Good morning, ladies and gentlemen, and welcome to the Power Corporation Q4 and year-end 2025 earnings conference call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. Analysts who wish to join the question queue may press star then one at any point throughout the call. You will hear a tone acknowledging your request. If anyone has any difficulties hearing the conference, please press star then zero for operator assistance at any time. I would like to remind everyone that this call is being recorded on Thursday, March 19th, 2026. I would now like to turn the conference over to Mr. Steven Hung, Head of Investor Relations for Power Corporation. Please go ahead, sir.
Thank you, operator. Good morning, everyone, and thank you for joining the Q4 financial results call. Before we start, please note that a link to our live webcast and materials for this call have been posted to our website at powercorporation.com under the shareholder results reports tab. Please turn to slide two. I would like to draw your attention to the cautionary note regarding the use of forward-looking statements which form part of today's remarks. Please also refer to slide three for a note on the use of non-IFRS financial measures and clarifications on adjusted net asset value. To discuss our results today, joining us are President and CEO, Jeffrey Orr, and our EVP and CFO, Jake Lawrence. We will begin with opening remarks followed by Q&A. With that, I'll turn this call over to Jeff.
Okay. Thank you, Steve, and I'll pass it right along to slide five. We can go over to slide six. Excuse me. That's my error. Thank you. I think very, very strong quarter, strong earnings growth from those parts of our businesses that are earnings-based, strong contributions from the businesses that we have that are more valued on an NAV basis. Strong capital generation, strong return of capital to shareholders, and then a number of moves that we made from a leadership point of view. I think it was. The quarter was strong and the year was strong.
I would characterize them in a very similar fashion, just strong value generation, all parts of the strategy coming together and contributing to value creation. A little bit of noise in the earnings as we sometimes get, coming from some consolidating adjustments and some other parts of the portfolio, GBL, et cetera. Jake will walk you through some of that, but I'm really, really happy with how we finished the year and with the year overall. With that, Jake, I'll pass it to you, and you can go through the results.
Great. Thanks, Jeff, and good morning to everyone joining us today. I'm gonna start on slide eight. As Jeff noted, we're very pleased to report strong adjusted results for the Q4 and as also noted for 2025. Looking at the quarter, adjusted net earnings were $867 million, which is up 5% year-over-year. On a per share basis, the Q4 adjusted net earnings were $1.36, which is up 6% from Q4 last year. When we look at the contributors, Great-West's contribution to Power's adjusted net earnings rose 13% year-over-year. The positive results in the quarter were supported by Great-West's seventh consecutive base earnings over $1 billion in a quarter. This includes double-digit growth in the U.S. and a notably strong quarter in the Capital and Risk Solutions.
These strong results obviously supported some more return on capital from Great-West Lifeco, which announced an increase in its quarterly dividend of 10% to CAD 0.67 per share. IGM's contribution to adjusted earnings were also quite strong, up 22% year-over-year with strong IG Wealth Management and Mackenzie Investments net flows. AUM and AUA were up 15% year-over-year and 3% quarter-over-quarter. IGM announced an increase to its quarterly dividend of 10% to CAD 0.62 a share. It's also worth noting the performance of some of the strategic investments at IGM. During the quarter, Rockefeller Capital Management completed its previously announced transaction, and IGM received total proceeds of CAD 394 million, primarily comprised as a return of capital as well as an equity sale.
Partially offsetting the results this quarter was a net loss of CAD 15 million from GBL's contribution to Power's adjusted net earnings. The performance in the quarter was due to fair value losses on the GBL Capital portfolio, while previous periods included significant gains and higher contribution from GBL's operating companies. GBL recently announced that it has completed 95% of its EUR 5 billion portfolio simplification target, which it communicated in its midterm strategic plan update back in November 2024. GBL also announced a 2.5% dividend increase to EUR 5.125 payable during 2026.
Contribution to the corporation's net earnings from GBL was a loss of CAD 109.95, which primarily includes the share of impairments and other charges related to GBL's investment in Imerys and additional losses on the partial divestment that I mentioned of the GBL Capital portfolio. Moving to our alternative investment platforms, Sagard's contribution to adjusted earnings was CAD 26 million. This is up from a loss of CAD 11 million last quarter and down slightly from CAD 33 million in the prior year. The increased contribution from Sagard in the quarter was mainly driven by fair value increases in private equity and venture capital. Power Sustainable reported an adjusted loss of CAD 21 million compared to a loss of CAD 16 million in previous quarter and a loss of CAD 43 in the prior year. This is driven by operating losses related to energy infrastructure.
Moving to our corporate operations and other line. The loss increased this quarter, driven primarily by foreign currency translation on our euro and US dollar cash balances, while the corresponding period included foreign exchange gains. Also in the quarter, we had some higher employee compensation costs. Overall, we're pleased with our group's strong Q4 results, and it caps a strong 2025, and we're pleased with the momentum we're moving into 2026 with. Turning to slide nine and our net asset value. We reported adjusted net asset value per share of CAD 85.77 as of December 31, 2025. First, I wanna highlight that 84% of Power's gross asset value continues to be driven by our earnings-based businesses, Great-West and IGM, and that's up from 76% at the reorganization back in 2019, 2020.
Second, Power experienced strong adjusted net asset value growth during the year, up 42% and up 19% quarter-over-quarter. All of our publicly reported operating companies experienced strong NAV growth year-over-year. Great-West increased 39%, IGM increased 35%, and GBL rose 24%. Sagard's NAV increased 35% year-over-year, driven primarily by the fair value increase in Wealthsimple. Meanwhile, Power Sustainable saw a reduction in NAV over the course of the year, but that was related to asset sales that occurred in the first half that did increase our cash balance up at Power. Speaking of cash balance, our Q4 ended very strong at CAD 2.2 billion, with approximately CAD 1.9 billion available when we factor in dividends to be received and dividends to be paid.
We remained active in returning capital to shareholders through our NCIB program, and during the Q4 , we repurchased 5 million shares worth CAD 329 million and 12.4 million shares in full year 2025. Power is well positioned and has delivered a strong return of capital with over CAD 2.2 billion in share buybacks and dividends over the course of the full year 2025. With that, I'll turn it back to Jeff.
Thank you, Jake. I'll just roll forward here and make a comment on the leadership transition that we announced about a month ago. I am delighted with what we have announced and very confident that this is going to be extremely successful. First of all, a comment on James. He's probably well known to many of you, but he clearly has the experience. He's got the leadership, he's got the judgment. He's gonna do a great job. He knows the company well. He has the confidence of the management teams. He's got the confidence of the boards. And I think he will be extremely successful. He has also got behind him to replace him in his role as CEO of IGM, Damon Murchison.
Damon, I think he's known to a number of you, very dynamic leader, real change agent. He has incredible experience and knowledge of the Canadian advisory and asset management space. Spent a long time at Mackenzie, has been running IG Wealth, and of course, was with a number of other players in different parts of the channel earlier in his career. We're very fortunate to have Damon amongst our group, and he also is well equipped to lead IGM. You know, these announcements that we made, if you go back over the year and just go back 12 months, we also successfully had a leadership transition at Great-West Lifeco. David Harney successfully moving into the role of CEO. That has gone extremely well.
You'll recall that we also announced a year ago or so ago that Johannes Huth was taking over as CEO of GBL. In a 12-month period, we've effectively managed CEO transition across the main operating businesses and at Power Corp itself. I'm gonna be looking forward to helping James and the team in whatever way I can in terms of my knowledge and experience, and ensuring that that transition is smooth and successful, and I'm very confident it will be. That was, you know, we talk a lot about our results at these calls, but that was a very significant move. I would call it a classic power move in terms of the way transition works.
I won't bore you with the 50-year history, but going back all the way to when Power Financial was created and James Burns and then Robert Gratton and then myself, it's always kind of these long planned out successions where you've got someone coming in who've already led parts of the businesses and get to know the network well and get to know the boards well. This is what I would say, classic playbook for our group. With that, let me then turn my comments to the results themselves. Great-West Lifeco, just the beat goes on, I guess, is the theme that I would put. Continued growth in earnings led by Empower, but contributions from across the different parts of the business.
When you go through Great-West Lifeco on the results, you know, strong results from CRS as well. Europe actually contributed well, but there's a lot of work on capital efficiency. I think the Great-West Lifeco team mentioned that their results, there was less capital deployed in there, and so that had an impact. They actually had quite strong earnings growth. Good contribution from across the group, and continued good momentum at Empower. Very strong capital generation, obviously. The buybacks are going on, so very strong return of capital to shareholders. We're participating in that. A dividend increase of 10% announced. Continued success at Great-West Lifeco.
If I turn you to page 13, I know you've seen this slide, but you know, this is almost five years. I think it was the spring of 2021. So five years ago, they came out with their medium-term objectives, and they've met or exceeded all of those objectives. I think you know at their Investor Day last spring, they bumped the ROE target from what had previously been announced from 16%-17% up to 19%, and they introduced a base capital generation measure. You're seeing that play through. They're strong. The earnings translation into cash flow is very strong at Great-West Lifeco.
I think one of the things I wanna point out, though, is if you go and if you have the time, look at the annual growth in base earnings in the last five, six years. It's really steady. This has not been kind of a three years of flat and then a big jump. It has just been steady growth, and it's obviously not perfect. I mean, it's not like it's 12% every year, but it's very close. It's just kind of steady growth in earnings and performance. Very impressive, so really pleased with that. I'll turn to IGM.
IGM, this was the year I would say where IG Wealth and Mackenzie, the earnings drivers at IGM versus the strategic portfolio, broke out with strong earnings after quite a few years of going up and down, but mostly sideways as they've been investing in change in their businesses. You know that the wealth and asset management businesses in the retail space in Canada in the last five years have been mostly in outflows. If you go back over the last five years, we had that bump coming out of COVID where inflation jumped up, interest rates jumped up, and unless you're in the ultra-high net worth, high net worth space, basically Canadian households were not saving. They were dissaving, and the savings they were doing were going into deposits and moving out of risk products.
That's finally come back in the past 12 months. We're starting to see the sector get into growth. You had flows kind of not being a friend of the business, but internal momentum at the business, and changes that they've made, together with flows getting back in and markets helping, and you've had a breakout year for earnings, which resulted in the first dividend increase that IGM has announced in over a decade, which is really nice to see. Good market share gains and good underlying strength in both IG Wealth and Mackenzie. The earnings part of the portfolio of their portfolio performing well. In addition to announcing a dividend increase, they also are returning capital to shareholders through buybacks.
That was the first time we've seen an aggressive buyback like that. Lots happening on the earnings side. If we flip the page to the strategic investments. In these businesses, if you go back, I think, in terms of the reported value, there's something like CAD 6 billion of reported value right now that, IGM has if you look at their material. Go back, five, six years ago, that was CAD 900 million. It was less than CAD 1 billion. This has been a big change. While the earnings parts of the businesses, IG Wealth and Mackenzie, have been invested in and transformed, this part of the portfolio, which really sets up the growth in the next five, 10 years, has really been performing well. We've got a portfolio of very exciting businesses here.
Wealthsimple, which is the biggest part of our ownership, is at IGM. A very, very strong growth. You see the AUA growth there year-over-year. Rockefeller continues to perform exceptionally well. China Asset Management has also been gaining market share in China, and then Northleaf had a very strong year. IGM has four very, very strong businesses here, and they're not contributing a lot to earnings right now, but I could imagine going out several years from now and doing this call, we would expect that they're gonna contribute.
You see that on the next page, because IGM did come out two years ago with medium-term objectives, and they have the higher growth even in the next three, four, five years coming from the strategic investments. To date, two years after coming out with the guidance, they are ahead of the objectives that they announced publicly. Quick comment on GBL. GBL actually delivered a strong TSR in 2025. Jake commented on the fact that in the fall of 2024, they came out with an objective of EUR 5 billion of assets they want to sell. They've effectively completed that.
They also then announced that the private assets where they've been moving their portfolio, that the indirect private assets that they have in GBL Capital and Sienna Capital, that's no longer part of the strategy. They're basically going to be disposing of that. Some of that is in the CAD 5 billion, but most of it is not. There's still lots of assets to sell there. They are selling their indirect private assets. They're winding down over time their public portfolio, and getting much more concentrated on direct private. While they're doing so, they're aggressively doing share buybacks. They also announced an increase to their dividend to EUR 5.125 subject to shareholder approval for 2026.
Remember, they had an 80% or 90% increase in the dividend last year. Okay. Make a comment on each of the two alternative asset platforms. Big year for Sagard. Everything is in Canadian dollars here until we get to this slide. Sagard reports their AUM in US dollars from the lower left, or right-hand corner, excuse me. You see year-over-year Sagard, they ended the year at $27 billion under management. Pro forma, the Unigestion acquisition that they announced last year, they will get to $47 billion on the closing, and we think they're very close to closing that transaction. Strong growth through acquisitions. Bex Capital was also an announced acquisition, and then they're in Bex Capital and Performance Equity Management. I'll actually say in a minute what they're doing with those three.
Strong growth by acquisitions, but also $3.5 billion in new commitments, so successful fundraising. They're pulling on every string, I would say, to get growth in what is a challenging market for fundraising in the alternative space, acquisitions, partnerships, and also fundraising. In the upper left-hand corner, the Sagard Private Equity Solutions, effectively, they're combining Performance Equity Management, BEX Capital, and Unigestion, which is a mid-market European-based private equity firm. These are basically solutions providers, so they're not kinda single sleeve managers for the most part, where they're going out and raising a fund and over five years buying 10 companies and then returning it.
These are they're basically buying positions in other funds, putting fund-of-funds together, taking direct participations in individual companies from time to time when they're investors in some of those funds. They're managing a multi-asset portfolio of mid-market companies and then packaging them together in either separately managed accounts for institutional investors or in the funds for individual investors. That'll be, I think, a CAD 22 billion or CAD 23 billion secondaries solutions provider when those three companies come together following the acquisition of Unigestion. Okay, Power Sustainable. You know, Power Sustainable is not. You know, its assets are much, much smaller, obviously. Just a reminder, when we announced reorganization at the end of 2019, start of 2020, there were no products in Power Sustainable.
We had a portfolio of energy assets that were being developed and managed on behalf of PowerCorp. All of these products that you see on the page there have been created, teams have been hired, and fundraising has been done. We now have four very attractive products, very strong track records, very experienced teams. Fundraising has been difficult, but they made good progress in 2025. They're still looking to get more scale into these strategies, but we're at a point here where we've got four very attractive strategies and we're optimistic that we're gonna deliver a good return for shareholders certainly, and we're hopeful that we continue to make success on fundraising. Gonna turn to page 20.
We have got here the return of capital Jake mentioned, the increased buybacks in particular in the Q4 . In 2025, we're participating in Great-West Lifeco's NCIB. We end the year with a very strong cash position, and we are going into 2026 with I think more cash than we've had since I can remember. Well, maybe ever, actually. I'm not sure, but I can't remember us having this much cash balance. We are looking to that, and if you can flip forward on the page, and my favorite slide to love or sometimes to not love is the Power discount to NAV.
With a discount at 20%, we have successfully moved it down in the last six, seven years with our strategies, but it's certainly not a straight line. When you get people deciding they're gonna take profits or whatever and we end up with some pressure or the stock doesn't do quite as well, it gaps out. As I initially react by going, "Why is it not at 3%? That's where it should be based on my math." Then I turn around and go, "No, that's just an opportunity for us, 'cause we're sitting on large cash balances," and then hopefully others out there look at it as an opportunity as well to buy into a portfolio of companies that are doing extremely well and buying them at a discount.
I sound like a retailer there, at Walmart or something like that, but stock's on sale here. It's 9%. I'll let you make your own judgments on that. Turning the page to page 22, we have basically since our TSRs for shareholders over various periods going back to the reorganization and the restructuring that we announced. The reorganization, I should say, and we have delivered strong and competitive shareholder returns. The final page is page 23. Here looking ahead, I think we're in a very strong position to continue to drive value. We've got earnings growth from the main part of the portfolio, which is earnings-based, which is now bigger than it was five years ago.
I think I mentioned explicitly we had as a strategy to have less NAV-based, good NAV-based businesses that set the stage for the future, but we were trying to increase the portion that was earnings-based. We've done that. Those, the Great-West Lifeco, Mackenzie Investments, IGM, IG Wealth Management, excuse me, the earnings portions are in strong position to drive earnings growth. That together with the NAV part of the portfolio will continue to drive our NAV growth. We've got strong cash generation across the companies. I think Great-West Lifeco and IGM are both reasonably valued. I think, Great-West Lifeco, given the growth it's delivered, the strength of the balance sheet, it's based on the forward multiples of the street estimates, they're in the mid-eleven multiple, in 2026 earnings and lower than that for 2027.
IGM's multiple to put any reasonable value on a strategic portfolio and is trading at a low PE. We're trading at 20% discount at the Power level. I think, as you look at the value that we have created in the last six years, it has not been based upon a run-up in our valuation. We are still extremely well valued in terms of the parts, and we're trading at a discount in terms of our NAV. I think that we're well set up to continue to drive good shareholder returns.
I guess another way to look at it, and I maybe end on this point, is that if you're buying Power today, there's 0.98 of a Great-West Lifeco share for every share of Power that's outstanding. That's what we own, not what's outstanding. Power owns 0.98 of a Great-West Lifeco share. You know, I think last night, Power closed at CAD 66.59, and Great-West Lifeco was CAD 64.50, something like that. So they're almost trading at the same price. You're getting almost one Great-West Lifeco share and everything else you're getting, that's at Power Corp basically for nothing, which is all of IGM and all the other assets, net of the pref shares.
It's you know that's just another way of saying we've got a reasonable valuation here and a good opportunity to continue to drive shareholder value. With that, operator, that would conclude my remarks and I'd be happy now if you open the lines and we can entertain questions that may be there. Thank you.
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. 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. The first question today comes from Graham Ryding with TD Securities. Please go ahead.
Hi, good morning. Maybe I just start with more of a earnings-related question just in the quarter for Jake Lawrence, just the consolidation offsets. That was a bit of a drag on the EPS this quarter, and I think it was also a theme last quarter. What drove the consolidation offset this quarter? Should we view this as more of one-off noise, or is this something that should be recurring?
Yeah. Graham, good morning. Thanks for your question. Yeah, I view these items in particular as largely one-off. The consolidation impact was about CAD 0.07 this quarter on the number. It is almost entirely related to fair value changes, and that's based on timing recognition of some of the investments that are within the group that were made down at Great-West and IGM. We're gonna do some work to try to smooth out those timing differences, but yeah, I view that as largely one time in nature.
Okay. Sounds good. Can't do a conference call without discussing AI. Maybe, Jeff, I can sort of just ask you, how much time at the board level of Great-West and IGM are you spending on looking at how those businesses are positioned to both leverage AI on your front foot and also defend the businesses against any AI-related, you know, competitive forces? Just maybe some high-level thoughts on how you're feeling about those businesses.
Hi, Graham. Thanks for your question. It's a great question, and the answer is a lot at the board level, a lot at the management levels, all the way through the organization. We are absolutely focused on it. The management teams are focused on it. What I would say is, first of all, from an organizational point of view, each of our management teams own the issue. You go into Great-West Lifeco and the champion of AI is David Harney. It's from the CEOs. You get nothing done unless the CEOs prioritize the issue. We have that within our group companies.
As well at Power Corp, we are attempting to coordinate and have the groups benefit from common learning, because we have about a 5-point strategy across the group, as to how we're gonna tackle AI and what we are tackling. I shouldn't use the future tense at this point, what we're doing. You know, two of those are kinda common as to we got a theme on the senior leadership and executives getting proficient at AI. We got a whole effort on doing that so that people know what they're talking about when they're engaged in it.
We also have a learning part of the strategy, which is going around and visiting competitors around the world, suppliers, and that learning process is also one that we're trying to coordinate and not have every company duplicate on its own. Once you go from there's an exercise of mapping across all of the business units, what the opportunities can be, and sizing them up so that we run an exercise of prioritizing. We have exercises going on across the group that, I would call, are more pilots, but they're actually putting things into play in different parts of Great-West Lifeco and IGM, and we're using different suppliers, outside suppliers, testing who's good, who's not, how is it working, people, the various names that you would hear as opposed to using one supplier.
We're trying different ones and then seeing how we work organizationally to put those into place and put the changes in process into place. That's what we're doing about it and prioritizing. You ask me for a comment and a perspective. I think this is, in the first instance, is going to be in some ways you could say it's similar to Fintech, and then I'm going to say how it's not. You know, 10 or 11 years ago we saw Fintech as a, "Oh my goodness, what's going to happen? Is this going to hurt our incumbent businesses?" You know how we responded.
We responded by doing some things external by setting up some things like we set up a venture capital fund to invest in Fintech, got all our companies in place, and put the management team in place. We started basically you know an incubator fund out of Montreal, where we founded a number of companies, some of which have gone public. Then we made a couple of bigger bets in Fintech through Wealthsimple and in the States through Personal Capital, which is now part of Empower bought that. Of course, we still control Wealthsimple. We responded, and many of the products that came out of that are now in our companies. Nesto is going to end up being one of the biggest mortgage administrators and managers in Canada. Guess what?
IG Wealth was the first company to put it in place. There's a company called TD. I don't know if you know them, Graham, but they're, as I say, with a smile on my face. You know, Nesto is basically going into the banking channel now and also going to be supplying that. Same thing with Conquest Planning. We had all this Fintech strategy. We're looking at AI as a comparable. It's an opportunity, and at the same time you ask yourself the question, is it a threat? Is it going to, you know, displace some of our businesses? We're thinking about it that way. We're taking it as seriously as that. The last thing I'm going to say is I do think it's going to be a while.
We, like many others that I talk to, are looking at the opportunity, but not too many people have translated those opportunities into savings yet. I think it'll be a while before you see actually P&L benefits. My own view is even when you get cost efficiencies and better client experiences, which is the two things you're going to get out of it, I think a lot of the savings will end up becoming table stakes. I don't know that at the end of the day you're going to see increased margins. I think you're going to have. My own view is ultimately it's gonna. Everyone is either gonna get good at this or they're gonna be lacking a competitive position. I think therefore the margins will be what the margins will be.
I don't view it as a massive profit opportunity. If people are selling it that way to their shareholders, I don't share that view. I think it's just something you've got to do to remain competitive. We're in a competitive world. The margins will be what the margins are. That was about as complete an answer as I can give you. I just went right through the whole thing. Hope that answers your question.
Yeah. That was very thorough. Appreciate it. I've got a couple more, but I'll re-queue. I'll let some other people in first. Thank you.
Thank you.
Thanks, Graham.
The next question comes from Tom MacKinnon with BMO. Please go ahead.
Yeah, thanks very much. On slide 27 of your investor presentation, this question's about the Power Corp earnings from investing activities of Sagard and Power Sustainable. You talk about a 10%+ return on the CAD 3.2 billion in proprietary capital. If we kind of look at what that CAD 3.2 billion was, is CAD 2.7 billion at the beginning of the year. So that would be at least CAD 270 million in terms of investing activity earnings. But if I go into the SIP, we're not getting kind of near that. The investing activity earnings on both Sagard and Power Sustainable are, you know, certainly less than that. In fact, we're negative in 2024 and 2023. Is there anything that we're missing here?
Is this predicated on monetization or, you know, does that have an impact on this 10% kind of return? Like, why wouldn't-
Yes. Tom, I'll start off. Jeff, you feel free to add in if you like. Thanks for your question, Tom. On slide 27 you'll note the CAD 3.2 billion, and it has grown. It is AUM and it is the fair value of the investments. As you'll note, there's a variety of strategies. Those strategies have different return profiles and different return expectations. We've tried to, under the target net IRR, lay out the return expectations. In terms of the return profile, you can expect something like a private credit to have more of a stream of income that comes in over time, as well as other investments like venture capital and private equity, which you can see are a large portion on the page.
They're going to have more episodic as it relates to monetizations and other activities. You will see the value. We've tried to spell that out in the wheel on the left-hand side of the page where you've got capital appreciation versus pure income strategies. You will see, as we fair value these, the increase will go up, but it doesn't always show up in the P&L or in earnings in the quarter. It is creating value and that will be realized and monetized over time.
Let me add to that, and I agree with what Jake said. This is not intended to say those are the earnings that we're going to drive. That's the returns we're going to drive.
Even on the income side of the picture, let's look at energy infrastructure, which is our energy fund, for example, Energy Equity Fund. We're getting a cash return, and we've had an NAV bump on the portfolio. The assets in that that were brought under production in the last three, four years from a net income point of view, and this one we happen to own a big chunk of because we moved our energy portfolio and we created a fund, and we own about 40% of the fund, I think, in this case. We're consolidating this one. We put all these energy assets into production, and there's big depreciation going on. We actually have net income losses.
That fund is producing losses in the NAV in the seed capital portfolio, but creating positive cash flow every year. We've had NAV bumps that have been going through the NAV. There's a perfect example. We have losses going through the P&L, and it's going to make its 8%-9% IRR. I think it's been doing better than that since we've been in it. It's a classic case, Tom, where we've got a portfolio of assets here that are not driving earnings, but they are, we think, driving value creation.
Yeah, understood. Thanks. Sort of a geography answer to some extent there. The second question, just if I may, is really just on page 13 of the SIP. You know, despite the fact that Sagard's got some bigger assets, you know, the fees went up, but they certainly didn't go up as much as the investment platform expenses. Still negative fee-related earnings. What's contributing to this negative operating leverage? When do you think we might be able to see some fee-related earnings at Sagard and Power Sustainable going forward?
It's a very good question. At the high level, the question is that Sagard is looking to grow, and it is adding strategies. In all the ways I've told you, adding strategies, making acquisitions, adding and trying. It's getting itself up. It's $44 billion. I think the Canadian equivalent of what we talked on the slide is $44 billion pro forma, and they have publicly stated a goal of getting to $100 billion. They are making, and Paul III is making an aggressive move to get Sagard to be a scale player, although focused in the mid-market. You may say scale $100 billion. You know, I thought Apollo had $800 billion versus their $100 billion. How could that be scale?
Sagard is much more focused on mid-market, and $100 billion in mid-market would put you as a very strong player globally. He's prioritizing growth to get to being a viable long-term mid-market player, strong mid-market player. Every time you do that, you end up with, you know, you're adding teams, you're adding costs. I think the last number, and look around the table to correct me. I think the run rate fees at this point are $190 million. You go back, it was $18 million when we launched the strategy six years ago, and we're creating an alternative asset manager here.
It's up from CAD 18-CAD 190 just on the fees over a six-year period. You can't argue with success. I think they're doing an amazing job. I'm gonna play back the discussion, Tom, to you, and hopefully it resonates. When you say, okay, so Power is earning CAD 3+ billion. We're creating a company where the GP stake of Power in Sagard has grown in value from virtually nothing to over CAD 300 million. Big growth in the value of GP. We've made money on the seed capital. We've got carry.
I'm trying to build a CAD 100 billion manager, and you're asking me to produce CAD 5 million of FRE for the shareholders of PowerCorp versus, you know, on a CAD 5 million loss while I'm trying to build, you know. Are you looking at this through the wrong end of the telescope? You go, "No, you should continue to build, but don't create big losses." How it comes out in any given year, I think they're trying to target to break even, but you get, you know, you get some fundings that are a little late or something, you don't quite hit the mark, but he's not far off. Anyway, that's maybe a longer answer than you wanted. They're doing a great job.
I agree with the objectives, I agree with the strategy, and that's another way of saying I wouldn't expect. Even if FRE gets a little positive in a given year, I wouldn't expect it to be a big contributor to you know, to Power's earnings in the next few years. We're not looking for it to do that.
Okay, thanks. The same for Sagard, or same for Power Sustainable.
Yeah. Power Sustainable's in a different situation. I think they're lacking scale at this point 'cause they're earlier. I tried to convey that. You know, we had great products and they built great products, but they've run into, you know, not been the easiest time to fund. They've got larger losses from an operating point of view. That's a bigger challenge, and I think we have a bigger need there to get scale into those strategies. They do have very attractive strategies. They're very, very focused on getting more funding into it. We have made good returns on the seed capital, so not. That was the one I explained. Even though we appear to be losing money on the seed capital, we're actually making money.
We've got some carry on it as well. It's not like the overall picture of our seed capital, the losses we're making at the GP, but the carry we're getting economically, that looks a lot better than just if you focus on the run rate of the FRE. Having said all that, also, I think we have a bigger scale issue. It's not exactly the same answer. We have a greater need to get more assets to get Power Sustainable to a point where it's up and it's got a decent P&L. It's not there yet. Still a work in progress on that one.
Okay. Thanks so much, Jeff.
Okay, Tom. Thank you.
The next question comes from Doug Young with Desjardins Capital Markets. Please go ahead.
Hi. Good morning. Jeff, just wanted to go back to slide 21. You know, you continue to tender into the Great-West Lifeco buyback. But you know, not all the cash that's coming in is being used to buy back Power shares. You know, that's kind of funneling into the build out of your cash balance. What's the strategy on holding more cash? To your point, you know, the discount to NAV has come out quite a bit. Why not be more aggressive on buybacks? Or is there kind of an effort to hold more cash up at the holdco? If that's the case, why?
It's a great question. We're having the same discussions internally. I think the cash came at us more quickly probably than we should have expected it, but we've let the cash balance grow. I think that coupled with where page 21, I think our top capital priority here is gonna be to buy back shares. I think that's the answer. We do think the cash balance is quite large. So I agree with your observation, and I agree with the opportunity, and we intend to be aggressive on the buybacks. It's a good question.
Okay. There's no binding constraint that I'm missing?
No.
why you wouldn't.
No.
Okay. Okay.
Yeah. It's just timing of when we receive the money. We're continuing to receive the money. You know, also, I will remind you that it wasn't clear Great-West Lifeco's board hadn't decided what they announced in terms of the buybacks for 2026. We were building up the capital late in 2025, wondering how long that was gonna go for, and do we kind of spend it all at once, or do we kind of feather it out over the next. Like some of those, we got behind the curve, and then they announced they're continuing to do it for another year, and all of a sudden the cash is gonna continue to come in, and now the cash balance is growing.
We're getting with the program here, and we got a lot of cash on the balance sheet, and that's not an intentional outcome. It just happens to be where we are. Looking at page 21, I think we will get more aggressive on the buyback side.
Okay. Are you proportionally tendering to the IGM buyback?
Yes. Oh, to the IGM. I'm sorry. I thought you said Great-West Lifeco. No, we are not. Excuse me. Pardon me. The answer is no. I had a look from Jake here when I said yes. That, he almost pulled me off the stage. No, I thought you said Great-West Lifeco. No, we are not in IGM. To remind you, Great-West Lifeco asked us. We didn't initially do so. They came to us and said, "We would like you to do that." We looked at that and considered it and said, "Fine, we will do that." Now we got the cash coming in, but we've not had that discussion with IGM.
Doug, sorry, it's Jake. I think it's something we can look at over time, but as you've observed, we've got a strong cash balance now. I think as Jeff's noted, job one is to take advantage of the opportunity that the market presents us, and then we can revisit if we need other sources of cash.
Just one last one. Like operating expenses, I think you referred to it in your remarks. CAD 60 million, you know, was up last quarter versus last quarter last year. Any unusual items that's going through this quarter that, kind of, we should think about, or is this kind of a new run rate? Is it hiring? Is it technology?
Yeah. Thanks, Doug. It's Jake again. I think, yeah, good observation. Both Q4 and 25 had some higher costs related to employee compensation. That would have been the bigger driver. I think specifically those costs are related to performance-related compensation or long-term incentive. We don't expect them to occur to the same magnitude in 2026. As we move into the year, we've taken some steps to tighten that up a little bit and make sure we don't see that same bump up. I don't view it as a new run rate, and our expectation in 2026 is to see that come down a little bit.
We haven't actually driven the costs of the head office up in terms of. It's gone up a little bit. We've
Inflation.
We've got some, yeah, we've had some inflation. We've certainly hired a lot of great people. The talent has never been better here. There's been some, and very happy, terrific investment, but not to the magnitude the costs have gone up. It's really been performance-based, equity-based compensation, some of which was issued in previous years. We've had great performance. All the metrics we have internally, the stock price has done well. It's really from the TSRs that you've been seeing, and some of that has been shared with the management and the people here. Not all of that was properly.
Perfectly hedged.
Perfectly hedged. Exactly. It wasn't perfectly hedged. That's the best way to say it. It's not because the underlying cost has gone up in a material way.
Yeah.
It's gone up a little bit, but not. Like, the actual infrastructure here hasn't grown at all relative to the value. It has grown in low single digits in terms of number of people, et cetera. Okay? Hopefully that helps.
That's perfect. Thank you. Appreciate the time.
Thanks, Doug.
The next question comes from Rommel Latayan with Jefferies. Please go ahead.
Good morning. Thanks for taking the questions. My question's on capital allocation as well. When we're looking at your shares discount to NAV, it's been coming down from, you know, 35 to close to 10% at some point. At what point would you say that the discount is too narrow to continue allocating excess capital to buybacks and probably better to reallocate that excess capital to reinvesting into Opcos or publicly listed subs?
Hi, Rommel. Thank you for the question. You are correct. It's been a. I think the discount started narrowing at the start of 2019 when Great-West Lifeco announced it was selling its U.S. insurance business and in the press release said it would consider returning capital to shareholders. We followed that up with a three-way buyback that you may not have been around to follow us, then we announced a reorganization. It's been a long road of our strategies, communication, changing the mix. I mean, it doesn't go in a straight line, but then where does it get to? My own math is the following. You know, we have, call it CAD 200 million or so of expenses here at Power Corp after tax.
That's a smaller number to a net present value on that, and that's the only real liability. You could put some pension expenses, I guess, if I was being complete on the balance sheet. You can get to a discount of about 3%, is the way I do it. Because the pref shares and the debt are already in the NAV calculation. You know, there's a value gap when the discount is above 3%. There's a big opportunity right there. The reason for the buybacks is not simply to arb the discount. That's just a benefit that we happen to be getting right now.
Even if the discount were to narrow down, it wouldn't mean we would stop buybacks. If we are getting capital coming in from participating in buybacks from Great-West Lifeco, for example, in the future, what they're doing is they're transferring their excess cash to us. Because on their excess cash, they're earning, you know, 2%-3%, and then they're putting the money on our books, if you will, by building up our cash balance. In that circumstances, you know, if we have good uses of capital, we'll do so. We'll invest it, but we would also continue to buy shares back potentially in those circumstances. It's not just an NAV arb that we're doing. We're basically returning excess capital to our shareholders.
That begs the question, you know, what are our capital priorities? Well, they've gotta be on strategy. We've always participated and supported Great-West and IGM if they needed to do an equity issue for an acquisition or something, but that's happened, I think, about three times in the last 35 years. That doesn't happen very often. Then we've got to be convinced that when we're investing in other businesses that we have, say, the platforms, that we're gonna get an adequate return, and it's gonna be properly valued in our share price. One other thing that's been happening is as
I'll finish my comment on that. As we've been buying shares back over the last six years, the source historically here has been selling, you know, a lot of NAV-based assets. You know, the standalone businesses, et cetera. We've actually been changing the mix of our business. From, I mentioned earlier in the call, I think we're about 74%, 75% of IGM and Great-West Lifeco in the mix. That's up to 84%. We did that explicitly. I think we're also another thing when we're buying shares back. We're mindful of not kinda tilting the portfolio, if I can call it that, to being too much of NAV-based because our shareholders, public shareholders tell us they're happy to have some of that, but not too much of it.
Anyway, maybe I went into too many details for you, Rommel, but it's not just the NAV discount that we're arbing. There's lots of other considerations when we do buybacks. That's my answer.
Yeah. That's helpful. I'm just trying to understand how you think about capital allocation.
Yeah.
Yeah, that's a helpful answer. Thanks.
Okay. That's it for me. Thank you.
The next question comes from Scott Fletcher with CIBC. Please go ahead.
Hi. Good morning. I wanted to go back to the asset manager platform. Just ask about fundraising. It's been a while since the last earnings call. Just was hoping we'd get an update on the change in the fundraising markets if it's, you know, strengthened or worsened for Sagard and by asset class in particular would be helpful. Thanks.
Yeah. I'm happy to kick off with some comments, Scott, and we can come back to you by asset class. In the quarter, Sagard raised about CAD 1.4 billion, and for the year they raised CAD 3.5 billion.
Those are U.S. dollars.
Yeah.
In their case? Yeah.
Yeah. US dollars, good point in their case. I think we've seen that across several strategies. I wouldn't say quarter-over-quarter we've seen any real change in the climate, and I don't think we've seen a change year-over-year, Frank. There was a period where I think monetization did start to happen, particularly in large-scale public funds at some point of last year, but I think that started just with market volatility to dry up a little bit. As Jeff noted in his comments for both Sagard and Power Sustainable, the fundraising continues to be tough, but creatively pulling on different strings and taking advantage of those opportunities to build scale through other means, whether it's partnerships.
Sagard obviously announced the Baird transaction last year, as well as with Sagard, the acquisition of Unigestion, and combining that with Performance Equity Management and another acquisition, BEX Capital, to build that private equity solutions business that has primary private equity funds, secondary and co-ownership opportunities. Still a tough fundraising environment, but a solid year for Sagard with $3.5 raised during the period.
Okay. That's helpful. Thanks. Just as a follow-up, if you think about getting to that 100 billion target of AUM, is there a-
Mm-hmm
An ideal mix between M&A and capital raising? Like, how much should we expect that to be acquired?
Anything there would be helpful.
I mean, I don't know that there's an ideal mix. I think it will depend on the opportunities that are in front of Sagard and what the fundraising environment is like. In a way, there's almost an inverse correlation. You know, you can imagine when the fundraising isn't very good, lots of firms are growing, and they're getting funding into their strategies, and they're less inclined to look to do partnerships because they're having fun, and they're getting there on their own. If we got back into a very healthy fundraising environment, you can imagine a lot of mid-sized players are saying, "Why would I sell out?
I'm growing beautifully here, and things are going well." You get into a tough environment, and now they're looking at their dreams, and they're going, "Boy, this isn't quite working out the way I thought it was. Maybe I need to partner with someone who's got more scale. We can get some cost synergies. We can get some more fundraising on a broader platform," et cetera. You get more of an M&A market. I don't think you can overtrain on how it's gonna play out in the future because you don't have a crystal ball. You just need to have all the tools in the toolset and be opportunistic as it comes. I think that's the real answer and-
Yeah.
But I, but I-
They'll be open to-
I know Paul Desmarais III and the team there are gonna pull on every lever they have. That is the one thing I'm sure of.
Yep. Great. That makes sense. I'll leave it there. Thank you.
Perfect. Thank you.
The next question comes from Bartek Ciszewski with RBC Capital Markets. Please go ahead.
Great. Thanks. Good morning, everyone. Thanks for taking my questions. I guess I'll stick with the asset management business. Just with Sagard on private credit, there's lots of kinda noise out there today. I think lots of it's overblown, but there is about $8 billion of AUM in Sagard. I think that has direct lending and CLO. Could you guys just give us an update on what you're seeing on the ground in that portfolio or part of the business?
Now, Jake, do you wanna handle that one?
Because we've covered seed capital as well in the conversation today, Bart. I just note that we're not concerned about our exposure that we have directly through seed capital. It's around CAD 100 million in Sagard private credit funds, and we're very comfortable with it. As you note, they do have AUM exposed. I'll scope your 8 down to about 6, which is specific to private credit, which is predominantly, I'd say the majority is institutional. When we look at the portfolios, I think we get to a spot where we're comfortable. Why we're comfortable is Sagard's strategies around these funds. They're conservatively positioned, and we're not seeing any concerns at this time. The default rates within those funds are not on the rise.
I think that's reflective of the credit team there, Adam Vigna, and other strong underwriting standards, their high-quality portfolio and low leverage. They have nearly zero software exposure. They've seen, as I noted, limited credit stress at this time. The way they approach the strategy, Bart, is their first lien senior secured loans in the mid-market space, generally in kinda family-owned or founder-led companies with moderate leverage and pretty predictable cash flow. We're not seeing stress at this stage. We're quite comfortable with how the product's performing and actually feel pretty well.
There's obviously been a lot of coverage in newspapers, but that's not actually what we're seeing play out in the books that we've got exposure to here, both directly through seed capital and what Sagard's managing for their clients.
Great. Very helpful. Thanks. Thanks, Jake. One of the growth opportunities within the alt sector is just the insurance channel. You know, you've got Canada Life within the ecosystem. Like, could you give us a sense of where you are at with Sagard kinda leveraging that relationship to source capital from insurance? I could broaden that out, I guess, to third-party insurance companies as well.
Yeah. Thanks. Good question, Bart. Thank you. The first thing to say is that what Canada Life and Great-West Lifeco does with its balance sheet is their own decision, of course. The primary decision that goes on there is what's right for their portfolio. When you look across the suite of assets that the alt managers have, there are some products that fit in. When you're running an insurance balance sheet, you know, equity is not exactly a capital-friendly thing to do. You have some room for it. There is some private equity on the Canada Life and the Great-West Lifeco balance sheets that comes from Sagard and Power Sustainable. The bulk of what they're looking for is credit.
When you get into private credit, there's some allocation to that on the Canada Life, Great-West Lifeco balance sheets, but it's a pretty small asset class, so you can address that more directly in questions to them. I guess the answer is there's an opportunity, but it's not. You know, it's not. You're not gonna drive the growth of Sagard or Power Sustainable based on that. Power Sustainable itself has an infrastructure credit fund in the United States, with Tom Murray running it, which is a really high-quality product. That is something I know that the Canada Life folks are very excited about and interested in. There's that. You know, there's some spots here and there.
You know, I think that Canada Life and Great-West Life have moved some of their portfolio into alts. In typical Canada Life, Great-West Life fashion, they've not been as aggressive in that space as some of their competitors, and certainly not the insurance companies that are actually owned by the alt managers, where they've gone in a much more aggressive fashion. The high-level answer is it's Great-West Life's decision. It's Canada Life's decision. There's some opportunity, but. Sagard and Power Sustainable are all over it. That's what we're talking to them all the time. I don't think you grow the businesses on the back of that.
Great. Thanks, Jeff.
Okay, Bart, thank you for your question. I think, operators, that's it for the questions. It looks like it is.
There are no further questions at this time.
Okay, great. Thank you. With that, I'd like to thank everyone for joining us this morning. Hope you have a great day, and we'll talk to you at our upcoming quarterly Q1 report. Thanks, everybody.
Thanks, all.
Ladies and gentlemen, this concludes your conference call for today. Thank you for participating, and you may now disconnect your lines.