not perform as anticipated. We also rely in part, and may in the future rely in part, on third parties for the development of, and access to, new technologies. Our future success will depend in part on our ability to develop or adapt to technological changes and evolving industry standards. We cannot predict the effects of technological changes on our business. If we are unable to develop, adapt to or take advantage of technological changes or evolving industry standards on a timely and cost-effective basis, our business, financial condition and results of operations could be materially adversely affected.

Furthermore, our competitors may have the ability to devote more financial and operational resources than we can to the development of new technologies and services that provide improved functionality and features to such competitors’ existing service offerings. If successful, their development efforts could render our services less desirable to clients, resulting in the loss of clients or a reduction in the performance and management fees and financial services advisory fees we could generate from our service offerings, which could adversely affect our business, financial condition and results of operations.

The success of our business depends on the identification and availability of suitable investment opportunities for our clients.

Our success largely depends on the identification and availability of suitable investment opportunities for our clients. The availability of investment opportunities will be subject to market conditions and other factors outside of our control and the control of the fund managers with which we invest. Past returns of our funds have benefited from investment opportunities and general market conditions that may not continue or reoccur, including favorable borrowing conditions in the debt markets, and there can be no assurance that our funds, or the underlying funds in which we invest, will be able to avail themselves of comparable opportunities and conditions. There can also be no assurance that the private markets funds we manage will be able to identify sufficient attractive investment opportunities to meet their investment objectives. Further, the due diligence investigations we conduct before investments are made by our funds may not uncover all facts relevant to the suitability of such opportunities. See “—Our due diligence processes for investments may not reveal all relevant facts, which could result in a material adverse effect on our business and financial condition.”

 

42


Table of Contents

Substantial and increasingly intense competition within our industry may harm our business.

The financial services market is highly competitive. Our growth will depend on a combination of the continued expansion of the financial services we offer and our ability to increase our market share. Our primary competitors include other alternative investment advisors as well as traditional financial services providers such as affiliates of financial institutions and well-established financial services companies in Brazil. We also face competition from non-traditional financial services providers that have significant financial resources and develop different kinds of services.

Many of our competitors may have substantially greater financial, technological, operational and marketing resources than we do. Accordingly, these competitors may be able to offer more attractive fees to our current and prospective clients, especially our competitors that are affiliated with financial institutions. If competition causes us to reduce the performance and management fees and financial services advisory fees we charge for our services, we will need to aggressively control our costs in order to maintain our profit margins and our revenues may be adversely affected. Moreover, we may not be successful in reducing or controlling costs and our margins may be adversely affected. In particular, we may need to reduce the performance and management fees and financial services advisory fees we charge in order to maintain market share, as clients may demand more customized and favorable pricing from us. We may also decide to terminate client relationships which may no longer be profitable to us due to such pricing pressure. Competition could also result in a loss of existing clients, and greater difficulty in attracting new clients. One or more of these factors could have a material adverse effect on our business, financial condition and results of operations. For further information regarding our competition, see “Business—Competition.”

Client attrition could cause our revenues to decline and the degradation of the quality of the products and services we offer, including support services, could adversely impact our ability to attract and retain clients and partners.

We experience client attrition resulting from several factors, including, among others, closures of businesses of our clients, transfers of investments to our competitors and lack of client satisfaction with investment returns and overall customer relationship and investor experience. We cannot predict the level of attrition in the future and our revenues could decline as a result of higher-than-expected attrition, which could have a material adverse effect on our business, financial condition and results of operations. Furthermore, should we not be successful in selling additional solutions or investment opportunities to our clients, we may fail to achieve our desired rate of growth.

Moreover, our clients expect a consistent level of quality on our investment platform. If the reliability, performance or functionality of our products and services is compromised or the quality of those products or services is otherwise degraded, we could lose existing clients and find it harder to attract new clients and partners, which could adversely affect our business, financial condition and results of operations.

Poor performance by our funds may adversely affect our brand and reputation, the performance fees and investment income received by us, and our growth and ability to raise capital for future funds.

In the event that our funds were to perform unsatisfactorily, in particular if this were the case for a larger fund, this may lead to difficulties for Vinci Partners in attracting fund investors and raising capital for new funds in the future. Poor performance by our funds could also result in a reduction in the performance fees expected to be received by us and the amount of performance fees ultimately received by us or could even result in us receiving no performance fees at all. Fund investors in future Vinci Partners funds may negotiate a lower management fee or a lower allocation of performance fees and investment income to us and the economic terms of our future funds may be less favorable to us than those of existing Vinci Partners funds.

The performance of our funds is always measured against the performance of competitors’ funds and public markets performance, and there is subsequently a risk that, even if our funds perform in line with expectations,

 

43


Table of Contents

where our competitors’ funds or public markets perform better by comparison, this may have an adverse effect on Vinci Partners’ ability to retain or attract fund investors and further adversely affect our ability to negotiate management fee rates or other economic terms of our future funds.

The performance of our funds could be adversely affected by a number of factors, for instance if competition for investment opportunities, on which a particular Vinci Partners fund is focused, increases. Competition for investment opportunities is based primarily on the ability to source such investment opportunities, the pricing, terms and structure of a proposed investment and the certainty of execution. Competition for investment opportunities is also influenced by our funds’ historical returns. For example, a Vinci Partners fund may be chosen as the preferred acquirer because of our history even where competitors are on equal or better footing in terms of pricing at the time of investment; conversely, a Vinci Partners fund may lose out on a potential investment if Vinci Partners was damaged by poor performance, even where a Vinci Partners fund offered better pricing terms than its competitors. Our funds may have been created under different organizational structures with the result that applicable laws and investment limitations might differ from current or future funds. Further, there is a risk that current and future Vinci Partners funds will not benefit from investment opportunities and general market conditions from historical periods. In addition, Vinci Partners funds could also generate lower returns on investments or experience increased risks of investment losses in situations where Vinci Partners offers more aggressive terms for certain investment opportunities when participating in competitive sales processes.

We are subject to risks relating to the dilution of our corporate culture and Brazilian heritage.

We have a strong corporate culture and continuously work to uphold this corporate culture within our organization. Our growth across new product offerings, investment opportunities, asset classes and markets may lead to organizational and cultural challenges. Without the existence of thoughtful strategies aimed at maintaining corporate culture despite rapid growth, there is a risk that our corporate culture will be diluted and our values will change over time. Our focus on our personnel has further been decisive in retaining employees and maintaining good organizational health.

Dilution of our corporate culture and of our Brazilian heritage may lead to key employees leaving us, a change in our leadership style or additional strain on our ability to successfully integrate new employees, new systems or other resources. If we do not uphold our corporate culture, this may also adversely affect our ability to retain and recruit investment advisory professionals and other key personnel. Our personnel is our most important asset, and a dilution of our corporate culture could have a material adverse effect on our continued development, which could adversely affect our business, financial condition and results of operations.

Changed trends in the Brazilian and in the global savings markets or in the private markets industry may adversely affect us.

We are affected by trends in the market for management of savings assets, which market has grown significantly in recent years. Growth has been primarily driven by investment returns, most notably rising equity market values. However, net inflows have made an increasing contribution towards overall growth in industry-wide AUM in recent years. The Brazilian basic interest rate, known as the SELIC rate, has been decreasing in recent years from 14.25% in October 2016 to the current annual rate of 2.00%, an all-time low. This rapid and significant decrease has created an environment beneficial to alternative asset management products, accelerating the migration of retail and institutional investors in Brazil from fixed-income products to alternative investments, such as ours. If basic interest rates are increased, this could result in a significant slowdown in our AUM growth and could necessitate a shift by us to investments in other asset classes or change our mix of investments, and we may not be able to generate the same investment returns that we have generated historically, or could experience a loss on in investments in real terms. In addition, if the positive trends in the asset management industry do not continue or if the industry were to be subject to negative trends, this may impede our ability to raise capital for new funds. Furthermore, fund investors’ investment returns can be impacted by overall public share prices and a decrease in share prices may affect our funds’ returns to fund investors.

 

44


Table of Contents

While we believe the current macroeconomic and interest rate environment has been favorable for our business, driving migration toward alternative investments, such as those that we offer, there is a risk that fund investors may, for instance due to an overall downturn in the public markets, end up over-allocated to private markets, which in turn could have a negative impact on our ability to raise capital for new funds. This may also lead to increased competition from new entrants and established players, making it more difficult for us to source suitable investment opportunities for our funds. For example, within the private equity sector, competitors include Advent International Ltd., Patria Investments Ltd. (in partnership with The Blackstone Group Inc.), Kinea Investimentos Ltda. and Kinea Private Equity Investimentos S.A. (which we refer to together as Kinea), and The Carlyle Group. Within the infrastructure sector, competitors include Patria and Perfin Administração de Recursos Ltda. Within the real estate sector, competitors include Kinea, XP Inc., Banco BTG Pactual S.A. and Credit Suisse Hedging-Griffo (through Credit Suisse Hedging-Griffo Wealth Management S.A. and Credit Suisse Hedging-Griffo Corretora de Valores S.A.). Within the credit sector our main competitors are the large Brazilian banks, including Itau Unibanco S.A., Banco Bradesco S.A., Banco do Brasil and Banco Santander (Brasil) S.A., and investment platforms tied to other financial institutions, including Kinea, XP Inc. and Banco BTG Pactual S.A. Our financial advisory services compete against those of local and international boutique mergers and acquisitions advisory firms. Alternatively, for a variety of reasons, fund investor sentiment may turn against private markets investing. For example, the returns generated by private markets may decline, and other asset classes or investment opportunities may be perceived to offer superior returns. Certain institutional fund investors are also demonstrating a preference to “in-source” their own investment advisory professionals. Such institutional investors may cease to invest in, or reduce their allocations to, our funds, as well as potentially become competitors of Vinci Partners and our funds, all of which could adversely affect our earning potential.

To meet the demands of fund investors, we have a multi-strategy platform including, inter alia, Private Equity, Real Estate, Infrastructure and Credit, enabling fund investors to simplify their investment manager relationships by investing across multiple investment strategies with the same manager. If fund investor requirements and preferences change, this could adversely affect the level of interest for investing in specific asset classes or investing in our funds. Such changes may impede our ability to raise capital for new funds, which could adversely affect our business, financial condition and results of operations.

We may face damage to our professional reputation and legal liability if our services are not regarded as satisfactory or for other reasons.

As an asset management firm, we depend to a large extent on our relationships with our clients and our reputation for integrity and high-caliber professional services to attract and retain clients. As a result, if a client is not satisfied with our services, such dissatisfaction may be more damaging to our business than to other types of businesses.

In recent years, the volume of claims and amount of damages claimed in litigation and regulatory proceedings against financial advisors has been increasing. Our asset management and advisory activities may subject us to the risk of significant legal liabilities to our clients and third parties, including our clients’ stockholders or beneficiaries, under securities or other laws and regulations for materially false or misleading statements made in connection with securities and other transactions. In our investment management business, we make investment decisions on behalf of our clients that could result in substantial losses. Any such losses also may subject us to the risk of legal and regulatory liabilities or actions alleging negligent misconduct, breach of fiduciary duty or breach of contract. Moreover, litigation risk may also arise from a perception from investors that any investment opportunity identified by us that is appropriate for two or more investment funds in a manner that excludes one or more funds or results in a disproportionate allocation based on factors or criteria that we determine is inconsistent with the fiduciary obligations of our subsidiaries under applicable law, governing fund agreements or Vinci Partners’ own policies. These risks often may be difficult to assess or quantify and their existence and magnitude often remain unknown for substantial periods of time. We may incur significant legal expenses in defending litigation. In addition, negative publicity and press speculation about us, our investment activities or the private markets in general, whether or not based in truth, or litigation or regulatory action against

 

45


Table of Contents

us or any third-party managers with whom we invest directly or indirectly involving us may tarnish our reputation and harm our ability to attract and retain clients. Substantial legal or regulatory liability could materially and adversely affect our business, financial condition or results of operations or cause significant reputational harm to us, which could seriously harm our business.

We are subject to increasing scrutiny from certain investors with respect to the governance and/or the social and environmental impact of investments made by our funds, which may constrain capital deployment opportunities for our funds and adversely impact our ability to raise capital from such investors.

In recent years, certain investors, especially pension funds, have placed increasing importance on the negative impacts of investments made by the private equity and other funds to which they commit capital, including with respect to environmental, social and governance, or ESG, matters. Certain investors have also demonstrated increased activism with respect to existing investments, including by urging asset managers to take certain actions that could adversely impact the value of an investment, or refrain from taking certain actions that could improve the value of an investment. At times, investors have conditioned future capital commitments on the taking or refraining from taking of such actions. Increased focus and activism related to ESG and similar matters may constrain our capital deployment opportunities, and the demands of certain investors may further limit the types of investments that are available to our funds. In addition, investors may decide to withdraw previously committed capital from our funds (where such withdrawal is permitted) or to not commit capital to future fundraises as a result of their assessment of our approach to and consideration of the social cost of investments made by our funds. To the extent our access to capital from investors, including pension funds, is impaired, we may not be able to maintain or increase the size of our funds or raise enough capital for new funds, which may adversely impact our revenues.

Unauthorized disclosure, destruction or modification of data, through cybersecurity breaches, computer viruses or otherwise, or disruption of our services could expose us to liability and protracted and costly litigation and damage our reputation.

Our business involves the collection, storage, processing and transmission of customers’ personal data, including names, addresses, identification numbers, bank account numbers and trading and investment portfolio data. An increasing number of organizations, including large clients and businesses, other large technology companies, financial institutions and government institutions, have disclosed breaches of their information technology systems, some of which have involved sophisticated and highly targeted attacks, including on portions of their websites, networks or infrastructure, or those of third parties who provide services to them. We could also be subject to breaches of security by hackers. Threats may derive from human error, fraud or malice on the part of employees or third-party service providers, or may result from accidental technological failure. Concerns about security are increased when we transmit information. Electronic transmissions can be subject to attack, interception or loss. Also, computer viruses and malware can be distributed and spread rapidly over the internet and could infiltrate our systems or those of our associated participants, which can impact the confidentiality, integrity and availability of information, and the integrity and availability of our products, services and systems, among other effects. Denial of service or other attacks could be launched against us for a variety of purposes, including interfering with our services or creating a diversion for other malicious activities. These types of actions and attacks could disrupt our delivery of products and services or make them unavailable, which could damage our reputation, force us to incur significant expenses in remediating the resulting impacts, expose us to uninsured liability, subject us to lawsuits, fines or sanctions, distract our management or increase our costs of doing business.

In the scope of our activities, we share information with third parties, commercial partners, third-party service providers and other agents, who collect, process, store and transmit sensitive data, and we may be held responsible for any failure or cybersecurity breaches attributed to these third parties insofar as they relate to the information we share with them. The loss, destruction or unauthorized modification of data by us or such third parties or through systems we provide could result in significant fines, sanctions and proceedings or actions

 

46


Table of Contents

against us by governmental bodies or third parties, which could have a material adverse effect on our business, financial condition and results of operations. Any such proceeding or action, and any related indemnification obligation, could damage our reputation, force us to incur significant expenses in defense of these proceedings, distract our management, increase our costs of doing business or result in the imposition of financial liability.

Our encryption of data and other protective measures may not prevent unauthorized access to or use of sensitive data. A breach of our system or of the system of one of our commercial partners or third-party service providers may subject us to material losses or liability, including fines. A misuse of such data or a cybersecurity breach could harm our reputation and deter clients from using our products and services, thus reducing our revenues. In addition, any such misuse or breach could cause us to incur costs to correct the breaches or failures, expose us to uninsured liability, increase our risk of regulatory scrutiny, subject us to lawsuits, and result in the imposition of material penalties and fines under state and federal laws or regulations.

We cannot assure you that there are written agreements in place with every third party or that such written agreements will prevent the unauthorized use, modification, destruction or disclosure of data or enable us to obtain reimbursement from such third parties in the event we should suffer incidents resulting in unauthorized use, modification, destruction or disclosure of data. Any unauthorized use, modification, destruction or disclosure of data could result in protracted and costly litigation, which could have a material adverse effect on our business, financial condition and results of operations.

Cybersecurity incidents are increasing in frequency and evolving in nature and include, but are not limited to, installation of malicious software, unauthorized access to data and other electronic security breaches that could lead to disruptions in systems, unauthorized release of confidential or otherwise protected information and the corruption of data. Given the unpredictability of the timing, nature and scope of information technology disruptions, there can be no assurance that the procedures and controls we employ will be sufficient to prevent security breaches from occurring and we could be subject to the manipulation or improper use of our systems and networks or financial losses from remedial actions, any of which could have a material adverse effect on our business, financial condition and results of operations.

Further, as a result of the COVID-19 pandemic, we have increased the number of our employees working remotely. This may cause increases in the unavailability of our systems and infrastructure, interruption of telecommunication services, generalized system failures and heightened vulnerability to cyberattacks. Accordingly, our ability to conduct our business may be adversely impacted.

We will be subject to risks related to noncompliance with data protection laws and the new Brazilian General Data Protection Law, which provides for application of sanctions, including financial penalties, in case of noncompliance.

In 2018, the President of Brazil approved Brazilian Law No. 13,709/2018, named the General Personal Data Protection Law (Lei Geral de Proteção de Dados), or the LGPD, which came into force on September 18, 2020, a comprehensive data protection law establishing the general principles and obligations that apply across multiple economic sectors and contractual relationships. Certain aspects of the LGPD will be subject to further regulation to be enacted by the National Data Protection Authority, which is not operational yet, and should result in changes to the LGPD’s approach that are not yet defined as of the date of this prospectus. However, the administrative sanctions provisions of LGPD will only become enforceable as of August 1, 2021, pursuant to Law No. 14,010/2020. The LGPD establishes detailed rules for the collection, use, processing and storage of personal data in all economic sectors, regardless of whether data is collected in a digital or physical environment. Once the administrative sanctions of the LGPD become enforceable, in the event of a violation of the LGPD, we may be subject to (1) legal notices and the required adoption of corrective measures, (2) fines of up to 2% of the our or our economic group’s revenues up to a limit of R$50.0 million per infraction, (3) publication of the infraction following confirmation of its occurrence, (4) the blocking and erasing of personal data involved in the infraction, (5) partial or complete suspension of the infringing processing activities for up to one year and

 

47


Table of Contents

(6) partial or complete prohibition to engage in processing activities. The effectiveness of such administrative sanctions, however, has been postponed to August 2021. Moreover, we may be liable for property, moral, individual or collective damages caused by us, including by third party providers that process personal data for us, and jointly liable for property, moral, individual or collective damages caused by our subsidiaries, due to non-compliance with the obligations established by the LGPD and certain other sector-specific laws and regulations on data protection still in force. If we are unable to use sufficient measures to protect the personal data we manage and store or to maintain compliance with the LGPD, we may incur material costs which could have an adverse effect in our reputation and results of operations.

We may be held liable for material, punitive, individual or collective damages to the data subjects due to its processing and treatment and could be held individually or severally responsible for material, punitive, individual or collective damages caused by us, our subsidiaries, service providers that process personal data on our behalf or our affiliates due to non-compliance with the obligations set forth by the LGPD, which may adversely affect our reputation and results and, consequently, the value of our Class A common shares.

In the event of failure or insufficiency in the adoption of measures to protect the personal data that is processed or to maintain compliance with the Brazilian General Data Protection Law, we may incur relevant costs, such as the payment of fines and indemnities, implementation of adjustment measures, and loss of business, as well as such failure or insufficiency having an adverse effect on our reputation and results of operations. As a result, we may be held liable even before the Brazilian General Data Protection Law sanctions come into force since consumer protection authorities and the Public Prosecutor’s Office have already been active in pursuing data privacy violations even before the LGPD became effective. Accordingly, failures in the protection of the personal data processed by us, or any failure to implement adequate data protection measures in response to applicable legislation, may subject us to high fines, the disclosure of the incident to the market, the payment of indemnities, the elimination of personal data from the database in question and the suspension of access to our databases, prohibition of our activities related to the processing of infringed data in addition to civil sanctions, which may adversely affect our reputation and results.

In addition, despite the fact that the administrative sanctions of the LGPD will not become applicable until August 2021, the application of administrative sanctions under other laws that deal with privacy and data protection issues may still apply, such as the Consumer Protection Code and the Brazilian Civil Rights Framework for the Internet. These administrative sanctions may be imposed by other public authorities, such as the Public Prosecutors’ Offices, the National Consumer Secretariat and consumer protection agencies. We may also be subject to liability in the civil sphere for violation of these laws. Sanctions imposed against us by these authorities may also adversely affect our reputation and results and, consequently, the value of our Class A common shares.

Our business depends on our well-regarded, reliable brand, and any failure to maintain, protect, and enhance our brand and related brands, including through effective marketing and communications strategies, would harm our business.

We have developed a well-regarded and reliable brand, “Vinci Partners,” that has contributed significantly to the success of our business. Maintaining, protecting, and enhancing our brands is critical to expanding our client base, and our relationships with other third-party partners, as well as increasing engagement with our products and services. This will depend largely on our ability to remain widely known, maintain trust, be a technology leader, and continue to provide high-quality and secure products and services. Any negative publicity about our industry or our company, the quality, reliability and performance of our products and services, our risk management processes, changes to our products and services, our ability to effectively manage and resolve client complaints, our privacy and security practices, litigation, regulatory activity, and the experience of clients with our products or services could adversely affect our reputation and the confidence in and use of our products and services. Harm to our brands can arise from many sources, including failure by us or our partners to satisfy expectations of service and quality, inadequate protection of personal information, compliance failures and

 

48


Table of Contents

claims, litigation and other claims, third-party trademark infringement claims, administrative proceedings at the applicable national trademark offices, employee misconduct, and misconduct by our partners, service providers, or other counterparties. If we do not successfully maintain well-regarded and widely known brands, our business could be materially and adversely affected.

We may in the future be the target of incomplete, inaccurate, and misleading or false statements about our company, our business, and our products and services that could damage our brands and materially deter people from adopting our services. Negative publicity about our company or our management, including about our product quality, reliability and performance, changes to our products and services, privacy and security practices, litigation, regulatory enforcement, and other actions, as well as the actions of our clients and other users of our services, even if inaccurate, could cause a loss of confidence in us. Our ability to respond to negative statements about us may be limited by legal prohibitions on permissible public communications by us during our initial public offering process or during future periods.

In addition, we believe that promoting our brands in a cost-effective manner is critical to achieving widespread acceptance of our products and services and to expanding our base of clients. Our brand promotion activities may not generate customer awareness or increase revenue, and even if they do, any increase in revenue may not offset the expenses we incur in building our brands. If we fail to successfully promote and maintain our brands or if we incur excessive expenses in this effort, our business could be materially and adversely affected.

The introduction and promotion of new services, as well as the promotion of existing services, may be partly dependent on our visibility on third-party advertising platforms, such as LinkedIn, Google, Facebook or Instagram. Changes in the way these platforms operate or changes in their advertising prices or other terms could make the maintenance and promotion of our products and services and our brands more expensive or more difficult. If we are unable to market and promote our brands on third-party platforms effectively, our ability to acquire new clients would be materially harmed, which could adversely affect our business, financial condition and results of operations.

Large investments made by certain of our funds may involve certain complexities and risks that may not be encountered in the context of small- and medium-sized investments and concentrated positions in any of our funds may expose us to losses.

Where our funds make large investments, these may involve certain complexities and risks that may not be encountered in small- and medium-sized investments. For example, larger transactions may be more difficult to finance or may entail greater challenges in implementing changes in the relevant portfolio company’s management, culture, finances or operations, and may face greater scrutiny by regulators, interest groups and other third parties. Further, in larger transactions, the amount of equity capital required to complete an investment has increased significantly. This has resulted in some larger private equity deals being structured as consortium transactions. Consortium transactions generally entail a reduced level of control over the investment because governance rights must be shared with the other consortium investors. Accordingly, in such deals, our funds may not be able to separately control decisions relating to a consortium investment and the timing and nature of any exit. In addition, large investments could result in concentrated positions in certain of our funds, or certain of our funds may have concentrated positions in the securities of certain issuers or of issuers of a particular industry, country or region, which could expose us to losses in respect of such issuer, industry, country or region. Any of these factors could increase the risk that our funds’ larger investments could be less successful than investments over which the relevant Vinci Partners fund has full control or has a more diversified position. The consequences of an unsuccessful larger investment by a Vinci Partners fund could be more severe given the size of the investment and any such adverse consequences could, in turn, have a material adverse impact on our brand and reputation as well as adversely affect the performance fees and investment income received by us from the relevant fund, which could adversely affect our business, financial condition and results of operations.

 

49


Table of Contents

We rely on a number of external service providers for certain key market information and data, technology, processing and supporting functions.

We rely on a number of external service providers for certain key market information and data, technology, processing and supporting functions, such as Microsoft and SS&C Eze, among others. The functions these service providers provide include portfolio management and asset allocation services, compliance management, communication systems, registration systems, data control systems, information security systems, and others which are of critical importance for us in order to provide our services to our clients in a satisfactory manner. These service providers may face technical, operational and security risks of their own, including risks similar to those that we face as described herein. Any significant failures by them, including improper use or disclosure of our confidential customer, employee or company information, could interrupt our business, cause us to incur losses and harm our reputation. Particularly, we rely on certain systems and institutions to allow our portfolio managers to access real-time market information data, such as Bloomberg, Reuters, Broadcast, Quantum and Economática, which are essential for our managers to make their investment decisions and take certain actions (such as making trades). Any failure of such information providers to update or deliver such data in a timely manner could lead to potential losses of our funds, which may in turn affect our business operations and reputation and may cause us to incur losses.

We cannot assure you that the external service providers will be able to continue to provide these services to meet our current needs in an efficient and cost-effective manner, or that they will be able to adequately expand their services to meet our needs in the future. Some external service providers may have assets and infrastructure that are important to the services they provide us that are located in or outside Brazil, and their ability to provide these services is subject to risks from unfavorable political, economic, legal or other developments, such as social or political instability, changes in governmental policies or changes in the applicable laws and regulations of the jurisdictions in which their assets and operations are located.

An interruption in or the cessation of service by any external service provider as a result of system failures, capacity constraints, financial constraints or problems, unanticipated trading market closures or for any other reason and our inability to make alternative arrangements in a smooth and timely manner, if at all, could have a material adverse effect on our business, financial condition and results of operations.

Further, disputes might arise in relation to the agreements that we enter into with our service providers or the performance of the service providers thereunder. To the extent that any service provider disagrees with us on the quality of the products or services to be provided under the terms and conditions of the payment under or other provisions of any such agreement, we may face claims, disputes, litigations or other proceedings initiated by such service provider against us. We may incur substantial expenses and require significant attention of management in defending against these claims, regardless of their merit. We could also face damage to our reputation as a result of such claims, and our business, financial condition, results of operations and prospects could be materially and adversely affected.

We may not be able to ensure the accuracy of the information for third-party funds that we invest in for our clients, and we have no control over the performance of these third-party funds.

We invest our clients’ funds in certain third-party funds. While the information related to these third-party funds has been generally reliable, there can be no assurance that the reliability can be maintained in the future. If these third-party funds or their service providers or agents provide incomplete, misleading, inaccurate or fraudulent information in relation to their funds, we may lose the trust of existing and prospective investors.

Furthermore, as clients invest in these third-party funds through funds managed by us, they may have the impression that we are at least partially responsible for the quality and performance of these funds. Although we have established standards to screen fund providers before we invest in these funds, we have limited control over the performance of these third-party funds. In the event that an investor is dissatisfied with a third-party fund

 

50


Table of Contents

invested in by us, we do not have any means to directly make improvements in response to client complaints. If investors become dissatisfied with these third-party funds, our business, reputation, financial performance and prospects could be adversely affected.

We rely upon our systems and upon third-party data center service providers to host certain aspects of our platform and content, and any systems failure due to factors beyond our control or any disruption to, or interference with, our use of third-party data center services could interrupt our service, increase our costs and impair our ability to deliver our platform, resulting in customer dissatisfaction, damaging our reputation and harming our business.

We utilize data center hosting facilities from a third-party service provider to make certain content available on our platform. Our primary data centers are located in Rio de Janeiro, Brazil. Our operations depend, in part, on our providers’ ability to protect their facilities against damage or interruption from natural disasters, power or telecommunications failures, criminal acts and similar events. The occurrence of natural disasters, acts of terrorism, vandalism or sabotage, a decision to close a facility without adequate notice, or other unanticipated problems at our providers’ facilities could result in lengthy interruptions in the availability of our platform, which would adversely affect our business.

In addition, we depend on the efficient and uninterrupted operation of numerous systems, including our computer systems, software, data centers and telecommunications networks, as well as the systems of third parties. Our systems and operations or those of our third-party providers could be exposed to damage or interruption from, among other things, fire, natural disaster, power loss, telecommunications failure, unauthorized entry and computer viruses. Defects in our systems or those of third parties, errors or delays in the processing of transactions, telecommunications failures or other difficulties could result in:

 

   

loss of revenues;

 

   

loss of clients;

 

   

loss of client data;

 

   

loss of licenses, registrations or authorizations with the CVM, ANBIMA and/or any other applicable authority;

 

   

fines imposed by applicable regulatory authorities and other issues relating to noncompliance with applicable asset management services or data protection requirements;

 

   

harm to our business or reputation resulting from negative publicity;

 

   

exposure to fraud losses or other liabilities;

 

   

additional operating and development costs; and/or

 

   

diversion of technical and other resources.

Valuation methodologies for certain assets in Vinci Partners funds involve subjective judgments and assumptions and the fair value of assets established pursuant to such methodologies could, therefore, be incorrect, which could have an adverse effect on fund performance, accrued performance fees and investment income.

Valuation methodologies for investments held by our funds can involve subjective judgments, and the fair value of assets established pursuant to such methodologies may therefore be incorrect, which could have an adverse effect on fund performance and accrued performance fees.

There are often no readily ascertainable market prices for a substantial majority of investments of funds that we manage. As of September 30, 2020, investments in non-listed companies comprise 81.3% of investments in

 

51


Table of Contents

portfolio companies for the private equity funds that we manage. Valuations of the investments held by our funds are generally prepared in line with applicable and recognized valuation processes and procedures (including, in respect of private equity investments in accordance with the international private equity and venture capital valuation guidelines). There is a risk that investments held by our funds will not be realized for amounts equal to, or greater than, the amounts at which they are valued, or that the past valuations based on such performance information will not accurately reflect the realization value of such investments. An investment’s actual realization value will depend on, among other factors, future operating results of the relevant investment, the value of the assets and market conditions at the time of disposal, any related transaction costs and the timing and manner of sale, all of which may differ from the assumptions on which previous valuations were determined.

Valuations of unrealized investments held by our funds can affect the amount of performance fees generated by our funds in circumstances where unrealized investments are written off or written down in value. To the extent that a valuation is incorrect, this may result in a recognition of revenue from performance fees, a subsequent reduction of which could ultimately reduce our profitability. Valuation of unrealized investments held by our funds could also affect management fees in the case of a bankruptcy of a portfolio company of a Vinci Partners fund, whereby the investment is considered realized and the invested capital is deducted from the base on which management fee is calculated, which could have an effect on the income from management fees received by Vinci Partners from existing funds.

Changes in values attributed to investments from time to time may result in volatility in the results of operations that our funds and we report from period to period. Also, a situation where asset values turn out to be materially different to those values previously realized could cause fund investors to lose confidence in us, which could in turn result in difficulty in raising capital for additional funds, and as a consequence, could adversely affect our business, financial condition and results of operations.

The historical performance of our investments should not be considered as indicative of the future results of our investments or our operations or any returns expected on an investment in our Class A common shares.

Past performance of our funds is not necessarily indicative of future results or of the performance of our Class A common shares. An investment in our Class A common shares is not an investment in any of our funds. In addition, the historical and potential future returns of funds that we manage are not directly linked to returns on our Class A common shares. Therefore, you should not conclude that continued positive performance of funds will necessarily result in positive returns on an investment in our Class A common shares. However, poor performance of our specialized funds could cause a decline in our revenue, and could therefore have a negative effect on our performance and on returns on an investment in our Class A common shares.

The historical performance of our funds should not be considered indicative of the future performance of these funds or of any future funds we may raise, in part because:

 

   

market conditions and investment opportunities during previous periods may have been significantly more favorable for generating positive performance than those we may currently be experiencing or that we may experience in the future;

 

   

the performance of our funds is generally calculated on the basis of net asset value of the funds’ investments, including unrealized gains, which may never be realized;

 

   

our historical returns derive largely from the performance of our earlier funds, whereas future fund returns will depend increasingly on the performance of our newer funds or funds not yet formed;

 

   

our newly established funds may generate lower returns during the period that they initially deploy their capital;

 

   

competition continues to increase for investment opportunities, which may reduce our returns in the future;

 

52


Table of Contents
   

the performance of particular funds also will be affected by risks of the industries and businesses in which they invest; and

 

   

we may create new funds that reflect a different asset mix and new investment strategies, as well as a varied geographic and industry exposure, compared to our historical funds, and any such new funds could have different returns from our previous funds.

If we lose key personnel, our business, financial condition and results of operations may be adversely affected.

We are dependent upon the ability and experience of a number of key personnel, including our partners and other members of senior management, who have substantial experience with our operations, the financial services industry and the markets in which we offer our products and services. Many of our key personnel have worked for us for a significant amount of time or were recruited by us specifically due to their industry experience. It is possible that the loss of the services of one or a combination of our senior executives or key managers, including our chief executive officer, could have a material adverse effect on our business, financial condition and results of operations.

The ability to attract, recruit, develop and retain qualified employees and continue to strengthen our business is critical to our success and growth. If we are not able to do so, our business and prospects may be materially and adversely affected.

Our business functions at the intersection of rapidly changing technological, social, economic and regulatory developments that require a wide-ranging set of expertise and intellectual capital. In order for us to successfully compete and grow, we must attract, recruit, develop and retain the necessary personnel who can provide the needed expertise across the entire spectrum of our intellectual capital needs. While we have a number of our key personnel who have substantial experience with our operations, we must also develop our personnel to provide succession plans capable of maintaining continuity in the midst of the inevitable unpredictability of human capital. However, the market for qualified personnel is competitive, and we may not succeed in recruiting additional personnel or may fail to effectively replace current personnel who depart with qualified or effective successors. We must continue to hire additional personnel to execute our strategic plans. Our effort to retain and develop personnel may also result in significant additional expenses, which could adversely affect our profitability. We cannot assure you that our qualified employees will continue to be employed by us or that we will be able to attract and retain qualified personnel in the future. Failure to retain or attract key personnel could have a material adverse effect on our business, financial condition and results of operations.

In addition, in order to manage our growth effectively, we must continue to strengthen our existing infrastructure, develop and improve our internal controls, create and improve our reporting systems, and timely address issues as they arise. These efforts may require substantial financial expenditures, commitments of resources, developments of our processes, and other investments and innovations. Furthermore, we encourage employees to quickly develop and launch new features for our products and services. As we grow, we may not be able to execute our strategies as quickly as smaller, more efficient organizations. If we do not successfully manage our growth, our business will suffer.

Implementing our growth strategy, including new investment products and business initiatives, may be unsuccessful.

We may be subject to a number of risks and uncertainties associated with our growth strategy, including the risk that new business initiatives will not contribute towards achieving our objectives or that we will not execute such new initiatives successfully. New initiatives may also be difficult to launch, for instance where we do not have a proven track record within the area of the new initiative, or may not reach the set goals and expectations following launch. Any new products we offer may have different economic structures than our traditional

 

53


Table of Contents

investment funds and may require a different marketing approach. Given our diverse offering of products and services, these initiatives could create conflicts of interests with existing products, increase our costs and expose us to new market risks and legal and regulatory requirements and could expose us to greater reputation and litigation risk. Implementing our growth strategy may also entail significant difficulties and costs, including the logistical and overhead costs of opening and expanding offices, the cost of recruiting, training and retaining a higher number of investment advisory professionals and higher costs arising from exposure to additional jurisdictions (including the laws, rules and regulations thereof) and activities. New initiatives and expanding our business, including to open new offices or develop new product offerings, could also divert significant time and attention of our senior management in the development of such new initiatives to the detriment of our existing business. Furthermore, we may be directly exposed to new business risks or be subjected to enhanced exposure to existing risks if business initiatives are financed with our own capital.

We may be exposed to asset-specific risks, including those relating to the holding of publicly traded securities, such as fluctuating stock prices and additional media scrutiny, which by extension may have an adverse effect on our brand and reputation. In addition, when our funds acquire minority stakes in public companies, or our portfolio companies are listed, these public companies may make decisions with which the relevant Vinci Partners fund disagrees, and the majority stakeholders or the management of the company may take risks or otherwise act in a manner that does not serve our funds’ interests.

Any failure of our new initiatives to meet or exceed expectations could lead to us not reaching profitability within the initiative, not growing in accordance with our growth strategy and not being able to enjoy the benefits that this is expected to lead to, as well preventing us from reaching our growth targets. In order for us to successfully compete and grow, we must attract, recruit, develop and retain the necessary personnel who can provide the needed expertise across the entire spectrum of our intellectual capital needs.

We are subject to various risks associated with the securities industry, any of which could have a materially adverse effect on our business, cash flows and results of operations.

We are subject to uncertainties that are common across the securities industry. These uncertainties include:

 

   

the volatility of domestic and international financial, bond and stock markets, and the markets for funds and other asset classes, in particular in the context of the COVID-19 pandemic;

 

   

extensive governmental regulation;

 

   

litigation;

 

   

intense competition;

 

   

poor performance of investments made by us or by third party investment managers with whom we invest;

 

   

substantial fluctuations in the volume and price level of securities; and

 

   

dependence on the solvency of various third parties.

As a result, our revenues and earnings may vary significantly from quarter to quarter and from year to year. Sudden sharp declines in market values of securities and the failure of issuers and counterparties to perform their obligations can result in illiquid markets which, in turn, may result in our having difficulty selling securities. In the event of a market downturn, or in the event of increased market volatility, including as a result of the COVID-19 pandemic, our business could be adversely affected in many ways, potentially for a prolonged period of time.

Our holding company structure makes us dependent on the operations of our subsidiaries.

We are a Cayman Islands exempted company with limited liability. As a holding company, our corporate purpose is to invest, as a partner, quotaholder or shareholder, in other companies, consortia or joint ventures in

 

54


Table of Contents

Brazil, where most of our operations are located, and outside Brazil. Accordingly, our material assets are our direct and indirect equity interests in our subsidiaries, and we are therefore dependent upon the results of operations and, in turn, the payments, dividends and distributions from our subsidiaries for funds to pay our holding company’s operating and other expenses and to pay future cash dividends or distributions, if any, to holders of our Class A common shares, and we may have tax costs in connection with any dividend or distribution. In addition, the payments, dividends and distributions from our subsidiaries to us for funds to pay future cash dividends or distributions, if any, to holders of our Class A common shares, could be restricted under financing arrangements that we or our subsidiaries may enter into in the future and we and such subsidiaries may be required to obtain the approval of lenders to make such payments to us in the event they are in default of their repayment obligations. Furthermore, exchange rate fluctuation will affect the U.S. dollar value of any distributions our subsidiaries make with respect to our equity interests in those subsidiaries. See “—Certain Risks Relating to Brazil—Exchange rate instability may have adverse effects on the Brazilian economy, us and the price of our Class A common shares,” “— Certain Risks Relating to Brazil—Economic uncertainty and political instability in Brazil may harm us and the price of our Class A common shares” and “Dividends and Dividend Policy.”

We may be subject to credit risks and could be subject to losses that would have a material adverse effect on our financial condition and results of operations.

We may be subject to the risk that our counterparties’ credit worthiness will deteriorate and that they no longer will be able to fulfil their financial obligations towards us. Our credit risks relate primarily to receivables and contract assets, cash held in bank accounts, any derivative instruments outstanding with a positive fair value, and any financial guarantees. If measures taken by us to minimize credit risks are not sufficient, or if one or more counterparties run into financial difficulties, we could be subject to losses, which could have a material adverse effect on our financial condition and results of operations.

The performance of our funds may also be affected by credit risks, which subsequently could adversely affect us. In our funds’ activities, defaults on commitments may have adverse consequences on the investment process. For instance, fund investors may not satisfy their contractual obligation to fund capital calls when requested by the general partner or fund manager of the relevant fund. This may result in shortfalls in capital and may affect the relevant fund’s ability to consummate investments and adversely affect our ability to receive management fees and other income.

We are exposed to fluctuations in foreign currency exchange rates and may enter into derivatives transactions to manage our exposure to exchange rate risk.

We hold certain funds in non-Brazilian real currencies, and will continue to do so in the future, including a portion of the proceeds from this offering, and our offshore operating subsidiaries generate revenue in non-Brazilian real currencies. Accordingly, our financial results are affected by the translation of these non-real currencies into reais. In addition, to the extent that we need to convert future financing proceeds into Brazilian reais for our operations, any appreciation of the Brazilian real against the relevant foreign currencies would materially reduce the Brazilian real amounts we would receive from the conversion, and any depreciation of the Brazilian real against the relevant foreign currencies could increase the amounts in Brazilian reais that we are require to convert into the relevant foreign currencies in order to service such relevant foreign currency financings. No assurance can be given that fluctuations in foreign exchange rates will not have a significant impact on our business, financial condition, results of operations and prospects. We may also have foreign exchange risk on any of our other assets and liabilities denominated in currencies, or with pricing linked to currencies, other than our functional currency, including certain contract assets. Fluctuations in the Brazilian real versus any of these foreign currencies may have a material adverse effect on our financial position and results of operations including, for example as a result of overall market declines and increased volatility due to the COVID-19 pandemic.

 

55


Table of Contents

In addition, we may in the future enter into derivatives transactions to manage our exposure to exchange rate risk. Such derivatives transactions would be designed to protect us against increases or decreases in exchange rates, but not both. If we enter into derivatives transactions to protect against, for example, decreases in the value of the real and the real instead increases in value, we may incur financial losses. Such losses could materially and adversely affect us.

We have identified material weaknesses in our internal control over financial reporting and, if we fail to remediate such deficiencies (and any other ones) and to maintain effective internal controls over financial reporting, we may be unable to accurately report our results of operations, meet our reporting obligations and/or prevent fraud.

Prior to this offering, we were a private company with limited accounting personnel and other resources to address our internal control over financial reporting and procedures. Our management has not completed an assessment of the effectiveness of our internal control over financial reporting and our independent registered public accounting firm has not conducted an audit of our internal control over financial reporting. In connection with the preparation of our consolidated financial statements for the year ended December 31, 2019, we identified a number of material weaknesses in our internal control over financial reporting as of December 31, 2019. A material weakness is a deficiency, or combination of control deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim consolidated financial statements will not be prevented or detected on a timely basis.

The material weaknesses identified relate to our insufficient accounting resources and processes necessary to comply with the reporting and compliance requirements of IFRS and the U.S. Securities and Exchange Commission, or the SEC. Specifically:

 

   

we identified material weaknesses related to (1) managing access to our systems, data and end-user computing, or EUC, controls, and (2) computer operations controls, which were not designed or operating effectively;

 

   

we identified material weaknesses related to (1) supervision in relation to financial reporting for a public company, including lack of an audit committee; and (2) training, specifically, training addressing financial reporting topics for a public company; and

 

   

we identified control deficiencies related to controls around the financial reporting closing process, the procedures in existence to maintain formal accounting policies, processes and controls to analyze, account for and disclose complex transactions, including controls of proper evidence of recognition and measurement of revenues; such deficiencies, when considered in the aggregate, would be considered a material weakness.

These material weaknesses did not result in a material misstatement to our consolidated financial statements.

We are in the process of adopting a remediation plan to improve our internal control over financial reporting, including increasing the depth and experience within our accounting and finance team, designing and implementing improved processes and internal controls, including the implementation of an audit committee. However, we cannot assure you that our efforts will be effective or prevent any future material weaknesses in our internal control over financial reporting.

After this offering, we will be subject to the Sarbanes-Oxley Act, which requires, among other things, that we establish and maintain effective internal controls over financial reporting and disclosure controls and procedures. Under the current rules of the SEC we will be required to perform system and process evaluation and testing of our internal controls over financial reporting to allow management to assess the effectiveness of our internal controls. Our testing may reveal deficiencies in our internal controls that are deemed to be material

 

56


Table of Contents

weaknesses or significant deficiencies and render our internal controls over financial reporting ineffective. We expect to incur additional accounting and auditing expenses and to spend significant management time in complying with these requirements. If we are not able to comply with these requirements in a timely manner, or if we or our management identifies material weaknesses or significant deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses, the market price of our Class A common shares may decline and we may be subject to investigations or sanctions by the SEC, the Financial Industry Regulatory Authority, Inc., or FINRA, or other regulatory authorities.

In addition, these new obligations will also require substantial attention from our senior management and could divert their attention away from the day-to-day management of our business. These cost increases and the diversion of management’s attention could materially and adversely affect our business, financial condition and operation results.

Requirements associated with being a public company in the United States will require significant company resources and management attention.

After the completion of this offering, we will become subject to certain reporting requirements of the Securities Exchange Act of 1934, or the Exchange Act, and the other rules and regulations of the U.S. Securities and Exchange Commission, or the SEC, and the Nasdaq. We will also be subject to various other regulatory requirements, including the Sarbanes-Oxley Act. We expect these rules and regulations to increase our legal, accounting and financial compliance costs and to make some activities more time-consuming and costly. For example, we expect these rules and regulations to make it more difficult and more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced policy limits and coverage or incur substantial costs to maintain the same or similar coverage. New rules and regulations relating to information disclosure, financial reporting and controls and corporate governance, which could be adopted by the SEC, the Nasdaq or other regulatory bodies or exchange entities from time to time, could result in a significant increase in legal, accounting and other compliance costs and make certain corporate activities more time-consuming and costly, which could materially affect our business, financial condition and results of operations. These rules and regulations may also make it more difficult for us to attract and retain qualified persons to serve on our board of directors or as executive officers.

These new obligations will also require substantial attention from our senior management and could divert their attention away from the day-to-day management of our business. Given that most of the individuals who now constitute our management team have limited experience managing a publicly traded company and complying with the increasingly complex laws pertaining to public companies, initially, these new obligations could demand even greater attention. These cost increases and the diversion of management’s attention could materially and adversely affect our business, financial condition and results of operations.

Our business is subject to complex and evolving regulations and oversight related to our provision of financial products and services and to costs and risks associated with other increased or changing laws and regulations affecting our business, including developments in data protection and privacy laws, which could harm our business, financial condition and results of operations.

As an asset management firm in Brazil, our business is subject to Brazilian laws and regulations relating to asset management in Brazil, comprising Federal Law No. 6,385/1976 and related rules and regulations issued by the CVM and ANBIMA, among others.

The laws, rules, and regulations that govern our business include or may in the future include those relating to consumer financial protection, tax, anti-money laundering and terrorist financing and escheatment (rules relating to unclaimed property). These laws, rules, and regulations are enforced by multiple authorities and governing bodies in Brazil, including the CVM. In addition, as our business continues to develop and expand, we may become subject to additional rules and regulations, which may limit or change how we conduct our business.

 

57


Table of Contents

In addition, during periods of heightened political and economic uncertainty, the Brazilian federal government could implement additional rules and regulations that could adversely impact our business. See “—Certain Risks Relating to Brazil—The Brazilian federal government has exercised, and continues to exercise, significant influence over the Brazilian economy. This involvement as well as Brazil’s political and economic conditions could harm us and the price of our Class A common shares.”

We are subject to anti-money laundering and terrorist financing laws and regulations in multiple jurisdictions that prohibit, among other things, involvement in transferring the proceeds of criminal or terrorist activities. We could be subject to liability and forced to change our business practices if we were found to be subject to, or in violation of, any laws or regulations impacting our ability to maintain a bank account in the countries where we operate, including the United States, or if existing or new legislation or regulations applicable to banks in the countries where we maintain a bank account, including the United States, were to result in banks in those countries being unwilling or unable to establish and maintain bank accounts for us.

If any person in the Cayman Islands knows or suspects or has reasonable grounds for knowing or suspecting that another person is engaged in criminal conduct or money laundering or is involved with terrorism or terrorist financing and property and the information for that knowledge or suspicion came to their attention in the course of business in the regulated sector, or other trade, profession, business or employment, the person will be required to report such knowledge or suspicion to (i) the Financial Reporting Authority (“FRA”) of the Cayman Islands, pursuant to the Proceeds of Crime Law (2019 Revision) of the Cayman Islands if the disclosure relates to criminal conduct or money laundering, or (ii) a police officer of the rank of constable or higher, or the FRA, pursuant to the Terrorism Law (2018 Revision) of the Cayman Islands, if the disclosure relates to involvement with terrorism or terrorist financing and property. Such a report shall not be treated as a breach of confidence or of any restriction upon the disclosure of information imposed by any enactment or otherwise.

Certain of our subsidiaries are subject to regulation in the United States. If we or any of our subsidiaries obtain additional licenses or registrations in the United States, we could be subject to compliance with additional applicable laws and regulations, including anti-money laundering and terrorist financing laws and regulations, which could adversely affect our business, financial condition, or results of operations.

Although we have a compliance program focused on applicable laws, rules, and regulations (which currently is principally focused on Brazilian law) and are continually investing in this program, we may nonetheless be subject to fines or other penalties in one or more jurisdictions levied by federal, state or local regulators, as well as those levied by foreign regulators. In addition to fines, penalties for failing to comply with applicable rules and regulations could include significant criminal and civil lawsuits, forfeiture of significant assets, or other enforcement actions, including loss of required licenses or approvals in a given jurisdiction. We could also be required to make changes to our business practices or compliance programs as a result of regulatory scrutiny. In addition, any perceived or actual failure to comply with applicable laws, rules, and regulations could have a significant impact on our reputation as a trusted brand and could cause us to lose existing clients, prevent us from obtaining new clients, require us to expend significant funds to remedy problems caused by breaches and to avert further breaches, and expose us to legal risk and potential liability, and we could be (1) required to pay substantial fines and disgorgement of our profits or (2) required to change our business practices. Any disciplinary or punitive action by our regulators or failure to obtain required operating authorizations could seriously harm our business and results of operations.

In addition, the Brazilian regulatory and legal environment exposes us to other compliance and litigation risks that could materially affect our results of operations. These laws and regulations may change, sometimes significantly, as a result of political, economic or social events. Some of the federal, state or local laws and regulations in Brazil that affect us include: those relating to consumer products, product liability or consumer protection; those relating to the manner in which we advertise, market or sell products; labor and employment laws, including wage and hour laws; tax laws or interpretations thereof; bank secrecy laws, data protection and privacy laws and regulations; and securities and exchange laws and regulations. For instance, data protection and

 

58


Table of Contents

privacy laws are developing to take into account the changes in cultural and consumer attitudes towards the protection of personal data (including as a result of the LGPD). There can be no guarantee that we will have sufficient financial and personnel resources to comply with any new regulations or successfully compete in the context of a changing regulatory environment.

We are subject to regulatory activity and antitrust litigation under competition laws.

We are subject to scrutiny from governmental agencies under competition laws in Brazil. Other companies or governmental agencies may allege that our actions violate antitrust or competition laws, or otherwise constitute unfair competition. Contractual agreements with clients or companies, as well as our unilateral business practices, could give rise to regulatory action or antitrust investigations or litigation. Some regulators may perceive our business to have such significant market power that otherwise uncontroversial business practices could be deemed anticompetitive. Any such claims and investigations, even if they are unfounded, may be expensive to defend, involve negative publicity and substantial diversion of management time and effort, and could result in significant judgments against us.

We are subject to anti-corruption, anti-bribery, anti-money laundering and sanctions laws and regulations and failure to comply with such laws and regulations could result in criminal liability, administrative and civil lawsuits, significant fines and penalties, forfeiture of significant assets, as well as reputational harm.

We operate in jurisdictions that have a high risk of corruption and we are subject to anti-corruption, anti-bribery anti-money laundering and sanctions laws and regulations, including the Brazilian Federal Law No. 12,846/2013, or the Clean Company Act, the United States Foreign Corrupt Practices Act of 1977, as amended, or the FCPA, and the Bribery Act 2010 of the United Kingdom, or the Bribery Act. Each of the Clean Company Act, the FCPA and the Bribery Act impose liability against companies who engage in bribery of government officials, either directly or through intermediaries. We have a compliance program that is designed to manage the risks of doing business in light of these new and existing legal and regulatory requirements. Violations of the anti-corruption, anti-bribery, anti-money laundering and sanctions laws and regulations could result in criminal liability, administrative and civil lawsuits, significant fines and penalties, forfeiture of significant assets, as well as reputational harm.

Regulators regularly reexamine their rules and regulatory measures, requirements and procedures, which may lead us to adjust our compliance and anti-money laundering programs, including the procedures we use to verify the identity of our clients and to monitor their transactions and transactions made by our funds. Costs associated with fines or enforcement actions, changes in compliance requirements, or limitations on our ability to grow could harm our business, and any new requirements or changes to existing requirements could impose significant costs, result in delays to planned product improvements, make it more difficult for new customers to join our network and reduce the attractiveness of our products and services. As a result, allegations of improper conduct as well as negative publicity and press speculation about us or our portfolio companies, or the private equity industry in general, whether or not valid, may harm our reputation, which may be more damaging to our business than to other types of businesses.

Misconduct of our employees, consultants or subcontractors could harm us by impairing our ability to attract and retain clients and subjecting us to significant legal liability and reputational harm. Fraud and other deceptive practices or other misconduct at our funds’ portfolio companies could similarly subject us to liability and reputational damage and also harm performance.

Our employees, consultants and subcontractors could engage in misconduct that adversely affects our business. We are subject to a number of obligations and standards arising from our asset management business and our authority over the assets managed by our asset management business. The violation of these obligations and standards by any of our employees, consultants and subcontractors would adversely affect our clients and us. If our employees, consultants and subcontractors were to improperly use or disclose confidential information, we

 

59


Table of Contents

could suffer serious harm to our reputation, financial position and current and future business relationships. Detecting or deterring employee misconduct is not always possible, and the extensive precautions we take to detect and prevent this activity may not be effective in all cases. If one of our employees, consultants and subcontractors were to engage in misconduct or were to be accused of such misconduct, our business and our reputation could be adversely affected.

In recent years, regulatory authorities across various jurisdictions, such as Brazil the United States and the United Kingdom, among others, have increasingly focused on enhancing and enforcing anti-bribery laws, such as the Clean Company Act, FCPA and the Bribery Act. While we have developed and implemented policies and procedures designed to ensure strict compliance by us and our personnel with such laws, such policies and procedures may not be effective in all instances to prevent violations. Any determination that we have violated the Clean Company Act, the FCPA, the U.K. anti-bribery laws or other applicable anti-corruption laws could subject us to, among other things, civil and criminal penalties or material fines, profit disgorgement, injunctions on future conduct, securities litigation and a general loss of investor confidence, any one of which could adversely affect our business prospects, financial position or the market value of our Class A common shares.

In addition, we may also be adversely affected if there is misconduct by personnel of portfolio companies in which our funds invest. For example, financial fraud or other deceptive practices at our funds’ portfolio companies, or failures by personnel at our funds’ portfolio companies to comply with anti-bribery, trade sanctions, anti-harassment or other legal and regulatory requirements, could subject us to, among other things, civil and criminal penalties or material fines, profit disgorgement, injunctions on future conduct and securities litigation, and could also cause significant reputational and business harm to us. Such misconduct may undermine our due diligence efforts with respect to such portfolio companies and could negatively affect the valuations of the investments by our funds in such portfolio companies.

Changes in tax laws, tax incentives, benefits or differing interpretations of tax laws may adversely affect our results of operations.

Changes in tax laws, regulations, related interpretations and tax accounting standards in Brazil, the United States or the Cayman Islands may result in a higher tax rate on our earnings, which may significantly reduce our profits and cash flows from operations. If the taxes applicable to our business increase or any tax benefits are revoked and we cannot alter our cost structure to pass our tax increases on to clients, our financial condition, results of operations and cash flows could be adversely affected. Our activities are also subject to a Municipal Tax on Services (Imposto sobre Serviços), or ISS. Any increases in ISS rates could also harm our profitability.

Furthermore, Brazilian governmental authorities at the federal, state and local levels are considering changes in tax laws in order to cover budgetary shortfalls resulting from the recent economic downturn in Brazil, considering in particular the COVID-19 pandemic and the state of emergency declared by governmental authorities as a consequence thereof and the related socioeconomic impact. Any changes in tax laws instituted by federal, state and local governmental authorities, even if temporary, could result in a more onerous tax burden on us, adversely affecting our business and results of operations. For example, recent discussions concerning the potential imposition of new taxes have raised a number of alternatives, including compulsory loans, wealth and contributions on financial transactions, in addition to the revocation of the income tax exemption for dividend distributions and changes in administrative interpretations regarding dividend distributions as executive compensation. If these proposals are enacted they may harm our profitability by increasing our tax liabilities, increasing our tax compliance costs, or otherwise affecting our financial condition, results of operations and cash flows.

In addition, there are a number of proposed drafts of legislation currently before the Brazilian Congress that aim to implement overall tax reform. Among the drafts under discussion, there are proposals that aim to completely change the consumption taxation system, which would extinguish three federal taxes—excise tax, PIS and COFINS, as well as state value-added taxes, and municipal taxes—and would impose in their place a new

 

60


Table of Contents

tax on operations with goods and services, or IBS, that would apply to consumption. According to a recent proposal by the Brazilian federal government, pending analysis by the Brazilian Congress, PIS and COFINS would be replaced by a new federal contribution (contribution on goods and services, or CBS), which could lead to a higher tax burden on us as compared to PIS/COFINS. If any tax reform is approved, or if there is any change in the laws and regulations that affects the taxes or tax incentives applicable to us and our subsidiaries or portfolio companies, such change or changes could, directly or indirectly, adversely affect our business and results of operations.

Moreover, tax rules in Brazil, particularly at the local level, can change without notice. We may not always be aware of all such changes that affect our business and we may therefore fail to pay the applicable taxes or otherwise comply with tax regulations, which may result in additional tax assessments and penalties for our company.

At the municipal level, the Brazilian government enacted Supplementary Law No. 157/16, which imposed changes regarding the ISS collection applied to the rendering of part of our services. These changes created new obligations, as ISS will now be due in the municipality in which the client contracting our services is located rather than in the municipality in which the service provider’s facilities are located. This obligation was enacted in December of 2016, but its force has been delayed by Direct Unconstitutionality Action No. 5835, or ADI 5835, filed by taxpayers. ADI 5835 challenges the constitutionality of Supplementary Law No. 157/16 before the Supreme Court, arguing that the new legislation would adversely affect companies’ activities due to the increase of costs and bureaucracy related to the ISS payment to several municipalities and the compliance with tax reporting obligations connected therewith. As a result, the Supreme Court granted an injunction to partially suspend the enforcement of article one of Supplementary Law No. 157/16. As of the date of this prospectus, a final decision on this matter is currently pending. On September 23, 2020, the Brazilian federal government enacted Supplementary Law No. 175/2020, which aims to establish a standard for determining the location where ISS must be collected in connection with the rendering of specific services, including investment fund management. ISS is a municipal tax payable by the service provider. Under Supplementary Law No. 175/2020 the ISS collection location for fund management services changes from the municipality where the services originate to the municipality where the services are destined to, which means, in our case, the municipality of incorporation or residence of the quotaholders of the investment funds managed by us. Although ISS for our services is currently taxed in Rio de Janeiro and São Paulo (the municipalities where we are incorporated) at the rate of 2%, the applicable rate may be defined by each municipality at up to 5%. Therefore, the new rules of Supplementary Law 175/2020 could cause an increase in ISS tax payable by us in connection with the services we provide, if we are required to pay ISS in municipalities that charge a ISS rate higher than the 2% rate charged in Rio de Janeiro and São Paulo.

Moreover, tax laws, regulations and treaties are complex and the manner in which they apply to us or to our funds is sometimes open to interpretation and, in some cases, they may be interpreted differently between us and the relevant tax authorities. The application of indirect taxes, such, value-added tax, services tax, business tax and gross receipt tax, to businesses such as ours is complex and continues to evolve. We are required to use significant judgment in order to evaluate applicable tax obligations. In many cases, the ultimate tax determination is uncertain because it is not clear how existing statutes apply to our business. One or more states or municipalities, the federal government or other countries may seek to challenge the taxation or procedures applied to our transactions, which could impose additional reporting, record-keeping or indirect tax collection obligations on businesses like ours or the charge of taxes due, plus charges and penalties. New taxes, social security and labor charges could also require us to incur substantial costs to capture data and collect and remit taxes. If such obligations were imposed, the additional costs associated with tax collection, remittance and audit requirements could have a material adverse effect on our business and financial results.

In addition, to support its fiscal policies, the Brazilian government regularly enacts reforms to tax and other assessment regimes that may affect our funds (including offshore funds) and the investors in such funds. Such reforms include changes in the rate of assessments and, occasionally, enactment of temporary taxes, the proceeds

 

61


Table of Contents

of which are earmarked for designated governmental purposes. The effects of these changes and any other changes that result from enactment of additional tax reforms have not been, and cannot be, quantified. There can be no assurance that any such reforms will not, once implemented, increase the overall tax burden on, and have an adverse effect upon, the operations and business of our private equity funds and their portfolio companies. Furthermore, such changes have in the past produced uncertainty in the financial system and may increase the cost of borrowing. The Brazilian tax authorities’ interpretations with respect to tax events and tax rates, as well as the computation of certain taxes, may change from time to time, including in ways that could materially adversely affect our funds, investors, and our financial condition and results of operations.

Transfer pricing may result in increased tax costs.

The jurisdictions in which we operate have rules on transfer pricing that require intra-group transactions to be conducted on arm’s-length terms. We regularly obtain advice regarding, inter alia, transfer pricing from external tax advisors. Transactions conducted between and among us and our subsidiaries, including, but not limited to, provision of investment advisory and investor relations services and business support services, and management services are made on a commercial basis by application of international guidelines and national regulations. As a consequence of globalization and growing world trade, tax authorities worldwide have increased their focus on transfer pricing with respect to cross border intra group transactions, as part of protecting their respective country’s tax base. In the event the tax authorities in the jurisdictions where we operate consider the pricing not to be on arm’s-length terms and were to succeed with such claims, this could result in an increased tax cost, including tax surcharges and interest.

The costs and effects of pending and future litigation, investigations or similar matters, or adverse facts and developments related thereto, could materially affect our business, financial position and results of operations.

We are, and may be in the future, party to legal, arbitration and administrative investigations, inspections and proceedings arising in the ordinary course of our business or from extraordinary corporate, tax or regulatory events, involving our clients, suppliers, customers, as well as competition, government agencies, tax and environmental authorities, particularly with respect to civil, tax and labor claims, including, but not limited to, aspects of our business, corporate structure, executive compensation and dividend policies in our operational subsidiaries. Indemnity rights that we seek to negotiate in certain transactions may not cover all claims that may be asserted against us, and any claims asserted against us, regardless of merit or eventual outcome, may harm our reputation. Furthermore, there is no guarantee that we will be successful in defending ourselves in pending or future litigation or similar matters under various laws. Should the ultimate judgments or settlements in any pending or future litigation or investigation significantly exceed any amounts we are able to recover under any indemnity arrangements, such judgments or settlements could have a material adverse effect on our business, financial condition and results of operations and the price of our Class A common shares. Further, even if we adequately address issues raised by an inspection conducted by an agency or successfully defend our case in an administrative proceeding or court action, we may have to set aside significant financial and management resources to settle issues raised by such proceedings or to those lawsuits or claims, which could adversely affect our business. See “Business—Legal Proceedings.”

We may not be able to successfully manage our intellectual property and may be subject to infringement claims.

We rely on a combination of contractual rights, trademarks and trade secrets to establish and protect our proprietary technology. Third parties may challenge, file actions to nullify, invalidate, circumvent, infringe or misappropriate our intellectual property, including at the administrative or judicial level, or such intellectual property may not be sufficient to permit us to take advantage of current market trends or otherwise to provide competitive advantages, which could result in costly redesign efforts, the discontinuance of certain service offerings or other competitive harm. If the ownership of any of our trademarks or domain names is legally

 

62


Table of Contents

challenged and such challenges result in adverse judicial decisions rendered against us, we may be prohibited from further using our trademarks and domain names. In addition, others, including our competitors, may independently develop similar technology, duplicate our services or design around our intellectual property, and in such cases, we could not assert our intellectual property rights against such parties. Further, our contractual arrangements may not effectively prevent disclosure of our confidential information or provide an adequate remedy in the event of unauthorized disclosure of our confidential information. We may have to litigate to enforce or determine the scope and enforceability of our intellectual property rights, trade secrets and know-how, which is expensive, could cause a diversion of resources and may not prove successful. Also, because of the rapid pace of technological change in our industry, aspects of our business and our services rely on technologies developed or licensed by third parties, and we may not be able to obtain or continue to obtain licenses and technologies from these third parties on reasonable terms or at all. The loss of intellectual property protection, the inability to obtain third-party intellectual property or delay or refusal by relevant regulatory authorities to approve pending intellectual property registration applications could harm our business and ability to compete. With respect to trademarks, loss of rights may result from term expirations, owner abandonment and forfeiture or cancellation proceedings before the Brazilian Patent and Trademark Office (Instituto Nacional da Propriedade Industrial, or the INPI/BPTO). In addition, if we lose rights over registered trademarks, we would not be entitled to use such trademarks on an exclusive basis and, therefore, third parties would be able to use similar or identical trademarks to identify their products or services, which could adversely affect our business.

We may also be subject to costly litigation in the event our services and technology infringe upon or otherwise violate a third party’s proprietary rights. Third parties may have, or may eventually be issued, patents that could be infringed by our services or technology. Any of these third parties could make a claim of infringement against us with respect to our services or technology. We may also be subject to claims by third parties for breach of copyright, trademark, license usage or other intellectual property rights. Any claim from third parties may result in a limitation on our ability to use the intellectual property subject to these claims or could prevent us from registering our brands as trademarks. Additionally, in recent years, individuals and groups have been purchasing intellectual property assets for the sole purpose of making infringement claims and attempting to extract settlements. Even if we became party to intellectual property related claims that we believe to be without merit, defending against such claims is time-consuming and expensive and could result in the diversion of the time and attention of our management and employees. Claims of intellectual property infringement also might require us to redesign affected services, enter into costly settlement or license agreements, pay costly damage awards, adjust our business practices or operations, change our brands, or face a temporary or permanent injunction prohibiting us from marketing or selling certain services or using certain brands. Even if we have an agreement for indemnification against such costs, the party providing such indemnification may be unwilling or unable to comply with its indemnification obligations. If we cannot or do not license the infringed technology on reasonable terms or substitute similar technology from another source, our revenues and earnings could be adversely impacted.

Any acquisitions, partnerships or joint ventures that we make or enter into could disrupt our business and harm our financial condition.

We evaluate, and expect in the future to evaluate, potential strategic acquisitions of, and partnerships or joint ventures with, complementary businesses, services or technologies. We may not be successful in identifying acquisition, partnership and joint venture targets. In addition, we may not be able to successfully finance or integrate any businesses, services or technologies that we acquire or with which we form a partnership or joint venture, and we may lose clients as a result of any acquisition, partnership or joint venture. In addition, we may be unable to realize the expected benefits, synergies or developments that we may initially anticipate. Furthermore, the integration of any acquisition, partnership or joint venture may divert management’s time and resources from our core business and disrupt our operations.

Certain acquisitions, partnerships and joint ventures we make may prevent us from competing for certain clients or in certain lines of business and may lead to a loss of clients. In addition, we may spend time and money

 

63


Table of Contents

on projects that do not increase our revenue or profitability. To the extent we finance any acquisition or investment in cash, it would reduce our cash reserves, and to the extent the purchase price is paid with our common shares, it could be dilutive to our shareholders. To the extent we finance any acquisition or investment with the proceeds from the incurrence of debt, this would increase our level of indebtedness and could negatively affect our liquidity, credit rating and restrict our operations. Our competitors may be willing to pay more than us for acquisitions or investments, which may cause us to lose certain opportunities that we would otherwise desire to complete. Moreover, we may face contingent liabilities in connection with our acquisitions and joint ventures, including, among others, (1) judicial and/or administrative proceeding or contingencies relating to the company, asset or business acquired, including civil, regulatory, tax, labor, social security, environmental and intellectual property proceedings or contingencies; and (2) financial, reputational and technical issues, including with respect to accounting practices, financial statement disclosures and internal controls, as well as other regulatory or compliance matters, all of which we may not have identified as part of our due diligence process and that may not be sufficiently indemnifiable under the relevant acquisition or joint venture agreement. We cannot assure you that any acquisition, partnership, investment or joint venture we make will not have a material adverse effect on our business, financial condition and results of operations.

Our risk management policies and procedures may not be fully effective in mitigating our risk exposure in all market environments or against all types of risks, which could expose us to losses and liability and otherwise harm our business.

We operate in a dynamic industry, and we have experienced significant change in recent years, including preparing for and conducting this offering, and the emergence of new risks within the industries in which we operate or may operate in the future. Accordingly, our risk management policies and procedures may not be fully effective in identifying, monitoring and managing our risks. Some of our risk evaluation methods depend upon information provided by others and public information regarding markets, clients or other matters that are otherwise inaccessible by us. In some cases, however, that information may not be accurate, complete or up-to-date. If our policies and procedures are not fully effective or we are not always successful in capturing all risks to which we and our funds are or may be exposed, we and our funds may suffer harm to our reputation or be subject to litigation or regulatory actions that could have a material adverse effect on our business, financial condition and results of operations.

When our products and services are used in connection with illegitimate transactions we may be exposed to governmental and regulatory sanctions, including outside of Brazil (for example, U.S. anti-money laundering and economic sanctions violations). Our risk management policies, procedures, techniques, and processes may not be sufficient to identify all of the risks to which we and our funds are exposed, to enable us to mitigate the risks we have identified, or to identify additional risks to which we and our funds may become subject in the future. Furthermore, if our risk management policies and processes contain errors or are otherwise ineffective, we and our funds may suffer large financial losses, may be subject to civil and criminal liability, and our business may be materially and adversely affected.

We may not be able to maintain adequate insurance coverage on acceptable terms, or at all, which could have a material adverse effect on our business and financial condition.

We have insurance coverage for, among other things, damages and crimes against property, business trips, and directors’ and officers’ liability. However, we may experience claims in excess of or not covered by our current insurance policies. For example, given the size of certain of our funds and their investments, the relevant member of Vinci Partners (such as the fund managers or advisors to such funds) could be subject to material legal or regulatory actions, including from dissatisfied fund investors, regulators or other third parties, which may not be covered by our current insurance coverage. Further, damage caused to us could, even if covered by our insurance coverage, result in increased insurance premiums. We may not be able to obtain or maintain liability insurance in the future on acceptable terms, or at all, which could in turn create a need or desire for us to build up an internal contingency reserve to cover risks, thus affecting our financial position, which would adversely affect our business and the trading price of our Class A common shares.

 

64


Table of Contents

Our due diligence processes for investments may not reveal all relevant facts and potential liabilities, which could result in a material adverse effect on our business and financial condition.

We continuously evaluate and carry out due diligence on a broad range of investment opportunities, some of which lead to investment while some do not. When conducting due diligence review of an investment, reliance may be placed on available resources which often include information provided by the target of the investment and, in some cases, third-party investigations and due diligence reports. Information provided or obtained from third-party sources may be limited and could, in some cases, be inaccurate or misleading. Thus, we cannot be certain that the due diligence investigations carried out with respect to an investment opportunity will reveal or highlight all relevant facts, opportunities or risks, including any on-going fraud, that might be necessary or helpful in evaluating such an investment opportunity. Accordingly, there is a risk that the success or future performance of an investment might fall short compared to the financial projections used when evaluating such investment, which may affect our fund’s results.

We may not be able to obtain and maintain requisite regulatory approvals and permits, including licenses for our fund operations.

We are required to maintain regulatory approvals and authorizations. There is a risk that we will not have the ability to obtain and retain requisite approvals and permits from relevant governmental authorities and other organizations, and to comply with applicable laws and regulations, or be able to do so without incurring undue costs and delays, which may result in a financial loss for us. A loss of the requisite approvals and/or permits, or the loss of relevant approvals and/or permits for us to operate or market funds within a certain area or generally, may result in the wind-down or liquidation of existing Vinci Partners funds, and could accordingly have a material adverse effect on the size of our AUM and thus also affect management fees that we receive, as well as the ability to receive performance fees and investment income.

We are subject to risks related to conflicts of interest.

Various conflicts of interest may arise with regard to our operations, our funds, our shareholders and our fund investors. Failure to appropriately deal with conflicts of interest as they arise, or the appearance of conflicts of interest, could harm our brand and reputation or result in potential liability for us, and could have a material adverse effect on our operations, financial position and earnings.

Our funds invest in a broad range of asset classes, including in the equity of portfolio companies, debt securities and corporate loans. In certain cases, certain of our funds may invest in different parts of the same company’s capital structure. In those cases, the interests of the different funds may not always be aligned, which could create actual or potential conflicts of interest or give the appearance of such conflicts. For example, one of our private equity funds could have an interest in pursuing an acquisition, divestiture or other transaction that, in that fund’s judgment, could enhance the value of the private equity investment, even though the proposed transaction could subject a Vinci Partners credit fund’s debt investment to additional or increased risks.

To the extent that any potential investment opportunities have been identified by us, including opportunities to co-invest with other investment managers; which fall within the investment mandate of several of our funds, conflicts of interest may arise in relation to the allocation of the investment opportunity and which fund will pursue the potential investment, in particular when such funds are both managed by the same independent fund manager appointed to act as alternative investment fund manager, and their fund management team. Moreover, we may be subject to conflicts of interest arising from co-investment opportunities where investment advisers to our funds or to investment vehicles with which we co-invest may have an incentive to provide potential co-investment opportunities to certain investors in lieu of others and/or in lieu of an allocation to our funds (including, for example, as part of an investor’s overall strategic relationship with us) if such allocations are expected to generate relatively greater fees or performance allocations to us than would arise if such co-investment opportunities were allocated otherwise.

 

65


Table of Contents

We have in the past invested alongside our investors, and while we have not targeted any specific investments as of the date of this prospectus, we expect to make investments alongside our investors in the future, including through the use of a substantial part of the proceeds from this offering. While we follow certain internal guidelines and CVM rules in respect of making such investments, these investments could lead to potential conflicts of interest with our clients. When we invest alongside our investors, we make such investments under the same conditions and according to the same fee structures, paying the same management and performance fees. In respect of public offerings, CVM rules prohibit investments by related persons if there is excess demand greater than one third of the amount of securities being offered, and we must adhere to these rules in connection with public offerings of any of our funds. For open-ended funds distributed by us or by third parties, any investor, including us, can invest or divest at any time, though such investor (including us) must comply with the provisions of the respective funds’ bylaws. In the case of our listed funds, any trade made by us can only be executed after first obtaining written pre-clearance from our compliance department. While we believe these conditions, measures, and internal protocols adequately address potential conflicts of interests that may arise from investing alongside our clients, there can be no assurance that we will adequately address all potential conflicts of interest, which could have an adverse effect on our customer relationships, thereby adversely affecting our reputation and our business.

Our funds may acquire investments from, or sell investments to, other Vinci Partners funds, and members of the board of the general partner or the fund manager of our funds may be officers or directors of entities which are not part of Vinci Partners and which provide advice or services to, or engage in other transactions with, a Vinci Partners fund or to one or more portfolio companies of a Vinci Partners fund. Such conflicts of interest may not always be properly disclosed. According to our internal policies, our officers, directors, members, managers, and, employees are prohibited from holding an interest in a portfolio company of our private funds, unless otherwise authorized by the compliance department and in certain cases where required by law to maintain plurality of partners. However, if our officers, directors, members, managers, employees, or other legal entities or entities of Vinci Partners hold or acquire a direct or indirect interest in a portfolio company of a Vinci Partners fund, this may create a conflict of interest. Such conflicts may result in litigation arising from investor dissatisfaction and may cause fund investors to explore withdrawing or cancelling their commitments to a Vinci Partners fund, or not to invest in new Vinci Partners funds, which could affect the size of the AUM being managed in existing Vinci Partners funds.

Certain policies and procedures implemented to mitigate potential conflicts of interest and address certain regulatory requirements may reduce the synergies across our various businesses.

Because we act in portfolio management, in distribution of our funds, and in advisory services, we may be subject to a number of actual and potential conflicts of interest and subject to greater regulatory oversight and more legal and contractual restrictions than that to which we would otherwise be subject if we had just one line of business. To mitigate these conflicts and address regulatory, legal and contractual requirements across our various businesses, we have implemented certain policies and procedures (for example, information walls) that may reduce the positive synergies that we cultivate across these businesses for purposes of identifying and managing attractive investments. For example, we may come into possession of material non-public information with respect to issuers in which we may be considering making an investment or issuers in which our affiliates may hold an interest. As a consequence of such policies and procedures, we may be precluded from providing such information or other ideas to our other businesses that might be of benefit to them.

Changes to applicable accounting standards, or changes to the interpretations thereof, could have a material adverse effect on Vinci Partners.

Vinci Partners applies IFRS in the preparation of its financial statements. In preparing our financial statements, we make judgments and accounting estimates that affect the application of our accounting policies and the reported amounts of assets, liabilities, income, including the recognition of performance fees, and expenses. Valuation methodologies for certain assets in our funds can be subject to significant subjectivity and

 

66


Table of Contents

the fair value of assets established pursuant to such methodologies may never be realized, and valuation methodologies for historical Vinci Partners funds may differ to the valuation methodologies used for current or future Vinci Partners funds. Amendments to, and changes to interpretations of, existing accounting standards could have a significant effect on Vinci Partners’ financial condition, and also result in extensive adoption costs.

The ability to comply with applicable accounting standards depends in some instances on determinations of fact and interpretations of complex provisions for which no clear precedent or authority may be available, or where only limited guidance may be available. If we are unable to accurately apply the relevant accounting standards, our financial reporting could be incorrect, and could require a restatement of our financial statements and result in a material adverse effect on our reputation, our business, our financial condition and results of operations, thereby adversely affecting the market price of our Class A Shares.

Certain Risks Relating to Brazil

The Brazilian federal government has exercised, and continues to exercise, significant influence over the Brazilian economy. This involvement as well as Brazil’s political and economic conditions could harm us and the price of our Class A common shares.

The Brazilian federal government frequently exercises significant influence over the Brazilian economy and occasionally makes significant changes in policy and regulations. The Brazilian government’s actions to control inflation and other policies and regulations have often involved, among other measures, increases or decreases in interest rates, changes in fiscal policies, wage and price controls, foreign exchange rate controls, blocking access to bank accounts, currency devaluations, capital controls and import and export restrictions. We have no control over and cannot predict what measures or policies the Brazilian government may take in the future. We and the market price of our Class A common shares may be harmed by changes in Brazilian government policies, as well as general economic factors, including, without limitation:

 

   

growth or downturn of the Brazilian economy;

 

   

interest rates and monetary policies;

 

   

exchange rates and currency fluctuations;

 

   

inflation;

 

   

liquidity of the domestic capital and lending markets;

 

   

import and export controls;

 

   

exchange controls and restrictions on remittances abroad and payments of dividends;

 

   

modifications to laws and regulations according to political, social and economic interests;

 

   

fiscal policy, monetary policy and changes in tax laws;

 

   

economic, political and social instability, including general strikes and mass demonstrations;

 

   

labor and social security regulations;

 

   

public health crises, such as the ongoing COVID-19 pandemic;

 

   

energy and water shortages and rationing;

 

   

commodity prices; and

 

   

other political, diplomatic, social and economic developments in or affecting Brazil.

Uncertainty over whether the Brazilian federal government will implement reforms or changes in policy or regulation affecting these or other factors in the future may affect economic performance and contribute to economic uncertainty in Brazil, which may have an adverse effect on our activities and consequently our results

 

67


Table of Contents

of operations, and may also adversely affect the trading price of our Class A common shares. Recent economic and political instability has led to a negative perception of the Brazilian economy and higher volatility in the Brazilian securities markets, which also may adversely affect us and our Class A common shares. See “—Economic uncertainty and political instability in Brazil may harm us and the price of our Class A common shares” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations— Significant Factors Affecting Our Results of Operations—Brazilian Macroeconomic Environment.”

Economic uncertainty and political instability in Brazil may harm us and the price of our Class A common shares.

Brazil’s political environment has historically influenced, and continues to influence, the performance of the country’s economy. Political crises have affected and continue to affect the confidence of investors and the general public, which have historically resulted in economic deceleration and heightened volatility in the securities offered by companies with significant operations in Brazil.

The recent economic instability in Brazil has contributed to a decline in market confidence in the Brazilian economy as well as to a deteriorating political environment. In addition, various ongoing investigations into allegations of money laundering and corruption being conducted by the Office of the Brazilian Federal Prosecutor, including the largest such investigation, known as “Operação Lava Jato,” have negatively impacted the Brazilian economy and political environment. The potential outcome of these investigations is uncertain, but they have already had an adverse impact on the image and reputation of the implicated companies, and on the general market perception of the Brazilian economy. In addition, the Brazilian Supreme Court is currently investigating Brazil’s current President in connection with allegations made by the former Minister of Justice. We cannot predict whether the ongoing investigations will result in further political and economic instability, or if new allegations against government officials and/or executives of private companies will arise in the future or will result in additional investigations.

A failure by the Brazilian government to implement necessary reforms may result in diminished confidence in the Brazilian government’s budgetary condition and fiscal stance, which could result in downgrades of Brazil’s sovereign foreign credit rating by credit rating agencies, negatively impact Brazil’s economy, lead to further depreciation of the real and an increase in inflation and interest rates, adversely affecting our business, financial condition and results of operations.

Any of the above factors may create additional political uncertainty, which could harm the Brazilian economy and, consequently, our business and the value of our investments, and could adversely affect our financial condition, results of operations and the price of our Class A common shares.

Inflation and certain measures by the Brazilian government to curb inflation have historically harmed the Brazilian economy and Brazilian capital markets, and high levels of inflation in the future would harm our business and the price of our Class A common shares.

In the past, Brazil has experienced extremely high rates of inflation. Inflation and some of the measures taken by the Brazilian government in an attempt to curb inflation have had significant negative effects on the Brazilian economy generally. Inflation, policies adopted to curb inflationary pressures and uncertainties regarding possible future governmental intervention have contributed to economic uncertainty and heightened volatility in the Brazilian capital markets.

According to the National Consumer Price Index (Índice Nacional de Preços ao Consumidor Amplo, or IPCA), which is published by the Brazilian Institute for Geography and Statistics (Instituto Brasileiro de Geografia e Estatística, or IBGE), Brazilian inflation rates were 4.3%, 3.7% and 2.9% as of December 31, 2019, 2018 and 2017, respectively. Brazil may experience high levels of inflation in the future and inflationary pressures may lead to the Brazilian government intervening in the economy and introducing policies that could

 

68


Table of Contents

harm our business and the trading price of our Class A common shares. In the past, the Brazilian government’s interventions included the maintenance of a restrictive monetary policy with high interest rates that restricted credit availability and reduced economic growth, causing volatility in interest rates. For example, the official interest rate in Brazil decreased from 14.25% as of December 31, 2015, to 4.50% as of December 31, 2018, as established by the COPOM. On February 7, 2018, the COPOM reduced the SELIC rate to 6.75% and further reduced the SELIC rate to 6.50% on March 21, 2018. The COPOM reconfirmed the SELIC rate of 6.50% on May 16, 2018, and subsequently on June 20, 2018. As of December 31, 2018, the SELIC rate was 6.50%. The COPOM reconfirmed the SELIC rate of 6.50% on February 6, 2019, but reduced the SELIC rate to 6.00% on August 1, 2019, and further reduced the rate to 4.50% on December 12, 2019. On February 5, 2020, the COPOM reduced the SELIC rate to 4.25% and further reduced the rate to 3.75% on March 18, 2020, to 3.00% on June 5, 2020, to 2.25% on June 17, 2020 and as of the date of this prospectus, the SELIC rate is 2.0%. Conversely, more lenient government and Central Bank policies and interest rate decreases have triggered and may continue to trigger increases in inflation, and, consequently, growth volatility and the need for sudden and significant interest rate increases, which could negatively affect us and increase our indebtedness.

Exchange rate instability may have adverse effects on the Brazilian economy, us and the price of our Class A common shares.

The Brazilian currency has been historically volatile and has been devalued frequently over the past three decades. Throughout this period, the Brazilian government has implemented various economic plans and used various exchange rate policies, including sudden devaluations, periodic mini-devaluations (during which the frequency of adjustments has ranged from daily to monthly), exchange controls, dual exchange rate markets and a floating exchange rate system. Although long-term depreciation of the real is generally linked to the rate of inflation in Brazil, depreciation of the real occurring over shorter periods of time has resulted in significant variations in the exchange rate between the real, the U.S. dollar and other currencies. The real depreciated against the U.S. dollar by 32.0% at year-end 2015 as compared to year-end 2014, and by 11.8% at year-end 2014 as compared to year-end 2013. The real/U.S. dollar exchange rate reported by the Central Bank was R$3.9048 per U.S. dollar on December 31, 2015, and R$3.2591 per U.S. dollar on December 31, 2016, which reflected a 16.5% appreciation in the real against the U.S. dollar during 2016. The real/U.S. dollar exchange rate reported by the Central Bank was R$3.308 per U.S. dollar on December 31, 2017, which reflected a 1.5% depreciation in the real against the U.S. dollar during 2017. The real/U.S. dollar exchange rate reported by the Central Bank was R$3.8742 per US$1.00 on December 31, 2018, which reflected a 17.1% depreciation in the real against the U.S. dollar during 2018. The real/U.S. dollar exchange rate reported by the Central Bank was R$4.0307 per US$1.00 on December 31, 2019, which reflected a 4.0% depreciation in the real against the U.S. dollar during 2019. The real/U.S. dollar exchange rate reported by the Central Bank was R$5.6407 per US$1.00 on September 30, 2020, which reflected a 39.9% depreciation in the real against the U.S. dollar during the nine months ended September 30, 2020. As of December 10, 2020, the exchange rate for the purchase of U.S. dollars as reported by the Central Bank was R$5.0852 per US$1.00.

A devaluation of the real relative to the U.S. dollar could create inflationary pressures in Brazil and cause the Brazilian government to, among other measures, increase interest rates. Any depreciation of the real may generally restrict access to the international capital markets. It would also reduce the U.S. dollar value of our results of operations. Restrictive macroeconomic policies could reduce the stability of the Brazilian economy and harm our results of operations and profitability. In addition, domestic and international reactions to restrictive economic policies could have a negative impact on the Brazilian economy. These policies and any reactions to them may harm us by curtailing access to foreign financial markets and prompting further government intervention. A devaluation of the real relative to the U.S. dollar may also, as in the context of the current economic slowdown, decrease consumer spending, increase deflationary pressures and reduce economic growth.

On the other hand, an appreciation of the real relative to the U.S. dollar and other foreign currencies may depreciate the Brazilian foreign exchange current accounts. We and certain of our suppliers purchase services from countries outside Brazil, and thus changes in the value of the U.S. dollar compared to other currencies may

 

69


Table of Contents

affect the costs of services that we purchase. Depending on the circumstances, either devaluation or appreciation of the real relative to the U.S. dollar and other foreign currencies could restrict the growth of the Brazilian economy, as well as our business, results of operations and profitability.

Infrastructure and workforce deficiency in Brazil may impact economic growth and have a material adverse effect on us.

Our performance depends on the overall health and growth of the Brazilian economy. Brazilian GDP growth has fluctuated over the past few years, with growth of 3.0% in 2013 but decreasing to 0.5% in 2014, a contraction of 3.5% in 2015, a contraction of 3.3% in 2016, a growth of 1.1% in 2017, a growth of 1.1% in 2018 and a growth of 1.1% in 2019, while as of June 30, 2020, Brazilian GDP measured for the prior four quarters contracted an estimated 2.2%. Growth is limited by inadequate infrastructure, including potential energy shortages and deficient transportation, logistics and telecommunication sectors, general strikes, the lack of a qualified labor force, and the lack of private and public investments in these areas, which limit productivity and efficiency. Additionally, despite the business continuity and crisis management policies currently in place, travel restrictions or potential impacts on personnel due to the COVID-19 pandemic may disrupt our business and the expansion of our client base. Any of these factors could lead to labor market volatility and generally impact income, purchasing power and consumption levels, which could limit growth and ultimately have a material adverse effect on us.

Developments and the perceptions of risks in other countries, including other emerging markets, the United States and Europe, may harm the Brazilian economy and the price of our Class A common shares.

The market for securities offered by companies with significant operations in Brazil is influenced by economic and market conditions in Brazil and, to varying degrees, market conditions in other Latin American and emerging markets, as well as the United States, Europe and other countries. To the extent the conditions of the global markets or economy deteriorate, the business of companies with significant operations in Brazil may be harmed. The weakness in the global economy has been marked by, among other adverse factors, lower levels of consumer and corporate confidence, decreased business investment and consumer spending, increased unemployment, reduced income and asset values in many areas, reduction of China’s growth rate, currency volatility and limited availability of credit and access to capital. Developments or economic conditions in other emerging market countries have at times significantly affected the availability of credit to companies with significant operations in Brazil and resulted in considerable outflows of funds from Brazil, decreasing the amount of foreign investments in Brazil.

Crises and political instability in other emerging market countries, the United States, Europe or other countries, including increased international trade tensions and protectionist policies, could decrease investor demand for securities offered by companies with significant operations in Brazil, such as our Class A common shares. In June 2016, the United Kingdom had a referendum in which the majority voted to leave the European Union (so-called “Brexit”). The announcement of Brexit caused significant volatility in global stock markets and currency exchange rate fluctuations. The United Kingdom formally withdrew from the European Union on January 31, 2020. On December 24 2020, the United Kingdom and the European Commission reached an agreement on the terms of its future cooperation with the European Union. On December 31, 2020, the European Union (Future Relationship) Act was enacted in the United Kingdom and the agreement reached with the European Commission is currently expected to come into full force in February 2021 once relevant E.U. institutions have also ratified the agreement, prior to which the agreement is being applied on a provisional basis. Significant political and economic uncertainty remains about whether the terms of the relationship between the United Kingdom and the European Union will differ materially in practice from the terms before withdrawal. We have no control over and cannot predict the effect of United Kingdom’s exit from the European Union nor over whether and to which effect any other member state will decide to exit the European Union in the future. These developments, as well as potential crises and forms of political instability arising therefrom or any other as of yet unforeseen development, may harm our business and the price of our Class A common shares.

 

70


Table of Contents

Ongoing developments and uncertainty relating to the U.S. federal elections, including judicial challenges and a split between the party of the President and the party that is in the majority in the Senate, may materially adversely affect the U.S. and global economies and capital markets, including the Brazilian economy and capital markets, which may, in turn, materially adversely affect the trading price of our Class A common shares. In addition, it is unclear the degree to which current political divisions in the United States will continue into the next four-year presidential term. We are also unable to predict the policies that will be adopted by a new presidential administration and the effects of any such policies, if implemented. These political divisions and policies may materially adversely affect the United States and global economies and capital markets, including the Brazilian economy and capital markets, which may, in turn, materially adversely affect the trading price of our Class A common shares.

Any further downgrading of Brazil’s credit rating could reduce the trading price of our Class A common shares.

We may be harmed by investors’ perceptions of risks related to Brazil’s sovereign debt credit rating. Rating agencies regularly evaluate Brazil and its sovereign credit ratings, which are based on a number of factors including macroeconomic trends, fiscal and budgetary conditions, indebtedness metrics and the perspective of changes in any of these factors.

The rating agencies began to review Brazil’s sovereign credit rating in September 2015. Subsequently, the three major rating agencies downgraded Brazil’s investment-grade status:

 

   

In 2015, Standard & Poor’s initially downgraded Brazil’s credit rating from BBB-negative to BB-positive and subsequently downgraded it again from BB-positive to BB, maintaining its negative outlook, citing a worse credit situation since the first downgrade. On January 11, 2018, Standard & Poor’s further downgraded Brazil’s credit rating from BB to BB-negative, and on December 11, 2019, the agency affirmed the rating at BB- and revised the outlook on Brazil to positive. In the last update, on April 7, 2020, the rating was reaffirmed as BB- with stable outlook, reflecting uncertainties stemming from the coronavirus pandemic, along with how extraordinary government spending will adversely affect the fiscal performance in 2020.

 

   

In December 2015, Moody’s placed Brazil’s Baa3’s issue and bond ratings under review for downgrade and subsequently downgraded the issue and bond ratings to below investment grade, at Ba2 with a negative outlook, citing the prospect of a further deterioration in Brazil’s debt indicators, taking into account the low growth environment and the challenging political scenario. On April 9, 2018, Moody’s revised the outlook to stable, reaffirming the Ba2 rating. In September 2020, Moody’s maintained Brazil’s credit rating at Ba2 and with a stable outlook.

 

   

Fitch downgraded Brazil’s sovereign credit rating to BB-positive with a negative outlook, citing the rapid expansion of the country’s budget deficit and the worse-than-expected recession. In February 2018, Fitch downgraded Brazil’s sovereign credit rating again to BB-negative, citing, among other reasons, fiscal deficits, the increasing burden of public debt and an inability to implement reforms that would structurally improve Brazil’s public finances.

 

   

In May 2020, Fitch Ratings confirmed Brazil’s long-term foreign currency sovereign credit rating at BB- and revised Brazil’s outlook from stable to negative. In April 2020, Standard & Poor’s confirmed Brazil’s long-term foreign currency sovereign credit rating at BB- and changed the outlook to stable from positive. In May 2020, Moody’s confirmed Brazil’s long-term foreign currency sovereign credit rating at Ba2 maintaining the stable outlook.

Brazil’s sovereign credit rating is currently rated below investment grade by the three main credit rating agencies. Consequently, the prices of securities offered by companies with significant operations in Brazil have been negatively affected. A prolongation or worsening of the current Brazilian recession and continued political uncertainty, among other factors, could lead to further ratings downgrades. Any further downgrade of Brazil’s sovereign credit ratings could heighten investors’ perception of risk and, as a result, cause the trading price of our Class A common shares to decline.

 

71


Table of Contents

Certain Risks Relating to Our Class A Common Shares and the Offering

There is no existing market for our Class A common shares, and we do not know whether one will develop to provide you with adequate liquidity. If the trading price of our Class A common shares fluctuates after this offering, you could lose a significant part of your investment.

Prior to this offering, there has not been a public market for our Class A common shares. If an active trading market does not develop, you may have difficulty selling any of our Class A common shares that you buy. We cannot predict the extent to which investor interest in our company will lead to the development of an active trading market on the Nasdaq, or otherwise or how liquid that market might become. The initial public offering price for the Class A common shares will be determined by negotiations between us and the underwriters and may not be indicative of prices that will prevail in the open market following this offering. Consequently, you may not be able to sell our Class A common shares at prices equal to or greater than the price paid by you in this offering. In addition to the risks described above, the market price of our Class A common shares may be influenced by many factors, some of which are beyond our control, including:

 

   

announcements by us or our competitors of significant contracts or acquisitions;

 

   

technological innovations by us or competitors;

 

   

the failure of financial analysts to cover our Class A common shares after this offering or changes in financial estimates by analysts;

 

   

actual or anticipated variations in our results of operations;

 

   

changes in financial estimates by financial analysts, or any failure by us to meet or exceed any of these estimates, or changes in the recommendations of any financial analysts that elect to follow our Class A common shares or the shares of our competitors;

 

   

announcements by us or our competitors of significant contracts or acquisitions;

 

   

future sales of our shares; and

 

   

investor perceptions of us and the industries in which we operate.

In addition, the stock market in general has experienced substantial price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of particular companies affected. These broad market and industry factors may materially harm the market price of our Class A common shares, regardless of our operating performance. In the past, following periods of volatility in the market price of certain companies’ securities, securities class action litigation has been instituted against these companies. This litigation, if instituted against us, could adversely affect our financial condition or results of operations. If a market does not develop or is not maintained, the liquidity and price of our Class A common shares could be seriously harmed.

Gilberto Sayão da Silva will own 100% of our outstanding Class B common shares, which will represent approximately 77.9% of the voting power of our issued share capital following this offering, and will control all matters requiring shareholder approval. This concentration of ownership and voting power limits your ability to influence corporate matters.

Immediately following this offering, Gilberto Sayão da Silva will control our company and will not hold any of our Class A common shares, but will beneficially own 26.1% of our issued share capital (or 25.1% if the underwriters’ option to purchase additional Class A common shares is exercised in full) through his beneficial ownership of all of our outstanding Class B common shares, and consequently, 77.9% of the combined voting power of our issued share capital (or 77.0% if the underwriters’ option to purchase additional Class A common shares is exercised in full). Our Class B common shares are entitled to 10 votes per share and our Class A common shares, which are the common shares we are offering in this offering, are entitled to one vote per share. Our Class B common shares are convertible into an equivalent number of Class A common shares and generally

 

72


Table of Contents

convert into Class A common shares upon transfer, subject to limited exceptions. As a result, Mr. Sayão da Silva will control the outcome of all decisions at our shareholders’ meetings, and will be able to elect a majority of the members of our board of directors. He will also be able to direct our actions in areas such as business strategy, financing, distributions, acquisitions and dispositions of assets or businesses. For example, Mr. Sayão da Silva may cause us to make acquisitions that increase the amount of our indebtedness or outstanding Class A common shares, sell revenue-generating assets or inhibit change of control transactions that may benefit other shareholders. The decisions of Mr. Sayão da Silva on these matters may be contrary to your expectations or preferences, and they may take actions that could be contrary to your interests. He will be able to prevent any other shareholders, including you, from blocking these actions. For further information regarding shareholdings in our company, see “Principal Shareholders.” In addition, for so long as Mr. Sayão da Silva beneficially owns more than two-thirds of our issued share capital, he will also have the ability to unilaterally amend our Articles of Association, which may be amended only by special resolution of shareholders (requiring a two-thirds majority vote of those shareholders attending and voting at a quorate meeting).

So long as Mr. Sayão da Silva beneficially owns a sufficient number of Class B common shares, even if he beneficially owns significantly less than 50% of our outstanding share capital, he will be able to effectively control our decisions. However, if our Class B common shares at any time represent less than 10% of the total aggregate number of common shares in the capital of the company outstanding, each Class B common share then outstanding will automatically convert into one Class A common share. For a description of the dual class structure, see “Description of Share Capital.”

We have granted holders of our Class B common shares preemptive rights to acquire shares that we may sell in the future, which may impair our ability to raise funds.

Under our Articles of Association, each holder of our Class B common shares is entitled to preemptive rights to purchase additional common shares in the event that additional Class A common shares are issued, upon the same economic terms and at the same price, in order to maintain their proportional ownership interests, which will be approximately 26.1% of our outstanding shares, immediately after this offering. The exercise by holders of our Class B common shares of preemptive rights may impair our ability to raise funds, or adversely affect the terms on which we are able to raise funds, as we may not be able to offer to new investors the quantity of our shares that they may desire to purchase.

Class A common shares eligible for future sale may cause the market price of our Class A common shares to decrease significantly.

The market price of our Class A common shares may decline as a result of sales of a large number of our Class A common shares in the market after this offering (including Class A common shares issuable upon conversion of Class B common shares) or the perception that these sales may occur. These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate.

Following the completion of this offering, we will have outstanding 41,049,335 Class A common shares and 14,466,239 Class B common shares (or 43,130,356 Class A common shares and 14,466,239 Class B common shares, if the underwriters exercise in full their option to purchase additional shares). Subject to the lock-up agreements described below, the Class A common shares sold in this offering will be freely tradable without restriction or further registration under the Securities Act by persons other than our affiliates within the meaning of Rule 144 of the Securities Act.

Our shareholders or entities controlled by them or their permitted transferees will, subject to the lock-up agreements described below and certain additional limitations described under “Class A Common Shares Eligible for Future Sale—Liquidity Restrictions on Pre-IPO Quotaholders,” be able to sell their Class A common shares in the public market from time to time without registering them, subject to certain limitations on the

 

73


Table of Contents

timing, amount and method of those sales imposed by regulations promulgated by the SEC. If any of our shareholders, the affiliated entities controlled by them or their respective permitted transferees were to sell a large number of their Class A common shares, the market price of our Class A common shares may decline significantly. In addition, the perception in the public markets that sales by them might occur may also cause the trading price of our Class A common shares to decline.

We have agreed with the underwriters, subject to certain exceptions, not to offer, sell or dispose of any shares in our share capital or securities convertible into or exchangeable or exercisable for any shares in our share capital during the 180-day period following the date of this prospectus. Our directors and executive officers have agreed to substantially similar lock-up provisions. However, J.P. Morgan Securities LLC, Goldman Sachs & Co. LLC and Banco BTG Pactual S.A. - Cayman Branch, or the Representatives, may, in their sole discretion and without notice, release all or any portion of the shares from the restrictions in any of the lock-up agreements described above. In addition, these lock-up agreements are subject to the exceptions described in “Underwriting,” including the right for our company to issue new shares if we carry out an acquisition or enter into a merger, joint venture or strategic participation.

Sales of a substantial number of our Class A common shares upon expiration of the lock-up agreements, the perception that such sales may occur, or early release of these lock-up periods, could cause our market price to fall or make it more difficult for you to sell your Class A common shares at a time and price that you deem appropriate.

Our Articles of Association contain anti-takeover provisions that may discourage a third-party from acquiring us and adversely affect the rights of holders of our Class A common shares.

Our Articles of Association contain certain provisions that could limit the ability of others to acquire our control, including a provision that grants authority to our board of directors to establish and issue from time to time one or more series of preferred shares without action by our shareholders and to determine, with respect to any series of preferred shares, the terms and rights of that series. These provisions could have the effect of depriving our shareholders of the opportunity to sell their shares at a premium over the prevailing market price by discouraging third parties from seeking to obtain our control in a tender offer or similar transactions.

If securities or industry analysts do not publish research, or publish inaccurate or unfavorable research, about our business, the price of our Class A common shares and our trading volume could decline.

The trading market for our Class A common shares will depend in part on the research and reports that securities or industry analysts publish about us or our business. Securities and industry analysts do not currently, and may never, publish research on our company. If no or too few securities or industry analysts commence coverage of our company, the trading price for our Class A common shares would likely be negatively affected. In the event securities or industry analysts initiate coverage, if one or more of the analysts who cover us downgrade our Class A common shares or publish inaccurate or unfavorable research about our business, the price of our Class A common shares would likely decline. If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, demand for our Class A common shares could decrease, which might cause the price of our Class A common shares and trading volume to decline.

Our ability to pay dividends to our shareholders is restricted by applicable laws and regulations and by the ability of our subsidiaries to pay dividends to us.

We cannot guarantee that we will be able to pay dividends to holders of our Class A common shares following this offering. Holders of our Class A common shares are only entitled to receive cash dividends to the extent our board of directors out of funds legally available for such payments. The declaration, payment and amount of any future dividends will be made at the discretion of our board of directors and will depend upon, among other things, the results of operations, cash flows and financial condition, operating and capital requirements, and other factors as our board of directors considers relevant. In addition, our holding company

 

74


Table of Contents

structure makes us dependent on the operations of our subsidiaries. See “—Certain Risks Relating to Our Business and Industry—Our holding company structure makes us dependent on the operations of our subsidiaries.” There is no assurance that future dividends will be paid, and if dividends are paid, there is no assurance with respect to the amount of any such dividend. See “Dividends and Dividend Policy.”

Our dual class capital structure means our shares will not be included in certain indices. We cannot predict the impact this may have on the trading price of our Class A common shares.

In 2017, FTSE Russell, S&P Dow Jones and MSCI announced changes to their eligibility criteria for inclusion of shares of public companies on certain indices to exclude companies with multiple classes of shares of common stock from being added to such indices. FTSE Russell announced plans to require new constituents of its indices to have at least five percent of their voting rights in the hands of public stockholders, whereas S&P Dow Jones announced that companies with multiple share classes, such as ours, will not be eligible for inclusion in the S&P 500, S&P MidCap 400 and S&P SmallCap 600, which together make up the S&P Composite 1500. MSCI also opened public consultations on their treatment of no-vote and multi-class structures and temporarily barred new multi-class listings from its ACWI Investable Market Index and U.S. Investable Market 2500 Index; however, in October 2018, MSCI announced its decision to include equity securities “with unequal voting structures” in its indices and to launch a new index that specifically includes voting rights in its eligibility criteria. We cannot assure you that other stock indices will not take a similar approach to FTSE Russell, S&P Dow Jones and MSCI in the future. Under the announced policies, our dual class capital structure would make us ineligible for inclusion in any of these indices and, as a result, mutual funds, exchange-traded funds and other investment vehicles that attempt to passively track these indices will not invest in our stock. It continues to be somewhat unclear what effect, if any, these policies will have on the valuations of publicly traded companies excluded from the indices, but in certain situations they may depress these valuations compared to those of other similar companies that are included. Exclusion from indices could make our Class A common shares less attractive to investors and, as a result, the market price of our Class A common shares could be adversely affected.

The dual class structure of our common stock has the effect of concentrating voting control with Gilberto Sayão da Silva as the beneficial owner of the entirety of our Class B common shares; this will limit or preclude your ability to influence corporate matters.

Each Class A common share, which are the shares being sold in this offering, will entitle its holder to one vote per share and each Class B common share will entitle its holder to ten votes per share, so long as the total number of the issued and outstanding Class B common shares is at least 10% of the total number of shares outstanding. The beneficial owner of all of our Class B common shares is Gilberto Sayão da Silva. See “Principal Shareholders.” Due to the ten-to-one voting ratio between our Class B and Class A common shares, Mr. Sayão da Silva will continue to control a majority of the combined voting power of our common shares and therefore be able to control all matters submitted to our shareholders so long as the total number of the issued and outstanding Class B common shares is at least 10% of the total number of shares outstanding and the total number of the issued.

In addition, our Articles of Association provide that at any time when there are Class A common shares in issue, additional Class B common shares may only be issued pursuant to (1) a share split, subdivision of shares or similar transaction or where a dividend or other distribution is paid by the issue of shares or rights to acquire shares or following capitalization of profits; (2) a merger, consolidation, or other business combination involving the issuance of Class B common shares as full or partial consideration; or (3) an issuance of Class A common shares, whereby a holder of the Class B common shares is entitled to purchase a number of Class B common shares that would allow such holder to maintain its proportional ownership interests in us (following an offer by us to each holder of Class B common shares to issue to such holder, upon the same economic terms and at the same price, such number of Class B common shares as would ensure such holder may maintain a proportional ownership interest in us pursuant to our Articles of Association).

 

75


Table of Contents

In light of the above provisions relating to the issuance of additional Class B common shares, as well as the ten-to-one voting ratio of our Class B common shares and Class A common shares, holder of our Class B common shares will in many situations continue to maintain control of all matters requiring shareholder approval. This concentrated control will limit or preclude your ability to influence corporate matters for the foreseeable future. For a description of our dual class structure, see “Description of Share Capital—Voting Rights.”

We are a Cayman Islands exempted company with limited liability. The rights of our shareholders, including with respect to fiduciary duties and corporate opportunities, may be different from the rights of shareholders governed by the laws of U.S. jurisdictions.

We are a Cayman Islands exempted company with limited liability. Our corporate affairs are governed by our Articles of Association and by the laws of the Cayman Islands. The rights of shareholders and the responsibilities of members of our board of directors may be different from the rights of shareholders and responsibilities of directors in companies governed by the laws of U.S. jurisdictions. In particular, as a matter of Cayman Islands law, directors of a Cayman Islands company owe fiduciary duties to the company and separately a duty of care, diligence and skill to the company. Under Cayman Islands law, directors and officers owe the following fiduciary duties: (1) duty to act in good faith in what the director or officer believes to be in the best interests of the company as a whole; (2) duty to exercise powers for the purposes for which those powers were conferred and not for a collateral purpose; (3) directors should not properly fetter the exercise of future discretion; (4) duty to exercise powers fairly as between different sections of shareholders; (5) duty to exercise independent judgment; and (6) duty not to put themselves in a position in which there is a conflict between their duty to the company and their personal interests. Our Articles of Association have varied this last obligation by providing that a director must disclose the nature and extent of his or her interest in any contract or arrangement, and following such disclosure and subject to any separate requirement under applicable law or the listing rules of the Nasdaq, and unless disqualified by the chairman of the relevant meeting, such director may vote in respect of any transaction or arrangement in which he or she is interested and may be counted in the quorum at the meeting. Conversely, under Delaware corporate law, a director has a fiduciary duty to the corporation and its stockholders (made up of two components) and the director’s duties prohibits self-dealing by a director and mandates that the best interests of the company and its shareholders take precedence over any interest possessed by a director, officer or controlling shareholder and not shared by the shareholders generally. See “Description of Share Capital—Principal Differences between Cayman Islands and U.S. Corporate Law.”

New investors in our Class A common shares will experience immediate and substantial book value dilution after this offering.

The initial public offering price of our Class A common shares will be substantially higher than the pro forma net tangible book value per share of the outstanding Class A common shares immediately after this offering. Based on an assumed initial public offering price of $17.00 per share (the midpoint of the price range set forth on the cover of this prospectus) and our net tangible book value as of September 30, 2020, if you purchase our Class A common shares in this offering you will pay more for your shares than the amounts paid by our existing shareholders for their shares and you will suffer immediate dilution of approximately $13.06 per share in pro forma net tangible book value. As a result of this dilution, investors purchasing Class A common shares in this offering may receive significantly less than the full purchase price that they paid for the shares purchased in this offering in the event of a liquidation. See “Dilution.”

We may need to raise additional capital in the future by issuing securities or may enter into corporate transactions with an effect similar to a merger, which may dilute your interest in our share capital and affect the trading price of our Class A common shares.

We may need to raise additional funds to grow our business and implement our growth strategy through public or private issuances of common shares or securities convertible into, or exchangeable for, our common

 

76


Table of Contents

shares, which may dilute your interest in our share capital or result in a decrease in the market price of our common shares. In addition, we may also enter into mergers or other similar transactions in the future, which may dilute your interest in our share capital or result in a decrease in the market price of our Class A common shares. Any fundraising through the issuance of shares or securities convertible into or exchangeable for shares, or the participation in corporate transactions with an effect similar to a merger, may dilute your interest in our capital stock or result in a decrease in the market price of our Class A common shares.

We have broad discretion in the use of the net proceeds from this offering and may not use them effectively.

Our management will have broad discretion in the application of the net proceeds from this offering and could spend the proceeds in ways that do not improve our results of operations or enhance the value of our Class A common shares. The failure by our management to apply these funds effectively could result in financial losses that could have a material adverse effect on our business, financial condition and results of operations. Pending their use, we may invest the net proceeds from this offering in a manner that does not produce income or that loses value. See “Use of Proceeds.”

As a foreign private issuer and an “emerging growth company” (as defined in the JOBS Act), we will have different disclosure and other requirements than U.S. domestic registrants and non-emerging growth companies.

As a foreign private issuer and emerging growth company, we will be subject to different disclosure and other requirements than domestic U.S. registrants and non-emerging growth companies. For example, as a foreign private issuer, in the United States, we are not subject to the same disclosure requirements as a domestic U.S. registrant under the Exchange Act, including the requirements to prepare and issue quarterly reports on Form 10-Q or to file current reports on Form 8-K upon the occurrence of specified significant events, the proxy rules applicable to domestic U.S. registrants under Section 14 of the Exchange Act or the insider reporting and short-swing profit rules applicable to domestic U.S. registrants under Section 16 of the Exchange Act. In addition, we intend to rely on exemptions from certain U.S. rules which will permit us to follow Cayman Islands legal requirements rather than certain of the requirements that are applicable to U.S. domestic registrants.

We will follow Cayman Islands laws and regulations that are applicable to Cayman Islands companies. However, Cayman Islands laws and regulations applicable to Cayman Islands companies do not contain any provisions comparable to the U.S. proxy rules, the U.S. rules relating to the filing of reports on Form 10-Q or 8-K or the U.S. rules relating to liability for insiders who profit from trades made in a short period of time, as referred to above.

Furthermore, foreign private issuers are required to file their annual report on Form 20-F within 120 days after the end of each fiscal year, while U.S. domestic issuers that are accelerated filers are required to file their annual report on Form 10-K within 75 days after the end of each fiscal year. Foreign private issuers are also exempt from Regulation Fair Disclosure, aimed at preventing issuers from making selective disclosures of material information, although we will be subject to Cayman Islands laws and regulations having, in some respects, a similar effect as Regulation Fair Disclosure. As a result of the above, even though we are required to file reports on Form 6-K disclosing the limited information which we have made or are required to make public pursuant to Cayman Islands law, or are required to distribute to shareholders generally, and that is material to us, you may not receive information of the same type or amount that is required to be disclosed to shareholders of a U.S. company.

The JOBS Act contains provisions that, among other things, relax certain reporting requirements for emerging growth companies. Under this act, as an emerging growth company, we will not be subject to the same disclosure and financial reporting requirements as non-emerging growth companies. For example, as an emerging growth company we are permitted to, and intend to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies.

 

77


Table of Contents

Also, we will not have to comply with future audit rules promulgated by the U.S. Public Company Accounting Oversight Board, or PCAOB, (unless the SEC determines otherwise) and our auditors will not need to attest to our internal controls under Section 404(b) of the Sarbanes-Oxley Act for up to five years or such earlier time that we are no longer an emerging growth company. We may follow these reporting exemptions until we are no longer an emerging growth company. As a result, our shareholders may not have access to certain information that they deem important. We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of this offering, (b) in which we have total annual revenues of at least US$1.07 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our Class A common shares that is held by non-affiliates exceeds US$700.0 million as of the prior June 30th, and (2) the date on which we have issued more than US$1.0 billion in non-convertible debt during the prior three-year period. Accordingly, the information about us available to you will not be the same as, and may be more limited than, the information available to shareholders of a non-emerging growth company. We could be an “emerging growth company” for up to five years, although circumstances could cause us to lose that status earlier, including if the market value of our Class A common shares held by non-affiliates exceeds $700 million as of any June 30 (the end of our second fiscal quarter) before that time, in which case we would no longer be an “emerging growth company” as of the following December 31 (our fiscal year end). We cannot predict if investors will find our Class A common shares less attractive because we may rely on these exemptions. If some investors find our Class A common shares less attractive as a result, there may be a less active trading market for our Class A common shares and the price of our Class A common shares may be more volatile.

Upon the listing of our Class A common shares on the Nasdaq, we will be a “controlled company” within the meaning of the rules of the Nasdaq corporate governance rules and, as a result, will qualify for, and intend to rely on, exemptions from certain corporate governance requirements. You will not have the same protections afforded to shareholders of companies that are subject to such requirements.

Immediately after the completion of this offering, Gilberto Sayão da Silva will beneficially own 100% of our Class B common shares, representing 77.9% of the voting power of our outstanding share capital (or 77.0% if the underwriters exercise their option to purchase additional Class A common shares in full). As a result, we will be a “controlled company” within the meaning of the corporate governance standards of the Nasdaq corporate governance rules. Under these rules, a company of which more than 50% of the voting power in the election of directors is held by an individual, group or another company is a “controlled company” and may elect not to comply with certain corporate governance requirements. For example, controlled companies, within one year of the date of the listing of their common shares:

 

   

are not required to have a board that is composed of a majority of “independent directors,” as defined under the rules of such exchange;

 

   

are not required to have a compensation committee that is composed entirely of independent directors; and

 

   

are not required to have a nominating and corporate governance committee that is composed entirely of independent directors.

Following this offering, we intend to utilize these exemptions. As a result, we do not expect a majority of the directors on our board will be independent upon the closing of this offering. In addition, we do not expect that any of the committees of the board will consist entirely of independent directors upon the closing of this offering. Accordingly, you will not have the same protections afforded to shareholders of companies that are subject to all of the corporate governance requirements of the Nasdaq.

 

78


Table of Contents

As a foreign private issuer, we are permitted to, and we will, rely on exemptions from certain Nasdaq corporate governance standards applicable to U.S. issuers, including the requirement that a majority of an issuer’s directors consist of independent directors. This may afford less protection to holders of our Class A common shares.

Section 5605 of the Nasdaq equity rules requires listed companies to have, among other things, a majority of their board members be independent, and to have independent director oversight of executive compensation, nomination of directors and corporate governance matters. As a foreign private issuer, however, we are permitted to, and we will, follow home country practice in lieu of the above requirements. See “Description of Share Capital—Principal Differences between Cayman Islands and U.S. Corporate Law.”

We may lose our foreign private issuer status which would then require us to comply with the Exchange Act’s domestic reporting regime and cause us to incur significant legal, accounting and other expenses.

In order to maintain our current status as a foreign private issuer, either (a) more than 50% of our Class A common shares must be either directly or indirectly owned of record by non-residents of the United States or (b)(i) a majority of our executive officers or directors may not be U.S. citizens or residents; (2) more than 50% of our assets cannot be located in the United States; and (3) our business must be administered principally outside the United States. If we lose this status, we would be required to comply with the Exchange Act reporting and other requirements applicable to U.S. domestic issuers, which are more detailed and extensive than the requirements for foreign private issuers. We may also be required to make changes in our corporate governance practices in accordance with various SEC and the Nasdaq rules. The regulatory and compliance costs to us under U.S. securities laws if we are required to comply with the reporting requirements applicable to a U.S. domestic issuer may be significantly higher than the costs we will incur as a foreign private issuer.

Our shareholders may face difficulties in protecting their interests because we are a Cayman Islands exempted company.

Our corporate affairs are governed by our Articles of Association, by the Companies Law (as amended) of the Cayman Islands and the common law of the Cayman Islands. The rights of shareholders to take action against our directors, actions by minority shareholders and the fiduciary responsibilities of our directors to us under Cayman Islands law are to a large extent governed by the common law of the Cayman Islands. The common law of the Cayman Islands is derived in part from comparatively limited judicial precedent in the Cayman Islands as well as that from English common law, which has persuasive, but not binding, authority on a court in the Cayman Islands. The rights of our shareholders and the fiduciary responsibilities of our directors under Cayman Islands law are not as clearly established as they would be under statutes or judicial precedent in some jurisdictions in the United States. In particular, the Cayman Islands has a less exhaustive body of securities laws than the United States. In addition, some U.S. states, such as Delaware, have more fulsome and judicially interpreted bodies of corporate law than the Cayman Islands.

While Cayman Islands law allows a dissenting shareholder to express the shareholder’s view that a court sanctioned reorganization of a Cayman Islands company would not provide fair value for the shareholder’s shares, Cayman Islands statutory law does not specifically provide for shareholder appraisal rights in connection with a court sanctioned reorganization (by way of a scheme of arrangement). This may make it more difficult for you to assess the value of any consideration you may receive in a merger or consolidation (by way of a scheme of arrangement) or to require that the acquirer gives you additional consideration if you believe the consideration offered is insufficient. However, Cayman Islands statutory law provides a mechanism for a dissenting shareholder in a merger or consolidation to apply to the Grand Court of the Cayman Islands for a determination of the fair value of the dissenter’s shares if it is not possible for the company and the dissenter to agree on a fair price within the time limits prescribed.

Shareholders of Cayman Islands exempted companies (such as us) have no general rights under Cayman Islands law to inspect corporate records and accounts or to obtain copies of lists of shareholders. Our directors

 

79


Table of Contents

have discretion under our Articles of Association to determine whether or not, and under what conditions, our corporate records may be inspected by our shareholders, but are not obliged to make them available to our shareholders. This may make it more difficult for you to obtain information needed to establish any facts necessary for a shareholder motion or to solicit proxies from other shareholders in connection with a proxy contest.

Subject to limited exceptions, under Cayman Islands law, a minority shareholder may not bring a derivative action against the board of directors. Class actions are not recognized in the Cayman Islands, but groups of shareholders with identical interests may bring representative proceedings, which are similar.

United States civil liabilities and certain judgments obtained against us by our shareholders may not be enforceable.

We are a Cayman Islands exempted company and substantially all of our assets are located outside of the United States. In addition, the majority of our directors and officers are nationals and residents of countries other than the United States. A substantial portion of the assets of these persons is located outside of the United States. As a result, it may be difficult to effect service of process within the United States upon these persons. It may also be difficult to enforce in U.S. courts judgments obtained in U.S. courts based on the civil liability provisions of the U.S. federal securities laws against us and our officers and directors who are not resident in the United States and the substantial majority of whose assets are located outside of the United States.

Further, it is unclear if original actions predicated on civil liabilities based solely upon U.S. federal securities laws are enforceable in courts outside the United States, including in the Cayman Islands and Brazil. Courts of the Cayman Islands may not, in an original action in the Cayman Islands, recognize or enforce judgments of U.S. courts predicated upon the civil liability provisions of the securities laws of the United States or any state of the United States on the grounds that such provisions are penal in nature. Although there is no statutory enforcement in the Cayman Islands of judgments obtained in the United States, courts of the Cayman Islands will recognize and enforce a foreign judgment of a court of competent jurisdiction if such judgment is final, for a liquidated sum, provided it is not in respect of taxes or a fine or penalty, is not inconsistent with a Cayman Islands judgment in respect of the same matters, and was not obtained in a manner which is contrary to the public policy of the Cayman Islands. In addition, a Cayman Islands court may stay proceedings if concurrent proceedings are being brought elsewhere.

Judgments of Brazilian courts to enforce our obligations with respect to our Class A common shares may be payable only in reais.

Most of our assets are located in Brazil. If proceedings are brought in the courts of Brazil seeking to enforce our obligations in respect of our Class A common shares, we may not be required to discharge our obligations in a currency other than the real. Under Brazilian exchange control laws, an obligation in Brazil to pay amounts denominated in a currency other than the real may only be satisfied in Brazilian currency at the exchange rate, typically as determined by the Central Bank, in effect on the date the judgment is obtained, and such amounts are then typically adjusted to reflect exchange rate variations and monetary restatements through the effective payment date. The then-prevailing exchange rate may not afford non-Brazilian investors with full compensation for any claim arising out of or related to our obligations under the Class A common shares.

Our Class A common shares may not be a suitable investment for all investors, as investment in our Class A common shares presents risks and the possibility of financial losses.

The investment in our Class A common shares is subject to risks. Investors who wish to invest in our Class A common shares are thus subject to asset losses, including loss of the entire value of their investment, as well as other risks, including those related to our Class A common shares, us, the sector in which we operate, our shareholders and the general macroeconomic environment in Brazil, among other risks.

 

80


Table of Contents

Each potential investor in our Class A common shares must therefore determine the suitability of that investment in light of its own circumstances. In particular, each potential investor should:

 

   

have sufficient knowledge and experience to make a meaningful evaluation of our Class A common shares, the merits and risks of investing in our Class A common shares and the information contained in this prospectus;

 

   

have access to, and knowledge of, appropriate analytical tools to evaluate, in the context of its particular financial situation, an investment in our Class A common shares and the impact our Class A common shares will have on its overall investment portfolio;

 

   

have sufficient financial resources and liquidity to bear all of the risks of an investment in our Class A common shares;

 

   

understand thoroughly the terms of our Class A common shares and be familiar with the behavior of any relevant indices and financial markets; and

 

   

be able to evaluate (either alone or with the help of a financial advisor) possible scenarios for economic, interest rate and other factors that may affect its investment and its ability to bear the applicable risks.

There can be no assurance that we will not be a passive foreign investment company for any taxable year, which could subject U.S. investors in our Class A common shares to significant adverse U.S. federal income tax consequences.

Under the Internal Revenue Code of 1986, as amended, or the Code, we will be a passive foreign investment company, or PFIC, for any taxable year in which, after the application of certain look-through rules with respect to subsidiaries, either (1) 75% or more of our gross income consists of “passive income;” or (2) 50% or more of the average quarterly value of our assets consists of assets that produce, or are held for the production of, “passive income.” Passive income generally includes dividends, interest, certain non-active rents and royalties, and capital gains. Based on our current operations, income, assets and certain estimates and projections, including as to the relative values of our assets, including goodwill, which is based on the expected price of our Class A common shares, we do not expect to be a PFIC for our 2020 taxable year. However, there can be no assurance that the Internal Revenue Service, or the IRS, will agree with our conclusion. In addition, whether we will be a PFIC in 2020 or any future year is uncertain because, among other things, (1) we will hold a substantial amount of cash following this offering, which is categorized as a passive asset; and (2) our PFIC status for any taxable year will depend on the composition of our income and assets and the value of our assets from time to time (which may be determined, in part, by reference to the market price of our Class A common shares, which could be volatile). As discussed in “Use of Proceeds,” we plan to use the proceeds from this offering to fund investments, which may generate, at least in part, passive income. To the extent that growth in any such passive income outpaces our active business, our PFIC status could change. Accordingly, there can be no assurance that we will not be a PFIC for any taxable year.

If we are a PFIC for any taxable year during which a U.S. investor holds Class A common shares, we generally would continue to be treated as a PFIC with respect to that U.S. investor for all succeeding years during which the U.S. investor holds Class A common shares, even if we ceased to meet the threshold requirements for PFIC status. Such a U.S. investor may be subject to adverse U.S. federal income tax consequences, including (1) the treatment of all or a portion of any gain on disposition as ordinary income; (2) the application of a deferred interest charge on such gain and the receipt of certain dividends; and (3) compliance with certain reporting requirements. A “mark-to-market” election may be available that will alter the consequences of PFIC status if our Class A common shares are regularly traded on a qualified exchange. For further discussion, see “Taxation—U.S. Federal Income Tax Considerations.”

 

81


Table of Contents

If we were deemed to be an “investment company” under the Investment Company Act, applicable restrictions could make it impractical for us to continue our business as contemplated and could have a material adverse effect on our business, results of operations and financial condition.

We intend to conduct our operations so that the Company will not be deemed to be an investment company under the Investment Company Act. Rule 3a-1 under the Investment Company Act generally provides that an entity will not be deemed to be an “investment company” for purposes of the Investment Company Act if: (a) it does not hold itself out as being engaged primarily, and does not propose to engage primarily, in the business of investing, reinvesting or trading securities and (b) consolidating the entity’s wholly-owned subsidiaries (within the meaning of the Investment Company Act), no more than 45% of the value of its assets (exclusive of U.S. government securities and cash items) consists of, and no more than 45% of its net income after taxes (for the past four fiscal quarters combined) is derived from, securities other than U.S. government securities, securities issued by employees’ securities companies, securities issued by qualifying majority owned subsidiaries of such entity and securities issued by qualifying companies that are controlled primarily by such entity.

We believe that we are engaged primarily in the business of providing asset management services and not in the business of investing, reinvesting or trading in securities. We also believe that the primary source of income from each of our businesses is properly characterized as income earned in exchange for the provision of services. We hold ourselves out as an asset management firm and do not propose to engage primarily in the business of investing, reinvesting or trading in securities. Accordingly, we do not believe that the Company is what is frequently referred to as an “orthodox” investment company as defined in the Investment Company Act and described in clause (a) in the first sentence of the preceding paragraph. Furthermore, the Company’s assets, consolidated with its wholly-owned subsidiaries (within the meaning of the Investment Company Act), consist primarily of fee receivables for the provision of services, property and equipment, right-of-use leases deferred tax assets, and other assets that we believe would not be considered securities for purposes of the Investment Company Act. Therefore, we believe that, consolidating the Company’s wholly-owned subsidiaries (within the meaning of the Investment Company Act), no more than 45% of the value of its assets (exclusive of U.S. government securities and cash items) consists of, and no more than 45% of its net income after taxes (for the past four fiscal quarters combined) is derived from, securities other than U.S. government securities, securities issued by employees’ securities companies, securities issued by qualifying majority owned subsidiaries of the Company and securities issued by qualifying companies that are controlled primarily by the Company. Accordingly, we do not believe the Company is an investment company by virtue of the 45% test in Rule 3a-1 under the Investment Company Act as described in clause (b) in the first sentence of the preceding paragraph. Alternatively, we do not believe the Company is an inadvertent investment company by virtue of Section 3(a)(1)(C) of the Investment Company Act, under which an entity is generally deemed to be an “investment company” if, absent an applicable exemption, it owns or proposes to acquire investment securities (other than U.S. government securities, securities issued by employees’ securities companies and securities issued by qualifying majority owned subsidiaries of such entity) having a value exceeding 40% of the value of its total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis. On an unconsolidated basis, at least 60% of the value of our total assets (exclusive of U.S. government securities and cash items) consists of our interest in Vinci Investments Brazil, our majority owned subsidiary which we believe is a qualifying majority owned subsidiary for purposes of the 40% test described in the preceding sentence, because it is primarily engaged in providing asset management services and is not an investment company by virtue of Rule 3a-1 as described above. In addition, we believe the Company is not an investment company under section 3(b)(1) of the Investment Company Act because it is primarily engaged in a non-investment company business.

However, our subsidiaries have a significant number of investment securities, and we expect to make investments in other investment securities from time to time. We monitor these holdings regularly to confirm our continued compliance with the assets and income test described above. The need to comply with this test may cause us to restrict our business and subsidiaries with respect to the assets in which we can invest (including the manner in which we can use the proceeds from this offering or any other securities offering) and/or the types of

 

82


Table of Contents

securities we may issue, sell investment securities, including on unfavorable terms, acquire assets or businesses that could change the nature of our business or potentially take other actions that may be viewed as adverse to the holders of our Class A common stock, in order to conduct our business in a manner that does not subject us to the registration and other requirements of the Investment Company Act.

If anything were to happen which would cause the Company to be deemed to be an investment company under the Investment Company Act, we may lose our ability to raise money in the U.S. capital markets and from U.S. lenders, and additional restrictions under the Investment Company Act could apply to us, all of which could make it impractical for us to continue our business as currently conducted. This would materially and adversely affect the value of your Class A common shares and our ability to pay dividends in respect of our Class A common shares.

 

83


Table of Contents

PRESENTATION OF FINANCIAL AND OTHER INFORMATION

All references to “U.S. dollars,” “dollars” or “$” are to the U.S. dollar. All references to “real,” “reais,” “Brazilian real,” “Brazilian reais,” or “R$” are to the Brazilian real, the official currency of Brazil. All references to “IFRS” are to International Financial Reporting Standards, as issued by the International Accounting Standards Board, or the IASB.

Financial Statements

Vinci Partners, the company the Class A common shares of which are being offered in this prospectus, was incorporated on September 21, 2020, as a Cayman Islands exempted company with limited liability duly registered with the Cayman Islands Registrar of Companies. Until the contribution of Vinci Partners Brazil quotas to it, prior to the consummation of this offering, Vinci Partners will not have commenced operations and will have only nominal assets and liabilities and no material contingent liabilities or commitments.

We present in this prospectus the unaudited interim consolidated financial statements as of September 30, 2020 and for the nine months ended September 30, 2020 and 2019, prepared in accordance with IAS 34, as issued by the IASB, and the audited consolidated financial statements as of December 31, 2019 and 2018 and January 1, 2018, and for the years ended December 31, 2019 and 2018, of Vinci Partners Brazil, our principal holding company and wholly-owned subsidiary, prepared in accordance with IFRS, as issued by the IASB.

Vinci Partners Brazil maintains its books and records in Brazilian reais, the presentation currency for its financial statements and also the functional currency of our operations in Brazil. Unless otherwise noted, the financial information presented herein as of September 30, 2020, December 31, 2019 and 2018 and January 1, 2018, and for the nine months ended September 30, 2020 and 2019 and for the years ended December 31, 2019 and 2018, is stated in Brazilian reais, our reporting currency. The consolidated financial information of Vinci Partners Brazil contained in this prospectus is derived from Vinci Partners Brazil’s unaudited interim consolidated financial statements as of September 30, 2020 and for the nine months ended September 30, 2020 and 2019, together with the notes thereto and audited consolidated financial statements as of December 31, 2019 and 2018 and January 1, 2018, and for the years ended December 31, 2019 and 2018, together with the notes thereto. All references herein to “our financial statements,” “our audited consolidated financial information,” and “our audited consolidated financial statements” are to Vinci Partners Brazil’s consolidated financial statements included elsewhere in this prospectus.

This financial information should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements, including the notes thereto, included elsewhere in this prospectus.

Following this offering, we will begin reporting consolidated financial information to shareholders, and Vinci Partners Brazil will not present consolidated financial statements. We also maintain our books and records in Brazilian reais and our consolidated financial statements will be prepared in accordance with IFRS, as issued by the IASB.

Vinci Partners Brazil’s and our fiscal year ends on December 31. References in this prospectus to a fiscal year, such as “fiscal year 2019,” relate to our fiscal year ended on December 31 of that calendar year.

Corporate Events

Our Incorporation

We are a Cayman Islands exempted company incorporated with limited liability on September 21, 2020 for purposes of effectuating our initial public offering.

 

84


Table of Contents

Our Corporate Reorganization

Prior to this offering, all of the quotaholders of Vinci Partners Brazil, held, directly or indirectly, 8,730,000 quotas of Vinci Partners Brazil which are all of the quotas of Vinci Partners Brazil, our Brazilian principal holding company whose consolidated financial statements are included elsewhere in this prospectus.

Prior to this offering, all of the quotaholders of Vinci Brazil have contributed the entirety of their quotas in Vinci Partners Brazil to us. In return for this contribution, we have issued (1) new Class B common shares to Gilberto Sayão da Silva and (2) new Class A common shares to all other quotaholders of Vinci Partners Brazil, in each case in a one-to- 4.77 exchange for the quotas of Vinci Partners Brazil contributed to us, or the Contribution. Until the Contribution, we had not commenced operations and had only nominal assets and liabilities and no material contingent liabilities or commitments.

After accounting for the new Class A common shares that will be issued and sold by us in this offering, we will have a total of 55,515,574 common shares issued and outstanding immediately following this offering, 14,466,239 of these shares will be Class B common shares beneficially owned by Gilberto Sayão da Silva, and 41,049,335 of these shares will be Class A common shares beneficially owned by the other former quotaholders of Vinci Partners Brazil and the investors purchasing in this offering. See “Principal Shareholders.”

The following chart shows our simplified corporate structure, after giving effect to our corporate reorganization, the Contribution and this offering:

 

 

LOGO

Please read the information in the section entitled “Summary—Our Corporate Structure” for a description of the operations of our material operating subsidiaries.

 

85


Table of Contents

Financial Information in U.S. Dollars

Solely for the convenience of the reader, we have translated some of the real amounts included in this prospectus from reais into U.S. dollars. You should not construe these translations as representations by us that the amounts actually represent these U.S. dollar amounts or could be converted into U.S. dollars at the rates indicated. Unless otherwise indicated, we have translated real amounts into U.S. dollars using a rate of R$5.6407 to US$1.00, the commercial selling rate for U.S. dollars as of September 30, 2020, as reported by the Central Bank. See “Exchange Rates” for more detailed information regarding the translation of reais into U.S. dollars and for historical exchange rates for the Brazilian real.

Vinci Capital Partners III Catch-Up

The final round of capital raising for the Vinci Capital Partners III fund (the newest fund managed by us within our private equity segment) was closed on April 30, 2019, for a total capital commitment of R$4.0 billion (measured using the exchange rate reported by the Central Bank on April 30, 2019, of R$3.9453 per US$1.00). The amount of capital raised in the final round of funding was R$1.3 billion (measured using the exchange rate reported by the Central Bank on April 30, 2019, of R$3.9453 per US$1.00), representing 33% of the total capital commitment for the fund. We closed a number of funding rounds after the initial closing in 2017 through the final closing on April 30, 2019, and investors who subscribed capital after the initial closing were required to pay a one-time fund management fee equivalent to the amount that each limited partner would have paid if such limited partner had been invested in the fund since the initial round of funding, which one-time fund management fee payments we refer to as the Vinci Capital Partners III Catch-Up. Payment of the Vinci Capital Partners III Catch-Up generated an increase on gross revenue from services rendered of R$26.7 million (or net revenue from services rendered of R$25.9 million) in 2019 of which R$19.1 million was fund management fees from investors related to the 2018 period (equivalent to R$18.5 million of net revenue from services rendered). Because of the magnitude of the Vinci Capital Partners III Catch-Up, which was fully recognized in 2019, our results of operations for the year ended December 31, 2019, and for the nine months ended September 30, 2019, reflect a significantly higher net revenue from services rendered in our private equity segment in comparison with our results of operations for the year ended December 31, 2018, and for the nine months ended September 30, 2020, respectively. In the discussion of our results of operations for the nine months ended September 30, 2020 and 2019 and for 2019 and 2018 under “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations of Vinci Brazil,” we present the impact of the Vinci Capital Partners III Catch-Up in our 2019 results of operations.

Special Note Regarding Non-GAAP Financial Measures

This prospectus presents our FRE, FRE Margin, Adjusted FRE, Adjusted FRE Margin, PRE, Adjusted PRE, Distributable Earnings, Adjusted Distributable Earnings, Adjusted Profit for the year, Adjusted Profit Margin for the year and Net Revenue from Fund Management and Advisory as well as Dividends to Partners, Dividends to Partners related to performance fees, Dividends to Partners, excluding performance fee-related dividends, and Dividends to Partners excluding unrealized performance fee-related dividends, which are non-GAAP financial measures, and their reconciliations to the nearest measure as defined by IFRS, for the convenience of investors.

We present FRE, and Adjusted FRE because we believe these are useful metrics to monitor the baseline performance of, and trends in, our business, in a manner that does not include performance fees or investment income. FRE is calculated as operating profit, less (a) net revenue from realized performance fees, less (b) net revenue from unrealized performance fees, plus (c) compensation allocated in relation to performance fees. FRE Margin is calculated as FRE divided by Net Revenue from Fund Management and Advisory. Adjusted FRE is calculated as FRE, less Dividends to Partners, excluding performance fee-related dividends. Adjusted FRE Margin is calculated as Adjusted FRE divided by Net Revenue from Fund Management and Advisory.

We present performance related earnings, or PRE, because we believe this measure can provide useful information as a performance measure that we use to assess our ability to generate profits from revenue that

 

86


Table of Contents

relies on outcomes from funds above their respective benchmarks. We calculate PRE as operating profit, less (a) net revenue from fund management, less (b) net revenue from advisory, plus (c) personnel expenses and profit sharing, plus (d) other general and administrative expenses, less (e) compensation in relation to performance fees. Adjusted performance related earnings, or Adjusted PRE, is calculated as PRE, less Dividends to Partners related to performance fees.

We present Distributable Earnings as a reference point by our board of directors for determining the amount of earnings available to distribute to shareholders as dividends. Distributable Earnings is calculated as profit for the year, less (a) net revenue from unrealized performance fees, plus (b) income taxes from unrealized performance fees, plus (c) compensation allocated in relation to unrealized performance fees, less (d) unrealized gain from investment income, plus (e) income taxes on unrealized gain from investment income. Adjusted Distributable Earnings is calculated as Distributable Earnings, less Dividends to Partners, excluding unrealized performance fee-related dividends.

We present Adjusted Profit for the year because management evaluates this measure and we believe this measure can provide useful information to investors and analysts regarding the net results of our business, excluding Dividends to Partners. We calculate Adjusted Profit for the year as profit for the year, less Dividends to Partners.

We present Net Revenue from Fund Management and Advisory as a performance measure that we use to assess our ability to generate profits from our fund management and advisory business without measuring the outcomes from funds above their respective benchmarks. We calculate Net Revenue from Fund Management and Advisory as total net revenue from services rendered less (a) net revenue from realized performance fees, and less (b) net revenue from unrealized performance fees.

FRE, FRE Margin, Adjusted FRE, Adjusted FRE Margin, PRE, Adjusted PRE, Distributable Earnings, Adjusted Distributable Earnings, Adjusted Profit for the year, Adjusted Profit Margin for the year and Net Revenue from Fund Management and Advisory as described in this prospectus are non-GAAP measures that are not a substitute for the IFRS measures of earnings. Additionally, our calculation of these measures may be different from the calculation used by other companies, including our competitors in the financial services industry, and therefore, our measures may not be comparable to those of other companies.

We present Dividends to Partners, Dividends to Partners related to performance fees, Dividends to Partners, excluding performance fee-related dividends, and Dividends to Partners excluding unrealized performance fee-related dividends as measures that we use to assess the share of distributions made to our partners and for purposes of calculating a number of the non-GAAP measures described above. Dividends to Partners, represents a portion of total dividends distributed or declared for distribution by Vinci Partners, related to management fees or performance fees; Dividends to Partners related to performance fees are those dividends that are distributed or declared for distribution to partners in connection with performance related to fund outcomes above their respective benchmarks; Dividends to Partners, excluding performance fee-related dividends are those dividends distributed or declared for distribution to partners other than those related to performance fees; and Dividends to Partners, excluding unrealized performance fee-related dividends are dividends that are distributed or declared for distribution to partners other than dividends for which performance fees are not yet recognized as realized performance fee-related dividends under the relevant accounting criteria (i.e., it is not yet highly probable that the amount of revenue related to such fees will not be changed in the income statement).

Market Share and Other Information

This prospectus contains data related to economic conditions in the market in which we operate. The information contained in this prospectus concerning economic conditions is based on publicly available information from third-party sources that we believe to be reasonable. Market data and certain industry forecast data used in this prospectus were obtained from internal reports and studies, where appropriate, as well as

 

87


Table of Contents

estimates, market research, publicly available information (including information available from the United States Securities and Exchange Commission website) and industry publications. We obtained the information included in this prospectus relating to the industry in which we operate, as well as the estimates concerning market shares, through internal research, public information and publications on the industry prepared by official public sources, such as the Central Bank, or the World Bank, as well as private sources, such as ANBIMA, B3, Bloomberg, BNDES, CVM, Inter.B Consultoria Internacional de Negócios, McKinsey & Company, Oliver Wyman, and Reuters, among others.

Industry publications generally state that the information they include has been obtained from sources believed to be reliable, but that the accuracy and completeness of such information is not guaranteed. Although we have no reason to believe any of this information or these reports are inaccurate in any material respect and believe and act as if they are reliable, neither we, the underwriters, nor their respective agents have independently verified it. Governmental publications and other market sources, including those referred to above, generally state that their information was obtained from recognized and reliable sources, but the accuracy and completeness of that information is not guaranteed. In addition, the data that we compile internally and our estimates have not been verified by an independent source. Except as disclosed in this prospectus, none of the publications, reports or other published industry sources referred to in this prospectus were commissioned by us or prepared at our request. Except as disclosed in this prospectus, we have not sought or obtained the consent of any of these sources to include such market data in this prospectus.

Rounding

We have made rounding adjustments to some of the figures included in this prospectus. Accordingly, numerical figures shown as totals in some tables may not be an arithmetic aggregation of the figures that preceded them.

 

88


Table of Contents

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains statements that constitute forward-looking statements. Many of the forward-looking statements contained in this prospectus can be identified by the use of forward-looking words such as “anticipate,” “believe,” “could,” “expect,” “should,” “plan,” “intend,” “estimate” and “potential,” among others.

Forward-looking statements appear in a number of places in this prospectus and include, but are not limited to, statements regarding our intent, belief or current expectations. Forward-looking statements are based on our management’s beliefs and assumptions and on information currently available to our management. Such statements are subject to risks and uncertainties, and actual results may differ materially from those expressed or implied in the forward-looking statements due to various factors, including, but not limited to, those identified under the section entitled “Risk Factors” in this prospectus. These risks and uncertainties include factors relating to:

 

   

general economic, financial, political, demographic and business conditions in Brazil, as well as any other countries we may invest and attract investors from in the future and their impact on our business;

 

   

the actual and potential effects of the COVID-19 pandemic and its potential to have an ongoing adverse impact on global, regional and national economies;

 

   

fluctuations in interest, inflation and exchange rates in Brazil and any other countries we may serve in the future;

 

   

competition in the investment advisory and financial services industry;

 

   

our ability to implement our business strategy;

 

   

investment performance of investment funds managed by our asset managers or by third parties;

 

   

the availability of government authorizations on terms and conditions and within periods acceptable to us;

 

   

our ability to continue attracting and retaining new appropriately skilled employees;

 

   

our capitalization and ability to fund new investments;

 

   

our ability to adapt to the rapid pace of technological changes in the financial services industry;

 

   

the interests of our controlling shareholder, Gilberto Sayão da Silva, who will own 100% of our outstanding Class B common shares, which will represent approximately 77.9% of the voting power of our issued share capital following this offering;

 

   

changes in government regulations applicable to the financial services industry in Brazil and elsewhere;

 

   

our ability to compete and conduct our business in the future;

 

   

the success of operating initiatives, including advertising and promotional efforts and new product, service and concept development by us and our competitors;

 

   

changes in investors’ demands regarding investment products, customer experience related to investments and technological advances, and our ability to innovate to respond to such changes;

 

   

changes in labor, distribution and other operating costs;

 

   

our compliance with, and changes to, government laws, regulations and tax matters that currently apply to us;

 

   

other factors that may affect our financial condition, liquidity and results of operations; and

 

   

other risk factors discussed under “Risk Factors.”

Forward-looking statements speak only as of the date they are made, and we do not undertake any obligation to update them in light of new information or future developments or to release publicly any revisions to these statements in order to reflect later events or circumstances or to reflect the occurrence of unanticipated events.

 

89


Table of Contents

USE OF PROCEEDS

We estimate that the net proceeds from our issuance and sale of 13,873,474 shares of our Class A common shares in this offering will be approximately US$216.0 million (or US$248.9 million if the underwriters exercise in full their option to purchase additional shares), assuming an initial public offering price of US$17.00 per share, which is the midpoint of the price range set forth on the cover page of this prospectus, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

Each US$1.00 increase (decrease) in the assumed initial public offering price of US$17.00 per share would increase (decrease) the net proceeds to us from this offering by approximately US$12.9 million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. Each increase (decrease) of 1.0 million in the number of shares we are offering would increase (decrease) the net proceeds to us from this offering, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us, by approximately US$15.8 million, assuming the assumed initial public offering price stays the same.

We intend to use the net proceeds from this offering (1) to fund investments in our own products alongside our investors; (2) to pursue opportunities for strategic transactions; and (3) for other general corporate purposes.

Amounts of any proceeds used to fund investments in our own products alongside our investors would be used to accelerate the growth of existing strategies within our business lines, though we could choose to direct proceeds towards the launch of new and complementary investment strategies for our long-term segments (such as private equity, infrastructure, real estate and credit) and our investment products in our more short-term segments (such as hedge funds, public equities and investment products and solutions). We would seek to allocate resources across products with the objective of achieving optimal returns for Vinci Partners and consequently our shareholders, through the combination of capital return and leverage of overall fundraising for our investment strategies.

In addition, we may use the net proceeds from this offering to fund potential future merger and acquisition, partnership and joint venture opportunities. Any acquisitions, if pursued, would be expected to consist of a combination of cash and stock, with the objective of integrating businesses that would be complementary to ours and improve our overall strategic positioning. In pursuing potential acquisitions, we would take into consideration “build-versus-buy” characteristics, and the accretive nature of any acquisition to our business plan.

We may consider acquisition opportunities that reinforce our strategy and market positioning. We will have broad discretion in allocating the net proceeds from this offering. Although we currently anticipate that we will use the net proceeds from this offering as described above, there may be circumstances where a reallocation of funds is necessary. The amounts and timing of our actual expenditures will depend upon numerous factors, including the factors described under “Risk Factors” in this prospectus. Accordingly, our management will have flexibility in applying the net proceeds from this offering. An investor will not have the opportunity to evaluate the economic, financial or other information on which we base our decisions on how to use the proceeds.

Pending our use of the net proceeds from this offering, we intend to invest the net proceeds in a variety of capital preservation investments, including short-term, investment-grade, interest-bearing instruments and U.S. government securities. No assurance can be given that we will invest the net proceeds from this offering in a manner that produces income or that does not result in a loss in value.

 

90


Table of Contents

DIVIDENDS AND DIVIDEND POLICY

We intend to pay semi-annual cash dividends on our common shares initially at an amount equal to at least 50% of our Distributable Earnings. We do not have a legal obligation to pay a semi-annual dividend or dividends at any specified rate or at all. Any declaration of dividends will be at the discretion of our board of directors and will depend on our financial condition, earnings, cash needs, regulatory constraints, capital requirements (including requirements of our subsidiaries and the ability of our subsidiaries to pay dividends to us) and any other factors that our board of directors deems relevant in making such a determination. Therefore, there can be no assurance that we will pay any dividends to holders of our common shares, or as to the amount of any such dividends.

In 2019 and 2018, Vinci Partners Brazil paid dividends totaling R$76.2 million and R$45.9 million, respectively. In the nine months ended on September 30, 2020, Vinci Partners Brazil paid dividends totaling R$129.8 million. Subsequent to September 30, 2020, Vinci Partners Brazil declared, made provisions for the payment of, and partially paid dividends related to earnings through the eleven months ended November 30, 2020, totaling R$141.3 million. Of this amount, R$117.0 million were related to the nine months dividend. In addition, Vinci Partners is expected to declare, and make provisions for, the payment of dividends related to earnings for the month of December 2020, prior to the consummation of this offering. The majority of the dividend declared in relation to earnings or retained earnings through December 30, 2020 is expected to be distributed to the former quotaholders of Vinci Partners Brazil by the end of the first quarter 2021, and investors purchasing Class A common shares in this offering will not be entitled to receive any portion of this dividend. See the statement of cash flows to our unaudited interim consolidated financial statements included elsewhere in this prospectus. See also “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Factors Affecting the Comparability of Our Results of Operations—Partner Dividends” regarding our historical practice for distributing dividends to our partners.

Certain Cayman Islands Legal Requirements Related to Dividends

Under the Companies Law and our Articles of Association, a Cayman Islands company may pay a dividend out of either its profit or share premium account, but a dividend may not be paid if this would result in the company being unable to pay its debts as they fall due in the ordinary course of business. According to our Articles of Association, dividends can be declared and paid out of funds lawfully available to us, which include the share premium account. Dividends, if any, would be paid in proportion to the number of common shares a shareholder holds. For further information, see “Taxation—Cayman Islands Tax Considerations.”

Additionally, please refer to “Risk Factors—Certain Risks Relating to Our Business and Industry—Our holding company structure makes us dependent on the operations of our subsidiaries.” Our ability to pay dividends is directly related to positive and distributable net results from our subsidiaries. We depend on dividend distributions by our subsidiaries, and we may be adversely affected if the performance of our subsidiaries is not positive. If, for any legal reasons due to new laws or bilateral agreements between countries, they are unable to pay dividends to Cayman Islands companies, or if a Cayman Islands company becomes incapable of receiving them, we may not be able to make any dividend payments in the future.

 

91


Table of Contents

CAPITALIZATION

The table below sets forth our total capitalization (defined as long-term debt and total equity) as of September 30, 2020 (in each case, after giving effect to the nine months dividend and the Contribution), as follows:

 

   

historical financial information of Vinci Partners Brazil, on an actual basis;

 

   

of Vinci Partners Brazil after giving effect to the nine months dividend in the amount of R$117.0 million;

 

   

of Vinci Partners (after giving effect to the Contribution); and

 

   

of Vinci Partners, as further adjusted to give effect to the items listed in the preceding bullet and to the issuance and sale by us of the Class A common shares in this offering, and the receipt of approximately US$216.0 million (R$1,138.6 million) in estimated net proceeds, considering an offering price of US$17.00 (R$89.60) per Class A common share (the midpoint of the range set forth on the cover of this prospectus), after deduction of the estimated underwriting discounts and commissions and estimated offering expenses payable by us in connection with this offering, and the use of proceeds therefrom (and assuming no exercise of the underwriters’ option to purchase additional shares and placement of all offered Class A common shares).

Investors should read this table in conjunction with our unaudited interim consolidated financial statements and the related notes included elsewhere in this prospectus, with the sections of this prospectus entitled “Selected Financial Information,” with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and with other financial information contained in this prospectus.

 

    As of September 30, 2020  
    Vinci Partners
Brazil, actual
    Vinci Partners Brazil
(after giving effect to
the nine months dividend)
    Vinci Partners (after giving
effect to the Contribution)
    Vinci Partners, as
further adjusted for
this offering (2)
 
    (US$) (1)     (R$)     (US$) (1)     (R$)     (US$) (1)     (R$)     (US$) (1)     (R$)  
    (in thousands)  

Long-term debt, excluding current portion (3)

    (14,428     (81,385     (14,428     (81,385     (14,428     (81,385     (14,428     (81,385

Total equity

    (24,277     (136,939     (3,540     (19,969     (3,540     (19,969     (205,389     (1,158,539
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total capitalization (4)

    (38,705     (218,324     (17,968     (101,354     (17,968     (101,354     (219,817     (1,239,924
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1)

For convenience purposes only, amounts in reais as of September 30, 2020, have been translated to U.S. dollars at the exchange rate of R$5.6407 to US$1.00, the commercial selling rate for U.S. dollars as of September 30, 2020, as reported by the Central Bank. These translations should not be considered representations that any such amounts have been, could have been or could be converted at that or any other exchange rate. See “Exchange Rates” and “Presentation of Financial and Other Information” for further information about recent fluctuations in exchange rates.

(2)

Each US$1.00 increase (decrease) in the offering price per Class A common share would increase (decrease) our total capitalization and shareholders’ equity by R$68.0 million.

(3)

Consists solely of non-current lease liabilities.

(4)

Total capitalization consists of long-term debt (excluding current portion) plus total equity.

 

92


Table of Contents

DILUTION

Prior to this initial public offering and after the Contribution, the prior quotaholders of Vinci Partners Brazil hold all of our issued and outstanding shares, and we hold all of the issued and outstanding quotas in Vinci Partners Brazil.

We have presented the dilution calculation below on the basis of Vinci Partners Brazil’s net tangible book value as of September 30, 2020, because (1) until the contribution of Vinci Partners Brazil quotas to it, Vinci Partners will not have commenced operations and will have only nominal assets and liabilities and no material contingent liabilities or commitments; and (2) the number of common shares of Vinci Partners in issuance prior to this offering was the same as the number of quotas of Vinci Partners Brazil in issuance as of September 30, 2020, after giving effect to the Contribution.

As of September 30, 2020, Vinci Partners Brazil had an adjusted net tangible book value of R$13.0 million, corresponding to a net tangible book value of R$0.3 per share, after giving effect to the nine months dividend and the Contribution. Net tangible book value per share represents the amount of our total assets less our total liabilities, excluding goodwill and other intangible assets, divided by 41,642,100, the total number of shares outstanding as of September 30, 2020, after giving effect to the nine months dividend and the Contribution.

After giving effect to the nine months dividend and the Contribution and the sale of the Class A common shares offered by us in this offering, and considering an offering price of US$17.00 per Class A common share (the midpoint of the range set forth on the cover of this prospectus), after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us, our net tangible book value estimated as of September 30, 2020, would have been approximately US$218.5 million, representing US$3.94 per share. This represents an immediate increase in net tangible book value of US$3.88 per share to existing shareholders and an immediate dilution in net tangible book value of US$13.06 per share to new investors purchasing Class A common shares in this offering. Dilution for this purpose represents the difference between the price per Class A common shares paid by these purchasers and net tangible book value per Class A common share immediately after the completion of this offering.

If you invest in our Class A common shares, your interest will be diluted to the extent of the difference between the initial public offering price per Class A common share (when converted into reais) and the pro forma net tangible book value per Class A common share after accounting for the issuance and sale of new common shares in this offering.

Because the Class A common shares and Class B common shares of Vinci Partners have the same dividend and other rights, except for voting and preemption rights, we have counted the Class A common shares and Class B common shares equally for purposes of the dilution calculations below.

The following table illustrates this dilution to new investors purchasing Class A common shares in this offering.

 

Net tangible book value per share as of September 30, 2020 (after giving effect to the nine months dividend and the Contribution)

   US$ 0.06  

Increase in net tangible book value per share attributable to new investors

   US$ 3.88  

Pro forma net tangible book value per share immediately after this offering (after giving effect to the nine months dividend and the Contribution)

   US$ 3.94  

Dilution per Class A common share to new investors

   US$ 13.06  

Percentage of dilution in net tangible book value per Class A common share for new investors

     76.9%  

Each US$1.00 increase (decrease) in the offering price per Class A common share, respectively, would increase (decrease) the net tangible book value immediately after this offering by US$0.23 per Class A common share and the dilution to investors in this offering by US$0.77 per Class A common share.

To the extent that we grant options in the future and those options are exercised or other issuances of common shares are made, there will be further dilution to new investors. See “Management-Long—Term Incentive Plan.”

 

93


Table of Contents

EXCHANGE RATES

The Brazilian foreign exchange system allows the purchase and sale of foreign currency and the international transfer of reais by any person or legal entity, regardless of the amount, subject to certain regulatory procedures.

The real depreciated against the U.S. dollar from mid-2011 to early 2016. In particular, during 2015, due to the poor economic conditions in Brazil, including as a result of political instability, the real depreciated at a rate that was significantly higher than in previous years. Overall in 2015, the real depreciated 47.0%, reaching R$3.9048 per US$1.00 on December 31, 2015. In 2016, the real fluctuated significantly, primarily as a result of Brazil’s political instability, appreciating 16.5% to R$3.2585 per US$1.00 on December 31, 2016. In 2017, the real depreciated 1.5% against the U.S. dollar, ending the year at an exchange rate of R$3.3074 per US$1.00. In 2018, the real depreciated 17.1% against the U.S. dollar, ending the year at an exchange rate of R$3.8742 per US$1.00 mainly due to the result of lower interest rates in Brazil as well as uncertainty regarding the results of the Brazilian presidential elections, which were held in October 2018. The real/U.S. dollar exchange rate reported by the Central Bank was R$4.0307 per US$1.00 on December 31, 2019, which reflected a 4.0% depreciation in the real against the U.S. dollar in 2019, and R$5.1967 per US $1.00 on December 31, 2020, which represented a 28.9% depreciation in the real against the U.S. dollar in 2020. There can be no assurance that the real will not depreciate or appreciate further against the U.S. dollar. The Central Bank has previously intervened in the foreign exchange market to attempt to control instability in foreign exchange rates. We cannot predict whether the Central Bank or the Brazilian government will continue to allow the real to float freely or will intervene in the exchange rate market by re-implementing a currency band system or otherwise. The real may depreciate or appreciate substantially against the U.S. dollar in the future. Furthermore, Brazilian law provides that, whenever there is a serious imbalance in Brazil’s balance of payments or there are serious reasons to foresee a serious imbalance, temporary restrictions may be imposed on remittances of foreign capital abroad. While we are not aware of any recent intervention by the Brazilian government, we cannot assure you that the Brazilian government will not place restrictions on remittances of foreign capital abroad in the future.

The following table sets forth, for the periods indicated, the high, low, average and period-end exchange rates for the purchase of U.S. dollars expressed in Brazilian reais per U.S. dollar. The average rate is calculated by using the average of reported exchange rates by the Central Bank on each business day during a monthly period and on the last day of each month during an annual period, as applicable. As of December 31, 2020, the exchange rate for the purchase of U.S. dollars as reported by the Central Bank was R$5.1967 per US$1.00.

 

Year

   Period-end      Average (1)      Low (2)      High (3)  

2016

     3.2585        3.4833        3.1193        4.1558  

2017

     3.3074        3.1925        3.0510        3.3807  

2018

     3.8742        3.6558        3.1391        4.1879  

2019

     4.0307        3.9456        3.6513        4.2596  

2020

     5.1967        5.1578        4.0213        5.9372  

 

Source: Central Bank.

 

(1)

Represents the average of the exchange rates on the closing of each day during the year.

(2)

Represents the minimum of the exchange rates on the closing of each day during the year.

(3)

Represents the maximum of the exchange rates on the closing of each day during the year.

 

94


Table of Contents

Month

   Period-end      Average (1)      Low (2)      High (3)  

July 2020

     5.2033        5.2802        5.1111        5.4288  

August 2020

     5.4713        5.4612        5.2760        5.6510  

September 2020

     5.6407        5.3995        5.2532        5.6528  

October 2020

     5.7718        5.6258        5.5205        5.7803  

November 2020

     5.3317        5.4178        5.2821        5.6932  

December 2020

     5.1967        5.1456        5.0578        5.2789  

January 2021 (through January 15, 2021)

     5.2714        5.3320        5.1626        5.4966  

 

Source: Central Bank.

 

(1)

Represents the average of the exchange rates on the closing of each day during the month.

(2)

Represents the minimum of the exchange rates on the closing of each day during the month.

(3)

Represents the maximum of the exchange rates on the closing of each day during the month.

 

95


Table of Contents

MARKET INFORMATION

Prior to this offering, there has been no public market for our Class A common shares. We cannot assure that an active trading market will develop for our Class A common shares, or that our Class A common shares will trade in the public market subsequent to this offering at or above the initial public offering price.

 

96


Table of Contents

SELECTED FINANCIAL INFORMATION

The following tables set forth, for the periods and as of the dates indicated, our selected financial and operating data. This information should be read in conjunction with “Presentation of Financial and Other Information,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements, including the notes thereto, included elsewhere in this prospectus.

The selected financial information has been derived from the unaudited interim consolidated financial statements of Vinci Partners Brazil as of September 30, 2020 and for the nine months ended September 30, 2020 and 2019, included elsewhere in this prospectus, prepared in accordance with International Financial Reporting Standard IAS No. 34 “Interim Financial Reporting,” or IAS 34 and from the audited consolidated financial statements of Vinci Partners Brazil as of and for the years ended December 31, 2019 and 2018, included elsewhere in this prospectus, prepared in accordance with IFRS, as issued by the IASB.

Income Statement Data

 

    For the Nine Months
Ended September 30,
    For the Year Ended December 31,  
    2020     2020     2019     2019     2019     2018  
    US$ (1)     R$     (US$) (1)     (R$)  
    (in thousands, except percentages)  

Total gross revenue from services rendered

    44,093       248,715       201,839       55,151       311,093       180,337  

Total net revenue from services rendered

    41,711       235,280       192,629       52,603       296,717       172,204  

Net revenue from fund management

    34,613       195,241       167,493       39,677       223,808       146,551  

Net revenue from realized performance fees

    2,165       12,212       7,480       8,146       45,949       6,042  

Net revenue from unrealized performance fees

    895       5,046       7,068       2,849       16,071       —    

Net revenue from advisory

    4,039       22,781       10,588       1,930       10,889       19,611  

Personnel expenses and profit sharing

    (9,016     (50,856     (42,259     (11,087     (62,536     (44,193

Other general and administrative expenses

    (5,942     (33,519     (36,910     (8,997     (50,751     (46,562

Operating profit

    26,753       150,905       113,460       32,519       183,430       81,449  

Investment income

    885       4,990       16,048       3,589       20,244       7,464  

Realized gain from investment income

    392       2,211       1,895       1,574       8,876       2,355  

Unrealized gain from investment income

    493       2,779       14,153       2,015       11,368       5,109  

Other financial income

    156       879       690       163       917       1,259  

Finance costs

    (1,705     (9,617     (9,261     (2,212     (12,476     (12,472

Profit before income taxes

    26,088       147,157       120,937       34,059       192,115       77,700  

Income taxes

    (5,381     (30,354     (25,202     (6,468     (36,483     (21,022

Profit for the year

    20,707       116,803       95,735       27,591       155,632       56,678  

Net profit margin (%)

    49.6     49.6     49.7     52.5     52.5     32.9

Adjusted Profit for the year (2)

    16,183       91,281       68,846       20,155       113,688       33,950  

Adjusted Profit Margin (%) (2)

    38.8     38.8     35.7     38.3     38.3     19.7

 

(1)

For convenience purposes only, amounts in reais for the nine months ended September 30, 2020 and for the year ended December 31, 2019 have been translated to U.S. dollars using an exchange rate of R$5.6407 to US$1.00, the commercial selling rate for U.S. dollars as of September 30, 2020, as reported by the Central Bank. These translations should not be considered representations that any such amounts have been, could have been or could be converted at that or any other exchange rate. See “Exchange Rates” for further information about recent fluctuations in exchange rates.

(2)

Adjusted Profit for the year and Adjusted Profit Margin are non-GAAP financial measures that we present for the convenience of investors. See “—Non-GAAP Financial Measures” for a reconciliation of these measures to their nearest GAAP measure and “Presentation of Financial and Other Information—Special Note Regarding Non-GAAP Financial Measures” for further information on why our management chooses to use these non-GAAP financial measures, and on the limits of using these non-GAAP financial measures.

 

97


Table of Contents

Balance Sheet Data

 

    As of September 30,     As of December 31,  
      2020         2020       2020
Pro Forma (1)
    2019     2019     2018  
    (US$) (2)    

(R$)        

    (US$) (2)     (R$)  
    (in thousands)  

Current assets

           

Cash and cash equivalents

    16,803       94,779       94,779       691       3,896       11,713  

Financial instruments at fair value through profit or loss

    3,683       20,772       20,772       15,236       85,944       37,583  

Trade receivables

    5,884       33,191       33,191       10,426       58,808       21,040  

Leases

    525       2,963       2,963       511       2,883       3,357  

Taxes recoverable

    198       1,118       1,118       140       789       115  

Other receivables

    1,274       7,189       7,189       894       5,044       1,469  

Total current assets

    28,367       160,012       160,012       27,898       157,364       75,277  

Non-current assets

           

Financial instruments at fair value through profit or loss

    4,850       27,356       27,356       4,284       24,164       14,313  

Trade receivables

    3,968       22,382       22,382       2,830       15,961       —    

Leases

    122       688       688       482       2,717       5,017  

Taxes recoverable

    26       149       149       91       513       548  

Deferred taxes

    945       5,328       5,328       391       2,207       575  

Other receivables

    241       1,357       1,357       236       1,330       1,405  

Property and equipment

    2,808       15,837       15,837       2,910       16,412       19,330  

Right of use – leases

    14,947       84,310       84,310       15,669       88,384       81,949  

Intangible assets

    310       1,747       1,747       482       2,720       3,833  

Total non-current assets

    28,215       159,154       159,154       27,374       154,408       126,970  

Total assets

    56,583       319,166       319,166       55,272       311,772       202,247  

Liabilities and equity

           

Current liabilities

           

Trade payables

    30       171       171       58       326       211  

Deferred revenue

    3,570       20,135       20,135       —         —         —    

Leases

    3,276       18,479       18,479       3,145       17,738       16,454  

Accounts payable

    414       2,338       143,662       6,678       37,669       2,527  

Labor and social security obligations

    5,147       29,033       29,033       5,487       30,948       17,895  

Taxes and contributions payable

    3,272       18,457       18,457       2,889       16,297       7,584  

Total current liabilities

    15,710       88,613       229,937       18,256       102,978       44,671  

Non-current liabilities

           

Accounts payable

    6       33       33       6       33       1,687  

Leases

    14,428       81,385       81,385       15,096       85,153       76,550  

Payables to related parties

    276       1,557       1,557       —         —         8,526  

Deferred taxes

    1,886       10,639       10,639       1,575       8,883       2,167  

Advance to capital increase

    —         —         —         —         —         580  

Total non-current liabilities

    16,596       93,614       93,614       16,677       94,069       89,510  

Equity

           

Share capital

    1,548       8,730       8,730       1,524       8,595       8,820  

Retained earnings

    20,010       112,870       (24,354     16,209       91,430       49,711  

Other reserves

    1,990       11,224       11,224       1,439       8,119       7,776  

Non-controlling interests in the equity of subsidiaries

    730       4,115       15       1,167       6,581       1,759  

Total equity

    24,277       136,939       (4,385     20,339       114,725       68,066  

Total liabilities and equity

    56,583       319,166       319,166       55,272       311,772       202,247  

 

(1)

The unaudited pro forma balance sheet data as of September 30, 2020 has been prepared to give effect to dividends declared through November 30, 2020 in the amount of R$141.3 million. The unaudited pro forma balance sheet data does not reflect any increase in retained earnings subsequent to September 30, 2020.

(2)

For convenience purposes only, amounts in reais as of September 30, 2020 and December 31, 2019, have been translated to U.S. dollars using an exchange rate of R$5.6407 to US$1.00, the commercial selling rate for U.S.

 

98


Table of Contents
  dollars as of September 30, 2020, as reported by the Central Bank. These translations should not be considered representations that any such amounts have been, could have been or could be converted at that or any other exchange rate. See “Exchange Rates” for further information about recent fluctuations in exchange rates.

Non-GAAP Financial Measures

This prospectus presents our FRE, FRE Margin, Adjusted FRE, Adjusted FRE Margin, PRE, Adjusted PRE, Distributable Earnings, Adjusted Distributable Earnings, Adjusted Profit for the year, Adjusted Profit Margin for the year and Net Revenue from Fund Management and Advisory as well as Dividends to Partners, Dividends to Partners related to performance fees, Dividends to Partners, excluding performance fee-related dividends, and Dividends to Partners excluding unrealized performance fee-related dividends (each as explained in the footnotes to the table below), which are non-GAAP financial measures, and their reconciliations to the nearest measure as defined by IFRS, for the convenience of investors. A non-GAAP financial measure is generally defined as a numerical measure of historical or future financial performance, financial position, or cash flow that purports to measure financial performance but excludes or includes amounts that would not be so adjusted in the most comparable GAAP measure. For further information on why our management chooses to use these non-GAAP financial measures, and on the limits of using these non-GAAP financial measures, please see “Presentation of Financial and Other Information—Special Note Regarding Non-GAAP Financial Measures.”

 

     For the Nine Months Ended
September 30,
    For the Year Ended December 31,  
     2020     2020     2019     2019     2019     2018  
     US$ (1)     R$     (US$) (1)     (R$)  
     (in thousands)  

Operating profit

     26,753       150,905       113,460       32,519       183,430       81,449  

(-) Net revenue from realized performance fees

     (2,165     (12,212     (7,480     (8,146     (45,949     (6,042

(-) Net revenue from unrealized performance fees

     (895     (5,046     (7,068     (2,849     (16,071     —    

(+) Compensation allocated in relation to performance fees

     385       2,173       862       548       3,091       239  

FRE (2)

     24,079       135,820       99,774       22,072       124,501       75,646  

(-) Dividends to Partners, excluding performance fee-related dividends (3)

     (3,906     (22,034     (22,969     (4,674     (26,365     (21,157

Adjusted FRE(2)

     20,172       113,786       76,805       17,398       98,136       54,488  

Operating profit

     26,753       150,905       113,460       32,519       183,430       81,449  

(-) Net revenue from fund management

     (34,613     (195,241     (167,493     (39,677     (223,808     (146,551

(-) Net revenue from advisory

     (4,039     (22,781     (10,588     (1,930     (10,889     (19,611

(+) Personnel expenses and profit sharing

     9,016       50,856       42,259       11,087       62,536       44,193  

(+) Other general and administrative expenses

     5,942       33,519       36,910       8,997       50,751       46,562  

(-) Compensation allocated in relation to performance fees

     (385     (2,173     (862     (548     (3,091     (239

PRE (4)

     2,674       15,085       13,686       10,447       58,929       5,803  

(-) Dividends to Partners related to performance fees (3)

     (618     (3,488     (3,920     (2,762     (15,579     (1,571

Adjusted PRE (4)

     2,056       11,597       9,766       7,685       43,350       4,232  

Profit for the year

     20,707       116,803       95,735       27,591       155,632       56,678  

(-) Net revenue from unrealized performance fees

     (895     (5,046     (7,068     (2,849     (16,071     —    

(+) Income tax from unrealized performance fees

     103       582       815       329       1,853       —    

(+) Compensation allocated in relation to unrealized performance fees

     72       405       601       229       1,289       —    

(-) Unrealized gain from investment income

     (493     (2,779     (14,153     (2,015     (11,368     (5,109

(+) Income taxes on unrealized gain from investment income

     168       945       4,812       685       3,865       1,737  

 

99


Table of Contents
     For the Nine Months Ended
September 30,
    For the Year Ended December 31,  
     2020     2020     2019     2019     2019     2018  
     US$ (1)     R$     (US$) (1)     (R$)  
     (in thousands)  

Distributable Earnings (5)

     19,662       110,910       80,742       23,969       135,200       53,306  

(-) Dividends to Partners, excluding unrealized performance fee-related dividends (3)

     (4,271     (24,094     (24,989     (6,655     (37,538     (22,728

Adjusted Distributable Earnings (5)

     15,391       86,816       55,753       17,314       97,662       30,578  

Profit for the year

     20,707       116,803       95,735       27,591       155,632       56,678  

(-) Dividends to Partners (3)

     (4,525     (25,522     (26,889     (7,436     (41,944     (22,728

Adjusted Profit for the year (6)

     16,183       91,281       68,846       20,155       113,688       33,950  

Total net revenue from services rendered

     41,711       235,280       192,629       52,603       296,717       172,204  

(-) Net revenue from realized performance fees

     (2,165     (12,212     (7,480     (8,146     (45,949     (6,042

(-) Net revenue from unrealized performance fees

     (895     (5,046     (7,068     (2,849     (16,071     —    

Net Revenue from Fund Management and Advisory (7)

     38,652       218,022       178,081       41,608       234,697       166,162  

 

(1)

For convenience purposes only, amounts in reais for the nine months ended September 30, 2020 and for the year ended December 31, 2019 have been translated to U.S. dollars using an exchange rate of R$5.6407 to US$1.00, the commercial selling rate for U.S. dollars as of September 30, 2020, as reported by the Central Bank. These translations should not be considered representations that any such amounts have been, could have been or could be converted at that or any other exchange rate. See “Exchange Rates” for further information about recent fluctuations in exchange rates.

(2)

Fee related earnings, or FRE, is a metric to monitor the baseline performance of, and trends in, our business, in a manner that does not include performance fees or investment income. We calculate FRE as operating profit, less (a) net revenue from realized performance fees, less (b) net revenue from unrealized performance fees, plus (c) compensation allocated in relation to performance fees. Adjusted FRE is calculated as FRE, less Dividends to Partners, excluding performance fee-related dividends.

(3)

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Factors Affecting the Comparability of Our Results of Operations—Partner Dividends” and “Dividends and Dividend Policy” regarding our historical practice for distributing dividends to our partners. Dividends to partners, or Dividends to Partners, represents a portion of total dividends distributed or declared for distribution by Vinci Partners, related to management fees or performance fees. As set forth in the table above, (a) Dividends to Partners related to performance fees are those dividends that are distributed or declared for distribution to partners in connection with performance related to fund outcomes above their respective benchmarks, (b) Dividends to Partners, excluding performance fee-related dividends are those dividends distributed or declared for distribution to partners other than those related to performance fees, and (c) Dividends to Partners, excluding unrealized performance fee-related dividends are dividends that are distributed or declared for distribution to partners other than dividends for which performance fees are not yet recognized as realized performance fee-related dividends under the relevant accounting criteria (i.e., it is not yet highly probable that the amount of revenue related to such fees will not be changed in the income statement). The following table presents a reconciliation of each of Dividends to Partners related to performance fees, Dividends to Partners, excluding performance fee-related dividends, Dividends to

 

100


Table of Contents
  Partners, excluding unrealized performance fee-related dividends and Dividends to Partners to the amount of dividends we report in our financial statements.

 

    For the Nine Months Ended
September 30,
    For the Year Ended
December 31,
 
    2020     2020     2019     2019     2019     2018  
    US$ (a)     R$     R$     (US$) (a)     (R$)  
    (in thousands)  

Dividends paid

    23,017       129,832       60,771       13,514       76,226       45,885  

(-) Dividends not related to management fees or performance fees (b)

    (18,492     (104,310     (33,882     (6,078     (34,282     (23,157

Dividends to Partners

    4,525       25,522       26,889       7,436       41,944       22,728  

Dividends to Partners

    4,525       25,522       26,889       7,436       41,944       22,728  

(-) Management fee-related dividends (c)

    (3,906     (22,034     (22,969     (4,674     (26,365     (21,157

Dividends to Partners related to performance fees

    618       3,488       3,920       2,762       15,579       1,571  

Dividends to Partners

    4,525       25,522       26,889       7,436       41,944       22,728  

(-) Dividends to Partners related to performance fees dividends

    (618     (3,488     (3,920     (2,762     (15,579     (1,571

Dividends to Partners, excluding performance fee-related dividends

    3,906       22,034       22,969       4,674       26,365       21,157  

Dividends to Partners

    4,525       25,522       26,889       7,436       41,944       22,728  

(-) Unrealized performance fee-related dividends

    (253     (1,428     (1,900     (781     (4,406     —    

Dividends to Partners, excluding unrealized performance fee-related dividends

    4,271       24,094       24,989       6,655       37,538       22,728  

 

  (a)

For convenience purposes only, amounts in reais for the nine months ended September 30, 2020 and for the year ended December 31, 2019 have been translated to U.S. dollars using an exchange rate of R$5.6407 to US$1.00, the commercial selling rate for U.S. dollars as of September 30, 2020, as reported by the Central Bank. These translations should not be considered representations that any such amounts have been, could have been or could be converted at that or any other exchange rate. See “Exchange Rates” for further information about recent fluctuations in exchange rates.

  (b)

Dividends not related to management fees or performance fees are dividends paid to our partners in relation to their participation in the company.

  (c)

Management fee-related dividends are the share of our total Dividends to Partners calculated based on the level of net revenue from fund management and from financial advisory services.

 

(4)

Performance related earnings, or PRE, is a performance measure that we use to assess our ability to generate profits from revenue that relies on outcomes from funds above their respective benchmarks. We calculate PRE as operating profit, less (a) net revenue from fund management, less (b) net revenue from advisory, plus (c) personnel expenses and profit sharing, plus (d) other general and administrative expenses, less (e) compensation allocated in relation to performance fees. Adjusted performance related earnings, or Adjusted PRE, is calculated as PRE, less Dividends to Partners related to performance fees.

(5)

Distributable Earnings is used as a reference point by our board of directors for determining the amount of earnings available to distribute to shareholders as dividends. Distributable Earnings is calculated as profit for the year, less (a) net revenue from unrealized performance fees, plus (b) income taxes from unrealized performance fees, plus (c) compensation allocated in relation to unrealized performance fees, less (d) unrealized gain from investment income, plus (e) income taxes on unrealized gain from investment income. Adjusted Distributable Earnings, or Adjusted Distributable Earnings, is calculated as Distributable Earnings, less Dividends to Partners, excluding unrealized performance fee-related dividends.

(6)

Adjusted Profit for the year is a performance measure that we use to assess the performance of our business and that we present to provide investors and analysts with information regarding the net results of our

 

101


Table of Contents
  business, excluding Dividends to Partners. We calculate Adjusted Profit for the year as profit for the year, less Dividends to Partners.
(7)

Net Revenue from Fund Management and Advisory is a performance measure that we use to assess our ability to generate profits from our fund management and advisory business without measuring for the outcomes from funds above their respective benchmarks. We calculate Net Revenue from Fund Management and Advisory as total net revenue from services rendered less (a) net revenue from realized performance fees and less (b) net revenue from unrealized performance fees.

 

102


Table of Contents

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

The following discussion of our financial condition and results of operations should be read in conjunction with our unaudited interim consolidated financial statements as of September 30, 2020 and for the nine months ended September 30, 2020 and 2019 and our audited consolidated financial statements as of and for the years ended December 31, 2019 and 2018 and the notes thereto, included elsewhere in this prospectus, as well as the information presented under “Presentation of Financial and Other Information,” “Summary Financial Information” and “Selected Financial Information.”

The following discussion contains forward-looking statements that involve risks and uncertainties. Our actual results and the timing of events may differ materially from those expressed or implied in such forward-looking statements as a result of various factors, including those set forth in “Cautionary Statement Regarding Forward-Looking Statements” and “Risk Factors.”

Overview

Vinci Partners is a leading alternative investment platform in Brazil, established in 2009. Our 205 full time employees as of September 30, 2020 draw from a wide-ranging network of personal and professional relationships with industry-leading executives, business owners, corporate managers, financial and operational advisors, consultants and attorneys to source, fund, and manage investments. Vinci Partners’ business segments (which we also refer to alternatively as our strategies) include private equity, public equities, real estate, credit, infrastructure, hedge funds, and investment products and solutions, each managed by dedicated investment teams with an independent investment committee and decision-making process. We also have a financial advisory business, focusing mostly on pre-IPO and M&A advisory services for Brazilian middle-market companies (those with annual gross revenue between R$100 million and R$600 million).

We have established a premier independent investment franchise with market leadership across each of our high value-added strategies that we believe provide us with strong competitive advantages. We believe that our business model, focused on high-performance and executed by talented multi-disciplinary teams with a focus on value creation, has enabled us to build one of the most complete portfolios of alternative investment strategies and solutions, which combined with adoption of innovative technologies and increasing integration across our business segments, strongly positions us to capitalize on the future expansion and shifts in asset allocation in the Brazilian investments market.

Key Business Metrics

The following table sets forth our key business metrics as of and for the periods indicated. These supplemental business metrics are presented to assist investors to better understand our business and how it operates.

 

     For the Nine Months Ended
September 30,
    For the Year Ended
December 31,
 
     2020     2019     2019     2018  
     (in R$ thousands, except as
otherwise noted)
 

Total gross revenue from services rendered

     248,715       201,839       311,093       180,337  

Total net revenue from services rendered

     235,280       192,629       296,717       172,204  

Net Revenue from Fund Management and Advisory (1)

     218,022       178,081       234,697       166,162  

FRE (1)

     135,820       99,774       124,501       75,646  

FRE Margin (%) (1)

     62.3     56.0     53.0     45.5

 

103


Table of Contents
     For the Nine Months Ended
September 30,
    For the Year Ended
December 31,
 
     2020     2019     2019     2018  
     (in R$ thousands, except as
otherwise noted)
 

PRE (1)

     15,085       13,686       58,929       5,803  

Distributable Earnings (1)

     110,910       80,742       135,200       53,306  

Profit for the year

     116,803       95,735       155,632       56,678  

Net profit margin for the year (%)

     49.6     49.7     52.5     32.9

Adjusted FRE (1)

     113,786       76,805       98,136       54,488  

Adjusted FRE Margin (%)(1)

     52.2     43.1     41.8     32.8

Adjusted PRE (1)

     11,597       9,766       43,350       4,232  

Adjusted Distributable Earnings (1)

     86,816       55,753       97,662       30,578  

Adjusted Profit for the year (1)

     91,281       68,846       113,688       33,950  

Adjusted Profit margin for the year (%) (1)

     38.8     35.7     38.3     19.7

 

(1)

Net Revenue from Fund Management and Advisory, FRE, FRE margin, PRE, Distributable Earnings, Adjusted FRE, Adjusted FRE Margin, Adjusted PRE, Adjusted Distributable Earnings, Adjusted Profit for the year and Adjusted Profit Margin for the year are non-GAAP financial measures that we present for the convenience of investors. See “Selected Financial Information—Non-GAAP Financial Measures” for a reconciliation of these measures to their nearest IFRS measure and “Presentation of Financial and Other Information—Special Note Regarding Non-GAAP Financial Measures” for further information on why our management chooses to use these non-GAAP financial measures, and on the limits of using these non-GAAP financial measures.

 

     As of September 30,      As of December 31,  
     2020      2019      2019      2018  
     (in R$ billions)  

Client Activity Metrics

           

AUM at period end

     46.1        29.8        34.7        23.4  

Average AUM (1)

     39.1        26.3        27.7        22.1  

 

(1)

Quarterly average calculated based on the average of the beginning and end of quarter AUM for each quarter.

Overview of Results of Operations

Our AUM increased from R$29.8 billion as of September 30, 2019 to R$46.1 billion as of September 30, 2020, a 54.7% increase. Overall AUM growth was driven by growth across each of our investment strategies, mainly by (1) the increase of net inflows into our public equities and investment products and solutions funds and (2) the launch of a new listed fund and follow-on offerings by listed funds from our real estate segment.

Growth in our AUM is affected by several internal and external factors, including our fundraising efforts, returns on our own funds, macroeconomic factors and the investing environment. The Brazilian basic interest rate, known as the SELIC rate, has been decreasing in recent years from 14.25% (as of July 2015) to the current annual rate of 2.00% (as of September 2020), an all-time low. This rapid and significant decrease has created an environment beneficial to alternative asset management products as well as other non-fixed income products, accelerating the migration of retail and institutional investors in Brazil from fixed-income products to alternative investments, and also provides us with the opportunity to expand our applicable product range. For example, institutional investors, such as large pension funds, often have established performance targets for real returns of at least 5% in order to fulfill their actuarial targets, which become harder to meet with fixed income investments when real interest rates are below 2%. Given that more than 50% of the portfolios of pension funds remain invested in fixed income securities, we believe there is additional potential for migration to alternative investment products from such pension funds.

 

104


Table of Contents

Our net revenue is composed of (1) net revenue from fund management; (2) net revenue from realized performance fees; (3) net revenue from unrealized performance fees; and (4) net revenue from advisory.

Total net revenue for the nine months ended September 30, 2020 amounted to R$235.3 million, an increase of R$42.7 million, or 22.1% for the nine months ended September 30, 2019. The increase in our net revenue was mainly driven by (1) an increase in management fees as a result of the increase in our AUM, as mentioned above, (2) an increase in performance fees, related mainly to our hedge funds, real estate, credit and infrastructure segment strategies, and (3) an increase in advisory fees.

FRE increased by R$36.0 million or 36.1%, from R$99.8 million for nine months ended September 30, 2019 to R$135.8 million for nine months ended September 30, 2020. The increase in FRE was mainly driven by (1) an increase in management fees from higher AUM and (2) increase in financial advisory fees, net from R$10.6 million for nine months ended September 30, 2019 to R$22.8 million for nine months ended September 30, 2020. FRE Margin for nine months ended September 30, 2020 was 62.3%, an increase of 6.3 percentage points compared to FRE Margin of 56.0% for nine months ended September 30, 2019.

The difference between our growth rate of 36.1% in FRE and our growth rate of 54.7% in AUM reflects (1) the effect of the Vinci Capital Partners III Catch-Up that resulted in higher total net revenue in 2019 and for this reason a lower growth rate of total net revenue in the nine month period ended September 30, 2020 (see “—Factors Affecting the Comparability of our Results of Operations—Vinci Capital Partners II Catch-Up”), and (2) a portion of net inflow to funds with higher management fees than the average.

Our Adjusted FRE for the nine months ended September 30, 2020 was R$113.8 million, an increase of R$37.0 million, or 48.1%, compared to the nine months ended September 30, 2019. Adjusted FRE Margin for the nine months ended September 30, 2020 was 52.2% which represents an increase of 9.1 percentage points compared to Adjusted FRE Margin of 43.1% for the nine months ended September 30, 2019.

PRE for the nine months ended September 30, 2020 increased by R$1.4 million, or 10.2%, from R$13.7 million for the nine months ended September 30, 2019 to R$15.1 million for the nine months ended September 30, 2020. PRE growth was driven by the increase in performance fees paid due to the outcomes of our funds above their respective benchmarks, mainly in our hedge funds, real estate, credit and infrastructure segments.

Our Adjusted PRE increase R$1.8 million from R$9.8 million for the nine months ended September 30, 2019 to R$11.6 million for the nine months ended September 30, 2020.

Distributable Earnings increased by R$30.2 million or 37.4%, from R$80.7 million for the nine months ended September 30, 2019 to R$110.9 million for the nine months ended September 30, 2020, as driven by the growth in net revenue from services rendered. Our Adjusted Distributable Earnings increased by R$31.0 million, or 55.7%, from R$55.8 million for the nine months ended September 30, 2019 to R$86.8 million for the nine months ended September 30, 2020.

Profit for the year increased by R$21.1 million or 22.0%, from R$95.7 million for nine months ended September 30, 2019 to R$116.8 million for nine months ended September 30, 2020.

We also present Adjusted Profit, which excludes from profit, for the nine months ended September, the amount of Dividends to Partners. Consequently, Adjusted Profit for the period increased by R$22.4 million to R$91.3 million for nine months ended September 30, 2020. Adjusted Profit Margin for the nine months also increased by 3.0 percentage points to 38.8%. See “—Factors Affecting the Comparability of Our Results of Operations—Partner Dividends” regarding our historical practice for distributing dividends to our partners.

 

105


Table of Contents

Significant Factors Affecting Our Results of Operations

We believe that our results of operations and financial performance are driven by the following factors:

Returns on Investments

As an asset management firm, we rely on the return of our investment funds and a successful investment track record to influence investors to invest in our products, which directly impacts our fund flows and new fund raises. Moreover, our portfolio must be attractive to investors and potential investors when they are considering their range of available alternative investment opportunities.

We believe that the following factors have driven and are expected to continue to drive our future performance and ability to realize a favorable return on investments:

 

   

Our ability to obtain superior risk-adjusted returns in the long term to meet our clients’ objectives. We must provide differentiated investment strategies for our clients reflecting: (1) a long-term vision to preserve investor capital and provide optimal risk-adjusted returns; (2) an established investment decision-making framework in each of our strategies; (3) operational and cost optimization initiatives (mainly in in our private equity segment) to help businesses execute their growth strategies; (4) efficient capital allocation; and (5) product enhancement through innovation and outside the box solutions.

 

   

Maintenance of an experienced and qualified management team and success in recruiting and developing qualified staff to execute on our investment strategies with effective oversight from investment committees.

 

   

Optimization of our business platform with deep integration across functions, including front-office, sales, macroeconomic and proprietary research departments, support departments, products, partners, and specialists.

 

   

A robust framework and capability to deliver best practices in governance and culture across all of our strategies and portfolio companies and for all our stakeholders.

 

   

Access to a broad base of investors and limited partners, including, but not limited to, local and foreign institutional investors, government and sovereign wealth funds, high net worth individuals and retail investors, with a range of investment horizons, risk tolerances and return expectations.

 

   

Strong relationships with contacts across industries and the financial market that provide several channels to generate investment opportunities, including through M&A transactions, IPOs, new financing, and partnerships.

With consolidated investment processes across all of our strategies, we expect to continue to deliver innovative solutions and favorable performance over time to our investors, strengthening our track record as the preferred alternative asset management partner for their capital.

Ability to Deploy Capital and Source Investment Opportunities

Our ability to raise capital for new funds and generate revenue through our products relies on our capacity to allocate capital and source attractive opportunities across our investment strategies, which is impacted by several factors including:

 

   

The ability of our teams to bring together a wide-ranging network of personal and professional relationships across leading industry executives, business owners, corporate managers, financial and operational advisors and consultants and attorneys in order to facilitate these investment opportunities;

 

   

Our ability to source top-down and bottom-up approaches for both long-term and short-term investing strategies. For example, our private equity strategy follows a proactive, top-down/bottom-up approach,

 

106


Table of Contents
 

in which we combine identification of target industries and sectors with identification of companies that fit our hands-on, active investment strategy. This process results in a highly differentiated deal sourcing platform. In our public equities strategy, we focus on holding positions in companies for three to five years following deep analysis and review by our various investment committees, taking into consideration our internal controls;

 

   

For our customized mandates, our ability to create tailor-made investment management services through our investment products and solutions strategy in order to meet our clients’ expectations regarding returns, investment terms, volatility and risk;

 

   

Our ability to launch innovative investment products in Brazil, such as Listed Infrastructure Mutual Funds (Fundos de Investimento em Participação de Infraestrutura) and Brazilian REITs (Fundo de Investimento Imobiliário), which has reinforced our brand in the listed funds market;

 

   

Our ability to maintain our broad network of collaborators to identify opportunities in different sectors and regions in Brazil as part of our long-term investment products;

 

   

Our ability to maintain strong relationships with market makers and advisory firms that can help generate opportunities and improve our product pipeline;

 

   

Our capacity to maintain a presence across various regions in Brazil where other investment firms do not usually devote meaningful attention, which we believe allows us to identify previously unnoticed investment opportunities with improved risk-return profiles, including, but not limited to middle-market opportunities (by which we mean opportunities with companies with annual gross revenue between R$100 million and R$600 million);

 

   

Our ability to maintain a strong reputation among investment management firms, as a preferred partner in structuring competitive processes, arranging credit financing, contributing as shareholders in publicly listed companies and acting as experienced financial advisors;

 

   

Our ability to cross-sell our products to our clients and use their connections to identify “off-market” opportunities (that is, investment opportunities that we identify internally and are not known by other investment firms); and

 

   

Our ability to maintain discipline within our investment mandates, with a robust approach to valuation, transaction and operation size, and holding period, as applicable to each of our investment strategies.

Even though the above-listed factors may vary depending on segment, our ability to deploy capital and seek investment opportunities has proven consistent. Our products have passed through international crises, national economic recessions, and political instability; even in the face of these challenges, we have been able to offer differentiated investment opportunities resulting in favorable returns for our investors. We expect to replicate this model, extending our successful track record into the future.

Growth of Our AUM

Our AUM equals the sum of: (1) the fair market value of the investments held by funds plus the capital that we are entitled to call from investors in those funds pursuant to the terms of their capital commitments to those funds (plus the fair market value of co-investments arranged by us that were made or could be made by limited partners of our corporate private equity funds and portfolio companies of such funds); (2) the net asset value of our public equity funds, hedge funds and closed-end mutual funds; and (3) the amount of capital raised for our credit funds.

We generate most of our revenues from management fees and performance fees on funds managed across our investment strategies. Historical fund-raising activities have been impacted by both internal and external factors.

In respect of external factors that have impacted our AUM growth, in the last five years, the Brazilian basic interest rate has fallen from a nominal 14.25% per year to the current annual rate of 2.0%. This rapid and

 

107


Table of Contents

significant change in the SELIC rate has initiated a never-before-seen migration of capital flows to alternative investments now that returns on fixed-income products longer meet investors’ investment return expectations. We expect that such flows will be accentuated in the coming years, as the economic outlook continues to favor lower interest rates for the foreseeable future.

The following chart shows the historical and expected evolution of the SELIC rate for the periods indicated:

 

 

LOGO

 

Source: IBGE, Boletim Focus as of November 11, 2020 (Central Bank).

As far as internal factors impacting our AUM growth, an increased number of listing of private mutual funds in the public markets in Brazil has also driven AUM growth over the last three years. From a capital raising perspective, publicly listed mutual funds in Brazil operate as if they are companies. We have carried out several IPOs and follow-on offerings for our real estate funds and an IPO for an infrastructure fund. Our current listed funds provide investors with dividend distributions. We believe that we can expand our products and launch new strategies via listed funds. The decrease in the SELIC rate is increasingly drawing retail investors to alternative asset classes; we also believe the share of investment from Brazilian institutional investors in listed funds, which is currently low, can increase significantly in the coming years, which should continue to support the potential growth in this asset class.

The AUM from our pension products has grown from approximately R$8.5 million in December 2015, to approximately R$1.2 billion as of September 30, 2020. With the approval of the Brazilian social security reform in 2020, we expect increased capital flows within this asset class in the coming years, as we believe that demand is growing for long-term investment products with tax incentives.

Our internal efforts to increase AUM include (1) raising new capital and (2) through capital gains. Our ability to raise new capital depends on historical and expected performance of our investment products, our ability to distribute returns to investors, and the ability of our client relations and capital raising teams to support fund management teams in maintaining strong relationships with current limited partners and building relationships with new limited partners.

We expect AUM growth trends to remain favorable in the short and medium terms, driven by the expected low SELIC rate, enhancement of our products, historical returns from our funds, and the strengthening of our relationships with our current and new investors.

Ability to Negotiate Management Fee Rates and Fund Terms

The level of management fees and performance fees carried by our funds directly impacts our revenues. The main factors that impact our effective management fees and performance fees are:

 

   

Negotiations with investors. As our brand and investment strategies continue to mature, and performance of our products continues to reward clients with strong risk-adjusted returns, we expect that our ability to negotiate fees and fund terms with local and offshore investors will improve.

 

108


Table of Contents
   

The level of fees we are able to charge in comparison to industry peers. Our local funds in Brazil generally present the same management and performance fees, terms, and conditions of similar industry peers, as applicable to each strategy.

 

   

The level of performance fees we are able to negotiate. To generate performance fees, returns must surpass each fund’s specified benchmark, which varies according to the respective strategy. We believe these hurdles are beneficial for both our limited partners and for Vinci Partners, as it supports strong alignment of interests.

 

   

Potential discounts on fees. In certain instances, we use third-party channels to distribute our products, such as placement agents, digital platforms, multifamily offices, and fund allocators, among others. We always negotiate discounts on fees on a case-by-case-basis, and expect that strengthening our brand will improve our bargaining power with these intermediaries. As we expand the number of our distribution channels and competition increases among distributors, we expect to be able to negotiate further decreases in third-party fees.

Management fees and performance fees do not apply to our financial advisory services business, where our business model is mainly based on the payment of success fees upon conclusion of M&A or IPO transactions for our clients.

Ability to Attract, Retain and Develop Talent

We believe that talented and experienced people have been and will continue to be critical for our success. Our ability to attract, retain, and develop qualified and committed employees has been supported by several factors including:

 

   

A well-designed selection process with five phases of interviews and tests on average, in which the candidate is exposed to its potential future managers, senior employees and partners. We believe that a structured recruitment program is important to select the most talented candidates, best aligned with our corporate culture.

 

   

A highly competitive selection process. In 2019, we received 3,000 resumes from candidates applying for a position with Vinci Partners. Of those candidates, our HR team selected and interviewed 263 candidates for 33 positions, which represents an average of 8 candidates interviewed per slot and 91 applications per slot.