Q1 2021 Power Corporation of Canada Earnings Call
And ladies and gentlemen, thank you for standing by and welcome to the Power Corporation first quarter 2021 conference call. At this time all participants lines are in a listen only mode. After the speaker's presentation there'll be a question and answer session. The ask the question. During the session you will need of press star one on your telephone. Please be advised that today's conference is being recorded and if you.
And he further assistance, please press star zero and now.
And I would like to hand, the conference over to your speaker for today, Mr. Geoffrey Moore, President and Chief Executive Officer of Power Corporation of Canada. Thank you. Please go ahead.
Thank you operator, and welcome everyone to our quarterly conference call. Thanks for joining US this afternoon on a Friday afternoon.
It's my pleasure to report on our Q1 results.
And I'll dive right into the presentation.
You've got the.
The standard forward looking statements.
Claimer statements and on pages, two and three they seem to be getting longer every quarter.
And so what's the skip over there over those and.
Talk about the participants and with Greg <unk>, and executive Vice President and Chief Financial Officer of Power Corp from the two of Us will.
The presentation and answer your questions afterwards.
So let me jump then to page <unk>.
Six and just talk about the fact that this.
Particular call as well as our annual meeting our power Corp, and disclosure statements are complemented by.
Past presentations and releases by Great West life, AGM and G. B L and theres been a lot of them over the last few weeks. So you can also avail yourself to the information that those companies have provided or follow up with direct questions.
With each of those companies and I'm sure they'd be happy to answer any questions that you might have.
Go to page seven of them and.
And just talk a little bit about the quarter.
It has been a very first quarter was very strong for our company on really every measure.
And the public operating businesses had really good quarters, both from an earnings point of view, but also of business momentum point of view. So good progress and are public companies and then at the power Corp level, we had a number of things that occurred that both validated the investments that we've made over the last several years as well as continued to build.
The momentum for building our businesses and the future.
And it's only been eight weeks actually since we had our last call regarding Q4.
But even since over that period, we had a number of announcements that we're and further and some of the strategies that we've been describing to you some fund raising going on by our alternative investment platforms.
Also had the real simple and transaction announced last week I'll speak a little bit more about that.
Why and electric began trading this week so of that deal closed.
And it had been announced back in the fall.
And as well of probably one maybe not associated as much with our group, but on March 30th dialog wishes of telemedicine company.
Went public debt was actually founded by diagram, which is an incubator launched and collaboration with power Corpus The guard.
And so that was just another successful company coming out of our Fintech ecosystem and further validating the reputation of of that whole effort.
I'll jump over quickly to page eight and just say from a financial point of view.
And the first quarter, the net asset value was up smartly.
From $41 27 at the end of the year of just under $46 at the end of March 31, and then.
That has been increased over the over the first month and a bit of the second quarter and as of earlier. This week was slightly over $50 and the way that we calculate that a good a good result and earnings on both the net earnings and adjusted net earnings basis, and the board declared the dividend at the 44, seven and <unk> at.
At the meeting yesterday, and with that I will pass it to Greg <unk> to talk a little bit more about our net asset value and Alberta.
Great and safety.
A few quick remarks on slide nine and the.
Start with the.
So, it's a little redundant, but nevertheless.
The.
On March 31 of our NAV was up 11% from December 31.
Since the first quarter ended two material announcements.
Well simple head of.
<unk> round and which.
The it completed debt on May 3rd and net added 94 cents for the NAV March seven.
And ill.
<unk> business combination, which added 52 cents and along with strong share price increases set the three publicly traded up close.
We were up another 10% and.
<unk>.
As Jeff just mentioned over $50.
With that I would go to <unk>.
Slide 10.
And do you look at the the earnings that were reported and you can see that we're reporting on a net basis 82 cents.
And on an adjusted basis.
<unk> 16 and <unk>.
And that adjustment.
The adjustment label talk to later on but for US. They go to the top of the the chart and you can see there that the 97 and was up over 31.
Our percent of over the prior quarter and the previous year.
Great West life reporting really strong quarter with all segments.
Up sharply over 20.
AGM and reported record earnings driven by record flows and the record AUM and AUC.
Okay.
JBL.
And.
And increased <unk>.
Contribution with its portfolio of companies rebounding.
The fleet from the pandemic.
And that is the composition of the 97.
When we look at the alternative and other investments.
38, <unk> contribution versus the 12 and the prior year.
The power Pacific contributing most of that and it manages.
<unk> manages our Chinese equity fund.
In the quarter, we had.
And $225 million of gains which were realized.
That.
Was taking advantage of the significant rise and the Chinese equity markets true.
And 'twenty, well timed and the.
And a good time to put some of our cash away given the market pullback and the first quarter.
The standalone businesses, nothing significant there and the quarter.
And then we have corporate and other operations of 21 since.
That has <unk> and at that.
As of tax item relating to the significant gains I just talked about on the Chinese portfolio and.
And you typically wouldn't see that flowing through our statements.
And given that we have sufficient tax.
Tax losses to offset those type of gains.
However.
Given the significant rise.
And the Chinese equity markets.
And 2020, and Q1 and we recognized.
A tax benefit and that period related to those gains and the.
The two of them were obviously offset.
And it was just a timing.
Issue with respect to.
The tax benefit and the tax charge.
Book.
And I take you through the adjustments and I'll leave the accounting lesson too.
Page 13, and 40 of the MBNA, but just to give you the brief.
And.
And the 34 cents there as of 31 cent remeasurement of the put liabilities held by certain of wealth.
The simple minority interest.
The liability.
<unk> was recognized as a result of the material increase and well simple.
Since October and.
And.
And this item too will reverse in Q2.
As the put rights will be extinguished upon closing.
However, when that does reverse it will go through retained earnings so when youre looking at our Q.
To earnings and the future.
And we'll.
And we will remind you of that but it will go through retained earnings along with a number of other gains related to the well simple transaction that will be recorded in that quarter.
Mr. <unk> I will pass it back for you.
Thank you very much.
Great.
And then the next couple of pages are just tier you've seen them before but for some of that may be on the call that haven't been on previous calls you can go through page 11, just talking about our strategy focused on financial services.
And page 12.
And just reiterating that we think about it in terms of three important levers being the organic growth thats going on at our publicly traded operating companies or M&A.
Leavers that we're trying to use actively and and been successful at over the last.
Ear or so and then we've also got all the actions we can take at the power corp level to enhance value as well.
I'll move on to page 13 at our publicly traded companies a lot of focus strictly of great West and IGN, which are more earnings driven and GPL on capitalizing on the investments we've made over a number of years and.
And turning that into higher momentum, we're seeing it and across many of those businesses in terms of their business growth.
And also focusing on turning that into the higher earnings and cash flow growth a key priority for the management teams and I've mentioned, the M&A side of things and then the last bullet on the page.
And clearly communicating to all of our stakeholders the value creation strategy that we're pursuing and trying to make sure. It's very clear to everybody what our goals are what our strategies are.
We are succeeding at it what we're doing what we're not doing we're trying to be as transparent as we possibly can.
And I'll flip over to page 14, and you just got some highlights from each of the businesses and I'm not going to dwell on the on all of this and get very good sales at great West life good for our.
All of us at empower Putnam actually had a.
Credit credit change and their sales mix going on there with the change in and.
And what's happening and the markets.
And then good good results across our capital and risk solutions at Great West just kind of broadly based very very strong results.
Record quarter record assets record flows obviously Mackenzie has been doing an amazing job of Iga will also having very good flows and I'll talk a bit more about that and one of the slides coming up and then the GBM continuing to.
Pursued the strategy that it has pursued for some time and continuing to create to increase value for shareholders.
Doing very well, having a very good results and outperforming its indices and I'll make a comment on that later in the presentation as well.
I'm just kind of highlight and then on the next few pages a few of the things that are going on and the group I'm not going to be exhaustive.
By the empowers business is the very important one for us and going to continue to grow.
And just to make the point on this page that is addressing a very very large market the United States.
The first of all out of the pages just for some.
The state and clearly that the integrations of personal capital and mass mutual are on track we continue to monitor those very closely.
And that the growth of empower as strong organically and then of course is being complemented by acquisitions. We can do the chart you see on the page is just a little quick precis on.
Americans financial wealth Americans have 59 trillion.
Just a proposal.
Disposable financial assets and the defined contribution business on the far left is $9. One trillion of that this is a very big market and empower now.
Got over a trillion dollars, where a very significant player and the defined contribution business. What you see to the right of that though is that the IRI market, which do you think about and Canada as the RSP market the tax assisted and personal savings market is another 11 trillion and then the non tax assisted.
The individual market of funds and securities is another 27 trillion.
And the D. C market is a feeder for the IRI market and the taxable business and so with our personal capital acquisition, which is directly targeting and IRA and taxable assets, but also with the personal capital tools plugged into the retail wealth management effort of empower.
We are looking to capture a.
Growth in the IR and tax what markets were much much smaller players there, but we think there's great opportunity. There. So the point of the slide is these are big markets and we've got a very strong platform that we built and the D. C market will continue to try and build out even stronger and larger as we move forward.
Page 16 is just a little highlight on the wealth of lot of the enthusiasm around AGM has been around the great momentum.
The momentum that Mackenzie is enjoying and they have been continuing to build on that momentum, but not to lose sight of the fact that <unk> wealth management is also gaining really good traction and you'll see and the chart that and increasing share of their sales are coming from households, with over half of million dollars with IAG well.
And that's part of the strategy.
And that is growing faster than the part of the market, which is for those with assets below 500000, which is what the company is trying to do and.
And on the right side of the page is just a little highlight that.
The company's business model is quite different from those who haven't looked at it for a while for example, there is now 22 billion of the client assets and what's called a high profile, which are of private portfolio of pools are targeted for high net worth.
Can see that they are have very strong morningstar ratings, good performance and those.
Products are continuing to be enhanced their multi manager.
The programs they continue to be enhanced with new pools coming in and and the team is looking at and expanded use of liquid alts and private market investments as well to add to some of the returns and those strategies, so lots happening and IGT wealth and they are starting to show real momentum and the marketplace.
I will turn to page 17, which is on JBL.
And just a couple of comments here, but.
GBM continues to actively manage its portfolio. It had a lot of transactions over the last year picking up on Mega trends and.
In the world and and particularly focusing on health consumer sustainability and technology very different from where it was the number of years ago and in fact since the new team took over there and 2012.
<unk> had great returns I think the number is I talked about at the annual meeting this morning over the over that period since 2012 they produced.
The nine 5% compounded annual return to their shareholders versus the benchmark, which is seven 3%. So continued good progress at <unk>.
Okay, I'm going to turn out and spend a few minutes on the group's fintech strategy. So everyone is clearer of what it is that we've been up to we had really two levels of the Fintech strategy of the first was a couple of large bets if I can put it that way, where we backed well simple and Canada and personal capital and the.
And I had states. They were both companies that we thought could be disruptors and had really interesting.
And.
And interesting approach to the market and could really.
Again, a lot of traction and the marketplace so and.
The last.
Year has validated and our minds that those were that part of the strategy was successful.
And we've talked about well simple, we'll talk about it and a few slides about the the wealth creation and the impact they are having in Canada and their client acquisition and obviously the value creation for our group, but personal capital also.
And incredible platform that we were.
We're funding as part of our group over the last five years and is now and integral part of our empower our strategy at the bottom of the peso was the other piece of our Fintech strategy, which was not nearly as much capital, but one which has had really strong benefits and it was derived initially to provide our.
The group with and our management teams with the window into what was going on and technology.
But it also has become an integral part of what we're doing and our alternative asset management platforms. So let me turn to the next page 19, and just give you a quick profile of a poor cash and so per cash is invested and some 50 companies that they've they've invested and and fintech businesses. The great majority of those not in <unk>.
Canada.
And they are businesses that are in.
The segments and verticals of financial services that we care about we're interested in.
And we haven't put a lot of the capital most of the capital is from third parties and a lot of these companies. If you haven't heard of them you will hear rhythm.
They are they're in.
They are all disruptive type of companies that are looking to change the landscape and the areas. They operate in the most important benefit for US here is that the interaction of the management teams of Canada life, and Mckenzie and <unk> wealth and empower with the leadership of these teams.
Has really put our management teams on their front foot when it comes to changes that are happening in their business and yes. There has been some partnership opportunities that have come out and they have been a number of those and we will continue to be but that's one benefit but the even bigger benefit is just <unk>.
Our management teams, having a much clearer idea and sense of urgency around where their businesses could be changing and where the business models are going and that's been the.
And the big benefit by then of course, we also now of a very successful.
VC business I think Portage is now one of the most successful and largest fintech venture capital firms and the world and so this has just been a great a great journey.
Okay, I'm going to talk a bit on page 20 about.
The simple you've probably seen all of this before but I'll just quickly go through the numbers. So last Monday, I should say two mondays ago the.
And the financing was announced it included <unk> and <unk>.
And and other institutional investors, although there seemed to be more attention around Drake and others.
For.
And my family and children and there was much more interest and that particular piece of the announcement.
The.
The <unk>.
Transaction values are groups overall investment and putting what we have at power IGN and and great West life has some as well at $2 6 billion and.
And that includes $500 and that will be turned into cash when the when the offering closes and and ongoing position of $2 1 billion. The group put in $315 million over the various rounds of financing. So it's a multiple of eight three times and a compound annual return of 17, 9% before expenses and taxes and.
We will retain a position of 43% of the equity 60 per cent of the voting value to $2 1 billion and we have full full.
Full flexibility as to what we do with that and the future whether that's a long term hold whether we continue to dilute ourselves through financing those are decisions. We can make in the future. We don't have to make those decisions. We got all of the Optionality we want.
At the power level itself and I was just looking at power's interest not including AGM.
As Greg mentioned the increase on the Mark because of the financing with about 90 for increase in the NAV and then of course, it had an impact on AGM, which we don't calculate directly we just pick up the.
The AGM price so the direct impact on power was at 94 cents on the NAV and.
You see along the bottom of the page of significant growth.
And what's happened at well simple and very strong growth and their assets and their clients and those clients don't include the well simple tax where theres a lot of other clients.
And they started off as a pure investment for.
Firm, they've expanded that into trading and obviously the first quarter was it was a big one for trading.
But they've also got other products that I mentioned tax and got cash products, they're expanding their offering and have a really really great inroads in terms of their branding.
And important and growing sector of the Canadian population. So very excited about the success of real simple and we congratulate the management team Mike and his team they have done an incredible job.
I'll turn on page 21 to Ly and electric the <unk>.
Merger was announced in November.
November of 2020, but it closed this past Monday, so it's now trading on the <unk> and the NYSE under the symbol of <unk>.
It is and a very very attractive and growing sector. Obviously of electric vehicles are going to be the way of the future and they are in the manufacturing.
Marshall trucks and buses.
Actually and business producing vehicles as opposed to thinking about doing it there actually.
For a long in terms of their development curve.
And the fair value of Power's interest and the alliance.
And as a result of the current trading price. This week. It was about $1 2 billion and to put that into context, our group invested $53 million and lion.
So we've got about of 'twenty, two time increase and the value of our original investment. We also put another $20 million Canadian as part of the closing at $10 of the $10 of issue price and I think it's trading last time I looked at 18, and so theres a little bit of gain also on the on the little bit of money, we put in as part of supporting the financing, but the the big story.
And from a return point of view is the 53 to $1 two.
And there are very exciting company encourage you to learn about them and important for Canada as economy as well will be participating in this.
First sector.
Just a quick word on page 22 to mentioned that cigar holdings and the power sustainable capital had a number of financings that they announced you can see them on the page of your cigar credit partners. The second credit fund is up to $900 million U S per test three launched its third fund the power sustainable energy.
<unk> announced a $1 billion.
The sustainable energy funds for out of power sustainable capital and which lots of third party capital invested into that so lots of good progress on the fundraising.
Let me turn to 'twenty, three and just have a word of boat alternative asset management, it's not only important as part of power of corpus value accretion strategy, but it's really leveraging the need the great West Lifeco has for its own balance sheet. <unk> is looking to provide these kind of products for its clients either directly for some <unk>.
<unk> of their clients are mixed into some of the portfolio of products that they do GBM has been active and it as well and you see some of the examples on this page and we are of great West Lifeco is playing not just with whats going on at the power level, but also in north leaf and they've got their own strategy to invest and non liquid alternatives with other players as well.
So this is this is yes, it's the value creation strategy at power, but it's also very synergistic with our operating businesses.
24, I'll talk about China AMC.
Been doing extremely well you see the net profit is growing over the last five quarters over the at the bottom of the page.
Assets under management continue to grow it's now Canadian and 285 billion is the <unk>.
Equivalent there on their assets under management at the end of the year. They are a very significant player in the Chinese asset management business.
Our share of earnings and the first quarter was $13 million at the power level. AGM also had of course the same.
Level of earnings within their business because since day, one the same percentage as power does that was up from 9 million a year earlier and the annual dividend was almost doubled it was declared in the first quarter of $27 million as power share and IGN and got another 2000 and another $27 million. So this is not just earnings. It's also providing income to our group very pleased about the.
Progress of China asset management.
Page 25.
And just talk.
Talk about our Standalone businesses again, our strategy here is to manage these businesses to surface and realize value over time, while honoring our commitments to our partners and I've already talked about the lion with the lion share of being public. This week, we now have approximately.
And one point.
$7 billion of the.
Yes.
The value of these businesses and 70% of it is publicly traded so youll be able to observe.
How that of value.
The changes overtime.
On the 26 again it was only eight weeks ago, we met but we're now at 66% of the actions taken to meet our target of reducing our run rate expenses by $50 million of year.
And then page 27.
Communication with the market continues to be a very high priority.
This call now I guess this is the fifth call. We've had because we launched the first one and Q1 'twenty right. After the organization.
And we've had we've tried to enhance our disclosure on the on.
On the investment platform is still work to do there, but making progress we.
We talked about having 81 meetings with the remaining 80.
The 81 institutions last year, and 2020, where we've met with 63 already this year and so of the beat goes on the paces enhancing and we have more meetings. The plans. So we're continuing to put a lot of emphasis on making sure that of shareholders understand exactly what we're up to that great. West life has also made a number of enhancements to their disclosure they have and invest.
For day coming up on June eight and I think it's kind of focus on empower and given the importance of that.
Now it's of Great West life, and today and in the growing importance of it and the future and then finally AGM lots of different disclosure they brought their sectors and the segments of asset management and wealth management and right down to the after tax earnings level and put a lot of emphasis on the sum of the parts valuation and so lots of good progress by AIG.
And.
And making sure people understand what theyre up to.
Page 28.
On our liquidity and our cash and we did suspend the.
Normal course issuer bid when COVID-19 hit the world other than very limited buybacks sufficient to offset the options that are being exercised and then just.
As we as we will look to restart those programs and I think we will look to see continued progress and.
In terms of COVID-19, also seeing how the regulators look at dividends coming out of our regulated entity Ie, great West life, and Canada life.
Those are all of the things we're considering we haven't made any specific decisions as to when we're going to restart the program, we would be and.
To do so as soon as we feel comfortable and doing so.
And just to repeat that cash we will we are looking to return it to shareholders, but we would always prioritize and.
And M&A opportunity of one of our group companies had a great opportunity, we will of course prioritize supporting those businesses.
29 were tracking our net asset value discount and many others are as well it had been trading around 34% over on average through 15 through the end of 2018 of the moves we've taken starting with the sale of our U S life company and our three level of buyback and our reorganization and the various things we've done sense of narrow that down.
I think it did expand a little bit with the inclusion of well simple and lion and our net asset value and not sure that all of that is getting as fully reflected as the NAV and that we're that were including and the numbers.
And so of that from as far as we can tell that's why it's jumped out a couple of points here and the last period of time, but we're still nevertheless, very committed and convinced that if we continue to deliver value and communicate clearly we're going to be able to continue to drive that down as an opportunity for additional.
Shareholder value creation, and I, just remind you and the box we have had periods where for long periods of time, where we were trading at lower discounts to this we don't see any reason that that was at the power financial level. When we only had one holding company and now we only have one holding company.
So we think we've got more room to move here and just to remind people probably don't remember there was actually a period, where we traded at a premium.
And to our net asset value discount.
The page 30.
Just a reminder of those three levers and how they translate into value. There is really on the right side of the page for elements to drive value higher earnings growth at the companies the potential.
Potential there for for multiple revisions higher net asset value creation at power Corp. Both true what's happening at the Opco and what we're doing at power itself and then the potential to lower the discount all facilitated by enhanced communication and those are the way, we think about our value creation strategy and 31 is just really <unk>.
What was the very strong quarter, and where we're headed in the future and.
We'll conclude operator, and my remarks, right there and open it up to questions that we may have from those participating and the call.
And at this time in order to ask the question you will need to press star one on your telephone keypad.
If you wish to withdraw of question rest of the pound key.
Our first question will come from Graham Ryding of TD Securities. Please go ahead.
Hi, good morning.
Afternoon.
Hi, Graham.
And I just wanted to talk Big picture of the first if I could poorly.
It's definitely taken and I guess at the.
The beginning of 2020, the perhaps even earlier just to simplify the business.
You sort of perceived value for some of the private investments.
For the.
And not as good as one of the public side of the business, where do you see other.
And there is of the opportunity of the business either.
The simplified.
And potentially transactions that could be.
Okay.
Okay. So yeah, great question, and I'll start by saying that of our.
Our gross asset value of great by Wi Fi GM, and JBL or sell 79%, 80% I think is on the chart Greg showed you.
Creating NAV and our minds is still.
First and foremost is making sure that we have.
The strong growing franchises and earnings at our operating businesses and that were active and helping them and identify and execute on M&A transactions. So that's the first thing there is nothing new and that and as you know succeeding at M&A is a bit lumpy you get.
And you get periods like we did last summer, where we did for deals and at other times you can go where you don't do them.
So that remains of the.
Continue to make progress there and I think having the market get conviction.
Around what we see as sustainable earnings growth going forward for great West life, and AGM absent M&A, but also with M&A, adding to that getting the communicating well delivering executing as a key part of the value creation strategy. The second piece of courses at the power Corp level and.
And we've done some things to surface Val.
Value that of validated that some of the investments that were perhaps not as obvious to the market over the last few years have in fact have and creating value but.
But we saw it a long way to go to have what I would call of simplified picture of power Corp.
And when we're there it will be.
Our seed capital underpinning the strategies that you saw under cigar holdings and power sustainable capital and we will have clear reporting on how we're getting returns on that.
We still have some work to do on that front for example on the energy side, we get cash flow and not necessarily earnings on some of them like the the.
The venture capital and the private equity, we get returns, but they can be lumpy on the capital. So we've got we still have of ways to go but imagine.
The future of two three years from now the <unk>.
Standalone businesses have been realized the cash has been crystallized.
Returns that cash to shareholders or supported our our companies and their growth when they've got opportunities and what's left is to alternative asset management businesses that are producing good returns on the seed capital and we can start to report hopefully profit on the asset management activities and have an operating business within power Corp, we're not quite there with <unk>.
Either of them of cigar holdings is close to getting to profitability power standard capital still has a little ways to go in terms of getting more assets under management.
Graham that's that's the vision and then communicate communicate communicate communicate.
And and if we execute we're pretty optimistic about what we can do here.
Okay.
That's helpful.
All of the investment platform side.
And balance sheet investments.
So go ahead and sustainable capital they did come down a little bit quarter over quarter, what were the moving pieces of debt.
And.
Sorry.
Graham I'm sitting a little far away from Jeff and I.
Couldnt hear your question and very well.
Your investment platform on your balance sheet, the the assets, they're kicked down and value quarter over quarter I'm, just wondering what the moving pieces for is that the.
What drove that with it and some of the divestments or.
Kevin.
And we're under current Bill.
There were returns of capital on.
Of the investment platforms during the quarter.
And.
And in particular, when we did the <unk>.
$1 billion.
The launch of the Infra Infra fund.
We took money off the table and.
And that was returned back to us and that went into the the.
The corporate coffers, so that'd be the biggest one but there were others during the quarter, the China asset management caching and some of that.
And not have an effect on that number.
So the the infrastructure fund that Greg referred to we rolled some of our existing assets into that.
Third party investors so.
That's what Greg is referring to are taking money off the table.
Diluted ourselves by rolling some of the assets and with outside investors.
Okay.
That's why it's called the way Youre cash flow.
And the investments.
Yes.
Okay.
The real part true.
Okay.
And last one if I could just you mentioned with the wealth of the transaction and the $8 three tons of multiple.
Is that of efforts to trailing revenue and.
Interested what the multiple would have looked like.
Previous round of financing and that wasn't that long ago.
No no it's not that it's the same we invested $315 million and it's worth $2 6 billion and that's $2 six divided by $3 15 is eight three that's all it was just a multiple on invested capital I don't have and my head.
And the multiple on revenue.
I don't think we would just go with debt.
We havent disclosed that yet.
But the.
For instance to actually what it's worth and what we invested as of yet.
Eight three times.
Okay understood.
Ram.
And again to ask a question press star one on your telephone keypad.
Your next question comes from Geoff Kwan of RBC. Please go ahead.
Hi, good afternoon.
And I wanted to ask a little bit of that with some of it and the non core assets that you plan to monetize just with.
And the markets being favorable and asset values being where they are.
Is that and.
Kind of change I guess, the timeline of how youre looking at but also to us.
What's the what's kind of the.
Criteria and that you are assessing as to when you need to monetize like is it with some of these assets you want to get better financial performance or are there other criteria that's involved.
Okay. Thank you, Jeff good question and sort of pointed out what the non core assets are there are Leon and GP strategies.
Alumina pulse and peak.
We don't put well simple into that category as I mentioned earlier.
That was of different investment altogether Youre question is whats the timing Hasnt changed is it more urgent et cetera, I think you've got to be opportunistic.
And Mary and where the market, whereas the demand and and whereas the company and <unk>.
Particularly in this business cycle.
It's a very dynamic decision and I don't mean to avoid the question.
But obviously.
When we announced the.
The.
Reorganization back in.
December of 2019, I think it was December of the last day in November I can't remember we talked about.
Realizing value over time back then and did we know that electric vehicles, and we're going to become.
As.
Popular with all of this happened around the world and the capital markets getting of.
Very focused on them the.
The answer is we felt really good about about lie and but we had quite frankly, not really and understanding or of any kind of clairvoyants on the fact that there would be so much demand a year. Later, so you have to be opportunistic and the spec opportunity came along and lie and has performed incredibly well and then the spa financing and and of itself gives the <unk>.
The momentum so what are we done there, we've actually surface value, but not realized any right. So we've surfaced it by saying it's trading publicly you can see the value of what we actually haven't taken any money off the table, we actually put as I mentioned and $20 million and to help facilitate the <unk>.
Transaction.
No.
I guess I'm trying to describe a process that you can't have perfect understanding of what you do going forward, but those are the for companies and we will continue to monitor the markets and look for opportunities to realize value of Greg did you want to add anything.
Just a couple of things.
Jeff you used the word need and.
Don't think that we need to do.
Anything with the realization.
It's more of <unk>.
Realizing the value of that is there and so some of those things will take time as Jeff just said.
And we're certainly looking to do that.
And it's different for each one of those properties.
As you might understand and.
And with Leon for example, there is the lockup period as well with respect to.
The agreements that we would have entered into with the.
And beyond.
And the GP strategies.
As a publicly traded company and.
It's doing well, it's done very well during these COVID-19 times so.
They are and the business of.
Training.
Putting on training sessions for companies globally and.
And it's done very nicely and.
So that's an opportunity.
It will we'll obviously be looking out over time as well so each one of these will emerge over the coming quarters and the I think the operative thing here is that.
And in some cases.
And Ah.
The maturity, where they're trading and where the public markets and the.
Helpful and the designing and exit.
Strategy.
Okay Perfect and just my second question was just thinking about your third party asset management business and trying to accelerate the growth of the.
Management fees.
Are there other strategies that you'd like to offer and.
Is that sort of thing.
And as you can do with the existing personnel you have in place or and.
The day involved potentially need to bring people on the board or even acquiring for.
And that May have strategies that you find attractive.
Yes, good question and I think the answer is.
There are other strategies that we would like to launch and theyre not necessarily from the people that are on the team now and.
Good way of illustrating that is that the private credit funds, which as I mentioned on the call.
<unk> got our second fund up to 900 billion U S. The first of all had very good track record.
That was the team that joined our group of few years ago that had been at.
The Canada pension investment board actually and the team joined us the.
Royalty fund of team the healthcare royalties was not part of our team previously so we are able to attract and those platforms are able to attract teams and professionals that are in strategies that are of interest and that is very much part of the growth strategies is not only to build on the capabilities, where we already have.
Have good track records by by creating additional funding.
And utilizing our LP base of our Investor base, but actually adding capabilities to it I think cigar holdings announced that they were going to be starting of private equity business and Canada.
In January we didn't have that as part of the highlights because it was simply an announcement not of funding. So we Didnt Dakota it but there is one.
And that they would do that they actually think could be complementary with the private credit business that we already have.
So theres an example, Jeff very much looking to expand the scope.
Okay, great. Thank you.
Thank you.
And your next question will come from Doug Young of do something and Kevin. Please go ahead.
Hi, good afternoon questions on China AMC.
Since Q1 of last year. The AUM is up 34% I think that's and from India, I think it's higher than and Canadian dollars, but youre carrying value of Chinese and see is actually down, 2% and and and I get how the accounting works for China AMC. I guess my question is is the way you can put up a fair market value on this investment and in the non.
Or does there have to be some form of event or a.
Transaction for this to occur it just seems like there's just the two different they're going into two different ways and again I understand how the carrying value is calculated.
Not sure if theres, a better way to put up a proper valuation on this on this entity.
Yeah, So as you know.
Doug.
Net entity is held between IAG and the.
And PCC and our last Mark was win.
<unk> acquired its interest and that was back in.
2016 17.
<unk> expense kind of closed, but I can't remember have been closed and 17 worked on it and 16.
And so the.
The the market's obviously stale data.
And.
We're in partnership with the strategic partner, there, which is sort of Citic securities and the Citic group and they have not.
Adjusted the Mark.
So.
The best guidance I could give you.
Is that.
And when you look back at what we.
And the multiples, we actually traded it for when we bought it.
Would be probably still a very good mark to use for.
And in terms of times earnings and times.
AUM.
And for giving you an indication of where it currently.
The trade that would be of good ballpark number.
Yeah. Okay. So there's nothing you can do but I guess, the we can we can play around with it.
I guess the second question just wealth simple I think theres going to be some noise coming through in Q2 and it sounds like the noise is it's all going through retained earnings and so theres not going to be additional noise coming through on the earnings side is that correct.
And I don't think that we've totally landed on it but.
The the large majority of its kind of be coming through retained earnings.
And then the I know, you've you've marked wealth simple and the NAV.
And then the carried interest expense, but you obviously haven't reflected the $500 million of cash that's the.
The come through when when the when the actual and that goes through is that correct.
Yes.
So thats.
I'm going to close soon so it will start to come through and the second quarter and we'll report on that but it won't be additional NAV, it'll substituting NAV and yes shares of all simple cash it will just show up on it. It's a geography question as to where it shows up on the math, yes, exactly I just want to make sure the cash balance of the cash balance of one point.
<unk> does not include the 500 millions and that's gonna be and the 500 don't forget it for the group so.
And so you've got to take our pro rata share, which is 37% and 38% of the total group holding the rest of us and mostly and AGM and so NAV.
He shows up and their balance sheet, and we just reflected and however their trading.
And just lastly on the Al you mentioned, the Greg that you're in the lockup of you disclosed.
Along that lockup period is.
Or details around the lockup.
Yes.
And for getting the.
Yes.
Yes, exactly I know its six months, but it's.
It's fully disclosed in the filing and if you go to the back.
Back filing youll find the.
All of the information on the lockup, but its six month lockup period.
Yeah, Okay. That's it for me thank you very much.
Thank you Doug.
Or any additional questions. Please press star one on your telephone keypad.
There are no further questions at this book we.
And we do have one further question from Jimmy <unk> from.
From the National Bank. Please go ahead.
Yes, Hello, and good afternoon.
And they are already.
So.
First question that really really.
Well go board on that on slide 19.
And sort of frame, what's going on and the Portage.
Investments.
Or is there anything else you can offer in terms of color around some of the investments which ones.
You feel comfortable about that or and a mature state of others that are.
Youre a little bit more excited.
But like what would be are there any names. Once you are out there that might be like quote unquote. The next wealth simple more dialogue and the sat in this group.
I don't think I would like to do that I don't know, Greg whether you are comfortable with those 55 investments they've made.
And I I quite frankly.
I hear of certain names talked about but I don't feel.
Comfortable enough to be able to answer that question Jamie of the way that you've answered it the well simple theres some per.
Cash did put some money into well simple, but the bulk of the gain that came and while simple, whereas not not of potash.
<unk> strategy, it was really investments and power and AGM made so the.
I wouldn't expect to see.
And the investment come out of there that would result in us owning $2 6 billion.
And the value of let me put it that way that was kind of all outsized, but because it wasn't for taxes not making the.
And $300 million bets on behalf of power.
Nothing like it so.
If that's the gist of your question I don't see anything like that coming but I think there's lots of great companies and there.
And the overall portfolio of returns per cash has created are off of off the charts, which is.
And why they are having great success in the third fundraising.
So im not really being.
And I'm not answering your question of the way you wanted it and I don't feel comfortable of doing so Greg did you want to add a comment yes, Jamie just.
For guidance, if you wish I mean, they do a really nice job on the website too of.
And explaining the each and one of the companies.
And and profiling them.
But the other.
The aspect of the list is that.
There are companies and there that have worked.
With our operating companies and so.
It's the other if you will lever with respect to this.
Of particular of adventure in terms of.
And what we'd like to see happen out of these companies and.
The dialog for example was a big success with Great West life and it's on the on their platform offered to the group benefit customers.
The conquest is of financial planning tool that is being used by.
The IGN and and IPC and our groups. So there is there is there is not angle to it too and the.
And I think that I'd leave it there because the.
I think.
Most people would.
Would love for us to be promoting one or two of them and <unk>.
True to their own from.
Motion, but the.
I wouldn't I wouldn't go there either right now.
I just want to come back on my numbers question. When you mentioned well simple we had $315 million as I mentioned between.
Power Corp, ICM and that a little bit by great West life, and while simple, including the our share within for cash.
So of that.
And the other for cash investments, we wouldnt have anything close to that.
And you mentioned dialogue, so I think our.
When you look true what our group has and dialogue through Portage and I think a lot.
Last time I saw we were just under $60 million Canadian of and investment that we made for about 5 million $6 million as a group. So it was a tremendous return on value, but within these funds were going to have smaller positions, we're not going to have big $300 million concentrated positions that was not the per ties strategy. This was about creating.
A window into all of that was Fintech and order to first and foremost make.
And make sure we understood what was going on and the only way you can be successful adequate to create a great investment track record of bringing great investors. So we've done that.
And then created a relationship model, whereby and not just our company, but any other Lps are welcome to interact with the management teams of the invested companies, but our companies have been very active and following up on that so it's quite a different strategy and while simple and for some capital as I was trying to explain on the previous page I hope that.
<unk> a little bit.
Yes, that's the that's very helpful. Thank you and debt.
I mean, it's a pretty broad.
Broad subset of companies here across the other fintech space, but and there.
And there may not be anything here, but are there any and.
Any gaps and the Fintech world are at where areas that you.
And you see might be underinvested debt that could be of interest to add or or continue to support for this portfolio.
And not any of that come to mind, we're in the east.
These are businesses that we're in and AI enablers.
Like a business that touches everything.
So.
That's it for now but.
Yes.
We'll see it could change the world's changed and fast.
And of course, okay.
Next the next set of.
Questions I guess, just around the the cigar and holdings and the alternative investment platform.
It's still not quite at the.
At breakeven, but I guess I just wanted to dig into like how how are you guys thinking about breakeven and.
The recurring revenue side of the story and Theres been some improved disclosure over the last couple of quarters, but is it are you focused on.
Pre carried interest with carried interest some of.
Of the gains and there are not like what.
How are you guys thinking about recurring revenue profitability and these.
And these alternative investment platforms and then within that.
We're still seeing I guess investment platform expenses continue to tick up so is there still of lot of investment and what's could do before before that levels off.
So good question. The first thing we think about is separating the.
The conceptually the businesses as being general partners I E. The asset managers and the seed capital that we have invested so historically at power, we thought of it as a diversification strategy, but we thought of it as kind of one ball of wax and we've been taking the steps to say we of asset managers.
The general partners and they have revenue and they have expenses and then we have our seed capital that earns investment so let's make sure we can.
We've separated those now from a corporate point of view internally and let's track those separately and your question was around the general partner asset manager and there are two streams of income as you pointed out there is a steady state fee income and then there is carry the steady state fee income.
The first stage is making sure we can get to breakeven.
And our steady state fee income, where the steady of fees.
From assets that are deployed and most cases, sometimes we get paid on committed but typically it's one of the assets are deployed.
And are equal to the expenses of the team's managing them and you can start to.
Breakeven and contribute and.
The steady state and then you end up getting.
Episodic or more sporadic carry as their of realizations and the portfolio or a certain return thresholds are met on existing funds and so we think of them and both ways and we separate them both.
And Theres predictable income and then theres less than there is the more sporadic income and Carrie I think thats the way that the industry does it.
Well.
And that's the way, we're thinking about it and as you can see there is more assets and cigar holdings and a lot more third party capital.
And there so and.
We do look at the fees by the way that comes from the seed capital like we pay fees on the seed capital to the platforms as we would if we put our money and our private equity fund of someone else or a private credit fund.
So thats part of their part of the revenue and and our net returns come net of that.
So, but theres more revenue and cigar holdings are much closer to breakeven on the basis I, just described and the CCAR holdings, but cigars, and making progress as well or not cigar excuse me of personal power sustainable capital and making good progress as well and Greg anything you want to add too.
And my answer and I think.
James If you if you look to our M.
M DNA that.
We certainly have.
Become more transparent of boat.
And the sources of revenue and the expenses.
Are you able to track it for as we do.
And obviously, you'll see there that management fees are separated from the carry.
And so.
That will give you some insight, but I'd also say to you that just in terms of our governance of both of these platforms.
Just to reiterate that it is.
They are being stood up as independent.
Operations and they have their own.
Governance structures and the.
They have their own board of directors and.
They are managing to the profitability and governed by the those boards in that respect the.
They're totally independent of Us and then the.
The.
Our two working to a plan that we approve but just to make sure that you understand that.
They have the ray on the bottom line as well and.
And of course.
Through the startup phases of building out these platforms.
As they bring on.
And open up new funds and there will be a blip and the expenses until they do they're the first fundings as you will see with the.
The Canadian private equity fund.
And just recently been launched the team zone, the ground, but theyre already into.
Finding their funding and hopefully having the first round of funding and the very new future. So that's the other color on debt.
Okay, great. So yeah, the expenses ticking up with with total AUM and the management fees coming after those unfunded commitments start to get deployed is kind of debt.
The the way to think about that great.
Great I appreciate the color.
Thank you very much.
And we have no further questions at this time and I'll now turn the call back over to the presenters for closing remarks.
Okay, well I don't really have any closing remarks.
And we feel good about what's happening and we're enthused.
And <unk> about carrying on the strategies that we've been pursuing up to date and I just want to thank you again for joining us on a Friday afternoon, and wish everybody a very good weekend and we will talk soon thank you very much operator, that's it for the call.
This concludes today's conference you may now disconnect.
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And then.
And.