Power Corporation of Canada

Good morning, ladies and gentlemen, and welcome to the Power Corporation's second quarter 2025 earnings conference call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question and answer session. Analysts who wish to join the question queue may press star then 1 at any point throughout the call. If anyone has any difficulties hearing the conference, please press star then 0 for operator assistance at any time. I would like to remind everyone that this call is being recorded on Friday, August 8, 2025. I would now like to turn the conference over to Mr. Stephen Hung, Head of Investor Relations for Power Corporation. Please go ahead, sir.

Thank you, Operator. Good morning, and thank you for joining the call to discuss our second quarter financial results. Before we start, please note that a link to our live webcast and materials for this call have been posted on our website at powercorporation.com. under the Shareholder Reports tab. Please turn to slide two. I would like to draw your attention to the cautionary note regarding the use of forward-looking statements, which form part of today's remarks. Please also refer to slide three for a note on the use of non-iPRESS measures and clarifications on adjusted net asset value. To discuss our results today, joining us on the call are President and CEO Jeffrey Orr and our EVP and CFO Jake Lawrence. We will begin with open remarks followed by Q&A. With that, I'll turn the call over to Jeff.

Thank you, Steve, and welcome, everyone. Thanks for joining us this morning for our results call. We are on page five, if we can just move it forward. We've got all four companies in the group that are reporting and have presentations over the last week, including GBL, which did their semiannual presentation. call. So you've got all of that information available to you. I just draw your attention to that. And with that, I'll move to slide six. This is a really strong quarter. It was strong from an earnings point of view from our two main earnings drivers, Great West Life Co. and IGM. They also had strong business momentum across basically all of their franchises. So really good from an earnings point of view and really good from a business momentum point of view. We Had a quarter continued with our buyback strategy, and we finished the quarter in a very strong cash position for a variety of transactions that occurred. So we're in a good position to continue with our stated objectives on share buybacks. And the alts platforms, the alternative asset managers, had a very strong quarter contributed to our results from an earnings point of view and also had very strong performance from a fundraising perspective. And so overall, a very, very strong quarter. I'm not going to spend any time on slide seven other than to say it's kind of around the horn snapshot of a lot of the positive developments that are going on across the company. And with that, I'll pass it to Jake to give his comments. Great.

Thanks, Jeff. Good morning, everyone. I'm going to begin on slide nine. As Jeff noted, PowerCorp's happy to report very strong second quarter results. Adjusted net earnings from continuing operations were $883 million in the quarter, and that's up 19% year over year. If we look at that on a per share basis, Q2 adjusted net earnings were $1.38, up 21% from last year, and that delta in growth rate reflects the buyback activity. Turning to the contributions from our publicly traded operating companies, as Jeff noted, they were strong across the board. Great West contribution to powers adjusted earnings was up 12% year over year. The positive results reflect Great West's fifth consecutive quarter of base earnings in excess of $1 billion. IGM's contribution to our adjusted earnings were up 15% year-over-year as IGM reported record second quarter adjusted EPS. These results were driven in part by record high AUM&A at both IG Wealth and at McKenzie. Partially offsetting was the decline in GVL's contribution to powers adjusted net earnings year-over-year. The decline in GDL was due in part to a reduction in the fair value of GDL Capital's investments. Meanwhile, GDL's share of earnings from Synoptis and Afidia were also down. It is worth noting away from earnings that during the quarter we did receive $175 million in cash dividends from the previously announced €5 per share dividend related to GDL capital. Moving to our alternative investment platforms, Cigar's contribution to earnings was $106 million, up from $27 million last year. The increase was primarily driven by fair value increases in private equity. Cigar also reported higher net carried interest. Power Sustainable's results saw FRE improvement and a small contribution from its energy infrastructure fund. The higher loss in our corporate operations and other line this quarter was driven primarily by the negative impact of FX, including U.S. dollar and Euro cash balances. Overall, we're pleased with the group's second quarter results and expect continued progress in the second half of the year. Moving on to slide 10, PowerCorp's net asset value per share was $64.76 as of June 30th. I want to remind everyone that 83% of Power's gross asset value is attributable to our earnings-based businesses, which is comprised of Great West and IGM. I'd also just quickly note that this quarter we've revised this NAV presentation table to show year-over-year versus quarter-over-quarter. We think this timeline, looking year-over-year, is a better presentation of the view in NAV. Looking year-over-year, NAV was up 28%. Quarter-over-quarter, it was down 6%. Focusing on the year-over-year growth, it was led by Great West, as strong underlying results have been rewarded by share price appreciation. Great West continues to report base earnings ahead of its medium-term guidance, and earlier this week announced an increased NCIB. At Investors Group or at IGM, we're also seeing underlying earnings performance that is exceeding medium-term objectives, which is also being reflected in IGM's share price. Turning to the alternative platforms, Cigar's NAV increased year over year, driven by the fair value increase in venture capital, including Wealthsimple, as well as private equity. The Wealthsimple fair value increase was based on an increase in public market peer valuations, as well as Wealthsimple's business performance and revised revenue expectations for the company. The reduction in power sustainable NAV related to the sale of two assets that generated just over $250 million in cash proceeds for power during the quarter, So, while less of a contribution on the earnings side, if you look at the NAV table, you can see a reduction in Power Sustainables NAV with a corresponding increase in cash. So, they're helping us with our available cash. And on that topic, we ended the quarter with about $1.7 billion, and we remained active in our NCID program during the quarter, as Jeff noted. We repurchased 1.4 million shares worth $74 million, and that takes us to 4.4 million shares year-to-date. We consider about $1.3 billion of cash to be available, which factors in dividends declared by Power and IGM but not yet paid, as well as maintaining a buffer for fixed costs. And with that, I'll turn it back to Jeff for some more comments. Okay. Thank you, Jake.

And I'll move it right along to slide 12. Really strong quarter at Great West Life. Their earnings, base earnings growth well ahead of their medium-term objectives of 8% to 10%. And it was broadly based. from different parts of the group, strong earnings growth in wealth and group benefits. It was a strong quarter at Empower, although the base earnings on a recorded basis were flat. We had some noise in the quarter in credit and then some offsetting positives in the previous quarter. So the earnings growth really came from across the franchise, and that was strong to see. As we've said, we think we have good momentum across the businesses. Great West Life is really generating a lot of capital at this point. Going from a period in the U.S. market where we were putting together the businesses, building the earnings, and also repaying some of the debt. The debt levels within Great West Life have been reduced to strong earnings generation turning into cash. I think the company has done a nice job of illustrating to the market, and that's across the different franchises. So a lot of capital generation, the cash level is built up, and they have announced, as you would have seen earlier this week, that the $500 million buyback that they had announced earlier for this year, which is finally completed, they've added another $500 million target to the buyback. And so strong performance. There's still lots of financial firepower left at Great West Light Co. in the context of a buyback of that size. So very pleased with the results at Great West Light. IGM on page 13, like just broadly based good news going on across the businesses at IGM, the two main earnings drivers in wealth management and asset management being IG Wealth and McKinsey had very strong earnings growth. And there were very strong flows and improving flows at both IG Wealth and McKinsey. IG Wealth has been in inflows for some time, but The market in and of itself across Canada for funds has continued to improve. If you want a macro picture money, not going in at this point to as much into cash products, into the CD products, and moving back into a longer term and higher risk investments. And so that has certainly helped IG Wealth and McKinsey, but their relative performance has also, then relative shares have been very strong. So a good flow picture. McKinsey in particular had a strong quarter and improved as the quarter went on. So they're back into inflows on the retail side, as well as they've got some strong inflows on institutional, which are more sporadic in terms of how they show up in the flows. But they've got both the retail business and the institutional business firing. So lots of good news there. And then the platform's themselves, or I should say the strategic investments all did really well. I'll come back to that in a minute. So Good Quarter and IGM is also now active in share buybacks as their earnings have been increasing and you've seen that. I think that was addressed by James in the call James O'Sullivan in their call yesterday. So let's flip it forward then to page 14. Now really Really strong performance across the board. Well, simple, easy way to illustrate it on this slide, $44 billion in AUA, I should say, a year ago, and $85 billion at the end of a year later. Just very, very strong continued growth. I think we've got 2.8 million Canadians now that they have as clients. So what can you say? And Jake already addressed the markup and the value at WellSimple. Rockefeller also continues to execute its strategy as we had hoped and as they had outlaid to us when we made the acquisition, which we announced in April of 2023. You can see that 21% year-over-year growth in their AUA and client assets is coming from broadly based organic growth, advisors bringing in new client money, new advisors joining the platform, and then market appreciations. Then we flip to our strategic investments in asset management. China AMC really having very, very strong flows and gaining market share. I think their market share in long-term funds is up about one point in a 12-month period, which is I think it's in the mid-fives to mid-sixes. I don't have the number in front of me, but it's like 5.3%. or 5.4% up to 6.4%. I'm not off by more than a decimal place there if I'm off. So very strong growth in their flows. And as you are probably aware, there have been legislated reductions in fees across a lot of retail products in the Chinese asset management business over the last couple of years. And they had some modest growth in net income, notwithstanding quite material fee reductions because of the strong asset growth that they're experiencing. And then Northleaf had another strong quarter of growth, $1.7 billion in fundraising. That's $5.2 billion of fundraising over the last 12 months. The reason the assets aren't up by that much is they have a number of strategies where there's some strong return of capital to their shareholders. But in a very difficult fundraising environment, they continue to perform extremely well. So just across the board, great news across at IGM. GBL, page 15. As I mentioned earlier, just had their call. So Johannes Hutt, the new CEO, came in in May, so that's kind of the big news in the quarter. It stalled himself. He reiterated and the company reiterated their target of creating double-digit TSRs, and they're doing that through a variety of strategies, but it is essentially monetizing certain assets using those proceeds and bringing – a good chunk of that to return shareholders, return money to shareholders through dividends and buybacks. As Jake mentioned, we just received the larger dividend this quarter. And then also reinvesting in private assets as they move forward. So the NAV was down, or the earnings, I should say, in contribution were down in the quarter. The NAV and share price has been up, as I think the investors are focusing on. the changes going on at GBL. Well, let me move to the alt platforms, page 16. I won't reiterate the way we think we can create value. I would simply say this quarter was a good example of the strategy being validated. We had earnings contributions from the platforms overall. That was from carried interest And then the capital itself and our proprietary capital, the investing activities, we had good returns as well. So a nice quarter demonstrating what was laid out here on page 16 is the value creation strategy. And on 17, continued growth in the assets. The BEX transaction, which we had previously announced, was closed. So that's where Cigar was. acquired a strategic stake in BEX, which is a secondaries platform to do secondaries fund-to-funds co-investment. So that added about $3 billion in AUM Canadian to their platform, and Cigar raised over $2 billion in Q2. So again, difficult fundraising environment, but Cigar continuing to get additional net flows into the platform and grow the scale of the business. So then moving to a big picture of power, very pleased that the discount was reduced over the last period of time. And, you know, I'm sure we'll have a discussion about it, probably get some questions on it. But I think we just continue to hammer away in terms of how across the platform, not just Great West Life and IGM, but within the other parts of PowerCorp, we can create value. and we have continued to expand our efforts to communicate to different shareholders and different potential shareholders. And so we will maybe save the discussion on that, but we're pleased to see that the discount has come down, and that's another source of value for PowerCorp shareholders. Whether the discount – comes down or whether you're buying the asset base at a discounted value and you get the return through, in effect, higher returns than we're getting on the underlying assets. It's a value creator either way, but we're really pleased that the progress were made. So then that rolls up onto page 19. These are obviously very, very strong shareholder returns, and there have been competitive shareholder returns over the relevant periods. And so, you know, I think the longer-term returns going back to the end of 2019 would be more in line with where we're targeting as opposed to, it would be nice to say we could do 65% every year, but we don't have a business case that will sustain that on a continuing basis. So I'll talk about that in a couple of slides. Page 25, I'm just going to state that all of these levers are still in place. There it is. no change to the high-level strategy. We're working on all three of them. The operating organic levers happen all of the time, two and three are more episodic as we take and see opportunities to deploy capital, change structure, et cetera. But they're all in place and they continue to be very much how we look to the future. And looking to the future, I'm going to conclude my remarks on page 21 by just kind of restating where we are from a valuation point of view and from a value creation point of view. It is what I stated in the last quarter, but it remains true. Notwithstanding the strong performance of our shares and the assets that we have, Great West Life and IGM, Great West Life and IGM themselves, which are 83% of the value of PowerCorp, have got guidance in the market of basically being able to create 8% to 10% earnings growth, and they have yields that are in the mid-4s. So you can figure out, just do the math on that, that gets you a return if nothing changes from a multiple point of view, and they execute, and that's a big thing to execute. It's not a given that you're going to create or meet the guidance that they've given, but under ordinary market conditions, assuming that they would meet that with no change in valuation, it creates creates TSRs in their stocks in the 14% range. And then the rest of the portfolio, the 13% that's in our platforms, that's in our seed capital, that's in JBL, we've got basically announced targets of creating value in TSRs that are 10% or 10% plus. And we're showing that we can monetize a portion of that, even though it doesn't create regular earnings. I think we've demonstrated we can monetize and drive cash from that. and turn that into growth in earnings and dividends by buying shares back. And that formula hasn't changed. And so that is the view going forward. And then the second thing I would say about that is notwithstanding the change in our values, you look at the valuations, and it hasn't been valuation-driven. Great West Life and IGM, I think, are trading about 10.2, 10.3 times consensus earnings for 2026. So those are not big multiples in the context of strong, diversified financial services companies. And in the rest of our portfolio, we're still trading at a 15% discount. So we think that the returns that we've created have not been on the back of material changes in valuation. Obviously, the discounts narrowed in a little bit here. That has certainly helped, but we look at where we are from a valuation point of view and say it's It's pretty reasonable, and we've got good plans going forward. So that may be a long way of saying the whole thesis on how we're creating shareholder returns and what we're targeting hasn't changed a bit. I think the quarter is just one more quarter of reinforcing that we're on track. So with that, operator, I would conclude my remarks and invite you to open up the lines for any questions that we might have.

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 are using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star, then 2. We will pause for a moment as callers join the queue. The first question today comes from David Young with Desjardins Capital Market. Please go ahead.

Hi. Good morning. The first question, over the years, you've sold down non-core businesses. This quarter, there are two renewable projects that you sold into a fund. My question is, is there anything else on the horizon from a divestiture perspective to raise cash and Maybe I'll kind of tag into this. I mean, you received a nice check from GDL, a special dividend, you know, from a cash flow perspective, anything else similar to that? And where I'm going is just trying to kind of understand as you simplify the structure, as you sell down businesses, non-core stuff, and move stuff into funds. I'm just trying to think of extra cash flow that could be coming up to the power level.

Thank you. You don't mind if I call you, Doug? Yeah, no, Doug's good. Thanks. Okay, thanks. Thanks, Doug. That's a good question. So, I mean, in terms of assets that are slated for sale or that would be non-core, we've got in the portfolio of standalone assets, there's still Lumen Pulse at some point, but that basically is that bucket for the most part is gone. The whole standalone, most of that is behind us. So as you look forward, that's not going to be a big source of capital. But we do have, and I think we've demonstrated that we've got within the seed capital, that produces returns. And while the returns from the seed capital are not steady like dividends every quarter, they do over time and through a period of a year produce cash flow. We get returns. We occasionally sell positions. And so that $2-plus billion is producing, we think about it, 10% return. That's a source of cash. We still have some residual energy assets that are within power that are wholly owned that could be a source of cash as we move forward. One of the things that we are contemplating as well is on the Great West Life share buyback that was just announced. We have not been participating in that up until this point, and that has resulted in us building up our position and increasing our ownership position in Great West Life. I think our intention would be to support Great West Life in their buyback activities, which would also put more cash into power while maintaining our ownership position. So, subject to going to And we're very supportive of what they're doing on the buyback program. We want to support them. So subject to going to the TSX and getting regulatory approval, it would be our intention if we do get regulatory approval to participate in the buybacks going forward on a pro rata basis. So we want to think about 68.5, 68.7% of Great West Lies. So it would be our intention to do that to support them. That would be another source. Of cash that would, once we get through those approvals, that would be coming in. So we've always got lots of levers. GBL itself has said that they're going to be continuing to kind of liquidate assets as they reinvest some of it, but return money to shareholders. That's through dividends. Are there other opportunities going forward? I would hope so, but we'll see there. I'm not leaving on any specific plans. Lots of pockets, I guess, Doug, is what I'm saying. Lots of pockets to continue to recirculate our capital and fund buybacks.

Perfect. Just two follow-ups on this. The residual energy assets that could be sold, any sizing of those? It's hard to parse it out. I can't see it, but any kind of size to that?

I don't lessen this quarter. Yeah, lessen what we did this quarter. That's the right way to put it. Okay.

And then, yeah, okay. Okay. Okay. And then, yeah, I know you still made the question on the buyback. So, your plan would be to proportionally participate, not necessarily on your current ownership, but maybe on the 68, like your target 68 to 68%. Like, is there kind of a certain ownership stake that you'd be keeping?

Yeah, so we, I think we, is it 68.7 we own directly? Yeah, so we would proportionally, our plan would be to proportionally participate in it once we have regulatory approval.

Okay, and I think if you, you've obviously listened to the, it's fake here, you've listened to the first part of the call. Great West has had amazing results. We haven't seen a big uplift in multiple. We don't think it's overvalued. We think it's a great investment, not even investment. It's a core piece. So I wouldn't want anyone to read pro rata participation into being a view on the company. We think it's in great shape, bright future, and have full confidence in it continuing to exceed its medium-term objectives and guidance.

The math just makes sense. You sell it into market at market and you buy it back at a 15% discount. Yeah. You got it. Okay, the other one that I had is just Wealthsimple. Clearly, you know, it's hitting on all cylinders. You have another revaluation this quarter. Can you remind us, and maybe it's in here, but like the value of Wealthsimple within your NAV? And then like the carrying value and then the future plans within Wealthsimple, like is it just status quo or – Is there other rounds of financing that are going to be done? Just kind of maybe kind of flesh that out.

Yeah. So we have just under a billion dollars. I think it was 990-something directly in 970? 997. 997. Thank you. Just under a billion dollars. Thanks for the precision. Directly held like at our corp and then IGM, not in our now, but in the IGM, they have $1.5 billion. and how much we own on a fully diluted basis is a calculation based upon how much dilution there are from management options. But we're in the high 40s is the way I would put it on an expected basis, given expected performance criteria on management options. So, you know, we're the controlling shareholder. I think we have the majority, the way the voting works, we have the majority of the votes just based on some of the employee shares not having votes. That's the status quo. You asked me, In terms of what our intention is going forward, you know, we acquired and funded Wealthsimple not as a venture capital flip, but we saw it as a strategic asset that did represent a material part of the Power Corp and IGM franchises over the long term. And we started investing in the company, you know, back in the early, the very, very early rounds. And that view hasn't changed. That's how the company develops. What's their need for capital? What are the potential opportunities to acquire more shares, not acquire more shares, do financings? I mean, it's really hard, Doug, to get into a crystal ball gazing, and we will reserve the right to make decisions as to what we do with our stake in the future. So it's not to say that we'll take each step as it comes. But the context in which we will make those decisions is that we established the position in Wealthsimple as a long-term strategic position, and that view has not changed. So I don't know if that's helpful.

Maybe no plans to IPO this. I've had that question before. I'm not going to go there.

I... I'm not going to comment on what future steps would be. You will know that you've got the power group as the major shareholder. You've got management with a chunk. And then you've got a number of very large institutions that have come in over the last several years. And those are financial institutions and funds. So the horizon is not forever, as you would know. So, you know, at some point there's going to be discussions around how do they get liquidity and and all the options will probably be discussed. But I don't want to – I don't know what the outcome of all that would be. That's premature to have that discussion right now. And so for me to telegraph one way or the other, I think, is just misleading. I don't know the answer.

Okay. No, that's fair. And then just lastly, did I hear you right that you had $2 billion of net inflows of the all-platforms at Sager and Power Sustainable in quarter?

Yep. It was at Sager.

At Sager. And what – What funds or what areas where most of that capital goes to?

Yeah, so PEM is a recent acquisition that they made. I think BEX had some inflows as well. Continuation funds, yeah. But we can get you, can we get a list of it?

We need a rough breakdown. It was across PEM, which is the performance equity management platform. They had some continuation funds as well, but we'll come back with a more granular breakdown.

Okay. Appreciate the color. Thank you. Thank you, Greg.

The next question comes from Tom McKinnon with BMO Capital Markets. Please go ahead.

Good morning. A question really just about the fee-related earnings at Cigar Empower Sustainable. If I look at what you've got from asset management activities, you know, it's negative $16 million in the first six months of 2025. And it was, I mean, that's better than the negative $32 in the first six months of 2024. but with $36.5 billion in funded AUM in these two alt platforms, what sort of size do you think it needs to be before we can get kind of some sustainable fee-related earnings from these platforms? Yeah. Hi, Tom. Good question.

So if I start with Cigar, Cigar's got a lot of assets, but they've also got a lot of strategies. So you need scalability at the strategy level to create enough contribution. So broad platform, good momentum, great performance, by the way. So tough fundraising environment. But also because of a lot of strategies and they continue to build the breadth of their franchise with products and capabilities, you still have it so that you've got a slight negative contribution. Their FRE is... Slightly negative. I don't have the revenue number on the fee side. I'm looking around the table. We were around $200 million in fee revenues. It's not far off. It's not far off, that number. And so their slight FRE loss is kind of low single digits. So they're close to break even, but your question is they need more scale and individual strategies. Or they could stop adding new strategies because every time they add a new strategy where they think the market is going, you know, you have a J curve. So they've been on a growth trajectory. So we're not kind of pushing them hard like, hey, you've got to get this to break even. You've got to get it to break even. They're clearly got momentum in the market. They're creating good value through the carry, and we're getting good returns on the seed capital. Overall success story, but that's a great question, is how do we scale this so that we get it into an FRE positive basis? If I flip to power sustainable, different issue, really good strategies. You know, they've got four strategies. They've got infrastructure equity, infrastructure debt, which has been launched in the U.S. market. They've got a Leos Agri-Fund. and they've got a DCARB fund that they've launched as we announced last quarter. So really good strategies, but there is more of a scale issue in terms of needing some fundraising to get more fees on the board to get them to a break-even point. So bigger challenge there, and that's where the fundraising stall that's gone into the market has hurt them relative to the plans that they had. In the big scheme of things, the relatively small loss of FRE, compared to the earnings that we think we're going to generate on a carry basis and then what we're earning on the seed. It's still a very, I think it's contributing to us right now, the overall strategy. If you pick on that part, we spend a lot of time talking about it. But it's funding. So the bottom line of your question is we need funding. And if you ask me, how much funding do we need? Well, that's a harder question to ask because it depends on what strategy, what kind of fees are coming in. It can get very complicated at that point. I hope

I hope I answered your question. That's good color. Your $2.7 billion investment in these, is this kind of how much we think this should be at going forward?

In there, you have our stake in Wealthsimple, by the way. It gets picked up in Cigar. Even though we think of it as a strategic investment, not an alternative asset management investment, because the investment into Wealthsimple was sourced out of Cigar. So it gets reported in their numbers, but we think of that portion of the NAV really as Wealthsimple and not per se alternative asset management businesses. So if you thought about $2 billion as the seed capital number that we would expect to be, the capital that we have supporting those businesses going forward, that would be about the right number. We'll launch three funds in a six-month period, and all of a sudden we put more capital to work, and then we get some returns, and so the number bounces around. But we talk about a $2 billion number that we're recycling.

Okay. So that kind of means if you're targeting 10% return on that, that means really your investing activities would be in the area of like $50 million a quarter or something like that. Yeah. And you want to keep that flat. And then I guess the final question is – Can I correct you? Can I jump in? Sure.

But it isn't $50 million a quarter, okay? Like, it'll be nothing for three quarters, and then all of a sudden you're going to distribute.

Yeah, totally. And then how do you balance buying back stock versus, hey, I'm looking at slide 25, this venture capital fund here with a targeted IRR of 12% to 20%. Why not just – How do you balance buying back the stock versus putting it into this venture capital thing where you can get, you know, looks like a pretty good return on that?

Yeah, well, we're looking at the proprietary capital as being what is required to support the buildup of the alt platforms and the earnings that we can get from an FRE basis, as you mentioned. as you mentioned, and from a carry basis. And we're looking at the success of those businesses as being the primary goal as to where we put our capital. So while we might have a preference for higher return businesses, higher return strategies, the real discussion is, you know, Cigar is saying, hey, we really need to launch a strategy here. We think it's going to be very strategic for us. It's going to complement this strategy. We're going to be more relevant to our institutional shareholders, this is going to provide us better access into the wealth market. We need to have this fund. We have a team and we need, you know, $100 million of seed capital to get this thing off the ground. That's what's actually happening as opposed to us going, hmm, I think we'd like to pick as a third-party investor, you know, this one over that one because it meets our book better. That's the reality. We're not like an LP or a pension fund trying to figure out with this part of our portfolio how we meet our – long-term obligations to our policyholders or to our beneficiaries, we're actually trying to work with the alternative asset managers to guard the power of sustainable to put capital in to the things that they need. And then the 10% kind of falls off the bottom, if I can put it that way. But it will be something like this because they have credit strategies and they have real estate strategies and they have venture strategies, so it works out that it's 10% plus and that will change over time. That's actually how it really works. I don't know if that answers your question. And generally, can I also say the venture funds and the equity funds, well, they typically need a little bit more of our capital as a percentage of They're smaller funds. Like your lower-risk funds, when it comes to credit, real estate tend to be larger funds than the higher-risk VC-type funds. So that's another phenomenon that happens.

Okay. Thanks so much, then. Thank you, Tom.

The next question comes from Jane Goyne with National Bank Financial. Please go ahead.

Yeah, thanks. I just wanted to start with the, I guess, Trump executive order to open up private equity for 401ks. I mean, not a huge surprise there, but just wanted to get your higher level thoughts on that segment of the market and the opportunity that that could present for the alt platform at Power Group. And, you know, have you... put anything to work there? Is there a component of the individual investor market that flows into SAGAR today? Maybe some high-level strategic thoughts on that opportunity. Thank you. It's a good question, and Power and Ed have really played a very vocal role, if you may have seen in the last two, three months, advocating for allowing private assets into the defined contribution space in the United States. It's $27 trillion of alts right now in the capital markets around the world, and institutions and high net worth individuals are participating. Smaller individual investors and retailers are having some opportunity to participate. 401K in the D.C. business is a big chunk of American savings, and it's very difficult to put those strategies in right now. Ed and our group have been advocating it because it's good for the customer and it's good for the channel because it provides more competitive and more balanced returns so that they can participate in it. I think to think of it as a short-term sort of big income opportunity would be over – I wouldn't bake it into your models. So I'll go two ways. I'll start from Empower. And I think Empower and the whole industry will have better returns for for their beneficiaries, for their participants, and that's good for their businesses over time. And Empower and the other participants do end up making some money on the products that are on their shelves. It's a complicated question, but more assets, more returns, they end up generally making more money. Your specific question is whether our alt platforms will benefit from that. And I think they will. I think they'll benefit initially through getting some positions on the shelves, but these are fiduciaries in the DC plan, right? So the 90,000 plan sponsors, i.e. employers, who are in the Empower platform, they each are fiduciaries and they make, with financial advisors or with the mercers of the world, they make the product decisions. So they control the shelves. But having said that, Empower announced they were partnering on an old platform program that they were putting into their products and Cigar was one of the seven players that are on that shelf. The six others would all be household names that you would know. So yes, we're trying to use our distribution money to help promote Cigar and Power Sustainable and we'll continue to do so. But I think you shouldn't turn to your models and say, wow, that's going to drive massive flows in the short term. And then I'll say one more thing before I got to stop on this topic. Before you get meaningful private assets in 401k, you're going to need safe harbor for the employers. And I haven't read the executive order. I saw it in the headlines. We knew it was coming. I haven't had a chance with our board meetings to read it. I'm not sure how far that went providing a safe harbor. And then you've got to get an option by the plan sponsors and by all the advisors. So this is going to be – this is still spade work, I guess, is the way I would answer the question. And we'll be talking about it in a few years that it's, hey, they're starting to get some traction. But over the short to medium term, it's still spade work. I hope that answers your question. Yep. No, of course. Maybe more specific, the carried interest that flowed through this quarter, You've had some slides in the past talking about period interest as well. Can you just kind of refresh where the balance of period interest is today? Do you have any other funds or opportunities that could be flowing through in the near term? Maybe just an update on, like, the timing expectations and all that. Obviously uncertain, but, you know, you do have some visibility in terms of when some of those returns could be flowing in.

Yeah, thanks, James. So we'd be in excess of 100, I think, in total carried interest across the strategies. We can look at revisiting. We're going to be putting out a supplementary information package in coming quarters, and we'll look to be including that info. In terms of this quarter, we did have a bit of a move up, a portion related to Wealthsimple. So as Jeff noted when we were talking about the proprietary capital, there is a portion of the Wealthsimple position across the group that's managed by Cigar, so there was a bit of a carried interest bump resulting from that, as well as you would have seen on the on the investing activity side, there was a really good quarter of realizations in cigar close to 100 million. And so there was some realizations, I think, over the first half of the year, and some of the private equity strategies, including in Europe that would have added to the carried interest also during the period.

Okay. And then, you know, thinking about that seed capital of 2 billion, Maybe just talk us through, like, why is $2 billion the right number to sort of settle around? Why not more, you know, given the opportunities that are presented there? Is it really just a, you know, constraint on a supply side, I guess, so to speak, from your group? You know, why is it $2 billion and not something higher, I guess? Yeah, good question, and it's something that we could revisit from time to time so nothing in business is ever frozen, as you know. But it's really about doing the trade-offs on the allocation of capital. So the trade-off would go, we've got capital, and we can invest it in our seed capital, or we can invest it in buybacks. You know, we've got dividend incomes. We flow through dividends to our shareholders, and then we've got buybacks versus seed. And The extent to which we make that trade-off depends on the opportunities, but also trying to be sensitive to our public shareholders. And our public shareholders, I think, are very focused on earnings and dividend growth. And so we've been trying to manage that bucket in a way that reflects what we think our public shareholders want. And buybacks have been part of that equation. So it's another way of kind of going, you know, do we really get proper value recognition within the power world for assets that don't produce steady income, produce maybe very strong returns, but the returns are episodic, they're a bit volatile, and then they sit there increasing your NAV, and do you really get value recognition for a public shareholder? So we have adopted a strategy to this point that says, well, we think we can build the alternative asset management businesses, we'll support it with $2 billion of capital, We'll get good returns on it, but we're not going to throw everything at it, and we're going to balance that with a need to be buying shares back, which is, in a way, a fashion of taking the returns off the seed capital and other assets and monetizing it by reducing the share count, which increases earnings per share and increases our ability to pay dividends. So that's the tradeoff. Good question. One we talk about from time to time, of course.

James, it's Jake. I just, I point again to, or I point to slide 24 in the appendix, I think it is. Our seed capital isn't a precursor to growth here. And so, If you adjust for the Wealthsimple on the right side in Q2-25, that number moves you down subs $2 billion. We've gone from the original $2 billion we had back in Q1 of 2020 and $3.7 in total was third-party. We've been able to go up to $37 billion largely on third-party growth. So it's not a precursor. As Jeff noted, we're there to support getting these up and running. And if there is, it'll be episodic. It'll ebb and flow and could go higher as more strategies are launched and then come down. But

It's not a precursor to growth for them, for sure. Yeah, and the last point I'll add on that is when we launched the strategy five and a half years ago, we did say to the market, and then I turned around and we turned around to the alt platforms and said, we're going to try and grow this on third party. We're going to try and keep our capital constant and recycle it. And so that's been what we've said internally, and we've been trying to work around that parameter. But, you know, nothing – Nothing is frozen. Things we can revisit as we move forward. Thanks very much for the time. Great. Thanks.

The next question comes from Graham Riding with TD Security. Please go ahead.

Hi. Good morning. Maybe just on the buyback theme, you mentioned that you are thinking of participating in Great West Lice buyback scenario on a proportionate basis. Have you sold into their buybacks in the past or is this a different approach for you than what you've done in the past?

Hi, Graham. Thanks for the question. We have not sold in to their buybacks. Over time, their buybacks up until the last few years have been principally to basically offset dilution from options. So it's really in the last I may not have it exactly, but the last six months that they've really stepped up their buyback activity. We had not participated, and that's resulted in our position, our direct position in Great West increasing from about 68.2 to 68.7, kind of inadvertently. And it's not that we don't want to own more Great West White, but it's not that we're happy with the position we have, and we're also happy to have you know, the public shareholders with a healthy group of public shareholders participating with us in Great West Life. So we have made the decision that they continue to bring in more capital and are increasing their buybacks to support them in that. And I think that's something they'd like to see us do. And so we're supporting them in that. And so we're going to make the applications to the GSX and the OSC, I think to the AMF and the various regulators to support to participate on it on a pro rata basis. So it is a change. But it's kind of new is also what I'm saying. It's not like Great West has a long history of reducing their float. That's really only in the last few quarters they've started that.

Great. I guess that makes sense. I guess their history is more on the M&A side. And then on the same theme with GDL sort of rotating its portfolio and acting on some buybacks as well. Are you planning to participate in that as well, or will you just let your ownership stink, migrate higher as that plays out?

Yeah, we have not been participating in buybacks. We don't have an immediate plan to participate in buybacks. I think we'll just watch that one. We've got a new CEO in place, and the strategy they've articulated hasn't changed, but we'll watch the pace at which that strategy gets executed, and I think we'll continue to have that discussion. So I don't want to tilt it one way or the other. I think at this point, we're participating in dividends, but we will note, we expect there's going to be continued distributions to shareholders through buybacks, and we'll continue to talk about that. So short answer, no immediate, we have not been participating, no immediate plans to change that.

Okay, understood. And then Obviously, the discount to NAV has tightened year to date, which is, I'm sure, what you guys were planning and hoping. Can you sort of talk about the drivers there from what you're sort of seeing and hearing from investors? Do you think this is more the performance of the operating companies and that message coming through? Is it your marketing efforts? your buybacks, you know, what are the pieces here that are really contributing most to the tight unit discount or is it just a combination of everything?

That is the hardest question that we will get at this meeting. You know, obviously, but it's a good question and it's obviously hard for us to get in the minds of all the buyers and all the sellers of the stock over a given period of time. You just can't do it. But we do talk to investors actively. My own I guess a couple of things I would say. I think that there is more confidence broadly with a broader group of investors, both institutional and individual, that all the different parts of PowerCorp are contributing to value creation. And I would say if you go back five years ago, the question wasn't are they all contributing, it's what do you guys own anyways? We don't know. And I think we're well through that phase. People understand the pieces a lot better, including, I think, the simplification of what's within power. And I think there's a growing appreciation within the investors that we talk about that the 13% that is not Great West Life Co., and 17%, excuse me, of our asset value that's not Great West Life Co. and IGM actually is capable of creating value, and we're capable of monetizing it, as per my answer to Jimmy's question earlier. The second thing, though, is that I do think that there's overall enthusiasm with the momentum across the group, and historically when there's overall enthusiasm with Great West Life and IGM, a number of people like to participate in that through PowerCorp. You can either buy the pieces or you can buy the whole. When you buy the whole, you get a slightly more diversified source of earnings, and you get the additional upside from our other assets. There's greater liquidity. There's a number of reasons why a number of people participate. So I have also found over the years that generally when businesses are doing well, you get more buying activity overall and the discount tends to narrow. So I, like I've said many times, I get to 2% or 3% discount based on the NPV of our expenses here. And, you know, when it's at 2% to 3%, then I'll think PowerCorp is fair value to And at this point, it's still a mission to continue to chip away at it.

Okay. Okay, great. And one last, if I could, there was just some commentary on sort of your targeting, the 10% returns on that proprietary capital. You know, if going forward, if you could give us some sort of like what you're actually generating from an IRR perspective, that would be a number that would be appreciated to be broken out. That'd be interesting to see.

Yeah. It is an excellent question. I agree. We need to do that, and we are working on that. Yeah.

Listen to me.

Thank you.

Great. Thank you.

The next question comes from Bart Verinsky with RBC Capital Markets. Please go ahead.

Hi. Good morning. Thanks for taking the question. I just wanted to follow up on Cigar and the scale discussion. I'd love to get your thoughts on within Cigar's four strategies, VC, PE, credit, and real estate, like which ones in your view are easier to scale, which ones are a bit tougher to scale, and then maybe we can tie that into with Cigar's M&A strategy. So we've seen recently BEX, a secondary platform. There was PAM, Fund of Funds, Co-Investment Platform. So that's sort of the direction of travel that we can expect for future M&A by Cigar. Thanks.

Yeah. Hi, Bart. Thanks for your question. And it's a really good one. The strategies that are more scalable would be on the credit and the real estate side. And the private equity strategies that Cigar has and the venture cap. Venture cap is hard to scale. You can make really good returns, but it's hard to scale. And private equity, we're not in the large cap, you know, look out Blackstone, here we come. We tend to be in the small mid-cap part of the PE market, and those tend to be niche strategies. So you make good returns, but they're hard to scale. Private credit and real estate, on the other hand, are very scalable. They tend to be lower fees, and you need scale to make money at them. And we're gaining scale, but we're still not at a scale where we're making big contributions. So that's a more kind of, I guess, detailed question to it. I think it was Jane that answered the question earlier on. So then your question was on secondaries and PEM and BEX, and that is very much the direction of where I think Cigar is traveling. So what's going on in the alt world in general is that you've just had a massive influx and proliferation of managers who are providing primary funds, i.e., your classic – go out and raise a credit fund or an equity fund. We're going to make, you know, 10 investments of 10% each, and we'll invest over three, four years, and then we'll realize the value and do another fund. I mean, that's kind of what we all think of as a model over the last 20, 30 years. What's going on and what is strongly happening right now is that solution providers are coming up with bundles of fund-to-funds, of secondaries, of direct investments, of direct... of primary participations and kind of bundling more diversified strategies to meet the needs either of institutional investors by creating SMAs for them or creating more diversified products that can then be sold into family office and retail channels and wealth management channels. And that's where a lot of the activity is going on, and BEX and PEM are both a result of Cigar's strategy to position themselves in that area, and that is going to be, I think, where a lot of flows go in the future, and they are very much focused on that as a big area of growth going forward. Okay, so I hope that answers your question. Did you want to add to that, Jake?

Bart, were you asking, I think, was the tail end just around M&A pipeline and activity?

Yeah, exactly, exactly.

Yeah, well, yeah, that's what we want to say about that. I mean, so they're looking, they're out, they're always looking, and that's where, that would be an area where they're looking. And again, they've announced two transactions in the last six months with PEM and VEX, or last year, 12 months, I guess, and they've both been in that space.

Okay, great. That's helpful, guys. And then just one quick follow-up on the U.S. retirement opportunity. Is there an expense spend required up front by Cigar to tap into that, or is it just a matter of You know, you get on Empower's shelf, and then I recognize the revenue opportunities longer term, but is there anything there to consider for, like, a build-out on the ground in the U.S. by Cigar or no?

Yeah, I think that in – I'm going to answer your question more generally. To get into defined contribution spaces or to get into retail wealth management spaces does require an investment in distribution. You've got to have product specialists. You've got to have sales and wholesale teams. You've got to have a brand. You've got to have a presence. It is a pretty strong build-out, and the brands and the positions in the Canadian market are much stronger than our brands would be in the U.S. market. So it's got to be a very targeted strategy to get into the USDC involved space. Now, obviously, we've got some distribution that we're associated with down there, whether it's – you know, with Empower, whether it's our investment in Rockfeller. But, you know, but to do it on a broad basis is a significant investment. So I think our all platforms will be doing kind of targeted approaches, picking on a number of distributors to start with, getting some entry points and getting some momentum. That would be the strategy. Your question is bang on. There's a lot of money if you want to go after the retail space and the DC space in a broadly based way.

Great. Thanks so much, guys. Appreciate the call.

Okay. Thank you, Bart.

This concludes our Q&A session today. I'd like to turn the conference back over to Mr. Stephen Hung for any closing remarks.

Thank you, everyone, for joining us today. A telephone replay will be available later this morning, and the webcast will be archived on our website. We look forward to discussing our third quarter results in November and wish everyone a great rest of the summer. This concludes our call for today. Thanks.

Ladies and gentlemen, this concludes your conference call for today. Thank you for participating.