Earnings Call: Q3 2020

Nov 12, 2020

Good afternoon. This is the Chorus Call conference operator. Welcome and thank you for joining the Agimut Holding nine months twenty twenty results conference call. As a reminder, all participants are in listen only mode. After the presentation, there will be an opportunity to ask questions. At this time, I would like to turn the conference over to Mr. Gabriel LeBlay, CEO of Azimut Holding. Please go ahead, sir. Thank you very much, and good afternoon to everyone. So as always, we'll go through the presentation, and then we'll leave you all the time for question and answer. If you take slide number four, there is just an unusual way to start a quarterly presentation where we wanted to signal how probably there has been a convergence in terms of the expectations vis a vis our stated target that we reiterated at every occasion during 2020. Although the macroeconomic picture was not ideal to provide targets, We kept the target unchanged throughout 2020, and we have seen numbers going up and down as far as consensus is concerned. So probably, this is another confirmation if required of the capability of the company and the people that work every day within the company to achieve what we say in terms of numbers. Needless to say that probably with such a erratic movement, I wonder whether it's convenient, if not useful at all, to provide with long term targets as far as the forthcoming business plan is concerned. Moving to Slide five, the highlights of the quarterly results. In nine months, $230,000,000 of net profit, 168,000,000 of recurring net profit above the 50,000,000 target per quarter that we set back at the Investor Day almost one years point ago. Recurring management fees have been back to pre COVID levels, and we have seen resilience in margins also during Q3. Needless to say that we have reconfirmed, and we are reconfirming the 300,000,000 target for 2020. As far as the international expansion is concerned, we have continued to diversify away from our domestic market, not that we don't like to have solid grounds in Italy, but we need to diversify our geographical exposure, and we believe this has been the right choice throughout the past years. We have invested and we are investing markets to sustain the future growth of the business. And in this with this in mind, we have done an acquisition in The US of Sanctuary Wealth, which we will see later, of an independent wealth management platform with EUR 7,400,000,000.0, which will bring the international assets over total assets to 35%. Private markets, we have seen an ongoing activity throughout the year. Needless to say that it was quite challenging not being able to visit or meet face to face clients, but we have reached so far €1,900,000,000 And we are continuing to diversify in terms of product, and we are launching or we are expecting to launch new funds and new investment solutions in the coming quarters. 1,900,000,000.0 so far, 2,000,000,000 target that we have set and is confirmed once again. Turning to Slide number six, the financial results, the revenue and margin are reflecting the focus on quality. We have achieved EUR $252,000,000 of total revenues. Of that, I would say that almost 90% is coming from recurrent or nonperformance fee related revenues. This is an increase of 6% vis a vis the EUR $238,000,000 in Q3 twenty nineteen. As far as management fees is concerned, we have achieved EUR 194,000,000 in the quarter with a stable basis point trend of the recurrent margin. Don't bear in mind that in Q3, probably what should not be forgot is the fact that in Q3, assets have increased by 400,000,000 due to the consolidation of Genesis in The U. S, but we did not achieve any management fee in Q3 for that. So probably the best way to see the margin evolution is to net this effect of the consolidation of the assets. Page seven, costs have been under control for some time now, and we are looking to maintain and continue this disciplined approach. 85,000,000 are the distribution costs, down from last year and account for 59% of the total cost. As far as SG and A are concerned, they increased from 47,000,000 to almost €52,000,000 but this is mainly linked to the M and A activity that we have done over the last years. If you see on the right hand side, you have the trend quarter per quarter of the SG and A line, and you see how this has been basically flat throughout and quite boring throughout the couple of two point five or if not more years with the increase of assets up 15%. Slide number eight, inflows have been positive during the ten months of 2020 with EUR 4,100,000,000.0. Of that, 3,300,000,000.0 are organic and EUR 1,300,000,000.0 are coming from private markets. The M and A activity is what I was referring to of EUR 800,000,000,000. The group has achieved with the consolidation of Sanctuary Wealth the highest level of assets under management ever. Sanctuary will be consolidated starting from end of the year, 2021 because of the regulatory approval that is required. But we have 63,500,000,000.0 of assets under management. And nice to say that 3% of that is coming from the alternative project that we are deploying. Slide number nine. This is a bit of a snapshot of the product that we have developed in the private market segment. It's quite astonishing of the range and array of products that and investors have access to in such a short period of time. The target by year end of 2,000,000,000 is confirmed, as I said before, and consider that in these numbers, you do not see a couple of funds that are under committing on the raising phase, which are going to be consolidated starting from probably the month of November, if not by year end. On the following slides, the pipeline of what we are doing. As we have mentioned in the past, we have an infrastructure fund that is in the fundraising phase. Fundraising is going well. I would say that we expect to close or to reach the first closing by year end, and we're expecting between 300,000,000 and $350,000,000 to be collected. Then we have other two products, Ophelia and Capital Solutions, the ones that I was mentioning before that are in the fundraising phase and are interesting because they are in line with the PIR alternative legislation, which we will see in a minute. Many other products are underway, especially to link also to the activities or to the minority stake that we took in Kennedy Lewis in The US, and we will be launching funds with their cooperation shortly. Turning to Sanctuary Wealth on Slide 12, you see a snapshot of what is the transaction. 55% is the stake that Assimut will be buying in the company. There is a primary issuance that is reserved to Adzimut, and therefore, money is going to flow into the company to finance the business plan. We have a long term commitment from the management team and the usual put call option agreement by which in the next ten years, we will be increasing our stake up to 100% of the company. Why did we do it? Simple. We wanted to recreate the integration also in The U. S. Of production and distribution. Probably, it's not as easy as could have been in other emerging markets or in Italy. But we are trying to focus on the high end part of the spectrum in terms of production, so the private market segment for the time being. And with the addition of Sanctuary, we'll be developing our proprietary distribution in The U. S. Turning to Slide 13, you see how The U. S. Presence is quite vast by now, 75 employees, 9,000,000,000 of assets under management, 23 investment professionals, and then a 140 financial advisers. These are split between the distribution, as I was saying, which where you see sanctuary units, which will be shortly consolidated, and the other two companies that with which we started the presence in The US is Adaptis, the first one, and then more recently, Genesis with the addition done completed in September. On the on the right hand side, the private market segment with alternative capital that shows the first acquisition of the first GP in the private market segment, Kennedy U. S. Turning to Slide fourteen. Sanctuary Wealth, what do they do? They are trying and doing it quite successful, as you can see from the graphs, to aggregate independent advisers that basically falls out from the traditional model. And they are looking to partner with Sanctuary because of their independence and because of their support in developing the assets. This is mainly a tuck in driven business model. So the more advisers they're able to hire, the more assets we will withdraw, and the more we are going to be able to make shorten the distance between our production and their distribution, the better the margin profile. Clearly, the perspectives are quite interesting because if you look around some statistics, there are the the wealth management industry in The US will undergo major changes with expected 2,400,000,000,000.0 assets on the move. We will have to be good enough to intercept a portion of this massive shift from the traditional model to the independent distribution model. On Slide 15, the key characteristics of the target advisers. They generate the bulk of the money through recurring fee. They want to clearly look for independence, and they want to be in charge of their clients and try to be able to develop the book of business through a number of different ways. The destination of the advisers that are falling out of the traditional model, you see this, and the independent portion is 44% here clearly showing how Sanctuary has interesting growth opportunities in the future. On Slide 16 sorry, 17, we wanted to update the net weighted average performance that we have delivered to clients. If we consider 2019 and 2020, we are up 7%. The client that invested money with us on the January 1 in 2019 is making 7% year to date. Whereas if I look at the weighted average performance net of fees of 2020 only, we are around we're down something like less than 1% or around 1% depending on the day. How this has been possible, we show you a number of examples in the following slides. So starting from slide 18 where you see a couple of funds, mainly allocation funds that have been able to navigate quite well during 2020. Dynamic fund is an 800,000,000 fund, and the balanced fund to fund has EUR $750,000,000, so a total of EUR 1,600,000,000.0 almost. We wanted to also update you on what we're doing in our Life business on slide 19, where we have been revamping the business with six commercial families of of strategies. And this is instrumental also for the development of the life insurance business going forward as far as the embracement of the real economy and, therefore, the private market initiative in the future. As far as we are today, total assets across these strategies and in Azimut Life account for €6,000,000,000 of assets under management. Following on the products, the global team, which is something we have started to discuss back at the Investor Day a couple of years ago, is more and more a reality. We have been launching a couple of new products, and one of these is the Equity China Fund, which has collected EUR 300,000,000 of assets under management and competes quite well vis a vis very renowned names across the industry. On Slide 21, product snapshot on the Egyptian initiative. This is an interesting thing because we launched the first ever retail fixed income fund in Egypt, launched in October 2020, and it starts distributing and basically mimicking what we have been doing in Turkey with launching retail funds in the local market. We're doing the same here in Egypt, and we are the only one doing this. And so far, the initiative is going on well with 50,000,000 Egyptian pounds collected so far. What I was referring before on on the PIR alternative is the initiative that we launched in September. This is we called it internally PIR box. It's a container that allow, individual clients to fully benefit benefit from the fiscal advantages of the Italian alternative directive, which basically tells you two things. You can invest up to 1,500,000.0, for at least five years, up to 300,000 per year, and you basically pay no taxes on capital gain and inheritance taxes. So this is something interesting that we have and anyone can have, but the difference with the competition is that we have the products already compliant and already raising assets. Therefore, clients can already start to invest through the PIR box and benefit from the fiscal advantages. Slide 23, stronger diversification is what we were looking for in a zero or negative interest rate environment and therefore, the launch of the private market initiative, which has then been followed by others. We're now well positioned with 2,000,000,000 almost of assets under management and 80% in Italy and 20% in U. S, thanks to the Kennedy News acquisition. Slide 24, the usual trend. We are overperforming the industry, but I did not spend time to commend this slide, and I will leave the floor to Alessandro for the financials. Yes. Thank you, Gabriel, and good afternoon to everybody. We can, as usual, look to Slide 26, where we have the consolidated reclassified income statement. As you can see, and as we already said at the beginning at the opening of the call, the third quarter twenty twenty closed with 87,000,000 of consolidated net profit, euros 12,000,000 above the third quarter twenty nineteen despite the fact that we had €3,000,000 less in variable fees, but we have a positive and significant increase in insurance revenue, a better, let me say, evolution of the operating cost that reduced by EUR 6,000,000. And therefore, the operating profit reached a difference a positive difference compared to the third quarter twenty nineteen of 20,000,000. Here, looking also to the nine months, can see that we reached EUR $230,000,000 of net profit, 16,000,000 less compared to the nine months of 2019. But again, here, you can see that the significant variation can be allocated to the variable fees, where we have a difference of €50,000,000 compared to the 2019. Back to the total revenue and focusing on the third quarter, you can see that we have a positive difference of EUR 1,000,000 on the recurring fees. This is even if we have EUR 1,000,000,000 less in terms of assets under management. As already stated, variable fees decreased by EUR 3,000,000, a positive variation we have other income. This is also coming from advisory activities and M and A and Corporate Finance business line that we are developing internally. And in particular, this year, it's contributing positively to the result of the group. Change turns revenue increased by EUR 12,000,000. This is mainly explained by EUR 10,000,000 of variable fees and EUR 2,000,000 of increase in recurring fees. At the level of the cost, distribution cost decreased by EUR 12,000,000. This is explained by the new amortization method. We already talked about this in the last quarter call. This method bring us a positive effect of around 4,000,000, 5,000,000. And on top of that, we have benefited from less cost linked to marketing context activities on the, let me say, financial adviser. This is mainly explained. I mean, it's simple to say that it's due to the adverse situation. And moving forward, Adelta and SG and A cost, we can see an increase of EUR 4,000,000. This is explained by the evolution of Uto Group, but this is important to underline, as Gabrielle has said before, that we are stable, let me say, quarter on quarter in 2020. And I think that this is a positive message. Moving forward at the level of the interest income, we have a positive impact of €2,000,000 Here, we are recovering the unrealized loss on our liquidity portfolio where we invested the liquidity of the group with a positive effect of EUR 3,300,000.0 and netted by a negative impact of EUR 1,500,000.0 coming from the fair value of valuation. I would say that I have no other, let me say, significant element to raise at the level of the consolidated income statement. We can move to the next slide where we have the net financial position. Comparing the negative level of the net financial position, we can see, actually, a better evolution compared to June 2020. And if we compare with December 2019, we are negative in variation of around EUR 100,000,000. This is a variation that can be explained adding, obviously, the net profit of EUR $230,000,000. But at the same time, we have to reduce EUR 45,000,000 of the buyback, EUR 138,000,000 on dividend paid last quarter, 48,000,000 of tax advance, EUR 87,000,000 of HM and A activity and EUR 70,000,000 coming from other investment that cannot be included in the cash and cash equivalent. This is the explanation, more or less, of the variation that we have. I'll leave back to Gabriela. Thank you, Leandro. So summary and outlook. In terms of Italy, we are, as you have seen, focusing on the real economy and the fiscal optimization that we can achieve through the Purebox. This is something that will be generating existing and new clients, and we will link for a longer period of time clients to the company also thanks to the investment in private market funds. Recruitment is ongoing. Certainly, 2020 will not be remembered as the year of recruitment for anybody, but we have been able to achieve 76 new colleagues throughout 2020 so far. Digital operations are fully functional as it is the case for some time. As you know, the pandemic in Italy has started again as of the beginning of, I would say, mid October. Most of the people are back to smart working in hard way to preserve their health and to make sure that the operations are fully functional. We are completing our investment product revamp by year end. And, therefore, in order to anticipate potential questions, we will be finally switching the remaining funds to the new performance fee calculation with the 01/01/2021. International, we are focused on three things. Distribution, we need to focus on developing our proprietary distribution channel, made of financial advisers and making sure that, they can grow their assets and they can, become more and more profitable also using our own production. So we will be leveraging more and more on the global team and the launch of new innovative solutions. Private market is very much in the rollout phase at an international level as well as on the Italian side, and we will be updating you in the coming quarters. Private markets, as I was just saying, reached EUR 1,900,000,000.0. If you didn't understand, we're on track to reach EUR 2,000,000,000 by year end, if not surpass that threshold. We are actively investing in real economy with more than 10 funds across a number of asset classes, and we are going to shortly close or reach the first closing for our infrastructure fund. Going forward, 300,000,000 is once again unfortunately confirmed. New business plan, we will be thinking, and we're working on it. As I as I said at the beginning, probably not the best time and given the reception of of what we say, probably not as urgent as one may think. We are consolidating the presence in Italy as as a key innovator, and we keep on focusing on the integration of production and distribution. Strong effort is to improve the profitability over overseas, as well as retaining, the profitability in Italy, and we will be looking to, continue the integration between the production and distribution. So the model that we have applied for more than thirty years is still very valid, and we still want to pursue our growth across those lines. Thank you very much, and we leave you the floor. Excuse me. This is the Chorus Call conference operator. We will now begin the question and answer session. The first question is from Domenico Santoro with HSBC. Please go ahead. Hello. Hi. Good afternoon. Thanks for the presentation and all the details. I do have a few questions and at the end a recommendation suggestion if you allow me. The first question is on the distribution cost. So if I add back the €5,000,000 marketing campaign expenses, you're running with 47,000,000 You're down again in the quarter at 46%. I was just wondering whether you can give us a bit of guidance going forward if this is sustainable, consensus is around a bit more pessimistic for next year, 47%. And if any recruitment of financial advisers back, it might change a little bit this ratio. The second question is on guidance on the cost administrative expenses for next year. This year, there was, of course, consolidation. The third question is if you can give us a bit of color on the rollout of the remaining portion of IUM on the calculation of performance fees. And then also an update on the increase of the stake by Timone. And then a recommendation, if you allow me. The international expansion, I get a lot of questions on this by investors. It's a big chunk of your total assets at this moment, but we don't know much about how the international business is contributing instead to the p and l. So more color on this, a bit more visibility on the way it does and on the p and l, it will, of course, give us more visibility on the business. I know there is a lot of effects that might mess up with the numbers, but it's just a suggestion on my side. Thank you very much. Thank you, Domenico. Any recommendation is well received and are very precious for us in terms of how we can improve our communication to the market and understanding of our business and the strategy. Needless to say, and I'm sorry to remark this, that I'm referring to the first slide of this presentation. There is probably a recommendation that we are also making to to you guys as far as the community when looking and assessing and expressing your opinions because sometimes, probably, these are not fully reflected on on the on the work. I've been an analyst. I know how hard it is to take views and strong views, so I do not absolutely criticize your job because I know exactly how hard it is. As far as the distribution costs are concerned, the the guidance and the outlook for this line is quite challenging because clearly, this year has been putting aside the change in the accounting treatment has been reduced in terms of marketing activity and recruitment activities. So if you recall from our Investor Day, the 40% of the cost of this distribution cost line that are manageable because they do not depend on the rebate of the 40% of the fixed management fee is something that has reduced the the the the cost line also this year. Clearly, we hope, and this and our hope is because we will be reverting back to a normal more normal scenario for everyone and because we will be able to continue to grow our business to revert back to some kind of normalized trend where we recruit advisers and we can invest in some initiatives. On the flip side, I think this 2020 has gave gave us a lesson on making good use of the cash flow that we generate and making sure that this is spent in a wise and careful way to set the base for sustainable profit and sustainable margins. We do not intend to, limit the capability of the company to grow and therefore to invest, but probably a bit more care care in in the way we spend, the money is needed and is a precious lesson that is twenty twenty has given to us. SG and A line, the guidance, if if I can bet on the guidance today for 2021, I would say, putting apart M and A, I will be looking to maintain a stable SG and A line. So without the perimeter change, we're not looking to make cost increase over 2021. On the contrary, we have set the base for in the coming years for some cost containment on this line, but it's a bit too early to speak about this. Rollout of the performance fee calculation, as I said, by year end, all the remaining funds that are currently applying, the old system of performance fee calculation will be switching to the new system from 01/01/2021. So we will have, we will not have anymore from 2021, the performance fee collection on a monthly slash, quarterly impact in terms of results. And therefore, going forward, we will probably discuss about performance fees only during the full year presentation results when we will know exactly how much we will have been generating of performance fees. Timone, the management buyout is ongoing. As we said in the past, the intention is to carry this out at a very opportunistic approach, and we are waiting for them to complete the building of the stake that we are required to buy. I remind you, it's 30,000,000 of equity and 30,000,000 of debt for a total of €60,000,000 of acquisition that we need to buy on the market. Thank you very much. Thank you. My pleasure. The next question is from Hubert Lam with Bank of America. Please go ahead. Hi, good afternoon. I've got three questions. Firstly, on the insurance revenues, there were $29,000,000 in the quarter. It's probably a little bit higher than I thought it'd be. How much of that is performance fees in that number? How much of it is recurring? And how sustainable could that be in the future? The second question is on Sanctuary. Thank you for the overview on Sanctuary. It's quite interesting. Can you let us know how profitable Sanctuary is today? And what are your expectations of profitability in the future? When do you expect it to start contributing to your earnings? And also is your acquisition sanctuary also to cross sell asthma products into that channel? And last question on the dividend. How should we think about the dividend now into, going forward for this year, when you report, in March next year? Do you think you can can you maintain the same EUR 1 dividend or it could be higher? Just any thoughts on dividend for us would be appreciated. Thank you. Thank you, Hubert. As Alessandro was saying, insurance revenues have benefited in the performance fee element by 10,000,000. And, therefore, how sustainable this is is actually hard to say, but it very much depends on the capability of the products to generate performance fees. Actually, we are quite pleased with the performance of the insurance products even this year. So fingers are crossed, and hopefully, we can repeat this many times in the future. As far as the sanctuary is concerned, the cross selling is clearly going to come through the capability to bring together sanctuary or closer together sanctuary with all the production initiatives that we have been we are investing in in The US. As you very well know, selling usage fund in The US is quite impossible if if actually forbidden. And therefore, you have to have very complex structures in order to allow US investors to access European investment funds. We will be thinking certainly on on different ways to making make cross selling capabilities a reality. But for the time being, the focus of the cross selling is mainly through the private market segment. As far as the profitability is concerned, this is a high growth company in terms of of assets. It has been established two and a half years ago. So we we will be looking to see strong profit generation starting from 2021. So at the present time, profit has not been the focus of the management because they had to build scale. But clearly, by building scale with a very well structured and engineered strategy, they are they are ready to take the benefit of their initial investment. And to this end, it's quite positive, I would say, that the fact that they are not cashing in, anyone is not cashing in, and we are just pulling in money into the company to develop the business further. As far as dividend is concerned, I would hide in a political answer in saying it's just a bit too early to say. I don't expect any reasoning on the dividend until we will be closing our full year results. Although, as you can see from our numbers, cash flow generation is quite strong, has been quite strong throughout the year. We do have a debt position that we have to repay at certain time in the future. We have investment that we continue to finance through the cash flow generation. And, certainly, we will be looking to remunerate investors with a dividend payment. The dividend payment that we did in 2020, thanks to our structure, which was not falling within the limitations imposed by the central banks in Europe and and in Italy. So dividend is certainly important for us to make sure that investors have a proper remuneration out of their investment, which is beyond the appreciation of the shares, But I would say just a bit too early at this stage. Great. Thank you. The next question is from Elena Perini with Intesa Sanpaolo. Please go ahead. Yes. Good good afternoon. I've got three three questions. The the first one is about the the performance fees that you gathered in October, if you can give us the amount. And then the second question is on distribution costs, 85,000,000 in the quarter, it was below my estimate. I was wondering whether this could be considered a run rate for the coming quarters. And then finally, a follow-up on your G and A. Can we assume a quarterly run rate between $5,055,000,000 in the next quarters. You were saying that with the constant perimeter, you would not expect any significant increases. Thank you. Thank you very much, Elena. Performance fees in October, not relevant, I would say. And we will be, as always, communicating the total Q4 number once we have closed the year, but I would say not a relevant figure for October. As far as distribution costs are concerned, the run rate, as I said before, it very much depends on the pickup in in the nonorganic activity, which is mainly recruitment and everything associated with the marketing and investment in the network. We do hope that at least a portion of that would be coming back. We do not expect Q4 to be very much different from Q3, maybe a bit of a pickup due to some year end change sorry, closing figures, but nothing that will deviate materially the €85,000,000 that we've recorded in Q3. SG and A, the run rate, well, let's go back to Slide seven. You see how this the trend of the EUR 50,000,000 to EUR 53,000,000 is quite something that has been rather stable over the last years, including some variables that have been paid at some point in time in Q4, typically. So once again, our effort is going to be to deliver to you sustainable margins at the bottom line level, which means that we have to keep cost SG and A line under control. And therefore, we do not expect, at this stage, material investment. If things will change, we will certainly update you and be able to make sure that you have a full understanding of how and why we have adopted a different view on the SG and A line. But so far, I think it's prudent to say that we will maintain the level as we have seen in the last couple of years. Okay. Thank you very much. My pleasure. The next question is from Alberto Villa with Intermonte. Please go ahead. Ciao, Gabriel, Victoria. Good afternoon. I beg your pardon if I ask something that you already mentioned, but I was also on another call. But anyway, I have a couple of questions from my side. The first one is if you can give us the indication on the cash outs for acquisitions in the third quarter and in the first nine months? The second one is your outlook on net inflows. We have seen improving numbers in the recent months overall. And I was wondering if there are, I mean, the outlook for the different main jurisdictions, so Italy, I guess Brazil and Australia, just to understand where is where new money are coming from? And if the recent trend is something that you expect also in light of the revamping in recruitment activity? And the final one, I remember in the old days, we discussed also on the equity exposure of the overall AUM. I don't know if it makes sense anymore due to the diversification of the investment and to the different geographies and so on. But if you can give us an idea of the exposure to equity, I remember in the past it was always around 40%. It was mainly domestic business, but for eventually for Italy a comparable comparison what would look like in terms of equity exposure? Thank you. Okay. So as far as the cash out, the M and A, as it is pointed out on Page 27, it's 87,000,000 for m and a and investment, and then we had something like 25,000,000 in q three. As far as the inflows are concerned, we we did see the same thing. So, yes, improving trend, although September is typically a very seasonally weak month, which is explained by the fact that people are coming back from holidays, and clients are still half on holidays, half with their mind on on their normal activity. But October was a decent month, and we do expect to continue to be able to raise money both in Italy as well as in the different regions. In Italy, as I was mentioning before, we have been collecting money on private market funds that you still do not see in the numbers, which are comfortably putting us in a position of being able to reach the 2,000,000,000 target, if not overcome this, as far as the private market funds are concerned. When it comes to, the international business, we we continue to see, a good trend from our Asia Pacific businesses, where we see, especially Singapore, a very solid and strong contributor to the monthly inflows. Australia has been posting positive flows, both at an organic level as well as with some acquisition of book of clients from advisers that were retiring. And if I look at our Middle Eastern businesses, we did collect money in Turkey every single month of the year and with an increasing trend in the last months. In Egypt, we launched the local fund, which has been well received by retail clients, even if this has been the very first time that we had launched such an initiative in Egypt, but it was it went well beyond our expectations. Dubai and Abu Dhabi need nothing relevant to to mention there. I think this is where once things will normalize, the activity will rebound quite aggressively. But at this stage, the inflow contribution is not material in terms of size. Brazil and LatAm in general, again, we have seen a difficult beginning of the year and then a normalization effect coming from Brazil, especially from June, July and onwards. We do see flows on the positive territory also in the most recent months, and we expect this to continue between now and year end. The flows from our U. S. Investment, which is mainly linked to Kennedy Lewis, They have been closing the fund, the second fund at 2,000,000,000 and then had to reopen the fund because of a strong demand from investors, which made them close the fund at 2,300,000,000.0. They're working on their third fund and on a project with us to launch another vehicle. So there is a lot of activity going there on, and we expect the coming quarters, so especially 2021, to be very interesting in terms of development over there. In terms of equity exposure, you're right. We don't talk about this anymore. We're quite frustrated probably by the fact that 40% is the bulk number that we still continue to see. Should there be more? But we are looking at also different ways of exposing clients to riskier asset classes. One way is through the private markets. But clearly, accumulation plan is what probably would help client to navigate the volatility in financial markets, in the equity market especially, but it's not always something that they embrace easily, but we will continue to push on this. Thank you. The next question is from Angeliki Baraktari with Autonomous Research. Please go ahead. Good afternoon. Thanks for taking my questions. First question, you have reiterated your €300,000,000 net income target for this year. Is that a level that you believe you can reach also next year? You showed the the first slide is a comparison of your target versus sort of the evolution of consensus. And when I look at consensus for next year, it's closer to 250,000,000. So would you say that is sort of a fair assessment also considering that your performance fee calculation will be different next year? And second question on Sanctuary Wealth. Could you give us some color on the management fees that are earned on those $6,000,000,000 assets, the gross management fee and also the management fee net of the rebate that is paid to The US financial advisers? Thank you. Okay. Target for 2021 or what consensus is saying, I'd I'd like to remind you that you make up the consensus, and it's up to you to make the analysis and to take a vision on where financial markets should go and assess our track record and the strategy that we are deploying and making sure that you can actually formulate your your ideas. Our job as managers and as with a vested interest in the company is to keep growing the the the share price and the profit of the business. So we're not here, as I said, in several occasions, we're not here just to make sure that we can maintain or defend our position. We're here to making make sure that we can grow the business, make it more profitable and make sure that the the value of the share price reflect what we are seeing. I think it's under everyone's eyes the multiples at which we're trading. So it's up to you guys to formulate what we will be expecting in terms of profit generation and, therefore, how much we should be valued and assessed. We are very relaxed on this. We think that time is on our side. And as we have seen in several occasions in the last fifteen years, the stock price can rebound quite aggressively. And, apparently, the some distraction moments can be wiped away in a very short period of time. Management fee on sanctuary is currently in the 1.2% region. We expect this to increase further as we can be able to cross sell products and make sure that we are helping Sanctuary's management to obtain what we have obtained in in Italy or in other markets through the integration of the model. Clearly, we're not just interested in what is Sanctuary generating in terms of management fee, but we're more interested in how much profit we can extract out of our US operations. Therefore, on a management reporting level whereby we can collect all the fees and profits and margins that we can generate out of the cross selling and the efficiencies that we can achieve. The last question I sorry, but I skipped that, or you had just two questions. Yes. Sorry. What would be the net management fee? So or to ask it differently, what is the rebate that a sanctuary pay the platform pays back to the financial advisers? Is it fair to assume in The US, it tends to be a bit higher than in Italy. Is it fair to assume it's close to 80%? I think it's in line with market standards. So we're not we're not we're not seeing a different level of of rebates to what is is market practice in The US. Thank you. And excuse me, if I may just also follow-up on your answer on my first question. If I just ask it a bit differently, your target for this year is €300,000,000 and you have an aspiration as management team to grow earnings every year. That's, of course, partly dependent on markets. But if we just exclude performances, what do you think should be should be the run rate growth of of your recurring net income in the next two to three years? When we first started speaking about recurring profit made out of recurring margins, We said our aim was to achieve 200,000,000, and then anything on top of that would have been profit. And again, we need to grow this because we need to invest in our international business and because our international business will grow in terms of contribution because we can increase the efficiency in our Italian business. So once again, our aim is to try to bring this threshold higher, not because it's going to be something easy to do, but because it's the right action to implement, and we are stressing this across all our people. So it's not that we are just relying and counting on performance fees to achieve higher profits. It's a mixture of performance and recurring businesses business that is going to grow in the future with assets, of course, that will be will allow us to increase the profitability of the business. We will certainly give you some kind of color and guidance as we approach 2021. But I would say for the time being, I leave it to you guys to assess our track record and eventually extrapolate on the projections going forward. The next question is from Mike Werner with UBS. Please go ahead. Thank you very much for the presentation. Most of my questions have been answered. But firstly, just a clarification. You indicated that the Genesis acquisition generated zero management fees Were there any costs associated with it? And then what should we expect in terms of a run rate from that business going forward? Thank you. Well, cost indeed is unfortunately is the case when we do any transaction, there are transaction costs associated. So lawyers, auditors for the due diligence and so far and so forth. We have been able to maintain this within a decent level. So there hasn't been any material impact vis a vis our consolidated numbers at the P and L level in Q3. But no revenues, some small cost and the consolidation of the assets that obviously mislead in terms of the margin on a quarter by quarter trend that we have commented before. The next question is from Gianluca Ferrari with Mediobanca. Please go ahead. Yes. Hi. Good afternoon, Cio Cabrierele. Only question is the paper issued by ESMA last week. Was wondering, understood that you are finally moving the remaining 20,000,000,025 billion of assets calculating performance fees on a monthly basis, three months rolling, to the annual calculation from January year. But was wondering if you have any comment on this five year negative performance recovery that they are suggesting local regulators to introduce. What are your thoughts on that? And if you agree that going forward carried interest on your private markets will become probably even more interesting than the old performance fees. And if you have any IT or any kind of investment to do in order to incorporate all these suggestions made by ESMA? Well, as you know, any change in the regulatory level have implicit costs. We still have no idea how any member state will implement and or adapt the guidelines. We're not particularly concerned because every change that has occurred in the past led to an action from our side, and the action on our side is always with the focus of generating performance for clients and preserving our margins for our stakeholders. So from our perspective, clearly, we will see how the five years or even the other points will be implemented. We will be reacting and accordingly changing anything that is required. From from the carried interest perspective, indeed, it's gonna be a big party when and if we would be able to collect the carried interest. This is the beauty of of the private market funds, and, clearly, we will be continuing with our strategy to push clients to embrace the private market initiative because with this environment, we cannot generate performance at a sustainable level and in line with the client's expectation. Gentlemen, there are no more questions registered at this time. Well, thank you very much, and my colleagues and I are available for any follow-up. And have a very pleasant day. Bye bye.