Q2 2025 Power Corp of Canada Earnings Call

Speaker #3: Good morning, ladies and gentlemen, and welcome to the Power Corporation second quarter 2025 earnings conference call. At this time, all lines are in a listen-only mode.

Speaker #3: Following the presentation, we will conduct a question-and-answer session. Analysts who wish to join the question queue may press star and one at any point throughout the call.

Speaker #3: If anyone has any difficulties hearing the conference, please press star and zero for operator assistance at any time. I would like to remind everyone that this call is being recorded on Friday, August 8th, 2025.

Speaker #3: I would now like to turn the conference over to Mr. Stephen Hung, Head of Investor Relations for Power Corporation. Please go ahead, sir.

Speaker #4: Thank you, operator. Good morning and thank you 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.

Speaker #4: A Power Corporation dot 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.

Speaker #4: Please also refer to slide three for a note on the use of non-IRS measures and clarifications on adjusted net asset value. To discuss our results today, joining on the call are President and CEO Jeffrey Orr and our EVP and CFO Jake Lawrence.

Speaker #4: We'll begin with opening remarks, followed by Q&A. With that, I'll turn the call over to Jeff.

Speaker #5: 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.

Speaker #5: Gut, all four companies in the group that are reporting and have presentations over the last week, including GBL, which did their semi-annual call. So you've got all of that information available to you.

Speaker #5: 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.

Speaker #5: We 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.

Speaker #5: 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.

Speaker #5: So we're 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, to our results from an earnings point of view.

Speaker #5: And also had very strong performance from a fundraising perspective. So overall, a very, very strong quarter. I'm not going to spend any time on slide seven, other than to say it's a kind of around-the-horn snapshot of a lot of the positive developments that are going on across the company.

Speaker #5: And, with that, I'll pass it to, Jake to give his comments.

Speaker #6: Great. Thanks, Jeff. Good morning, everyone. I'm going to begin on slide nine. As Jeff noted, Power Corp is happy to report very strong second quarter results.

Speaker #6: 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.

Speaker #6: Turning to the contributions from our publicly traded operating companies, as Jeff noted, they were strong across the board. Great West's contribution to Power's adjusted earnings was up 12% year over year.

Speaker #6: 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 was up 15% year over year, as IGM reported record second quarter adjusted EPS.

Speaker #6: These results were driven in part by record high AUM & A at both IG Wealth and at McKinsey. Partially offsetting this was a decline in GBL's contribution to Power's adjusted net earnings year over year.

Speaker #6: The decline at GBL was due in part to a reduction in the fair value of GBL's capitals investments. Meanwhile, GBL's share of earnings from Synoptis and Ifidia were also down.

Speaker #6: It is worth noting away from earnings that during the quarter we did receive $175 million in cash dividends from the previously announced five euro per share dividend related to GBL.

Speaker #6: 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.

Speaker #6: Cigar also reported higher net carried interest. Power Sustainable's results saw FRE improvement and a 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 US dollar and euro cash balances.

Speaker #6: Overall, we're pleased with the group's second quarter results and expect continued progress in second half of the year. Moving on to slide 10, Power Corp's net asset value per share was $64 and 76 cents, as of June 30th.

Speaker #6: 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.

Speaker #6: I'd also just quickly note that this quarter we've vised this NAB 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 NAB.

Speaker #6: Looking year over year, NAB 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.

Speaker #6: 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.

Speaker #6: Turning to the alternative platforms, Cigar's NAB increased year over year, driven by fair value increases in our capital, including Wealthsimple, as well as private equity.

Speaker #6: 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.

Speaker #6: The reduction in Power Sustainable NAB related to the sale of two assets generated just over $260 million in cash proceeds for Power during the quarter. So, while it's a lesser contribution on the earnings side, if you look at the NAB table, you will see a reduction in Power Sustainable's NAB with a corresponding increase in cash.

Speaker #6: 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 NCIB program during the quarter, as Jeff noted.

Speaker #6: 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.

Speaker #6: 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.

Speaker #6: Really strong quarter at Great West Life. Their earnings base earnings growth well ahead of their medium-term objectives of 8 to 10 percent. And that was broadly based.

Speaker #6: From different parts of the group, there was strong earnings growth in Wealth and Group Benefits. It was a strong quarter at Empower, although the base earnings on a reported basis were flat.

Speaker #6: You 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.

Speaker #6: 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.

Speaker #6: You've gone from a period in the US market where we were putting together the businesses, building the earnings, and also repaying some of the debt.

Speaker #6: The cash flows are so that the debt levels within Great West Life have been reduced to strong earnings generation turning into cash with, I think, the company is done a nice job of illustrating to the market.

Speaker #6: And '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 they have $500 million buyback that they had announced earlier for this year, which is frankly completed.

Speaker #6: They've added another $500 million target to the buyback, and so a strong performance. There's still lots of financial firepower left at Great-West Life Co in the context of a buyback of that size.

Speaker #6: I am very pleased with the results at Great West Life. Now, IGM on page 13, I'd like to highlight the broadly based good news going on across the businesses at IGM.

Speaker #6: The two main earnings drivers in wealth management and asset management, being IG Wealth and McKinsey, had very strong earnings growth. Additionally, there were very strong flows and improving flows at both IG Wealth and McKinsey.

Speaker #6: IG Wealth has been an inflows for some time, but the market in and of itself across Canada for funds is continued to improve. If you want a macro picture, money not going in at this point to as much into cash products and into CD products.

Speaker #6: 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 is also then relative shares have been very strong.

Speaker #6: So 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 having strong inflows on institutional, which are more sporadic in terms of how they show up in the flows.

Speaker #6: But they've got both the retail business and the institutional business firing, so there's lots of good news there. And then the platforms themselves, or I should say the strategic investments, all did really well.

Speaker #6: I'll come back to that in a minute. So good quarter and IGM is also now active in the share buybacks as their earnings have been increasing.

Speaker #6: 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.

Speaker #6: You know, really strong performance across the board. Wealthsimple, the easy way to illustrate it on this slide, $44 billion in AUM or AUA, I should say, a year ago.

Speaker #6: And 85 billion at the end of a year later. Just very, very strong continued growth. I think they've got 2.8 million Canadians now that they have as clients.

Speaker #6: So, what can you say? Jake already addressed the markup and the value at Wealthsimple. Rockefeller also continues to execute its strategy as we had hoped and as they had laid out to us when we made the acquisition.

Speaker #6: Which we announced in April of 2023. You can see that 21% year over year growth in their AUA and client assets. It's coming from broadly based organic growth, advisors bringing in new client money and new advisors joining the platform.

Speaker #6: And then market appreciation. Then we flip to our strategic investments and asset management. China AMC is really having a very, very strong flow and gaining market share.

Speaker #6: I think their market share in the long-term funds is up about 1.12% over the past month, which I think is in the mid 5% to mid 6% range.

Speaker #6: I don't have the number in front of me, but it's ike 5.3 or 5.4% up to 6.4. It's, I'm not off by more than a decimal place there if I'm off.

Speaker #6: So very strong growth in their flows. And as you are probably aware, there have been legislated reductions in the fees across a lot of retail products in the Chinese asset management business over last couple of years.

Speaker #6: And they had some modest growth in net income, notwithstanding quick 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.

Speaker #6: That's 5.2 billion of fundraising over the last 12 months. There was in the assets aren't up by that much as they have a number of strategies where there's some strong return of capital to their shareholders.

Speaker #6: But in a very difficult fundraising environment, they continue to perform extremely well. So just across the board, great plate news across at IGM. GBL, page 15, just as I mentioned earlier, just had their call.

Speaker #6: So Johannes Hood and the new CEO, came in in May. So that's kind of the news in the quarter. It stalled self. He reiterated and the reiterated their target of creating double-digit TSRs.

Speaker #6: 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.

Speaker #6: We just received the larger dividend this quarter. And then also reinvesting in private assets as they move ward. So the NAV was down or the earnings, I should say, and contribution were down during in the quarter.

Speaker #6: The NAV and share price have 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.

Speaker #6: I won't reiterate the way we think we can create value. Simply say this quarter was a good example of the strategy being validated.

Speaker #6: 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.

Speaker #6: So a nice quarter. Demonstrating what what we've laid out here on page 16 is the value creation strategy. And on 17, continued growth in the assets.

Speaker #6: The BEX transaction, which we had previously announced, was closed. So that's where Cigar acquired a strategic stake in BEX, which is a secondary platform to do secondary fund-to-funds co-investment.

Speaker #6: 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 .

Speaker #6: So then moving to a big picture at Power. that the discount was reduced over the last period of time. And you know, like I'm sure we'll have a ussion about it, probably get some questions on it.

Speaker #6: 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 A very pleased parts of the Power Corp, we can create value.

Speaker #6: 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 e that the discount has come down.

Speaker #6: And that's another source of value for Power Corp shareholders. Whether the discount comes down or whether you're buying the asset base at a discounted value and you get the return through an effect higher returns than we're getting on the underlying assets at the value creator either way, but we're really pleased that the progress were made.

Speaker #6: 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.

Speaker #6: 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 being 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.

Speaker #6: So, I'll talk about that in a couple of slides. On page 25, I'm just going to state that all of these levers are still in place.

Speaker #6: There 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 or more episodic as we take and see portunities to deploy capital change structure, et cetera, but they're all in place and they continue to be very very how we look to the future.

Speaker #6: 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.

Speaker #6: 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 Power Corp, are trading, have got guidance in the market of basically being able to create 8 to 10 percent earnings growth, and they have yields that are in the mid-fours.

Speaker #6: So you can figure out that we just do the math on that. That gets you a return if nothing changes from a multiple point of view.

Speaker #6: And they execute, and that's a big thing to execute. It's 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 TSRs in their stocks and the 14% range.

Speaker #6: And then the rest of the portfolio, the 13% that's in our platforms, it's in our seed capital, it's in GBL, we've got basically announced targets of creating value and TSRs that are 10% or 10% plus.

Speaker #6: And we're showing that we can monetize a portion of that. And even though it doesn't create regular earnings, I think we've demonstrated we can monetize and drive cash from that.

Speaker #6: And turn that into growth, earnings, and dividends by buying shares back. And that formula hasn't changed. And so that is the view going forward.

Speaker #6: 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.

Speaker #6: 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.

Speaker #6: And then 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.

Speaker #6: Obviously, the discounts narrowed in a little here. That certainly helped, but we look at where we are from a valuation point of view and say it's for any reasonable.

Speaker #6: And we've got good plans going forward. So that's maybe 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.

Speaker #6: I ink the quarter just one more quarter of reinforcing that we're on track. So with that, operator, I would conclude my remarks. I'd invite you open up the lines for questions from for any questions that we might have.

Speaker #2: We will now begin the question and answer session. To join the question queue, you may press star, then one on your telephone keypad. You will hear a tone acknowledging your request.

Speaker #2: If you are using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star, then two. We will pause for a moment as callers join the queue.

Speaker #2: The first question today comes from David Young with Desjardins Capital Markets. Please go ahead.

Speaker #7: Hi. Good morning. Maybe the first question, you know, over the years, you've sold down, you know, non-core businesses. This quarter, there are two renewable projects that you sold into a fund.

Speaker #7: My question is, is there anything else on the horizon from a divestiture perspective to raise cash? And maybe I'll kind of add, tag into this.

Speaker #7: I mean, you've a nice check from GBL. On 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 new stuff into funds.

Speaker #7: Like, I'm just ying to think of extra cash flow that could be coming up to the power level.

Speaker #8: Thank you. You don't mind if I call you Doug?

Speaker #7: Yeah. No, Doug's good. Thanks.

Speaker #8: Thanks. Thanks, Doug. The good question. So, I mean, in terms of assets that are slated for sale, or that are or that would be non-core, we've got in the in the portfolio of, standalone assets, there's still, Lumen Pulse at some point.

Speaker #8: But that basically is that, that bucket for the most part is gone. Is that the whole standalone and, you know, most of that is behind us.

Speaker #8: 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, you know, that produces returns.

Speaker #8: And that, 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.

Speaker #8: We get we get returns. We occasionally sell positions. And so that two-plus billion dollars is is producing we think about a 10% return. That's that's a source of cash.

Speaker #8: we we still have some residual energy assets, that are in that are within the power that are wholly owned that could be a source of cash as we move forward.

Speaker #8: 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 till this point.

Speaker #8: And that has resulted in us building up our position in, and increasing our ownership position in Great West Life. I think, our intention would be to support Great West Life in their, buyback activities.

Speaker #8: 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.

Speaker #8: 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.

Speaker #8: so we want to think 68.5, 68.7% of Great West Life. So it be our intention to do that, to support them. That could, would be another source of cash that would, once we get through those approvals, that would be coming in.

Speaker #8: So we've got, we've always got lots of levers. GBL itself has said that they're going to be continuing to liquidate assets as they reinvest some of it, but return money to shareholders. That's through dividends or their other opportunities going forward.

Speaker #8: I would hope so, but we'll see there. I 't want to, I'm not leading on any specific plans. Lots of pockets, I ess. Doug is what I'm saying.

Speaker #8: Lots of pockets to continue to recirculate our capital and fund buybacks.

Speaker #7: Perfect. Just a two follow-ups on this. The residual energy assets that could be sold, any size, like sizing of those? It's hard to parse it out.

Speaker #7: I can't see it. So, but, but like any any kind of size to that?

Speaker #8: I don't think. Yeah, yeah, less than what we did this quarter. That's the right way to put it.

Speaker #7: Okay. And then, so yeah, okay.

Speaker #8: Okay.

Speaker #7: Okay. And then, yeah, I know you still made a estion on the buyback. So ou're your plan would be to proportionally participate? Not necessarily on your current ownership, but maybe on the 68, like the target 68 to 68%.

Speaker #7: Like, is there a kind of certain ownership stake that you would be keeping?

Speaker #8: Yeah. So we, I think we are, it's 68.7 we own directly. Yeah. So we would proportionally our plan would be to proportionally participate in it.

Speaker #8: Once we have regulatory approval.

Speaker #7: Okay.

Speaker #8: And I think if you, you've obviously listened to the, 's Jake here. You've listened to the first part of the call. Great West has had amazing results.

Speaker #8: 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.

Speaker #8: 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, has a bright future, and we have full confidence in it continuing to exceed its medium-term objectives and guidance.

Speaker #8: Yeah, I know. I an, the math just makes sense. You sell it into market at market and you buy it back at a 15% discount.

Speaker #8: Think that's to your own stock. You got it.

Speaker #7: Okay. The other one that I had is just Wealthsimple. Clearly, you know, it's it's hitting on all cylinders. You had another revaluation this quarter.

Speaker #7: can you remind us and and make maybe it's in here, but I'd like the value of Wealthsimple within your NAB, and then like the the carrying value and then the future plans within Wealthsimple.

Speaker #7: Like, is it is it just status quo or is there another other rounds of financing that are going to be done? Just kind of maybe kind of flesh that out.

Speaker #8: Yeah. So we have just under a ion dollars. Like, I think 's 990 something at directly and 970. 997. Thank you. So it's just under a billion dollars.

Speaker #8: Thanks for the for the precision. on, on it directly held, I guess, Power Corp and then IGM not in our NAB, but the IGM, they have a billion five.

Speaker #8: And how much we own on a fully diluted basis is a calculation based upon how much dilution there is from management options.

Speaker #8: But we're we're just, we're in the high 40s is the ay I would put it on an on an expected basis, given expected, performance criteria on management options.

Speaker #8: So, you know, we're the controlling shareholder. I think we have the majority of the way the voting works. We have the majority of the votes just based on some of the employee shares not having votes.

Speaker #8: So that's the status quo. You asked me, in s of what our intention is going forward, you know, we we acquired and and funded Wealthsimple not as a venture capital flip, but we saw it as a strategic asset that, could represent a material part of the Power Corp and IGM franchises over the long term.

Speaker #8: and we started investing in the company back in the early, the very, very early rounds. and that view hasn't changed. Now, as to how the company develops, what's their need for capital?

Speaker #8: What are the, what are the, potential, opportunities to, acquire more shares, not acquire more shares, do financings? I mean, it's really hard to get into a crystal ball gazing, and and we will reserve the right to make decisions as what we do with our stake in future.

Speaker #8: So it's not to say that, you know, we're we'll we'll e each step as it as it comes. But the context in we will make those decisions is that we established the position in Wealthsimple as a as a long-term strategic position.

Speaker #8: And and that view has not changed. So I don't know if that's pful. I think the I can give you is how we think about .

Speaker #7: Maybe no plans to IPO this. Like, you ow, I've had that question before, but like.

Speaker #8: I'm I'm I'm not going to go there. I look, it's I'm not going to comment on what what future steps would be. You will you will know that you've got the power group as the major shareholder.

Speaker #8: You've got management with a chunk. And then you've got a number of a number of very large institutions that have come in over the last several years.

Speaker #8: And those are financial institutions and funds. So their horizon is not forever as you would know. So, you ow, at some point, there's got to there's ing to be decisions around how do they get liquidity and and all the options will probably be discussed.

Speaker #8: But I don't want 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.

Speaker #8: I don't know the answer.

Speaker #7: Okay. No, that's fair. And then just lastly, did I hear you right that you had 2 billion of net inflows with the alt platform that staggered in Power Sustainable in quarter?

Speaker #8: Yeah. It was at Cigar.

Speaker #7: At Cigar, what funds or what areas did most of that capital go to?

Speaker #8: Yeah. So PEM is a cent 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 that?

Speaker #7: Yeah, we can give you a rough breakdown. It was across PEM, which is the Performance Equity Management platform. They had some in continuation funds as well, but we'll come back with a more granular breakdown if you like.

Speaker #7: Appreciate the color. Thank you.

Speaker #8: Thank you, Doug.

Speaker #2: The next question comes from Tom McKinnon with BMO Capital Markets. Please go head.

Speaker #9: Good morning. The question really just concerns the fee-related earnings at Cigar and Power Sustainable. If I look at what you've got from asset management activities, you've noted it's negative $16 million in the first six months of 2020.

Speaker #9: And it was, I mean, that's better than the negative 32. In the first six months of 2024, but with 36 and a half 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 some sustainable fee?

Speaker #9: Fee-related earnings from these platforms.

Speaker #8: 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.

Speaker #8: So, you need scalability at the strategy level to create enough contribution to a broad platform—good momentum, great performance. By the way, it’s a tough fundraising environment.

Speaker #8: But also because of a lot of strategies and they continue to build the the breadth of their franchise with products and capabilities, you ow, you still have it so that you've got a slight negative contribution.

Speaker #8: Their FRE is slightly negative. I don't have the revenue number that on the on the fee side, and I'm oking around the table. We were around 200 million dollars in fee revenues.

Speaker #8: It's not far off. Okay. So just if it's not far off that number. And so their slight FRE loss is a kind of single low single digit.

Speaker #8: 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 new strategy, where they think the market is going, you know, you have a J curve.

Speaker #8: So they've been on a growth trajectory. So we're not kind of pushing them hard like, "Hey, you got to get this to break even.

Speaker #8: You've got to it to break even." They're learly got momentum in the market. They're creating good value through the carry and we're getting good returns on the on the seed capital.

Speaker #8: So overall success story, but that's a at question is how do you how do we scale this so that we get it into an FRE positive basis?

Speaker #8: When I if I flip to Power Sustainable, different issue. Really good strategies. You know, they've got four strategies. They've got infra, infrastructure, equity, infrastructure debt, which has been launched.

Speaker #8: And in the U.S. market, they've got a Leos Agrifund and a decarb fund that they've launched, as we announced last quarter. So, really good strategies.

Speaker #8: But there, there is more of a scale issue in terms needing some fundraising to get more fees on the board to get them to a break-even point.

Speaker #8: So bigger, 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.

Speaker #8: In the big scheme of ings, 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 arning on the seed is still a very, I ink it's contributing to us right .

Speaker #8: 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.

Speaker #8: And if you ask me how much funding do we need, well, that's a harder question to k because it depends on what strategy, you ow, what kind of fees are coming in.

Speaker #8: You get very complicated at that point. I hope I hope I answered your estion.

Speaker #9: That's good color. Your 2.7 billion investment in these, is this kind how much we think this should be at going forward?

Speaker #8: So in there, you have our stake in Wealthsimple, by the ay. It gets picked up in in Cigar. And 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 as Wealthsimple and not per se alternative asset management businesses.

Speaker #8: So if you thought 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.

Speaker #8: You know, 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.

Speaker #8: And so the number bounces around, but we talk about a $2 billion number that we're recycling.

Speaker #9: Okay. So that kind of means if you're targeting 10% return on that, that means really you're investing activities would be in the area of like 50 million a quarter, something like that if you kept anyone to keep that flat.

Speaker #9: And then I guess the final question is.

Speaker #7: Can I correct you? Can I jump in?

Speaker #8: Sure. But

Speaker #7: But it's not.

Speaker #8: it isn't 50 million a quarter, okay? Like it'll be, it'll be nothing for three quarters and then all of a sudden you got to distribute.

Speaker #8: Oh. Yeah. Sorry. Good.

Speaker #9: 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%?

Speaker #9: 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 pretty good return on that?

Speaker #8: Yeah. Well, we're 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 as you mentioned, and from a carry basis.

Speaker #8: 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 and higher return strategies, the real discussion is, you know, Cigar is saying, "Hey, we really need to launch a strategy here."

Speaker #8: 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.

Yeah, thanks. Uh, I just wanted to start with the, uh, I guess Trump executive order to open up private equity for 401ks. I mean, not a huge surprise there, but, um, just wanted to get your, your higher level thoughts on, uh, on that, uh, that segment of the market and the opportunity that that could present for, uh, for the alt platform at Power Group and, um, you know, have you have you put anything to work? There is there a component of, uh, of the individual investor Market that flows into seaguar today?

Um, maybe, maybe some high-level strategic thoughts on, uh, on that opportunity.

Um, thank you. Um, it's

It's a it's a good question and Empower and Ed have really played a very vocal role. If you may have seen in the last 2, 3 months advocating for allowing private assets into the defined contribution space in the United States. Um, it's 27 trillion dollars of alts right now in the in the capital markets around the world and um, institutions and high, net worth individuals are participating. Um, a smaller individual investors in retail are having some opportunity to participate but 401K in the DC business is a big chunk of American Savings. And, uh, it's not, it's very difficult to put those strategies in right now. So, um, add in our group of an advocate.

These are fiduciaries um, in the DC plan, right? So the the 90,000 plan sponsors IE employers, who are in the Empower platform. They each are fiduciaries. And they make uh with financial advisors or with the Mercers of the world, they make the product decisions, so they control the shelves. Um, and but having said that the Empower announced, um, that they were partnering on a, on a on all, uh, uh, platform program that they were putting into their products and cigar was 1 of the 7, um, players that are on that shelf. Uh, the 6 others would all be household names that you would know. Um, so yes, you know, we're trying to, uh, use our distribution might to help promote cigar and power sustainable, and we'll continue to do so. But I, you know, 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 I'll say 1 more thing before I uh got to start.

Up on this topic before you get meaningful private Assets in 401K. Um, you're going to you're going to need Safe Harbor for the employers. And uh and I 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 uh and then you got to get adoption by the plan sponsors and buy all the advisors. So this this is going to be this is still Spade work, I guess is the way I would answer the question and and we'll be talking about it in.

A few years at a, hey, they're starting to get some traction, but over the short to medium term, it'll still be Spade work. Hope that answers your question.

Yep. No, of course. Um, maybe more specific, uh,

the the carried interest that uh, flowed through this quarter,

Uh, you've had some slides in the past talking about carried interest as well. Can you just uh kind of refresh uh where where the balance of uh carried interest is today? Um do you have any other uh funds uh uh or opportunities that uh that could be flowing through in the near term? Uh maybe just an update on like the timing expectations around that obviously uncertain but that you know you do have some visibility in terms of 1 uh when some of those returns can be flowing in

Yeah. Do you want to add a lot check? Yeah. Uh, thanks. Thanks James. So we'd be in excess of a 100. I think in total carried interest across the strategies. Um, we can we can look at revisiting we're going to be putting out a supplementary information package and coming quarters. And we'll look to be including that info. Uh, in terms of this quarter we did have a bit of a move up a portion related to well, simple. So, as Jeff noted, when we were talking about the proprietary Capital, there is a, a portion of the, well, simple 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 um on the investing activity side. There was a really good quarter of realizations in cigar close to a 100 million. And so there was some realization

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.

See capital of of 2 billion. Um, you know, maybe maybe just talk us through like why why is 2 billion the right number to sort of settle around, why not more. Um you know given the opportunities that are presented there is it really just a you know constraint on a supply side. I I guess so to speak from uh

Uh from your group. Um, you know, why is it 2 billion to not something higher? I guess.

Yeah. Uh, good question. And it's something that we could revisit from time to time. So nothing is in in business is ever Frozen as, you know. But the, the it's it's really about doing the trade-offs on the allocation of capital. Uh, so the trade-off would go. Uh, we've got, we've got capital and we can, uh, invest it in our, uh, in our seed capital or we can invest it in BuyBacks. Uh, you know, we've got, we've got dividend incomes, we've got we, we flow through dividends to our shareholders, and then we've got BuyBacks versus seed and

And they they sit there and increasing your nav and do you really get value recognition for a public shareholders. So we have adopted a strategy to this point that says well we're going to we think we can build the alternative asset management businesses. We'll support it with 2 billion of capital. Uh 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 shareholders, 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 by reducing the share count, which increases earnings per share and increase, you know, in earnings and increases our ability to pay dividends. So it's that, it's, that's the trade-off good question when we talk about from, you know, from time to time, of course, James, it's Jake. I just, I I Point again to uh, or point to slide 24 in the appendix, I think it is RC capital is in a precursor to growth here. Um, and so if you adjust for the well, simple on the right side in Q2, 25,

That that number moves, you down Subs, 2 billion. Um, 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 to go up to 37 billion, um uh largely on third-party growth. So it's not a, it's not a precursor as Jeff noted, we're there to support getting these up and running um and if there is it'll be episodic at 11 Flow and could go higher as more strategies are launched and then come down but it 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 5 and a half years ago, we did say to the market and then I turned around and we turned around to the all 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. Uh, and we've been trying to work around that parameter. So, but you know, nothing nothing is is Frozen. We can things we can revisit as we move forward.

Yep, thanks very much for the time.

Great, thanks.

The next question.

From Graham writing with TD.

Hi, good morning um maybe just on the on the the buyback theme you know you're you're mentioned that you are thinking of participating in Great, West life's, um, buyback scenario on a proportionate basis. Have you sold it to their Buybacks in the past? Or is this a, is this a different approach for you? Um, than what you've done in the past?

Hi Graham. Thanks for the question. We have not sold in to their BuyBacks, uh, you know, their but over time their BuyBacks up until the last few quarters have been principally to, um, to basically offset dilution from options. So, it's really in the last, I, I may not have it exactly, but the last 6 months that they've really stepped up their buyback activity, we had not participated, uh, and and, um,

As resulted in our position, our direct position, a great West increasing from by from about 168.2 to 68.7 uh kind of inadvertently. And it's not that we don't want to own more Great West Life, but it's not a, you know, we're happy with the position we have and we, we all, we're all so happy to have, you know, the public shareholders with a, with a healthy group of public, shareholders participating with us in Great, West Life. So we have made the decision as they continue to bring in more capital and areas in their BuyBacks. Um, to support them in that and I think that's something they'd like to see us do and then so we're supporting them in that. And so we're going to make the applications to the TSX and the osc, I think to the the AMF and the various Regulators to uh to participate on it on a period of basis. So it is a change um as but it's all 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 their float that's really only in the last few quarters. They've started that

Great. Okay, that makes sense. I guess their history is more on the on the m&a side.

Um, you know, the the and then on on the same theme with with GBL um sort of rotating its portfolio and and active on some BuyBacks as well. Are you planning to participate in that um, as well? Or you just let your ownership stake, migrate higher as that plays out.

Continued distributions to shareholders through BuyBacks. And well I will continue to talk about that. Um so no, so short answer, no immediate we have not been participating, no, immediate plans to change that.

Okay, understood. And then um, obviously the discount to nav has um, tightened the year to date. Um,

Which is, I'm sure what you guys were planning and hoping can you sort of talk about the the drivers there from what you're sort of seeing and hearing from investors, you know, do you think this is more the performance of the operating companies in 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 uh to the tightening of the discount? Or is it just a combination of everything?

That is the hardest question that we will get at this meeting because it's, you know, obviously. But but it's a good question and it's obviously hard for us to get 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. Uh I I guess a couple of things I would say. Um I think that there is more confidence broadly with a broader group of investors, both institutional and individual that the all the different parts of power Corp are contributing to Value creation. And I would say if you go back 5 years ago, the question wasn't are they are all contributing its 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, um, I think the simplification of what's within power, and I think there's a growing appreciation, uh, within the investors that we talk about that. The that the 13%, that is not great West, lifeco, and 17%, excuse me of, of our, any of our of our asset value. That's not great with lifeco and IGM actually is capable of creating value and we're, we're capable of monetizing it as per my, uh, answer to as James Jamie's question earlier. The, 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. Um you know, a number of people like to participate in that through power core. Um there's you can you can either buy the pieces or you can buy the whole when you buy the whole you get a slightly uh you know, a slightly more Diversified

Uh source of earnings and you get the additional upside from our other assets. Um, there's there's there's greater liquidity. There's a number of reasons why a number of people participate. So I have also found over the years to generally when the businesses are doing well, you get to get more buying activity overall in the discount tense scenario. So I like I've said many times I get to 2 or 3% discount based on the npv of our of our expenses here. Uh and uh you know when it's at 2 to 3%, then I'll think

Power Corp is is a fair valued. Um and at this point it's uh it's still a mission to continue to chip away at it.

Okay. Okay. Great. And 1. Last like there was just some commentary on sort of your targeting, the 10% Returns on that proprietary Capital. Um,

You know, if the 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 you.

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

Yeah.

That's it for me. Thank you.

Great. Thank you.

The next question comes from Bart, zarinsky.

With RBC capital.

Go ahead.

Hi, good morning. Thanks for taking the question. Um, just wanted to follow up on cigar and the scale discussion, so I'd love to get your thoughts on within cigars for strategies vcpe 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 cigars m&a strategy. So we've seen, you know, recently backs the secondaries platform, there was Pam fund of funds co-investment platforms. So that's the direction of travel that we can expect uh for future m&a. Buy cigar. Thanks.

Part of the PE market and those tend to be Nietzsche 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 I think it was James that answered the, uh, the, uh, the question earlier on. So then your question was on uh, secondaries and and Pam and backs and that is very much the direction of where I think cigar is traveling. So what's going on in the in in the in the alt World in general is that you've just had a you know massive influx in proliferation of managers who were providing primary funds. IE you know your 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 3, 4 years and then we'll

realize the value and do another fund? I mean, that's kind of what we all think of as the model over the last 20, 30 years at what's, what's going on? And what is strongly happening right now, is that solution providers are coming up with uh, bundles of uh, of fund of funds of, secondaries of direct Investments of direct of uh, of a primary participation and and kind of bundling more Diversified strategies to meet the needs, either of institutional investors.

By creating smas for them or creating more Diversified, uh, products that can then be sold into family office and Retail channels and wealth management channels. And that's where a lot of the activities going on and Becks and PM are both. Um, the are both a result of cigars strategy to position themselves in that area and that is going to be, I think where a lot of flows going 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 uh, 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. What, what do you 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. Yeah. And and again, they've announced 2 transactions in the last 6 months with pain and Becks their last 12 year, 12 months, I guess they've both been in that, they've both been in that in that space.

Okay great, that that's helpful guys and then just 1 quick follow up on the US. Retirement opportunity is there an expense, spend required upfront, buy cigarettes to tap into that or is it just a matter of you know you get on empowers shelf and then I recognize the revenue opportunity is longer term but is there anything there to consider for like a build out on the ground in the US by cigar or or no?

Yeah, I think that in, I'm going to ask you a question, more generally to, to get into a defined contribution spaces, or to get into a retail wealth management spaces does require an investment in distribution. Um, you've got to have, uh, product Specialists. You've got to have, uh, sales and wholesale teams. Uh, you got to have a brand, you got to have a presence, it is a, a, pretty strong build out. And, uh, the brands and the positions.

In the Canadian Market are much stronger than Our Brands would be in the US market. So it's got to be a very targeted strategy to get into the usdc and wall space. Now obviously we've got some, we've got some, uh, distribution that we're associated with down there. Uh, whether it's, um, you know, with Empower, whether it's our investment in our Rockefeller, um, but you know, but to do it on a broad basis is a, is a significant investment. So I think our, our all platforms will be doing kind of targeted approaches, um, picking on a number of Distributors, to start with getting some entry points and getting some momentum kind of. That's that would be the strategy. You're you're your question, is bang on. There's a lot of money if you want to go after the retail space in the DC space in a in a broadly based way.

Great. Thanks so much, guys. I appreciate the caller.

Okay, thank you, Bart.

this concludes

Our call, our Q&A session today. I'd like to turn the conference back over to Mr. Stephen hung, for any closing remarks

Uh, 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.

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