Power Corporation of Canada

Good morning, ladies and gentlemen, and welcome to the Power Corporation Q1 2024 Earnings Conference Call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question and answer session. Instructions will be provided at that time for you to queue up for a question. If anyone has any difficulties hearing the conference, please press star then zero for operator assistance at any time. I would like to remind everyone that this call is being recorded on Thursday, May 9th, 2024. I would now like to turn the conference over to Mr. Jeffrey Orr, President and Chief Executive Officer of Power Corporation. Please go ahead, sir.

Thank you, operator, and welcome, everyone. Thanks for joining us for our quarterly results call this morning, and I'll kick it right off. We've got our title page here, and I'm going to move into the most exciting part of the presentation, the disclaimers on forward-looking information and non-IFRS information. information on the first couple of pages. Joining me today in his first official capacity on his first call as CFO is Jake Lawrence, and Jake, welcome to the call.

Thanks, Jeff, and good day, everyone. Before we get into the results and I turn it back over, Jeff, I just want to take a moment to express how fortunate and how honored I am to be the CFO of PowerCorp. It's a fantastic job I've learned in my past eight weeks, and I also want to acknowledge the great groundwork that's been laid by my predecessor, Greg Tretiak. Greg had a very impressive 40-year career at the Power Group. The last 10 is CFO at PowerCorp. So I obviously wish Greg and the rest of the team wishes Greg as well in his continued recovery. Looking ahead, as I've shared with many of you, I'm very excited about the opportunities that I see for Power. I look forward to bringing my experience and skill set to both complement and partner with Jeff, as well as the broader PowerCorp team and group of companies to help create further value for our shareholders in the coming years. Since I started back in March, I've had the opportunity to meet and speak with many of the investors that are on the call today, and as we move forward in this journey, I look forward to further engaging with all of you. Great.

Thank you, Jake. We're all looking forward to it. So with that, we'll turn to the results, and I will flip you forward through page six, which is information on our companies and different sources recently from different presentations that have been made and then i'll move it over to page seven and just kind of give the overall introductory comments um you know a strong quarter uh we're feeling good about the momentum that we have across our businesses we're feeling good about the positioning that our companies are in um the businesses i think right across from the three public companies to our alternative asset management platforms, all of the businesses have very clearly defined strategies. They're executing on those strategies. The environment is pretty good. I wouldn't say it's the perfect environment. We've got some areas where we've got some headwinds out there in the macro world, but it's not a bad environment. But notwithstanding that, we're moving forward, growing earnings, growing the businesses, and so that leads us to feel good about what is happening. In this particular quarter, I'll let Jake address the earnings in a few pages here. Some of the highlights of the quarter, the Empower integration of Prudential was essentially completed March 31. All of the defined contribution record-keeping participants had been put onto the Empower systems. There were a couple of smaller blocks of business that were getting cleaned up this quarter. So that's a big step. And Putnam closed this quarter, so that really does mark a really complete retransition of the U.S. business over a five-year period, and I'll talk a little bit more about that as we go through the presentation. A lot of activity on the alternative asset management platforms. There's fundraising going on, but a lot of use of partnerships and transactions to grow scale as that continues to be a big focus. So that's all I'll really say in terms of my opening remarks. highlights, and then I got to pass it over to Jake to talk about the financial results.

Jake? Great. Thanks, Jeff. Picking it up on slide eight, PowerCorp reported strong earnings off contributions, as you noted, from the momentum in our main operating companies, and I'd say particularly Great West and IGM Financial. Recall that these two companies generally drive the entirety of our recurring earnings. Adjusted net earnings from continuing operations was $727 million. That's up $139 million from $5.88 in the same quarter last year. On a per share basis, which is really relevant given our buyback activity, adjusted net earnings in Q1 was $1.12. That compares with $0.88 in the same quarter last year. I'll address the breakdown of earnings shortly. Adjusted NAV was $53.10 per share at March 31st. That compared to $53.53 per share at December 31st. The change in NAV quarter over quarter, slight change, was primarily due to share price performance at Great West, while IGM shares stayed relatively flat. As of yesterday's market close, Powers NAV had increased to $53.43, reflecting strong share price performance at IGM following their Q1 earnings last week. Finally, the Board of Directors declared a quarterly dividend of $56.25 per share in line with last quarter, and that's up 7.1% from Q1 2023. Turning to slide nine to break down the earnings, Great West delivered record earnings with strong contributions to growth from each of its segments, including Empower. This marked the first quarter where Great West base earnings exceeded $1 billion. These results reflect the deliberate strategic actions that Great West has taken in recent years in its producing results. IGM also reported strong earnings driven by both of the operating segments. Recall that's wealth and asset management. Average AUM and A grew year over year, despite challenging flows in the market. IGM also saw strong growth in its strategic growth investments. That includes Rockefeller, Wealthsimple, and China AMC. In Q1, IGM wrote up its investment in Wealthsimple by 19%. That's reflecting the strong business performance we saw in Wealthsimple, revised revenue expectations for the business, and an increase in public market peer valuations. Power Group's combined investment in Wells Simple is now valued at $1.3 billion. That's up from $1.1 billion at Q4. Of that $1.3 billion, Power's share is $490 million, up from $413 million just last quarter. Moving to our net asset value-focused businesses, this quarter, GBL results benefited from their shift from public to private and alternative investments. GBL's results included positive contributions from fair value increases in its private equity portfolio, as well as a gain on sale of a private investment during the quarter. Also, I'd note that the comparative quarter included expenses related to the revaluation of WebHelp's put right liabilities, an item that no longer exists following its merger with Concentrix. Moving to our alternative investment platforms, Cigar contributed positive earnings this quarter, driven primarily by Performance Empower's investment in Cigard's credit and royalty funds. Power Sustainable's contribution to earnings remained flat year over year. Both Cigard and Power Sustainable managers continue to make strong progress, building their platforms despite market headwinds impacting fundraising and capital deployment. During the quarter, we took a non-cash impairment charge on one of our standalone businesses, resulting in a negative contribution in that line item compared with Q1 of last year. Finally, you'll recall that in prior quarters, the impact of revaluating non-controlling interest liabilities related to Power Sustainable's infrastructure fund produced a meaningful amount of noise as it generated expenses to Power every time the fair value of the fund increased. After reviewing this item, we decided to modify the definition of adjustments to include this impact. We believe that this will result in an adjusted earnings metric that better reflects the underlying operating performance and economic reality of our financial performance. Turning to slide 10, we break down the $53.10 net asset value per share as at March 31st. Our NAV remained relatively flat compared to December 31st. As mentioned earlier, the slight decrease is mainly attributable to Great West, whose shares traded down slightly during the quarter, while IGM shares stayed relatively flat. In Q1, Power Sustainable made the strategic decision to wind down its public equities fund and reallocate those resources to other strategies that have been raising third-party funds. As part of this wind down, Power repatriated cash, which is reflected as a decrease in Power Sustainable's NAV line. As a result, Power's cash and cash equivalents grew to $1.6 billion at March 31st. This further demonstrated our ability to generate liquidity from different sources, at different points and at different velocities. I'll note that we spent close to $100 million on share buybacks during the quarter, which is reflected in the decrease in our shares outstanding. As I mentioned earlier, Powers Nav has increased to $53.43 as of yesterday's market close, reflecting that strong share price performance of IGM last week. With that, I'll turn it back to Jeff. Okay.

Thank you, Jake. And we'll move forward to the next page here. And this is just a list of our transactional activity. We continue to be very active with the focus over the last few quarters in particular on building out the scale of our alternative asset management platforms. And I'll then roll forward to the next slide. You've seen the format of this slide before. I guess I'll make an observation that there's some past tenses on this slide. It used to be filled with future tenses. We were talking about all the things we're going to do and and all of a sudden we got repositioned in the past tense. And it's just to reflect that four and a half years into the strategy, five years into really, as I've described, getting back on our front foot, we have really repositioned the businesses in a material way. Great West Life is significantly repositioned with obviously a big driver of growth in the U.S., but each of the businesses are in stronger position and experiencing stronger growth. IGM has not only continued to strengthen IG Wealth and McKinsey, but it's got a group of businesses in each of Wealth Management and Asset Management, which represent the very good prospects for enhanced future growth and could be meaningful parts of the IGM franchise in the future. And in terms of the alternative asset management platforms that we have, You know, strong progress, but still a work in progress. Still lots of work to do there, but we're very focused on that, as hopefully you see. I'll flip over to the page. I was going to say I'll promise this is the last time I'll show this slide, but I don't want to commit to things that I'm not sure I can do. But as I said, Putnam has closed this quarter. The prudential acquisition is essentially all of the synergies that have been or the reintegrations have been completed. The synergies will start to flow in completely in the next quarter. But this really looks back over a period where this business has been substantially repositioned from three businesses into one business. The U.S. business now, Great West, is emerging as the largest contributor to Great West Life. It wasn't quite there in the first quarter, but it was close. And given the growth prospects that Great West has enunciated for Empower, that should continue to grow and share. So really, that's a very meaningful transition, and I will then move on. I'm going to spend a few minutes in this presentation talking about IGM. IGM has gone through, as I mentioned a few minutes ago, a lot of change. They did in December focus on a few things. As you know, they have resegmented their business into wealth management and asset management. in order to give investors a better understanding of how they think about the businesses. They've also come out with earnings guidelines, and IG Wealth and McKinsey have got solid growth. The investments in those businesses have continued. They're well positioned. As you know, the environment is not great for either IG Wealth or McKinsey with what's going on with interest rates, mortgage rates. You've got part of the client base under pressure, in terms of their own financial affairs, going from savings to potentially pulling money out. You've got, in this kind of environment with high rates, you've got money going into CDs and other products. When I've looked over the past decades when wealth management or asset management goes into outflows, typically it's because there's fear in the market. It's a different phenomenon this time. It's not like the market is full of fear. You've just got a lot of people under stress and you've got alternative investments But those businesses are confident they're going to grow at solid earnings rates. And then, as I mentioned, and as the IGM has put out, I believe there's a lot higher growth in earnings that are going to come from the other franchises that they have in those buckets. So I'm going to touch on three of them here. So on page 15 of the presentation, Rockefeller, a little over a year after we announced this transaction growing really, really well along the lines that we had anticipated. You see here strong client asset growth in AUA and strong advisor growth. The AUA is coming from organic growth, inorganic growth, meaning advisors who are joining, and then market growth. So terrific progress at Rockefeller. Well, simple. Jake already mentioned, as did IGM on their call, that We've written up the value of Wealthsimple. I think that's the second write-up over the last few quarters, and that's just because the business continues to perform exceptionally well. Very high growth. You look at the client count on this slide, 2.36 million Canadians now. Our clients are Wealthsimple. It's across a myriad of different services and products, particularly when you get in the under-40 age group, the penetration is quite meaningful. Mike and his team are doing a great job and we're thrilled with the performance of Wealthsimple. And then China AMC, it just continues to perform really well. The management team there is doing a great job. First on the left of this slide, you'll see that China AMC's AUM has grown. Those bars are just going back to the start of 2021. That's quarterly growth, not annual growth. The industry is growing. The China AMC is growing faster than the industry. You see its position on the right side. It's got a 5.6% market share of the Chinese market. That's up a full percentage point from a year ago. And second bullet point there, you see on the individual side of the market, the share has grown from 4.3% to 5%. They've moved into a number two position when it comes to individual funds. So continued strong growth. The overall industry here is benefiting from some of the difficulties that the economy is facing in China and their real estate sector. So real estate has been a big focus of Chinese savers for many decades. Some of that money is now flowing into the funds industry. Savings rate is continuing to be very high, and the industry in China AMC in particular is benefiting. So I think It goes back to 2011, if I'm not mistaken, when we made our first investment in China ANC. This has been a great investment for the group, and we continue to be very optimistic about the future prospects. Okay, I'm going to then spend a couple of comments on our alternative asset management businesses. I mentioned earlier, in a difficult funding environment, both Cigar and Power Sustainable Capital are turning to other means of growing their scale. Cigar did the partnership that they announced last year with Lunate and with BMO. And then you saw that Power Stable Capital announced earlier this week its partnership with Great West Life Co. In addition, Cigar has done a couple of acquisitions. In particular, on this point, when you see the funded AUM slide on the right of this slide, you see it's jumped up quite dramatically to $27 billion from, I think it was around $15 billion, if I'm not mistaken, on this slide last quarter. In the performance equity acquisition, which was the fund-to-fund and secondaries platform that was announced by Cigar, the position that Cigar has in that, I think it's 38% ownership with a hard option for it to get over 50%. We've determined we need to consolidate that, both for financial purposes, but also here you see the AUM is included in Cigar's numbers, so that adds at least about $9 billion U.S., in assets, it adds about $12 billion. And you see the growth in the management and the assets under management of our platforms going back to the first quarter of 2020, and obviously a very strong growth, and it's all been done through third-party funding, huge growth in third-party funding, which was exactly the strategy that we announced. You see the power capital steady at $2.1 billion. you know, we're going to spend some more time, I think, going forward getting into that a little bit more. That $2.1 billion actually is not the same $2.1 billion it was at the start. There's a lot of velocity to that business. That numbering has changed because we have taken capital out. We've had returns on the capital. We've reinvested the capital. We've managed it to be flat, but it doesn't mean it's just sitting there inactive. It's actually there's been a lot of activity in that, and as Jake mentioned, some of that capital and some of the earnings come out and provide funding that we can use for different purposes, including share buybacks. Okay, and then as we move to the P&L, I think Jake actually commented pretty well on the P&L. You've got, well, I don't think I'll add too much. You've got the numbers here, and if you want to come back on questions, we can do so. Last one on the platforms is just the partnership this week that was announced by Power Sustainable and Great West. You know, Great West is able... in working with Power Sustainable and Cigar to tailor some of the strategies that they launched to meet their own needs and get a position where they can provide seed and put capital to work. And that's certainly been true in past strategies. So that has been formalized now into an agreement where Power Sustainable will have Great West as a partner. You've seen that elsewhere at Northleaf. Great West has got a 20% stake. I think in Northleaf, you've got Great West Life, which is a Again, a stake in Cigar. The stake is just slightly below 20%. And it works for Great West. They get to put capital to work, have influence on what's being done, who's being hired, and get their capital deployed in areas that they're looking to deploy it. And obviously our platform's benefits because we get committed capital and we get more growth in the platform. So a win-win for everybody, and we're thrilled about that. Page 21. I'm going to go down here and see if there's any points that Jake didn't pick up and that I think you picked it up in terms of the return of capital and the growth in cash to $1.6 billion. So I think you've got all that covered. And then I'll move forward to 22. We track our TSRs pretty quickly, pretty closely. They jump around. You drop off a quarter of performance and you add a quarter of performance. For those of you who are on the line managing funds, you know what that's all about. These numbers are end-date sensitive. We continue to be very focused on returns to shareholders, and we're also a competitive bunch and like to watch how we're doing against our key peers. We're feeling good about the performance and will continue to be focused on shareholder returns. The last few slides just speak to our discount on page 26, which we continue to monitor. And we conclude on 24 with an overall statement that just says, Yeah, we're still executing on the strategy. We're not in the late innings here. We're still in early to mid innings. There's still lots of opportunity to execute going forward. We're feeling good about the direction. And with that, I'm going to stop my comments, operator, and I will invite you to open up the lines for questions.

Thank you. We will now begin the question and answer session. To join the question queue, you may press star then 1 on your telephone keypad. You will hear a tone acknowledging your request. If you're using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star then 2. We'll pause for a moment as callers join the queue. The first question comes from Jeff Kwan of RBC Capital Markets. Please go ahead.

Hi, good morning. My first question was, is Is there any other opportunities to bring in third-party capital into the alts platform where they're not at like the GP level or ways that they can come in at the LP level that would allow you to reduce the amount of money that you're kind of investing in the various strategies so it can free up capital that you can do things like, for example, more share buybacks?

Hi, Jeff. Thanks for your question. You've seen two of those transactions in the past, few quarters, and there's other parties that are always kind of in conversation. But I wouldn't – so you're asking if there's other opportunities to bring in other GPs. I guess the answer is yes, but I don't want to leave anyone with the impression that we've decided we're going to do more transactions when, you know, those will be evaluated first and foremost by the cigar and power of sustainable capital teams, and then we obviously get involved because it changes our percentage ownership. But I don't want to leave the impression – that yes, we're about to do a bunch of others. There's a lot of conversations that go on. It's a tool. Expectations there that may or may not happen. We are being really careful in ensuring that we rotate the capital that we have that's underpinning these strategies. We're not necessarily have a decision or are trying to reduce it. Those are decisions we make actively based on the opportunities So, for example, we've got some strategies, particularly in Power of Sustainable Capital, which is focusing, as we've said from the beginning for over four years, we're going to put our money where we can get third parties to fund the growth. Power of Sustainable Capital's got some ideas and some strategies it thinks it's going to be able to launch where we can really fund them with third parties. But we'll put capital into those strategies to get them seeded. So what am I saying there? I'm saying, yeah, I guess there's opportunities, but we're kind of happy with the approach we've been on, which is to recycle the capital we have, take out some of the returns we've had on it, and just continue to see the platforms grow. That's still the main strategy, Jeff.

And, Jeff, were you also wondering if that opportunity exists down at the LP level?

Yeah, just, I mean, for the capital that is there, instead of maybe taking an X percent stake in the fund, you, you know, have a lower amount and therefore, like I said, have a little bit more capital to allocate elsewhere.

Yeah, so let me comment on that. It's very strategy specific. So if you are launching a brand new product, the LPs are going to expect that the sponsor being power or in this case, or it could be Great West, if they have an appetite for the product, is going to take a big chunk of the initial fund. And if you're on your second or third strategy and it's been successful returns, then the LPs will not require as much seed capital from the sponsor. So, you know, that's a hard one to answer because obviously we'd all like to be adding second and third funds because You scale the businesses, you scale the teams, the economics get better, and you don't have to put as much seed capital in. So that's kind of nirvana. But we're also at a stage where we still have to launch and create some breadth in the portfolio to get products that are giving traction. So that's the dynamic at play, and we don't have a hard and fast rulebook. It's kind of where does opportunity in the market meet our need and our ability to grow and put teams in place? And that's why it jumps around a little bit from fund to fund. I don't know if that answers your question, Jeff.

It does. And just my second question was, for the three non-core assets you've talked about looking to realize or crystallize value at some point, in order to monetize those investments, how much of it is just wanting to have better financial performance or improvements in the balance sheet versus needing more favorable market conditions?

I think it would be more favorable market conditions would be where you underline that. Obviously, we're not going to give away the assets. It's something that's less than their market value. But I think it is really whether there's liquidity and whether there's enough opportunity in the market and not kind of getting in the way of the company's own plans and needs for capital. You know, you could look at Lion in that way, and it's an obvious one that we could comment on, but Lion's been out looking for capital themselves, and we haven't been trying to compete with that in terms of our own ambitions. So we're not getting in the way of their own company development and being a negative for them is a perspective on that. We've tried to be supportive, as I said from the beginning. We changed our strategy recently. These three companies are not financial services, but we've tried to do that in a way that we really protect our reputation of being a great partner, of honoring our commitments. And at the same time, I would point out that the buybacks and the freeing up of capital, I guess it hasn't come from the standalone businesses. That's a future opportunity, which we'll get to. But we managed to do a lot of buybacks because of the things I've talked about, you know, rotating the capital, creating returns on the seed capital, doing other transactions and raised a lot of capital without having really dented that portfolio in a very serious way yet.

Okay. Thank you. Okay.

Thank you. The next question comes from Graham Writing of TD Securities. Please go ahead.

Hi, good morning. My first question is just on the capital that you've received from Great West for, you know, this 20% stake in Power Sustainable. What's the plan? How do you plan to use that capital?

The capital will go into the treasury of Power Sustainable Capital, and they'll use it for their own operations at this point. So that's – it wasn't a secondary that we did. They actually put capital in. You have the financials on power sustainable capital, so you can derive from that. I think we announced the numbers when Cigar brought in outside capital, that Cigar is a bigger company and a lot more revenues, a lot more mature stage of development. So this is a smaller business. The numbers are less material overall, but capital that came in went into Treasury. I don't know, Graham, if that fits your question or not.

Yeah, so just to fund operations going forward. Okay, that makes sense. And then what level of AUM commitment? Can you disclose like what Great West is committed to going forward? I think they've invested already a billion into power sustainable. Can you disclose what they're committing to going forward?

No, I can't. And I'm not even sure that was an explicit commitment in the agreement. And they are committed to a billion. As you know, they're in the Infra Fund. They've got a little bit in the Leos Fund. The strategy that the Paris Stable Capital has launched in terms of the Infra Debt Fund, which is a U.S.-based global fund led by Tom Murray and his team, they've committed a fair bit of capital to that strategy, which is really, I think, right up their alley in terms of the kind of assets that they're looking for. And we're pretty optimistic with that strategy. once it's got a few investments done, is going to get some really good traction with third-party investors. We'll see how that goes, but we're optimistic. That's kind of the main one that they've done so far. And as I said, they have an ability in working with Power Sustainable Capital to say this is something else we'd be looking for and work with Power Sustainable Capital to help them go out and actually conceive strategies and look for teams. So it's more than just coming in and saying, you know, we'll spend this much money. It's actually kind of a working partnership here that helps power sustainable capital and Great West.

I do think, Graham, it's Jake here, I do think their interests are aligned, right? When you become a, call it approximately 20% owner of the business, your interest is to obviously invest in the business. So no explicit number commitment to share at this point, but I don't think they became a partner in the GP not to influence or participate at the LP level.

Yep, okay. Makes sense. And my last question would just be sort of in line with your decision here to wind down the public equities platform in China. Are there other areas still within your platform where you see opportunities for further simplification?

I think that most of the strategies that are currently in the alternative are either being primarily funded by third-party capital or we are optimistic they will. I just mentioned the U.S. Infra-Debt Fund where it's currently not, but we're optimistic it will. That would be my quick summary on the various portfolios. I don't want to preclude in any asset manager they're always opening new funds and making decisions to close other funds over time, so I don't want to say we'd never do any of that, but there's nothing at this point that comes to mind.

Okay, that's it for me. Thank you.

Thank you. The next question comes from James Goyne of National Bank Financial. Please go ahead.

Yeah, thanks. Good morning. Morning. First question, just wanted to drill into the SAGARD asset management activities profitability. And so we see management fees stepping up quarter over quarter. but also exactly in line with the investment platform expenses quarter over quarter as well. So just, you know, trying to get a sense as to, you know, whether there's any sort of one-time drivers in there, obviously PEM is included and, and was PEM sort of operating at like full profitability for the quarter or were there some other factors that were at play here?

Do I take that? I'll go ahead and then you can jump in Jake. Yeah, good question. Thank you. So, yeah, I think by memory here, $55 million of expenses, $51 million of fees, so a slight loss. There is a little bit of a catch-up that was not in the quarter on a fund that was expected to close, so that probably overstates a little bit the run rate profitability of Cigar. It's probably... Not quite a break-even right now, but that gap is overstated because some funds we expect to get in. PEM came in, and specific answer to your question, it is above break-even, not contributing a lot, but it is making money, so it was not a further drag. It would have contributed a little more revenue than expenses. The overall statement I would have, and then I invite Jake to add anything else, is that CIGAR has been growing, adding strategies, adding staff, The fundraising environment in 2023 slowed quite a bit. They actually took an action and reduced their expenses in headcount, but they grew their expenses through the year, and revenues have grown in a comparable fashion, but not to the point where the fee-related earnings jumped into a positive. So they're just under break-even right now. I'd stop back and look at the forest instead of the trees and say, They got a run rate fee of over $200 million Canadian from where they're standing today, and that business really didn't exist 40 years ago. So it's been an incredible growth in breadth and in depth. But the current environment has been a challenging one, and that's reflective in the time at which they get the positive contributions.

Jake, I don't know if you want to add to that. No, the only other favorable variance I'd highlight is the venture capital line, which ties into some of the discussion we've had around Wealthsimple, where it had a favorable variance quarter over quarter around $7 million, and that's largely related to the performance within that Wealthsimple franchise.

Okay, great. Staying in this lane here with the acquisition of PEMM, Can you maybe just refresh us on what were the key drivers of that acquisition or key benefits from bringing in PEM and what gaps did it fill? And then related to that, what other gaps do you see that you would seek to fill through acquisition in the asset management business?

PEM is primarily a fund-to-fund and secondaries player. And fund-to-fund is effectively going out and buying a whole bunch of different strategies from different managers. And secondaries, of course, is buying the same thing but from LPs that are selling. And what that does, that product suite is very well suited to family office and smaller family office and even getting into the democratization into retail accounts. Why? Because you have diversification, and two, you don't have the jade. Imagine if you go into a private equity fund institution, and they say, great, $50 million or $200 million, and we'll come back to you 18 times in the next four years and draw down your money as we invest it. And then we'll send you checks over the next five years as we divest of it. That, for an individual investor or family office, is really a very, very difficult thing. So, So the fund-to-fund business gets you diversification, and it doesn't have this long investment period typically. You're invested almost right away. So it broadens out the product suite and the distribution that Cigar has, and that is particularly relevant given that institutional investors are, you know, they've grown a lot in the last 20 years, and the growth rate is probably going to come more from other parts. By saying that, I do not want to say that there are no institutional investors in secondaries. And they also, institutional investors might go into a secondary to fill in part of their portfolio where they don't have the team themselves. They'll use a secondary or a fund-to-fund type strategy to fill in their portfolio. But it opens up all those doors for CEDAR, and that's why I'm a strategic for them. I hope that answers the question, Jamie.

Yeah, it answered the PEM part, and then the second part was, you know, what else could you be looking at in terms of M&A to help drive that asset management platform?

Yeah, I mean, I'm not going to comment there. The lead on, like, the cigar team and the power of sustainable capital team will be out hunting and in discussions with people all the time, and then we've got something that's they're interested in, they bring it forward and we end up getting in discussion. So, you know, I, I don't want to avoid the question, but I, I'm not sure I can give you anything that you can have your hat on.

Maybe, maybe I can word it differently in the sense of, as we're thinking about asset management, reaching a breakeven and turning it into a profitable business, like how, how much,

in in your strategic outlook is that driven by organic uh drivers versus inorganic is that maybe a better way to ask it okay yeah that depends on the environment and hopefully it's both over time you know it's like you're uh you these things get actively managed you you have a lot of tools in your toolbox and if you're an environment of bad fundraising you're using one tool more than you're using another if we get back into an environment with lots of fundraising the team's going to quite naturally spend more of their time focusing on organic growth. That's my answer. We've got a toolbox, and we use the ones that are most appropriate at the time.

Okay. I'll turn it over from here. Thanks.

Okay. Thanks, Jamie. The next question comes from Phil Harv of Scotiabank.

Please go ahead. Hey, good morning. Hey, Phil. This one's for you. I want to start off taking a big picture question and kind of revisit a theme. But I guess if you look back to the slide deck and you consider, I guess, all the changes across the power group for the last five or so years, what any now do you think we're at in terms of maximizing some of the operational synergies across that broader group? It feels like quarter to quarter, there's new transactions, new strategic agreements. What do you think is ahead of us?

Boy, that's a tough question to ask. I think... Let me first look in the rearview mirror. A number of the transactions that we did between the group were to kind of put things in their right place. And it wasn't because it was necessarily an error in the first place, but just the market had developed. Examples of that would be if you look at the sale of Great West Life's asset management business, GLC, to McKenzie. You know, that would have been a strategy for Great West Life Co. and Canada Life for a long time, but the scale required and the scale that they had in asset management was not being optimized, whereas McKinsey was in a better position to utilize the scale, provide better performance, et cetera. So that was an obvious one. China AMC was another one. We didn't start off with a view. that we should have the asset in two places. I think I've told the story before. We actually wished when CMAC first came in 2011 that we could have had IGM be the buyer. It was within the fund and asset management business, and that didn't work out because of regulations, and we weren't able to buy it there, so it had to go into PowerCorp, and then when IGM was able to buy, we ended up having it in two places. So there was a, you know, What are we doing with this asset in two places? Let's simplify it, put it in one place. So a lot of the transactions were of that nature. Are there any of those left? Yeah, I would say there probably is. You know, if you look at the way Wealthsimple is positioned, it's in two places. That was because it started off as part of our fintech strategy that we were driving at Power Financial. And as we got into subsequent rounds of funding, it was clear that this company was going to become something real. and maybe that belonged more in our operating businesses than up at Power Corp. So there's an example of, you know, we're in two places. Does that ever get moved? I do not want to create speculation that we're about to announce that, please, in answering your question, but we've still got some opportunities for those kinds. The second kind of transaction are the synergistic ones where, you know, the companies have an ability to work together either by providing their product through the distribution of the other organization, and they cooperate. And that continues to be a lot of opportunity to basically take the distribution we have at IGM and the distribution that we have at Great West Light and see where there's opportunities to distribute each other's products. And then between our alt platforms, and the needs of Great West Life and the needs of the clients of IGM. There's lots of synergies there that we're going to continue to, you know, continue to try and monetize for the benefit of everybody, clients and the shareholders of all the group. So that's my summary of what we've done and what I see going ahead. Phil?

Excellent. Great call. Maybe one follow-on. I think a number of the questions we've had this morning are more what's called near-term capital priorities and kind of thoughts. And same thing, I just want to keep in this big picture and mid to longer-term theme, but can you talk about what's called mid to longer-term capital rebalancing? Again, you know, how you kind of look at balancing between investing in new growth at power, either retiring preps, buybacks, increasing, decreasing stakes in Great West and IGM. Again, more in the context of kind of three to five years out. So how does this look? in the midterm?

Yeah. So, yeah, good question. I'll say, let me answer the question that you didn't ask, which is in the short term, we're balancing buying shares back. We're trading at a 26%, 27% discount. That is clearly creating benefits for shareholders. I think I mentioned on the last call that if you just looked at the buybacks over the last few years, most of which came in the last two years because during COVID we just kind of suspended the buyback activity. I think I made the comment, we've done the math, that we had $72 million additional cash flow that would not have been there had we not bought the shares back and that was available to and contributed to the increase in dividends that we're able to comfortably fund at the power court level. That would also be true in terms of buybacks increasing our earnings per share, and then buybacks obviously increasing the NAV because there's an arbitrage going on when we take cash at NAV and we buy shares back at 75 cents on the dollar, you bump your NAV. So lots of benefits to buybacks, but we're not planning on the growth of the business simply to return all the capital to shareholders and buy it back. We're in the business of trying to also build businesses that can create firstly earnings, Second, excuse me, first and foremost, value growth. Second, earnings come. And then third, cash flow comes. It's kind of the sequence. And we are very much looking to balance at PowerCorp, building businesses that can do that, create value, create ultimately earnings, and create cash flow. Your question about, you know, buying more at Great West or buying less at IGM, that's a lot harder one to kind of answer on the fly, Phil. I mean, I think, typically, when you're making those changes, it's because of some opportunity that exists in the market. We love our position in Great West. We love our position in IGM. And whether we would increase or decrease, I think will be decisions we'll make in the future, depending on what opportunity might exist. It may be some M&A transaction or some other opportunity that would make the decision at the time. But they're both long-term holds for our group, and we're happy with our ownership. Think about as far as I want to go in terms of the longer-term nature of your question. I'll stop there.

All right. Well, that's great, caller. Thank you.

Okay, Phil. Thank you.

The next question comes from Tom McKinnon of BMO. Please go ahead.

Yeah, thanks, and good morning. Jumped on the call late, so hopefully this question wasn't asked. Apologies if it was, but with respect to power sustainable, it looks like some money was moved out of power sustainable and into cash. What was the driver of that? Was that not funding some other mandates, taking some money off the table with respect to power sustainable? And how do you juggle then the need to, I guess, invest in these platforms, feed money into these platforms versus put money into cash and try to buy back stock? Yeah.

Hi, Tom. Thanks for joining us. Yeah, so the strategy there was we're putting our capital in cigar and car symbol in strategies that can fund themselves for third parties. And there were questions on that earlier. So we've taken money out of one strategy that is really not yet going places in terms of getting third-party funding. And it's gone into cash right now, about $400 million. $50 million somewhere around there. $435 is the number I think on that basis. We've taken that out of the strategy. It's currently sitting in cash. As I mentioned earlier on the call, Power Sustainable Capital has got other strategies that we are planning to launch. So some of that capital is going to support new strategies where we think we can be getting third-party funding. And as the primary driver, we've said that, like we've been saying that for 21 quarters in a row, that's what we're about. We're going to try and take the capital we have, it recycles, you missed the comment, the 2.1 billion that's been the power capital under these strategies is actually recycled a lot. And we're going to try and come forward with some information on that. And we've taken money out and through returns, but we're basically trying to grow the platform and we have been using third party capital. That strategy wasn't getting there. So we're redeploying it. Some of it can be used for buybacks, and we're going to redeploy some of it in supporting the business of our platforms going forward. And we have some product launches that we're anticipating in the near future.

Okay. Yeah, that's great. And how do you juggle the need to – are you just recycling capital and power sustainable in cigar, or are you in a – in a position where they would, for lack of a better word, kind of remit capital back into cash?

Yeah, good question, a really good question. Their GPs, they run their GPs, the managers, and there's a little bit of cash in there. I guess Cigar has some from the ADQ, the Lunate and the BMO transaction they've been using for acquisitions. But this capital that I'm talking about, the $2.1 billion that we always talk about, is not managed by Cigar. or by power of single capitalists, not just by power. We're an LP, if you will. We own the GPs, but we're also a limited partner. And so we will invest in their strategies, typically as a seed investor. As I was saying earlier, on a new fund, we might take a bigger share to get a new fund going. On a second fund that's launched, we might take less. So we're getting returns. Sometimes we're selling our interest in those LPs after a period of time. We're getting money back. It's recycling. And we manage that portfolio. And then we're in discussions with them PowerStandable Capital will come and say, we want to launch a new fund. We think we have a team that's going to join us. We think we can raise, you know, a $500 million going to a billion, but we need PowerCorp to put $100 million or $150 million in to get the thing going. And then we have those discussions. We negotiate with our GPs, and we make a decision, okay, we're going to support that. That's the process. PowerCorp, the folks around this table, and our folks here at Power, we manage the LP in support and in discussions with Cigar and Car St. Will Capital, and we manage that bucket.

Is that clear? Does that help you? Yeah, that's a fulsome response. Thanks. Great. Okay, Tom, thank you.

The next question comes from John Aiken of Jefferies. Please go ahead.

Hello, John, are you there?

John, you may be on mute. Yeah, sorry, it's me in technology. My apologies. Just wanted to follow along from Jamie's line of questioning in terms of Great West's investment in Power Sustainable. With the injection of capital and their investment in funds and presumably bringing in third-party funds for their distribution channels, does this materially change the timeline to break even for the platform?

You know, I think that it advances it, but I'd hate to make a prediction exactly. That's clearly something we're focused on. We've got cigar to over $200 million in fees, and we're not quite a break-even, but we're very, very close from a FRE point of view. We're not there yet with car-standable capital. We need more scale in car-standable capital, but we have products that are very ripe for the market and in high demand. We've got good teams, and we have the potential to raise a bunch of capital here. Bringing in Great West Life as a partner, getting more commitments from them is going to help that. But I want to stop short of saying, when is it going to break even? I'll just say we're putting a lot of energy and effort into making sure that it gains scale. And I also mentioned, and what they did is consistent with kind of a the playbook of the last few quarters, which is that in a difficult funding environment, we're using partnerships, we're using M&A to try and get more revenue and spread the costs over a broader base. That's part of the playbook as well. So all of those, and we don't have anything else we're about to announce here, but all of those are part of the playbook in addition to launching good products to get this business to scale.

Fantastic. Thanks. And Jake, well, first off, congratulations on the move. I know you basically just stepped in the door. I completely understand the change for adjusted earnings from the non-controlling interest in sustainable, but is there anything else in the works that may be coming down the pipeline of a similar change like this? I mean, I know the focus of power on these are actually net asset value, but there are implications in terms of your EPS as you obviously illustrated with this change.

Yeah, no, nothing complicated at this time. And the change that we did elect to make here, John, and it ties a bit with your last question, is we really want to represent the economic performance of these businesses, including power sustainable. So we felt it made sense to make the change at this time. It also was a bit reflective of some of the questions that We had thought internally around the treatment of it as well as feedback from the investment community. So I think it was a good exchange from the investment community that helped us realize that that probably doesn't represent the economic performance of the platform most appropriately. So that's why the change was made. And as we look forward, there's nothing imminent on the forefront to change net adjusted earnings.

Fantastic. I'll leave it there. Thank you. Okay, John.

Thank you. There are no further questions. I would like to turn the conference back over to Mr. Jeffrey Orr for any closing remarks.

Thank you, operator. No closing remarks. I would like to thank all of you for being with us today. We look forward to talking to you in the weeks and months ahead, and I wish you all a good day. Thank you very much.

Ladies and gentlemen, this concludes your conference call for today. Thank you for participating, and you may now disconnect your lines.