Good afternoon, this is the Chorus Call conference operator. Welcome, and thank you for joining the Azimut Holding Nine Months 2022 Results Conference Call. As a reminder, all participants are in listen-only mode. After the presentation, there will be an opportunity to ask questions. Should anyone need assistance during the conference call, they may signal an operator by pressing star and zero on their telephone. At this time, I would like to turn the conference over to Mr. Gabriele Blei, CEO of Azimut Holding. Please go ahead, sir.
Thank you very much and welcome to everyone. We'll go through the presentation as always, quite rapidly and then leave as much time as possible for Q&A. If we turn to slide number 4, we have some key highlights on the nine-month results. Stressing the fact that the platform is diversified and global, can deliver results in an adverse market environment such as the one we have lived, especially during Q3, but I would say also the entire of 2022. Assets stands at EUR 83.7 billion, of which 46% are coming from our international business by now. Year to date, net inflows, EUR 6 billion, of which EUR 1.5 billion coming from private markets.
Because of that, we have once again reconfirmed the guidance we've given at the beginning of the year of EUR 6 billion-EUR 8 billion of net new money in the full year. As far as our P&L is concerned, nine months total revenue stands at EUR 969 million, +12% vis-à-vis the same period last year. This is mainly driven by recurring fees that today constitute 85% of our total revenues. This is, as far as the total revenues are concerned, despite a lower performance fees vis-à-vis the same period last year, because we are short of EUR 30 million of performance fee when comparing the period of 2022 with 2021.
Q3 operating profit of EUR 415 million, 70% increase year-on-year. This is the result of the growth in revenues as well as disciplined cost control, despite the inflationary environment in which we are living, excluding Sanctuary. We will see this in a minute. The growth is mid-single-digit, which is something that should be taken into account. Finally, net profit guidance. As always, we set our targets. We don't change it, although the environment is everything but normal, which was the basic assumption at the beginning of this year when we set the target. We are standing at EUR 302 million in terms of net profit for the nine months.
Clearly we are looking to some sort of support from the market in the last quarter of the year. Once again, EUR 400 million is what we are working for. Turning to the following slide, total assets evolution. You see that total assets at the end of September has grown 6% year-over-year. This is thanks to a continued positive net new money environment as far as we're concerned, and despite clearly the negative market effect, which we'll see in a minute. Average assets, which is even more relevant, are up 16% year-over-year with 7% of managed assets. Net new money, you see a quick snapshot of the last couple of years in terms of quarterly evolution.
We have in Q3 recovered to the level seen in 2021, thanks to the contribution coming from all geographies. Today, net new money stands at 8% of initial of 2022. Moving on to slide 6. As I was just mentioning, all the regions have contributed to our net new money collection. Starting from the left-hand side, Italy, we have been recovering partly the outflows that we have seen at the beginning of the year in terms of the institutional mandate, and we have kept on collecting money from our network of financial advisors. Clearly, the focus here, especially when the network is concerned, is on private markets and managed products, which we are quite keen to continue.
Clearly the industry or if you want the financial industry at large is clearly attracting considerable flows into current account and deposit, given the higher interest rate in which we are today working. Turning to EMEA, we have kind of smaller number, but it can be explained by the following. When we look at our Turkish presence, flows have been positive by EUR 160 million, partly if not all, entirely offset by outflows coming from Egypt due to the decision of an investor, a sovereign wealth fund, to completely divest out of the country and region.
Nothing that relates to our capabilities to perform and even outperform very well vis-a-vis the local industry. Lastly, worth mentioning, Dubai is positive by EUR 60 million, while Switzerland is also positive by EUR 40 million of net new money. APAC, the main contribution here comes from Australia and Singapore respectively, almost EUR 300 million and EUR 140 million. Last but not least, the Americas, where we have Brazil that has come back quite strongly as we have commented over the last quarters, with more than EUR 700 million of net new money, and also Mexico with almost EUR 300 million of net new money.
The rest being coming from the U.S, of which almost EUR 400 million coming from our private market presence and the rest EUR 2.7 billion from Sanctuary Wealth. The almost EUR 550 million M&A contribution is entirely explained by the contribution from RoundShield, which is the latest acquisition we have done in our private market venture of a 20% stake. This leads us to the EUR 6 billion of net new money in nine months, 2022. Moving to slide number 7, our assets evolution shows cumulative annual growth of 14%, with assets standing at EUR 85.7 billion at the end of October.
Mainly, the driver here is an international business that keeps growing with 47% contribution to the total assets, whereas Italy stands at EUR 45.3 billion. The delta vis-a-vis 2021 of EUR 4.5 billion is effectively the negative market effect that we have been witnessing so far year to date. Private market, so moving to the right-hand side of the page, stands at 12%, and it is approaching our 15% target by 2024, and we will continue to pursue new product launches and penetration within the network. Moving on to slide number 8.
We just want to give you a quick reminder of what is the deconsolidation and the impact of the deconsolidation of Sanctuary, as far as the accounting is concerned. Total assets as of June 30th have not been adjusted, will be adjusted by year-end. First half 2022 net inflows will not be retrospectively adjusted. Whereas net inflows from July 1, as far as Sanctuary is concerned, have been taken into account just for the economic rights we now have, which is currently 53.4%.
When we look at the impact on the P&L, and we will have the next couple of slides to dig into the details, P&L until the first half has not been retrospectively adjusted, as like net new money up to that moment, whereas the financial from the first of July, i.e. the Q3 results, have been adjusted according to the economic rights we have in Sanctuary and are recorded in the finance income line, so below the operating profit line. Moving to slide number 9, digging into the revenue breakdown. I would highlight a couple of things, starting from the 9-month results.
We have EUR 969 million up 12% vis-à-vis the same period, with an increase of EUR 120 million on the recurrent fee level. Moving from 706 to 826. How this is broken up, it is explained by an increase of contribution from revenues from our foreign operations by EUR 25 million, excluding Sanctuary, of course, an increase by almost EUR 20 million coming from our private market initiatives that are starting to contribute to the revenues that we generate. The remaining bulk being coming from the new distribution, which accounts for EUR 70 million in the 9 months. I remind you, we had the new distribution fee just in Q2 and Q3 and not starting from Q1.
When it comes to the variable revenues, we are somehow lower than the nine months 2021, and this is due to the fact that we have introduced the fulcrum mechanism. We have crystallized EUR 34 million up to the end of March. The foreign operation has contributed EUR 6 million in the nine months, whereas the fulcrum has subtracted almost EUR 6 million during Q3. Moving to the insurance fees. We have EUR 71 million in the nine months, of which EUR 19 million increase vis-a-vis the same period last year. How is this broken up? EUR 24 million less performance fees in insurance revenue and EUR 5 million more instead of recurrent fees in the nine months.
Last but not least, the other income line is basically positive year-over-year by EUR 8 million, and this is mainly linked to the fact that our private market presence in Italy, as well as the neo-lending project and M&A activity that we are starting to perform, are contributing by eight million to the growth in this line. If we move back to the quarterly results, so Q3, and we focus on the same period, we can see that fees, the recurring fees are flat year-over-year, because if you exclude Sanctuary, 2Q 2022 is EUR 273 million.
We have basically had an impact in Q3 positive by more than EUR 3.5 million linked to our foreign business, as well as the private market initiative, that have offset the reduction in the fees due to the market in our liquid instruments, which has been negative by EUR 2 million. As far as insurance revenue is concerned, there is a slight increase in the quarter thanks to the fact that we have had some performance fees by EUR 1.2 million, and then a positive development of the recurrent component by almost EUR 1 million.
Last, the other fees are going from EUR 14 million to EUR 9 million on a quarter-over-quarter basis, and this is basically explained by the deconsolidation of Sanctuary, because if you remember, there was a contribution from brokerage commissions that were impacting the other income line. Moving to the following slides, we wanted to represent you a management fee snapshot of the last couple of years, where you can see the growth and we have tried to show you the impact of the Sanctuary consolidation and then deconsolidation. Basically the 14% increase is from Q1 2020 to 3Q 2022.
If we try to exclude whatever is the impact from Sanctuary, the growth from, say, EUR 200 million in Q4 2020 up to EUR 274 million is explained by the new distribution fee, the growth of our foreign business in terms of contribution to management fees. The growth in the asset base that clearly has had a positive impact. Last but not least, the private market exposure that, as I have explained to you before, is starting to contribute in terms of management fee generation. Moving to slide 11, costs. Here we have tried to show you a similar picture to the revenue on a longer period of time.
If we focus our attention on Q3 2022, we have EUR 163 million of total costs, which compares to EUR 98 million in Q2. There is a decrease of EUR 35 million, of which the bulk is linked to the deconsolidation of Sanctuary. If we go to the distribution cost line, they have gone down to EUR 90 million, and this is mainly explained by the fact that we're not including Sanctuary anymore.
The rebate to the network has basically remained flat, Q -on- Q, with an increase coming from high revenues on private market, offset by the fact that, as I have explained before, liquid products management fees have decreased slightly quarter-over-quarter. As far as SG&A line is concerned, at net of Sanctuary, basically, we are working with flat evolution on a quarterly basis despite the environment which is everything but friendly as far as the cost inflation is concerned.
On the overheads, it's good to mention the fact that we have recorded lower overhead, and we have had a positive impact from the higher yield curve on the future severance payment TFR phase that is the consequence of the higher interest rate environment in which we are living. Lastly, operating margin is up to 46% in the quarter, which is a level pre-Sanctuary consolidation that is back. Moving to slide 13. Just a quick update on our funds breakdown.
Despite a very tough market environment, the advisory work that has been carried out by our financial advisory with our clients has recorded a positive evolution in terms of clients remained invested in our funds. Although the change in the mix has been subdued, and this is shown in the maintenance of the margin level that Alessandro will show you in a minute, which stands at 178 basis point.
Clearly, all of this is even more true when we come to the observation that private market exposure has gone up quarter after quarter, which is going to help us in managing clients' expectation as far as performance is concerned, and the short-term volatility is somehow subdued. As far as the underlying assets is concerned, just worth mentioning that the equities exposure is managed very actively these days. It stands at 46% at the end of September 2022, but changes daily. As far as the fixed income component, we have not been, let me say, hammered by the overall industry poor results in 2022, thanks to our strong diversification across regions and categories and decision to take a very low duration.
If we turn to slide 14, not much to discuss. It's a quick snapshot of our equities diversification. This rests on the fact that more than ever today, we work with our global team across all the countries in which we operate. As far as the bond component, it follows clearly the evolution of our asset management capabilities. Worth mentioning that we have decided strategically, from a management perspective, of our portfolio managers to not have exposure to Italian BTPs. That has clearly benefited the performance of our bond portfolios. This translates on page 15 of an outperformance of more than 300 basis points year- to- date.
As far as the industry is concerned, we're down 9%, the industry is down more than 12%. Over a medium term, clients are still enjoying a positive net weighted average performance of 6.5%. Moving on, slide 16. Private markets, EUR 6.4 billion of total AUM, 10x the level we have seen when we started this venture in 2020. We now have 52 products and initiatives launched or in the fundraising phase. 18% of our clients are invested in our private market products. We still have a significant potential penetration within our Italian client base.
Worth mentioning, on the right-hand side, the diversification by category, where you can see how private debt is still quite significant, although private equity and real assets especially are covering the rest, the remaining part of the pie chart. By region, Italy 53%, U.S. 38%, and U.K. and Europe 9%, thanks to the acquisition of RoundShield. On page 17, we have decided for this quarter to provide you a quick snapshot of the product suite that we have. I think that probably nobody can claim, at least in Italy, to have such a well-diversified offering in the private market across geographies and asset classes.
Clearly, this includes a number of very specific products, such as a fund that provides exposure to the staking and seeding business of emerging U.S. managers, that is wrapped up in a fund that we're offering to our client base. As well as some smart initiative called Private Escalator, which provides for a gradual build-up of the exposure to private market across different asset classes within this private market investment. We have had also the pleasure to launch a couple of club deals lately.
One dedicated to an initiative that is linked to the mining of cryptocurrencies, but linked to the clean energy approach that these guys are trying to evolve, given that we all know how energy intensive this business can be. Lastly, let me mention the initiative within the venture capital fund. P101 is an alternative asset manager investing in the VC world in Italy, in the tech environment. We are now at the third product launched by these guys, and we recently decided and agreed to buy a 30% stake of the management company. Last but not least, we have had the pleasure to invest in Electa Ventures.
We control full ownership of the company, and we are developing a number of initiatives, thanks to their deep know-how of the Italian SMEs environment. They're active in the pre-IPO SPAC world, as well as they leverage on their extensive network of relationship within the private equity environment in Europe. Moving on to slide 18. I don't want to bother you too much, but we wanted to show you that, despite you know, raising assets, we're also trying to invest this and invest it in a wise and profitable manner. Today, we have capability of investment both in Italy as well as internationally. The first two transaction are related to our neo-lending projects or the synthetic bank, if you want.
The venture capital investment worth mentioning that we have invested in more than 110 companies across four funds for more than EUR 100 million. In the infrastructure fund, we have committed investment for an enterprise value of close to EUR 800 million into what is an Article 8 compliant ESG fund that we are still fundraising. We have also been able to propose to our clients a couple of club deals, one in the vertical farming environment and the other one in the clean and safe nuclear technology that are going to be building the fourth generation reactors. Moving to slide 20, I leave the floor to Alessandro for the financials.
Thank you, Gabriele. We can now move to slide 20. As we always do, we will go through the P. Starting from the operating profit, we see that an increase of EUR 62 million is thanks to an increase in total revenue of EUR 102 million and slight increase of cost of only EUR 40 million. Therefore, we have this positive effect on the operating profit. Back to the revenue. The main variation is coming from the recurring fees that increased by EUR 125 million. The key elements, the key aspects of this increase has been already explained before by Gabriele, so and nothing specific to add.
In terms of variable fees, we have a lower impact compared to the nine months 2021, because as you can see, we are EUR 34 million that, as we already explained, is driven by the crystallization of the performance fees under the old method. 34 is coming from the first quarter. EUR 6 million are coming from the international business already booked in the first half of the year, and then the negative effect of the full group. Other income increased by EUR 9 million. This is mainly driven by the business of Azimut Direct and Azimut Capital Management. Therefore, that has to be what's already said, it is coming from what we call synthetic bank. Insurance revenues decreased by EUR 20 million.
Again, here also following the note, number three, insurance revenue, I mean, are impacted by a minor effect of the performance fees with a difference of EUR 24 million that we netted by the increase of the recurring fees of EUR 4.5 million. At the level of the cost, distribution cost increased by EUR 22 million, mainly driven by the evolution of the recurring fees. Personnel and the G&A increased by EUR 18 million in line again with the growth of the business. More specifically, we have EUR 2.3 million coming from the deconsolidation of Sanctuary. EUR 2 million is linked to the new Italian perimeter. Additional EUR 10 million from mainly Australia.
Again, as you remember, cost of the financial advisor outside Italy are booked at the level of this line of cost. EUR 3 million more in terms of IT costs due to the transition to the new front end. On QoQ variation, again, I would say that there are no specific elements to highlight if we compare the two quarters, 2022 and 2021. We can now move to slide 21, where we have additional, let's say, elements to share with you in terms of finance income. For example, EUR 5 million positive. If we cross to the note, this is mainly driven by dividends from GP at around EUR 8.5 million. We have the impact of Sanctuary due to the deconsolidation.
Now we know that the effect of Sanctuary Wealth is booked here. We have a negative effect of EUR 2.6 million. Fair value option effect that is positive by EUR 13 million, and then a mix of unrealized and realized gains and losses on our treasury investment that all together make a difference negative of EUR 13 million. Non-operating cost instead of having a negative effect, we are still positive. As you remember already in the first half, we shared, let's say, the effect of the deconsolidation of Sanctuary Wealth of EUR 5.7 million. So this effect has been, let's say, netted by the one-off costs, so we reduce this positive effect, but we still have a positive contribution to the net worth.
Finance expenses, again, this is simple to explain. As you know, we reimbursed our bond of EUR 350 million in March, therefore, we have lower interest rate booked during the nine months of 2022. Income tax, the evolution, let's say, is in line with what we already share and discussed in the last few quarters, therefore nothing to add specifically. Probably makes sense to share with you a quick focus on the minorities. We have twofold effect if we compare to the nine months of 2021. This is due to better results on foreign operations business and some Italian subsidiaries, and also one-off dividend to our management team in some foreign countries.
In general, just to conclude, the level of net profit, EUR 303 million comparing to the nine months 2021, we see a negative difference. If we take out the effect of the goodwill, the tax realignment that then we reverse at the end of the 2021, instead of having a negative difference, we have a positive variation of EUR 12 million, despite the higher tax rate and overall less performance fees of about EUR 30 million compared to last year. Now we can move to slide 22. We represent the net financial position. Overall, we have a positive level of EUR 354 million. EUR 44 million less if we compare to December 2021, and anyway, positive.
We increased the net financial position of EUR 76 million if we compare it to the end of June 2022. We increased our treasury shares that stand now at 2.9%. If we want to perform an overall reconciliation of the EUR 44 million variation on comparing to 2021, we have a net profit before tax. We should consider a net profit before tax of EUR 440 million. We take out the dividend paid of EUR 261 million. We have an advanced tax payment of EUR 77 million M&A activities in Italy and international, so outside Italy of more or less EUR 124 million therefore, which should be there and reconcile the EUR 44 million negative variation.
I hand back to Gabriele Blei for the final part.
Thank you, Alessandro. Now moving to slide 24, just a focus on the business development as far as Italy is concerned. We continue to work on growing the underlying business. Clearly, market is not supportive as we had in the last couple of years, but we continue to invest and train our financial advisors in order for the company to grow its potential. We are expanding, and we'll continue to do so the product offering, leveraging on our proprietary distribution channels, simply because there is nobody else that can claim such a capabilities, know-how, and competence across so many regions offered to our Italian client base.
Private markets and FinTech, these are the latest initiatives and projects. We believe we still have untapped potential in both areas. We will be trying to develop this organically and inorganically, whether with third party agreements or additional acquisitions. As far as the international business is concerned, we think and see a continued improved momentum across markets and products. This is exactly what I've been referring in the last couple of calls as a platform that is much more resilient to external shocks because of its diversification and depth of solutions and presence in several markets. We will be expanding some strategic partnership in some key markets.
As always, we are quite active and we assess ongoing potential increase of our capabilities, whether in the asset management or distribution in mainly, I would say, regions in which we are already present. We don't see ourselves as easily engaging in new markets in the coming future. All in all, this will translate in an improving profitability. As you all know, we have set our 2024 target of EUR 150 million of net profit contribution from our international business. This stands as one of the key targets we want to reach by 2024. Private market EUR 6.4 billion as of October. We will be growing in this area.
We are thinking to launch a significant new product as well as complete the fundraising of those products that have been launched up to September and even beyond. 37,000 clients are already invested, and this number has just to increase even further in the coming years. Lastly, capital management. We have a dividend policy that has been set almost a year ago at 50%-70% of recurring earnings. That is reconfirmed. Buyback has been initiated, as you have heard from Alessandro. We continue to monitor and exploit potential opportunities given the ridiculous valuation at which our stock is trading at. We are continuing also to deleverage our balance sheet.
The last milestone that we have is at the end of 2024 to repay the EUR 500 million bond, thanks to the continued strong cash flow generation on a quarter-for-quarter basis. Moving to the very last slide, 25th, sorry. As you see, there has been gradual development of the net profit towards the EUR 400 million target, which we can only just reconfirm given that we are three months from the target. The net inflows stands at EUR 6.8 billion, well in the middle range for the full year of EUR 6-8 billion, which we again reconfirm and we will give you more updates in the coming months.
Thank you very much, and we are clearly available for any Q&A.
This is the Chorus Call conference operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press Star and One on their touch-tone telephone. To remove yourself from the question queue, please press Star and Two. Please pick up the receiver when asking questions. Anyone who has a question may press Star and One at this time. The first question is from Hubert Lam of Bank of America. Please go ahead.
Hi. Good afternoon. I've got three questions. Firstly, on your distribution costs in Q4. At EUR 90 million, it was a bit better than I expected. I think in your presentation, you talked about helped by lower overheads and deposit impact from the yield curve. Just wondering how much of this is recurring and how should we think about the run rate, going forward on this number, and whether or not that's the low nineties is sustainable or not. That's the first question. Second question is on private development of your private markets business, both, I guess, in terms of product pipeline, client appetite. You've raised EUR 1.5 billion of new assets from private assets this year, which is good. Can you repeat this, you know, next year?
Do you expect a slowdown as the client base could possibly be tapped out on these type of products already? I guess last question. It could be a bit early, but what's your outlook into 2023 compared to what you've done in 2022? I know on slide 24, you talk about business development and brand focus areas. Just wondering how you think about, you know, any specific type of products or regions where you think could maybe take off in the next year. Just broadly, how you think about budgeting into next year or guidance into next year. Thank you.
Thank you, Hubert. Well, as far as distribution costs are better than what you were expecting, I mean, the evolution of the yield curve, and therefore, the impact coming from what is mentioned as a severance payment is hard to predict. Although, given the direction of interest rates, we might have some positive effect, at least in Q4, but I would not go beyond because I wouldn't speculate too much on where we think interest rates are gonna land. As far as the overheads are concerned, they have been softer than in the previous quarter.
We do expect to have from now on even a more tighter control on this kind of expenses, just because and I'm gonna partly answer to your last question, 2023 is probably gonna be a quite a challenging year for everyone. We are already thinking of actions to put in place to control costs, if not reduce them. I think it's a bit too early to start discussing how and where we think we can manage the cost base. We will certainly give you more updates on this and details on how we will be doing in the next couple of quarters.
As far as the run rate is concerned, I would assume that, as you know, there is a bit of seasonality effect always in Q4. We expect this to be somehow less than Q4 2022 vis-à-vis 2021, simply because the year has not been as extraordinary as last year. I would expect somehow a slightly higher number in Q4 than what we have seen in Q3. Moving to the private markets, can you repeat it? That's an excellent question. We always want to repeat good numbers.
There is no alternative to what we have done this year, and we have to continue to do in 2023 and onwards, simply because volatility will still be present, and we need to diversify the performance driver for our clients, which is something that at the end of the day is the only number that matters when we try to deliver to them some positive news. We will be testing our network capabilities in the coming months vis-a-vis the products that we have in the pipeline.
We are in the process of building up a product suite that will be delivered and presented at the beginning of January on our usual convention that will lay the path towards a number of an expectation in terms of asset gathering capability within the private market space, which cannot be very much dissimilar to what has been achieved in 2022. Outlook 2023, tough question. Probably hard to give you an answer, but the way we are thinking from a rational standpoint is probably market will still be somehow complicated, at least in the first part of the year. It's a guess estimate that we can all make.
In order to produce potentially net profit growth, which is the basic assumption on which we are working, because we need to make sure that the company evolves and different areas of the business increase their contribution to the profit, we need to manage the cost base quite carefully if there is gonna be some sort of shortfall in the revenue evolution due to market effect. I'm not gonna speculate on any number, but I hope this gives you a picture of how we are kind of figuring out the numbers for 2023.
No, that's very good. Thank you.
My pleasure.
The next question is from Domenico Santoro of HSBC. Please go ahead.
Hello. Hi. Good afternoon. Thanks for the presentation. A few questions from my side. First of all, the delta of management fees that you had in the quarter. You said EUR 3 million more from foreign business, if I remember correctly, so I wonder whether this is M&A. Two million less from liquid assets, sorry. I mean, I struggle to understand a little bit why you got less money on this product given that there is no mark to market. I'm just wondering, what's the driver? Is it lower sales? Because if I look at the volumes, they went up quarter-over-quarter.
On this matter, it's a little bit difficult, you know, to look at the underlying business in this quarter because there were all these perimeter changes. What happened to margins on your business? Because if I'm correct, there was a little bit of deterioration of margins. What will happen in Q4 as well, because there is still September, you know, market performance to account for. That could be useful given that we don't see any indication of margins in the presentation. The other question is on performance fees, because I mean, all the data points that you show in the presentation are also the numbers that the chairman shows in the press release. They would probably, you know, point it out to positive performance fees.
Instead, I know that is, it might be the net of plus or minus, but why performance fees were negative in the quarter when you outperformed, basically, the market? And then just a clarification on the other revenues, because if I look at the presentation of H1, the other revenues, or at least average for Sanctuary, there were EUR 26 million more or less per quarter. I'm just wondering whether the delta between revenues is in the others that you're indeed losing the quarter. Sorry for the very geek questions. Thank you.
Thank you, Domenico. Let me try to answer some of your questions, and then if Alessandro wants to jump in and add and clarify, he will elaborate further. What I said, and I refer to slide 9, Q-on-Q, the evolution of the management fee. We have, I said EUR 3.5 million positive evolution Q-on-Q from our foreign business and our private market business. Specifically EUR 2.5 million from our foreign business and one million or slightly more from our private market Q-on-Q.
If you check, we did not do any specific M&A transaction on our foreign business, so it's quite organic growth that we have witnessed, and this is not linked to market performance because it's truly management fees. When I refer to the liquid instruments, so the negative contribution of EUR 2 million, I refer to the fact that we're not immune to market movements in our liquid products. Our 25-27 billion, sorry, UCITS funds that we have out of Luxembourg, and we cannot simply exclude the fact that either because of the market or because of the mix we have some kind of erosion on a quarter-over-quarter basis, given the overall environment we have lived in.
When it comes to margins, I would point you to slide 20, where you can see the recurring margin on the bottom of the page. Sorry, apologize not highlighting this clearly before. If you check the evolution over the nine months, it is a slight movement downwards of 2 basis points. If you check it on an annual basis, Q3 2022 versus Q3 2021, which was a completely different environment, we had 181 basis point versus 178 basis points. An erosion of 3 basis points on a quarterly basis.
As I referred on a number of occasions, I tend not to see this evolution of a couple of basis points up and down as significant and material, simply because the market can have an impact on the mix that we currently have in any specific point. The third question was on the fulcrum, right?
Yeah. Well, on Q4 instead, what's your expectation about margin? Because, I mistaken, you're correct. I mean, you show in the Q2, so margins went down in the quarter. Yes. What about in the Q4? What would you expect?
Listen, again, if we assume that Q4 has seen a positive evolution so far in terms of market performance, probably we can see a margin that is stable or slightly recovering the 1-2 basis points that we have lost, that I just commented. Let's see how the year finishes, because we all remember what happened in November last year, which we have seen quite a big drop that has been partly, if not all, recovered in December. So a bit too early to say, but again, I'm not expecting huge swings because of this market movement.
This is, let me say, an occasion to congratulate with our portfolio managers wherever they're based because of the excellent work they've done so far. Probably to clarify on Pietro's comment in the press release, the outperformance of 300 basis points is vis-à-vis the industry. The benchmark that is commonly used in Italy is the Fideuram index.
Although we are, as unfortunately most of the industry participants, showing negative performance to our clients, the fact that we are 300 basis points ahead of competition and even significantly better than many competitors that we see when we receive clients from financial advisors moving from other companies to Azimut these days, the results that we are showing are significantly better than what clients are having in other asset management companies.
I think we are in a good position today to have a quite constructive dialogue with our clients when it comes to eventually changing the asset allocation, which is something we have been talking about for the last I would say three plus years because eventually market would have moved in a downward trend, although we did not try to speculate but we were kind of anticipating what we're living today.
Can I ask, sorry, as of now, the performance which, you know, these funds have been generating negative fulcrum in the Q4, I mean, in the portion of Q4, has it improved? We will see this number to reverse into positive, or you still expect some negative?
Domenico, I would tend to be consistent with what I've said so far, commenting performance fees. We don't want to anticipate any comment when the quarter is still running, just because it would provide the wrong message. Having said that.
Sure.
I think you have seen the recovery in the weighted average performance, and clearly this is somehow the contribution of funds performing in line or better than our benchmark. I would not be expecting, as of today, material performance fee contribution, just because there hasn't been any spectacular positive or negative outlier. I would put it this way so far.
Thank you very much.
My pleasure.
The next question is from Elena Perini of Intesa Sanpaolo. Please go ahead.
Yes, good afternoon. I would ask some clarification on your outlook for next year and in general on a
On a potential guidance about a recurring net profit. Actually, you were able to deliver this, which was quite a difficult or at least a challenging year, around EUR 100 million per quarter. I was wondering if this could be considered as a recurring net profit on a quarterly basis going forward, plus or minus market movements. Just to clarify, well, on the performance fees, I didn't understand your answer to the previous question, which was that the element determining the negative contribution if you had some outperformance. I couldn't get your answer, actually. Thank you very much.
Thank you, Elena. Well, actually, thank you for the first question because it gives us the opportunity to stress and underline something that probably we have mentioned in the past several times. I would like to start from here. I think as we have all witnessed over the last years you know the expansion the diversification of the company as far as our geographies is concerned the investment into the products that we have delivered the entry into the private market space the fact that we are developing new initiative in the FinTech/M&A activities all are pointing to years ahead of us that are going to diversify even more our revenue generation and net profit contribution. We are not here for building businesses that are making loss.
We are here to produce results, possibly results that grow year after year, independently from the market performance. Obviously, as you all know, we are, however, dependent on external factors that we cannot control among all the markets and eventual regulatory changes that may happen in the future. We work for growing the recurring component. Following the change in the fee structure, we have stressed several times how we were moving into the direction of P&L that would have been for the bulk and the vast majority of the earnings being built up for recurring revenues and profit. This is taking effect this year, and you see this in the numbers. Again, probably, you know, taking just a single quarter is not a good indication of what we will be doing in the future.
It's three quarters now that we have been stressing these aspects that I've just recalled in my comments. I think the business, the company, the people that work within this organization are worth some sort of credibility when they say and set targets. You know, we typically set targets at the beginning of every year. In the last three years, we've done so. We have been able to achieve all these targets beyond, you know, the five-year business plan targets that were delivered in the past. We will most likely, you know, do the same and set a target at the beginning of 2023 that is going to be challenging that will deliver growth.
That we, despite the market, we will try, as always, to meet, and if we are lucky, to overcome. I hope I did provide you some color, but I will not be providing you specific numbers and actions that will be taken before the year 2022 is completed. As far as performance fee is concerned, what I said before is we don't want to, you know, enter into a discussion of whether we are or not generating performance fee in a quarter that is still running. To that extent, we will not provide the numbers for Q4 at the current stage.
What I can say from the numbers we're seeing is we do not see any significant positive or negative impact from the fulcrum mechanism, which I remind you is capped and floored at ±20%. So indeed, we are benefiting from the uplift in the market that has taken place so far in Q4, but we are not betting on any super material performance fee contribution so far.
Okay. Thank you very much. If I may, I would have another question. Given the current interest rate and environment, do you think that there could be, you know, some lower interest for your private market business because clients were interested also in higher yields, given the very low yield environment when you launched this kind of business? Or on the other hand, do you perceive that there is a higher sensitivity to the funding of the real economy also by your clients? Thank you.
Thank you, Elena, also for this one, because again, it gives us the opportunity to try to reinstate some of the reasons for us entering this private market space. We have seen especially over the last year that if you were building a balanced portfolio, so a 50/50 equity bond product, you would have probably be down 25%+ year to date. We are working in an environment in which the old-fashioned way of building a portfolio for a retail client, 50/50 equity and bond, is no longer the solution, or at least this is what we think.
The idea we have had back in 2019 when markets were positive was to try to introduce an element of innovation and the driver of performance for the medium to long term. Therefore, we are not changing today our idea because interest rates are going up. Clearly, this is gonna help us in delivering performance from, say, the liquid instrument at some point when the mark-to-market on the bond side will stop having a negative sign. On the other hand, what we need to do and to justify vis-a-vis our client is to try to bring some other pocket of performance and investment opportunities.
We're not changing our long-term vision of becoming or transforming this business from a traditional asset management company into a well-diversified platform of products and services across any geographies. Because today we're speaking about private markets in Italy mainly, as well as in the U.S. where we did our staking business investment. Believe me that we are starting to enter the private market space in emerging markets or developed markets in which we operate because clients have the same needs, because clients do understand that markets are changing and they need to change accordingly the way they were building their asset allocation. No, we're not changing our long-term strategy. Certainly, higher interest rates are appealing, but they serve as a performance driver for a number of other liquid strategies.
Okay. Thank you very much.
The next question is from Filippo Prini of Kepler. Please go ahead.
Good afternoon. For clarification on the private market business, the first one is just on accounting. The commission on private market that go in the line of recurring fee are only those on the assets in Italy, so I talk about EUR 3.4 billion. Second, do you disclose to your client, to the client the sort of mark to market also these assets, I don't know, twice a year or on a different time horizon? Finally, I see that you put a slide with some of the investment dividend into this business of private market lending and other investment.
Could you share a rough idea of how much, for instance, of the assets in private market in Italy, EUR 3.4 billion are not only committed capital but already invested? Thank you.
Thank you very much. As far as the booking of the private market line, Alessandro will certainly be able to elaborate further. The contribution coming from our staking business in the US is not booked under the management fee line, but is consolidated below the operating profit line as he was commenting before. Within the private market contribution to the management fee, you will have only whatever is done out of the, let's say, EUR 3.4 billion linked to the distribution of private market products from our Italian network. Okay? Ale, no, you're good?
Yeah.
Mark to market on the private market, it depends very much on the type of product. It can be once a year NAV or twice a year NAV. But it very much depends on what we have written in the prospectus of each single product. Sorry, I missed the last question, if you can repeat it.
Yeah, of course. How much of the committed capital to the private market in Italy is already invested?
Listen, I don't have specifically the Italian, but from the latest.
More generally or even generally.
From the latest statistics that we have seen, we have deployed around 50% of what we have raised so far.
Thank you.
It clearly varies from fund to fund, but, the bulk average is that.
The next question is from Alberto Villa of Intermonte SIM. Please go ahead.
Good afternoon, Ciao, Gabriele, Alessandro. Couple of questions. One is on net inflows outlook for the future. You provided a split by geographical regions of the inflows for so far. I was wondering if you expect in the future to have a revamp of some regions or different mix. I'm referring especially to Italy, where there is room for more managed assets inflows in the future. And what is your expectations in terms of contribution coming from recruitment on that point? And the second one is on cost inflation. You said stable or even down cost. It seems to be a challenging exercise in an inflation environment.
I was wondering if you have specific already actions in mind to reach this target. If you can give us an idea, what is the split of the costs on your P&L related to the Italian business overall and the business outside of Italy?
Sorry, we were just speaking, but the mic was off. Well, thanks for the questions. Net inflows expectations as far as the geographies, it's always hard to predict with a good degree of precision. What we are seeing is countries that have lagged such as Brazil has come back quite well. There has been some sort of one-off effect mainly linked to institutional mandate decision in some regions that have turned into negative territory.
Let me say that eventually, you know, what is the missing bit is probably inflows from China that has been going through a prolonged period of lockdown that has effectively limited the capability of our colleagues that have been locked up in their houses to meet with the clients. As far as Italy is concerned, there's always room to do better. There is always room to increase, but we have been working with our network specifically on trying to, you know, change the allocation and increase the penetration of private markets. This takes away a good degree of time when it comes to them visiting clients and trying to elaborate some investment decision proposals to put forward.
Certainly when it comes to the environment and therefore the recruitment activity, you know, whenever markets turn negative and we're down 15 and have been down even more than that, the activity of the recruitment is slower simply because it is harder to move from one company to the other and show to your existing client base the fact that you are generating negative returns. We have done 89 additions in terms of recruitment year to date. It's not a big number, it's not a small one, but certainly this has had an impact on the flow environment. As a guideline, in good years, meaning good market environment, more than 50% of the flow historically has come from the recruitment activity.
In bad years, the proportion are the opposite when it comes to the existing advisors. Costs, yes, we have ideas. Yes, we're studying and digging into the details and making sure that we will be ready from first of January to try to implement actions that will gradually manage the cost base. To try to limit what you have mentioned correctly as being the pressure coming from inflation on our P&L.
Whatever we save is not just gonna be a pure saving, but it can be either offsetting the inflationary pressure or being used to invest in the business in areas in which we feel comfortable to deploy some investment to have a better machine in the future or expect higher revenue generation. When it comes to the split, Ale?
Well, if we look to the personnel and G&A, the EUR 200 million, I would say it's almost 50-50. To be precise, EUR 110 million at the level of the Italian business and EUR 90 million for the foreign business. At the level of the distribution cost, let's say, the contribution from the foreign business was just coming from Sanctuary. We have the six months of 2022, that is around EUR 65 million, so the rest is the Italian business.
Thank you.
Thanks a lot.
Gentlemen, there are no more questions registered at this time.
Well, thank you very much for your time and attention, and my colleague and myself are always available for further follow-up. Have a good day. Bye-bye.