Good morning, ladies and gentlemen, and welcome to the Power Corporation First Quarter 2026 Earnings Conference Call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. Analysts who wish to join the question queue may press one then one at any point throughout the call. If anyone has difficulty 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 Wednesday, May 13th, 2026. I would now like to turn the conference over to Mr. Stephen Hung , Head of Investor Relations for Power Corporation. Please go ahead, sir.
Thank you, operator. Good morning, everyone, and thank you for joining our first quarter 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 reports tab. Please turn to slide 2. I'd 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 3 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 the call over to Jeff.
Thank you, Steve , and thank you to all of you for joining us here this morning as we go through our results for the first quarter. Very pleased with the first quarter results and generally the momentum that we have across the businesses at Power Corp. I think the backdrop has been a very positive macro factor, notwithstanding all the heightened risk that we see in the markets and going around the world right now. Obviously, the stock market levels continue to rise. Interest rates have been supportive. Investors have made a lot of money. There's high investor confidence, good flows going on. Notwithstanding that, all that goes on around the world, the business conditions actually have been very supportive.
That's combined with the strength of our group's earnings to basically provide, you know, very strong momentum from an earnings point of view and strong perspectives from a cash flow point of view are, that's evident across Great-West Life businesses, IGM's businesses. Strong cash flow, strong increases in dividends, buybacks, the portions of the portfolio that are not earnings-producing assets like Wealthsimple, Rockefeller, the NAV portfolios are doing extremely well. All things well. I was addressing page 6. Thank you for catching up to me. I should have said I was on page 6. Very happy with the quarter. With that, I'm going to pass it over to Jake to talk a little bit about the earnings and the asset values, and I'll pick it back up after that. Jake?
Great. Thanks, Jeff, and good morning to everyone. Thanks for joining us for our Q1 call. I'm going to begin on slide 8. As Jeff noted, we're very pleased to report strong results for the first quarter of 2026. Our adjusted net earnings were CAD 905 million, that's up 15% year-over-year. For the quarter, our net EPS of CAD 1.43 is the second highest quarterly EPS that Power has reported since our reorganization that was announced back in 2019. Now our earnings per share is up 17% from last year. When we look at our earnings-based businesses, specifically Great-West and IGM, they both delivered strong financial results and continue to have very good business momentum. Great-West contribution to Power's adjusted net earnings was up 21% year-over-year.
Those positive results were supported by Great-West's eighth consecutive quarter of base earnings in excess of CAD 1 billion, including double-digit growth this quarter across all segments. Great-West reported base ROE above 19%, and this was the first time they had achieved that medium-term objective. Moving to IGM. IGM's contribution to Power's adjusted earnings was also up 21% year over year, as IGM saw strong IG Wealth and Mackenzie net flows. Record high ending AUM&A was up 14% year over year. The results also saw a stronger earnings contribution from China AMC. In terms of return to capital to shareholders, IGM reported its highest quarter ever of dividends and buybacks. Moving to our NAV-based businesses. GBL reported a positive contribution in the quarter of net earnings of CAD 20 million, which was up from CAD 3 million a year ago.
The improved performance this quarter was due to higher contributions from the operating companies within GBL, as well as higher interest income generated from cash balances. GBL also announced continued progress on its simplification strategy, which Jeff will have more to say on later in the presentation. Moving to our alternative investment platforms. Sagard's contribution to earnings was a loss of CAD 5 million. That's down from a positive contribution of CAD 37 million in the same quarter last year. The decrease was driven primarily by lower private equity gains at Sagard, as reported in investing activities. Power Sustainable reported a loss of CAD 13 million, reflecting a higher loss compared to a year ago due to lower asset management activities and operating losses on the energy infrastructure assets.
Corporate operations and other also reported a higher loss, driven in part by higher dividends on non-participating preferred shares following our issuance of CAD 400 million in 2025. Operating expenses were lower than last quarter and flat compared to a year ago. We're pleased with the group's strong start to 2026 and expect continued momentum into Q2. Turning to slide 9, looking at our net asset value. We reported net asset value per share of CAD 84.54 at the end of the quarter on March 31, 2026. I want to remind listeners today that 83% of Power's growth asset value continues to be driven by our earnings-based businesses of Great-West and IGM. Power Corp experienced strong NAV growth when we look at it on a year-over-year basis. We were up 23% with strong growth across all of the operating companies.
NAV related to IGM increased 51%, which is quite impressive. GBL was up 22% and Great-West increased 12%. Wealthsimple's NAV rose approximately 90% year-over-year and Power's cash balance rose 50% to CAD 2.1 billion compared to the prior year. Power Sustainable's NAV reduced a little bit, and that was reflected in some sales and to help generate that higher cash balance up at Power Corp. Speaking of our cash balance, we ended the quarter at CAD 2.1 billion, and when we factor in dividends to be received and paid, we have about CAD 1.7 billion available.
We remained active with our normal course issuer bid and continued to participate in Great-West normal course issuer bid during the quarter. As a result, we returned capital in the form of buybacks and dividends worth CAD 650 million, tracking ahead of the CAD 500 million we returned during Q1 of 2025. With that, Jeff, I'll turn it over to you to talk a bit more about the business results.
Okay. Thank you, Jake. We will move forward to slide 11, I think it is. Yeah, there we go. We have the earnings on Great-West Life. Obviously, a very strong quarter of earnings growth across the company. What was impressive, it was really across all the geographies and the segments. You had broad-based strength in the earnings. As you know, those earnings are very cash, they transform into cash. I think the company estimates about 80% of its earnings are available as cash. They've been not only increasing their dividends, but picked up their buyback activity, of course, which is also helping their ROE.
The company actually hit their 19% ROE target, as Jake mentioned, which they had updated from their previous 16%-17% when they announced their medium-term goals back in the spring of 2021, I think it was. Very strong performance across the board by Great-West. If we flip forward one page, Empower continues to have very strong performance, delivered on a U.S. dollar basis, constant currency, 23% earnings growth over the first quarter of 2025. It's 18%, of course, in the financial statements of Great-West Life because of currency. In the local market, in terms of measuring how the company is doing on its own growth, it's 23% in growth and earnings.
It was about 18% up in retirement, strong performance in retirement. Market certainly helped, their growing franchise and the leverage in the business certainly coming through. It was helped a little bit. There were some credit losses in the first quarter of 2025, that favored the earnings growth a little bit ahead of what one would expect in the retirement sector over time. Nonetheless, a very strong performance and good flows in the first quarter and good participant growth year-over-year. The wealth business had a very strong quarter from an earnings point of view, 65%. Had strong positive flows.
They were impacted by some seasonality and some transformation initiatives that the company had during the first quarter, but continued to look at wealth as the highest growth opportunity within Empower and I think really within the Great-West Lifeco group. If I turn the page 1 forward to page 13, I mean, I tend to focus on the performance over the last since 2021, over the last five years, which has been ahead or met all of the objectives that the company set for itself. This is just a point to say, as a pickup from the slide that Great-West had one week ago, to say that the first quarter was off to a great start. Let me move forward therefore to IGM.
Really, really great momentum at IGM. Great quarter, earnings-wise, flow-wise, IG Wealth, Mackenzie, the strategic initiatives really firing on all cylinders. I'll talk about flows for a second. The Canadian individual market, retail market, if you want to call it that, in investments and savings, it's really come back after having been shocked by the inflation and interest rates rises that came out of the post-COVID period. It had been rolling along with good inflows. Of course, we went through that period, I don't know whether it's exactly three or four years ago, where all of a sudden, interest rates were really biting. You had people paying down debt.
If they were savings, a lot of the money was going into deposits and the whole kind of investment, equities, mutual fund, investment funds flows went negative, certainly in the sectors where IGM plays, maybe not in the ultra-high net worth, where people still had a lot of money and in the upper reaches of high net worth. The sector went into outflows, and it's back. It's come back right now the first quarter through the RSP season was back to levels it was at back in 2022, 2021. IG's two main core lines of business there, IG Wealth on the wealth management side, and Mackenzie Investments in asset management. Both are participating in those strong inflows.
IG Wealth is just a stronger and stronger franchise and my view continues to improve its competitive position every year. I'm quite pleased with what I see at Mackenzie. If Mackenzie's had strong flows in the first quarter. Part of that is because the strong institutional flows that they've been getting, which have been a real breakout for them over the last 12 months or so. If you just focus in on the Canadian retail investment funds flows, you're seeing some really positive developments. Gross flows were up a lot in the quarter, net flows were positive. There's still a couple of big strategies. One big strategy in particular, which is outflowing.
Their net flows are still being affected by that, but the gross flows are up a lot. Those outflows, it's hard to predict the future, but the strategies where there are outflows, it can't go on forever because the strategy gets smaller and smaller. Eventually, I see the making here of a pretty strong turn for Mackenzie's flows in retail, and now they've got the institutional business. That's I'm going on a little bit about that, but I haven't spoken about that for a while. I like what I see there. Predicting the future is always a mug's game, but that's kind of my perspective here, looking at what's happened over the last few months. I'm going to flip forward to page 15.
You got the earnings contributions, the wealth management, earnings really, IG Wealth is the driver there, the strongest part of it, and asset management also showing good growth. You've got the rest of the segments on 15. I don't need to dwell on it. I will stop here on 16 for a second and just talk about the strength of these franchises. The strategic investment portfolio of IGM not producing a lot of earnings right now, with the exception of China AMC, has got earnings in there. It's small relative to the rest. The underlying growth of these franchises is really tremendous. Wealthsimple, the beat goes on. They continue to drive very strong growth. Rockefeller continues to have very strong growth.
While Northleaf, by comparison, is only 10% year-over-year AUM, that's actually terrific in the alternative space. That's all organic fundraising. They have got great track records. They are broadening out their distribution. Really impressive story at Northleaf, good stuff happening there. Okay, couple of comments on GBL. It was, I think a year ago, I think it was May of 2025, Johannes Huth came in as CEO. The strategy that GBL is pursuing is being pursued with vigor, I would say. Just to remind you, they are in effect reducing their exposure to publicly listed companies and switching to direct private assets. They're at about 32% of the portfolio right now is in direct private assets.
On the left of the slide, they set a target to sell EUR 5 billion of their public portfolio. They're basically done on that over the last 12 months. On the direct side, they continue to make investments. You got a couple of examples on the page. They also announced late last year, the sale of Sienna, which was where they were investing in other people's funds. That is being divested of. They're just focusing down on their direct private assets. While they're doing so, they're also returning capital to shareholders, which you see on the right side through dividend increases and buybacks. Lots of activities. Last year, GBL produced an overall TSR of 23%. We like what we see at GBL.
Good performance by the management team there. On the alts platforms, moving forward to page 18, Sagard continues to grow both organically and also through acquisitions. Right after the end of Q1 here in April, Sagard closed the acquisition of Unigestion, which is a European-based private equity solutions provider, meaning fund-to-fund secondaries, direct private placements where they put together portfolios of private equity companies broadly based, and package that for institutional investors, high net worth investors. That complements the acquisitions that Sagard had already made, Performance Equity and BEX, and they've combined all three of those into basically a private equity solution, Sagard Private Equities solution provider with $22 billion of U.S. assets with a strong presence in Europe and North America.
That closing brings the total AUM of Sagard up to $46 billion. That's quite meaningful as a mid-market player. Sagard plays in the mid-market. They're not focused on large cap. very strong continued growth at Sagard. Very impressive what they're doing. Over on the Power Sustainable side, they closed their U.S. infra credit fund, $800 million. Super strong team there, based in the U.S. That's an asset class. Notwithstanding what you might hear about private credit, infrastructure credit is very much in demand. We have a very good team there. I'm quite optimistic for what we can do in that strategy.
The fourth of their four strategies, the private equity fund based out of New York, the Decarb Fund, closed on their first transaction over the last few months. Good momentum in building Power Sustainable. Page 19, just to show the return of capital. We're about CAD 11 billion since we announced the reorg back in December 2019. Return to shareholders through the form of dividends which are increasing and buybacks, we're sitting on a lot of cash, as you will have noted. The buybacks will continue to be a very high priority use of our capital. Page 20 just follows the discount, which at 18% at last night's close, I continue to view as a future source of value creation.
I won't say much more about it now. We probably talked a lot about that topic over many, many calls. You've got on 21, our shareholder returns over various periods since we've announced the reorganization. We continue to be pleased with the absolute returns we're producing and the relative returns that we're producing. I'll finish up on page 22. I mean, to my mind, the value creation strategy is completely intact. I've spoken in the past about how we create returns, that story hasn't changed over the last few years. Notwithstanding that the shares have moved up well, the story is very much intact in my view. We have 83% of the NAV or the gross asset value, I should say, at Power Corp, is in Great-West Life and IGM. Great West is earnings driven.
IGM is principally earnings driven. They both have 9% earnings guidance that they've given on the medium term. Since they've given those guidance, they both exceeded it. If you just take their earnings guidance and say for a second, they're going to be able to achieve that, they're both generating a lot of cash. They pay out a good dividend yield on top of that. You can just figure if all they do is hit that and there's no multiple revisions, you know, the math works out to about 12.5%, 13% as to what kind of TSR you would expect. Hopefully, they can do better than that, we'll see going forward. We've got the NAV portfolio, where our expectations are for even higher returns. We have been performing very well there.
All of that remains intact. What has changed in the last few months is that the valuations of IGM from a PE multiple, excuse me, Great-West Life and IGM have moved up a little bit. We haven't seen that really over the last 5, 6 years. They've moved up a few turns. Two things about that. On a relative basis, they haven't. Financials have moved up, banks have moved up, insurance companies have moved up. IGM is multiple. When you look at it, the P/E multiple on a forward basis might look like it's moved up. If you just, I think the company itself has disclosed, you know, about CAD 15 in value just on the marks on, Wealthsimple and Rockefeller based on the transactions that they announced last September.
If you just take those values and make some sort of reasonable adjustment for those 2 assets which don't produce any earnings, IGM's multiple is reasonable. I look at the PE multiples on Great-West and IGM. They moved up a little bit, but they haven't moved up on a relative basis to their peers and on an absolute value basis those are not high multiples given the kind of companies and the earnings trajectories, certainly relative to the rest of the market. I think the valuation story is intact. I think from a strength point of view, if I go back, over the last six years, the companies are in a better position today.
Great-West Life, all of their businesses, IGM, the businesses at Power, the alt program, the alt platforms, everything is in a stronger position than it was six years ago when we announced the strategy. I feel very good that the story, the value creation potential and the strategies that we're executing are going to continue to be strong as we move forward. I'll turn just before I close to say, you know, this is my last call at Power here as CEO. James O'Sullivan will be on the next call. We started these calls back in December 2019 when we announced the reorganization. That was the first time we had done a call like that.
We laid out then what we were going to do. One of the things we said we were going to do is we were going to be a lot more transparent, a lot more in dialogue and actively engaged with the analyst community and the investor community. We've tried to do that, and I think we've done that at Power and at Great-West and IGM. It takes two to talk, and I just want to thank all of you on the line, both analysts and investors listening in, and your predecessors who have, you know, actively engaged, done your diligence, asked your questions, probed, and participated in generally helping get the understanding of what Power Corp's doing and what our companies are doing out to the marketplace. For that, I want to thank all of you.
I do say as we move into new leadership, in addition to the strength of our franchises, the last thing I'd like to point out is, you know, we've got James O'Sullivan coming in as CEO of Power. He's going to do a great job. We've really had leadership transition across the group in the last 12 months. I mentioned at GBL, but of course, also it was July first of last year, David Harney taking over as CEO of Great-West Life. Damon Murchison is so well equipped and will do a great job as CEO of IGM.
Really across our three public companies and across at Power Corp, we've had leadership transition within the last 12 months, and I think we're well set up to move forward with the strength of our team. Wi th that, I will close my comments, and I will, operator pass it open. You can open up the lines, and we can do a Q&A. Hello.
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're using a speaker phone, please pick up your headset before pressing any keys. To withdraw your question, please press star then two. Our first question comes from John Aiken with Jefferies. Please go ahead.
Good morning.
Good morning.
Good morning.
Jake, just wanted to take a bit of a different tact. Looking at the expenses for the holdco, the corporates, the operating expenses, bumping along mid to low CAD 50 million on a quarterly basis. I know Q4 had a bit of the compensation bump. Is this a level we should expect going forward, or is there going to be any inflation in terms of expected expenses at the holdco level?
Hey, John. Good morning and thanks for your question. I'd say you should expect kind of the normal inflation around salary. That should be traditional in any sort of business. Over time, that will creep in. The other points I'd highlight is the greatest volatility we see, and you alluded to it a little bit in your question, is going to be around the LTI. As we have stronger performance around the stock, we have had some higher costs associated with that, whether it's around taxes or some of the hedging costs, depending on where performance factors come out. Those would be the greatest variability. The core operating expenses around the team and the investments and the technology up at Power, expect those to grow around the rate of inflation in the economy.
Thanks, Jake. Jeff, just want to pass along my congratulations on you stepping back, although I'm not sure exactly how far you're stepping back. Thank you for all your help.
Thank you, John. I'm not sure either, but we'll see. We call it Hotel California here, so I'll be around to help Jake and help James and the team here move forward in whatever way I can help. Thank you for that.
Our next question comes from Scott Fletcher with CIBC. Please go ahead.
Hi, good morning. I'll also just extend my congratulations, Jeff. We didn't overlap for long, but congratulations nonetheless.
Thank you.
I wanted to ask a question on Unigestion. Now that that's closed and you're launching the Sagard Private Equity Solutions, is there any updated information you can share just on plans for the acquired platforms to complement each other and work together?
Yes. I mean, They will be working together. They are being combined. They're quite complementary. Unigestion has just a terrific reputation in Europe. Their investment focus, although they've got global capabilities, their real strength is into the European mid-market, and they have a very strong investor base in Europe. When you look at Performance Equity Management and BEX, they're more North American-focused, mid-market, strong focus on the U.S., strong U.S. and North American investor base. Although both of them have investors from other parts, they're not uniquely, but those are where their strengths are.
Those two platforms coming together under common leadership, and then going out and being able to both bring their strategies to the investor bases that the, that the other had, and then also bring in the products, and being able to do portfolios that are more broadly based, it's a, it's a real win-win. Then in asset management businesses, whether it's public asset management platforms or private, the cultural issues are always the one that you go, "How's that going to work?" There was so much I would say that here the Sagard team is very good.
Paul III, his whole team they put so much emphasis on bringing teams together and the value add of being part of the Sagard network, and lots of work before the deal was even announced to make sure that that was on side and people were on side, including the way the equity lines up and the compensation lines up. Absolutely. This is not pulling together a string of pearls and hoping that somehow you can call it a business. They are very much making it a business. I think there's going to be really good synergies over time.
That's it. Great. Thanks. Just a quick one then on the GBL. Nice pickup in earnings in the quarter. As they shift more to the direct private investments, just wondering if, like, you could share anything on what we should expect for the rest of the year in terms of the earnings contribution.
I don't really have visibility into that, and I think it's hard when you get into their particular accounting and when you get into a business that's a lot of the earnings are based on asset values. It's really hard to predict that number. Jake, anything you want to add to that?
Yeah, but I don't have great visibility. I wish I did, but it's hard to do. I think Jeff's answer is really good guidance. I think the best way we try to think about those businesses is how we present them with Great-West and IGM being the earnings-based ones and GBL being a net asset value business. We look for it to accrete net asset value. It's a trickier model on the P&L lines, just given the consolidation accounting that Jeff alluded to.
You know, my experience is that the NAV businesses tend to create more noise than anything else. You know, some of the oddities. I shouldn't take my last call to bash the accountants, but hey, why not? You know, in some of the accounting I've got accountants around the table here, just understand I'll be gentle. As some of those, you know, sometimes you get the underlying asset value going up, like in Wealthsimple, we get the underlying asset value goes up when we've got an upwards mark, but we consolidate.
We don't enjoy the growth in that upwards value, but we have a minority interest, a non-controlling interest that we mark to market. The more the value goes up, the more we have losses. Go figure. Anyway, that was kind of a broader answer to your question. I think that part of the portfolio, we really focus on NAV growth and earnings. At best, if they're not noisy, I'm usually happy.
Yeah. Okay, thanks. Appreciate the color.
Our next question comes from Tom MacKinnon with BMO Capital Markets. Please go ahead.
Yeah, thanks. I guess, before I start my question, I want to congratulate Jeff on your great career with Power Corp and your, I guess it was PowerFin prior to that and your, also your, great career with BMO Capital Markets prior to that.
Thanks, Tom.
Yeah. The question is, you participate in the Great-West buyback, but you don't participate in the IGM buyback. Why is that? What are you signaling to the market there in terms of the fact that your ownership is modestly increasing in IGM as a result of not participating in that buyback?
Thank you, Tom. A good question. I think all we're signaling is that we are sensitive to the requests of our leadership teams within our major operating companies. To go back a few quarters ago when we started participating in the Great-West Life buyback, I gave some background on that. We are not sellers of either IGM or Great-West Life. In the case of Great-West Life, they are very much and very active on bringing in new shareholders and into their investor base, and they are doing so on a global basis with some very, very large global asset managers who were very interested and have been very interested in participating. One of the issues, while they're focusing on that marketplace, was the relative float of Great-West Lifeco.
Even though it's just a sick under a CAD 70 billion market cap company, you know, we own 68% directly, and IGM's got another 2 points there. There's only 30% available on the float. The float became an issue, saying: "We'd love to buy, but, you know, your float is not really as big as we'd like to have when we participate." Great-West Life found itself kind of as swimming in cash, if I can put it that way. Rather than sitting on it just earning money market rates, said, "You know, we're not going to have a lazy balance sheet like that. We got lots of firepower.
We're going to start doing buybacks. Then we're going, "Well, we don't want to sell any Great-West, so go buy it in the float." They were finding that they were shrinking the float. After about a quarter, they came to us and said, "Look, why don't you at least participate pro rata? You're not reducing your position in Great-West Life. You're maintaining it." Then we can You know, we're only buying back basically, you know, 32% of the float when we buy, o r not 32%, o nly 32% of the CAD we're spending are going to reduce the float. We talked about that. We said, "All right, we'll do that.
It wasn't the plan, but we will respond to that." That was the background, and they've kind of put the monkey on our back. It's a nice problem to have, but all of a sudden, we've built up this cash position kind of before we were really totally focused on what kind of buyback levels we would have. That's exactly the background. That has not been the story at IGM. IGM is not doing the same level of buybacks. They haven't they've been increasing them recently.
They haven't been out there talking to those major institutions in the same way. It doesn't have the same market cap for them to be having those discussions. That pressure hasn't been there at IGM, and therefore, it just hasn't happened. We just haven't been participating in it and allowing them to go out on the market to do so. Tom, that's the background, and I'm not sure if I can add anything to that. Jake, did you want to add anything?
No, I think that that's the fact.
Hopefully, you understand that.
Yeah. Wouldn't IGM want to be more broad-based with their shareholders i f the float skinnies down ?
Yeah.
Why wouldn't some of those same things that, the argument AUM raised apply to IGM?
It could. Yeah, they could over time. A 17 billion-dollar market, you know, market cap company with, what, 7, 8 billion in the marketplace is not talking in the same way to the very largest U.S. and global institutions and pension funds, right? Because they might in some of their funds, but they haven't had the same pressure. Even though their float is smaller, it hasn't been an issue with the public shareholders that have been buying them relative to some of the places that Great-West Life has been talking. Tom, you're quite right. It could come up. I mean, it's possible that at some point, if IGM's continuing to do buybacks and has a lot of excess cash, they might come to us and say, "Hey, we got our float's becoming an issue." You know, that's. You're quite right. That could come in the future. Don't know.
Okay. Thanks very much for the color.
We've been responsive to them is my point. Like, this wasn't us going and We've been responsive to how the management companies have asked of us, what they've asked of us.
Yeah.
Okay.
Our next question comes from Doug Young with Desjardins Capital Markets. Please go ahead.
Hi. Good morning. Yeah, Wealthsimple has become a bigger part of the conversation. You know, Power, I think, owns 54%, 55%, you know, through various entities, kind of like a spider web. M aybe Jeff, just thinking as you think longer term, you know, is there a reason Like, you've done a lot of simplifying over the last 6 years across the Power organization. You know, Wealthsimple is becoming bigger and bigger. Is there reasons to simplify just the ownership structure? Is there benefits, again, longer term, to have, you know, Wealthsimple or Power own the entire Wealthsimple stake? Because you've done this before, you know, with the China AMC being moved around. I'm just trying to think through longer term here you know, as Wealthsimple becomes bigger .
Yep
Like, how do you think about that?
It's a really good question, Doug. Let me give you one more time the background as to how we got there, just so you don't think that we spend our time trying to make our life complicated. It's important you understand the background. Then I'll talk about some of the thinking about why we might or might not do that in the future. The background is simply that at the time that we were launching our Fintech strategy back in 2014, 2015, and we were looking at kind of the threat and the opportunity posed by Fintech, we were all over that at Power Financial. We set up our Portage strategy. We set up, which was a VC in Fintech.
We set up our Diagram incubator strategy with François Lafortune, which has given rise to companies like Dialogue and Nesto and others. We also said we would have our eyes open for some larger opportunities. That turned out that Wealthsimple was the opportunity with Michael Katchen, and in the States, it was Personal Capital. That was different. With both of those, we decided to commit quite a bit more capital as opposed to taking a portfolio with small positions. We ended up funding the first five rounds, I believe, of all of the, not the very first seed round that Wealthsimple did, but the next five rounds, our group was 100% of the funding.
We said to Michael, "You go out and build the business and don't worry about fundraising." IGM management wasn't engaged in that in an active way. They weren't kind of, didn't have capital to do that. They weren't focused on it. It was a Power Financial initiative. The first couple of rounds went entirely to Power Financial. There was another vehicle where Portage had some, and Great-West and IGM were investors in it. We ended up with all these, okay? It was mostly Power Financial.
I was of the view, and in speaking to Jeff Carney at the time, said, "You know, Wealthsimple, this company could be, in 10 years from now or 15 years from now, could be like one of the main franchises we have, and it really probably belongs at IGM more than it belongs at Power Financial." They started doing the next rounds. I can't remember if it was rounds three,four or five, but they started to come in, and we ended up with it in two places. Okay. That's the history. As I said, we don't go out of our way to kind of complicate the way we're structured. To do it over again, you might have put it all in one place. Okay, we are where we are right now, and look at the value that we have.
Wealthsimple is not producing any earnings or cash right now. They're investing money to continue to grow their franchises. Imagine, you know, if all of a sudden you've got a great big asset with a lot of value, not producing any earnings or cash flow. Now IGM has to buy Great-West, you know, Power's position or Power buys, whatever way you go. All of a sudden, you're looking at either issuing equity or using cash to buy an asset that's not producing any cash. Right there, you end up with a bit of an issue in terms of cash flow dilution mix. If, you know, if it comes to us, it's more NAV in our portfolio. If it goes to IGM, all of a sudden it's a big check to write.
It's not like when we did the China Asset Management deal. China Asset Management was creating earnings. They had a dividend payment, they were on a very high growth rate, and it's turned out to be true. They paid cash, we took some of their Great-West Life stock, and the whole thing worked for them, because China AMC didn't quite replace the earnings that they lost on the Great-West Life side. It basically, it had earnings and dividends to support it. That is not true at Wealthsimple. I am just giving you the pieces to how we got there and some of the issues we talk about.
I agree that over time, it would be nice to see an opportunity, I don't know when that would be for the group, to consolidate its position. Whether we can do that or not, I mean, the time will tell, but would have been better had we had it in one place. Hopefully, that gives you some background on. Anything else you want to add to that, Jake?
No, I think, Doug, the only thing I'd add is, and you'll see it this quarter, we're starting to enhance a bit of the disclosure around the business given its size, to Jeff's point, and we're going to continue to try to do that in future quarters to make the visibility of the business given its relative proportion of our overall asset value.
No, it's good color. I mean, it sounds like you guys have thought about it. Obviously, Personal Capital ended up at Great-West, and obviously Great-West is a much bigger entity, but I don't think Personal Capital was earning much at the time either.
No.
It's interesting to hear how you think about it, but I appreciate the color. Then just second question. You know, lots of discussion around private assets, private credit these days, you know, and it's in the paper every day. You know, Jeff or Jake, when you guys take a step back, you know, any concerns, anything that gives you pause, anything that changed the long-term outlook or strategy for Sagard? I assume no, but I'd be curious. You know, you've been in the industry a long time, like anything that you're concerned with that you see that's going on out there?
Not from our perspective. I'll start high level, and Jake might want to jump in a little bit. We have exposure. The impact is on the fundraising, particularly in getting individual investors to participate in alternative assets. That's where the impact is because there's a lot of headlines. Obviously, what's gone on with Blue Owl and a few others. There's concern out there and therefore the market is concerned, so trying to go out and raise money in private credit with individual investors is difficult. In fact, those that have put some of the money in are trying to take them out. I think we've seen a little bit about that, but not a lot. That's the impact.
The actual what's going on in the markets, we have not either in Sagard or in Northleaf that has a private credit capability or on the balance sheet of Great-West Life that's got some private credit or even in the seed capital that Power Corp has, which I think is about CAD 100 million in private credit. We don't have credit concerns at this point. Our Sagard and our Northleaf, and therefore our seed capital, I mentioned earlier, we're all mid-market focused. Northleaf is a mid-market, they're mid-market. Sagard Private Credit is mid-market. Where the issues have been in private credit have been around some of the larger players, particularly in the SaaS and the software space. We just don't have a lot of exposure there.
We've got a lot more, I'm going to say, nuts and bolts companies. They're more basic companies, where our portfolios, and I'm not speaking with 100% clarity, but we've gone through them at Great-West, spoken to the credit managers. We're not seeing a lot of credit problems. We're not seeing credit problems, period, across our private credit portfolio. It's more of a market impact for us ourselves. That's my overall comment. We'll get through it, we're not seeing any credit problems. Anything you want to add to that, Jake?
Yeah, Doug, I'll run a bit of a commercial for the Sagard Private Credit project. As Jeff noted, it's first lien senior secured loans. It's mid-market based, moderate leverage with durable cash flows. They're not seeing any loans in arrears currently. There's no loans ticking at this stage, payment in kind. As Jeff alluded to, there's very minimal exposure to software. They've actually seen good performance. The exposure that Sagard has or the assets they're managing is about CAD 6 billion, largely institutional. I think you get a different reaction in the institutional space than you may see in the retail space. They are out fundraising the third vintage of the institutional private credit strategy, and it's targeting its largest ever size by final close at CAD 2 billion.
I think there's a lot of headlines and private credit can be a very broad term. It can refer to a pretty broad asset class across different sectors, different types of structures. Private placements can get looped in there as well. Some project finance sometimes gets looped in. We just want to be clear that as Jeff and I are commenting, we're very comfortable with our exposures here and on the balance sheet of our businesses. It is in a way that is impacting probably fundraising across the alternative space, but the Sagard product's holding up very well.
Jake, just on that, have you disclosed or do you have, what the net flows, you know, for Sagard would have been in the quarter relative to last year?
Yeah, I've got it in the quarter. I can get back to what the relative comp was last year. They did about CAD 1 billion. The majority was concentrated in the real estate sector. There was some private assets as well as venture capital in there and broad-based retail, but the majority was in real estate in the quarter.
As you know, Doug, most of the funds aren't open funds. They have closes on them. You can't always measure the progress in a quarter because you're building books, and then you close the strategy every, you know, fund 3 comes along two years after fund 2 kind of thing. It's episodic as to when you get the fundraising, other than the open strategies, which tend to be the much smaller retail strategies that are just getting going.
Doug, I'm providing the absolute fundraising of the quarter, not a net flow number like you'd see at IG.
Yeah.
Sorry, to be clear.
Yeah. No , that's good.
Yeah.
Jeff. Sorry, go ahead.
No, go ahead. That's it, Doug. That's it.
No, I was just going to say, Jeff, all the best in the next chapter, and thanks for all your insights and help over the years. Really appreciate it. Thanks.
Thank you very much, Doug. I really appreciate your comments.
Our next question comes from Graham Ryding with TD Securities. Please go ahead.
Hi, good morning. Most of my questions have been asked. It's been a pretty thorough call. I will just ask one question on GBL. Just as since portfolio's transition, it sounds like you're sort of nearing the end or the management team there is nearing the end of their sort of transition efforts. Is the expectation for it to sort of be about a third of the portfolio private assets going forward and 2/3 public? Is that how we should think of GBL going forward?
No, I think you're going to see more concentration on direct private. It's simply that they had an intermediate goal of EUR 5 billion over a time period, which they hit. We haven't heard from them stating new intermediate goals. Directionally, I think you're going to continue to see the public portfolio shrink and more focus on direct. It's not complete. I think there's still lots to do, is the answer.
Okay. How should we think about sort of the earnings impact going forward? Like, is it still going to be, it sounds like low visibility and there's going to be some volatility and noise coming from GBL going forward, even, you know, despite sort of transitioning the portfolio?
That would be my view. I think you're going to continue to see with that kind of a business, It's not really earnings-based, it's NAV-based. You might have missed the answer to the previous question. Yes, I think we bucket it with the NAV portfolio. We don't look to earnings as being the source of value. It's NAV is the source of value, which can go up and down over time, but hopefully over time is going up with good rates of return, but not earnings. I made a quip earlier basically saying when there's no noise out of the NAV portfolio, I'm happy. I don't look to it for earnings. I look to it for good growth and value, but not earnings. I think GBL will continue to be in that bucket.
Okay, u nderstood. Then just on the alternatives platform, like as you think about this year, where are you sort of seeing decent appetite and opportunity for fundraising? What areas sort of continue to remain soft?
I'll take a crack at that, and then you jump in, Jake. I think strength on private equity side because we are mid-market, we've got a lot of secondaries, not just Sagard, but we've got a really good secondaries capability within Northleaf as well. As you know, secondaries and solutions are really well suited to a lot of investors because you end up with a much shorter duration. You're buying into portfolios that have already been invested, as opposed to the start of a new fund that's going to take four or five years to put the money to work, and you're buying a broader portfolio. Good continued demand on private equity side.
On the private credit side, we already talked about it. Good demand on private credit within Power Sustainable. Really good demand on infrastructure credit right now. I don't know if there are particular areas of weakness by strategy other than, as we said earlier, on the retail side, probably what's going on in private credit has set that back a little bit in terms of fundraising, but it's pretty good across the board. Am I missing something, Jake?
Real estate was the strongest asset class in the first quarter, Graham, as I noted. I would say your question is around where you're seeing strength in fundraising. I'd say it continues to be a challenging f undraising market .
Yeah
I think that's an important backdrop. With that as a backdrop, I think the strategy we're seeing around consolidation that Sagard, in particular, has been pursuing for a couple of years now is going to be a theme that continues to play out. Unigestion, as we alluded to, was closed at April second. I think you can expect the team at Sagard to continue to look for opportunities to scale the firm. I think with that, scale matters, obviously. As you get a larger asset base, you're able to spread out the fixed costs across a wider fee-paying pool. Scale is really important here. If it's not happening through organic fundraising exclusively, it's going to happen probably through inorganic strategies as well.
Scale gives you breadth across.
Yeah.
Okay, t hat's great. Jeffrey, congrats on a great career at Power Corp, even though I know you're moving into a different role. All the best.
Thank you, Graham. Appreciate it. Thank you for all of our engagements together. Thanks very much.
Our next question comes from Jaeme Gloyn with National Bank Capital Markets. Please go ahead.
Yeah, thanks. Just wanted to touch on the pace of share buybacks. Obviously, you know, ticking higher this quarter, and to get your views on that pace of return of capital to shareholders through buybacks versus perhaps, say, deploying some of that capital to more asset management acquisitions, following the Unigestion. Just maybe talk through some of that. Thank you.
Thanks. If you heard the answer to Tom MacKinnon's question earlier around how kind of the switch went on in terms of us participating in the Great-West Lifeco buyback at their request back in the fall, I think it was, I think it was August of last year, we were dealing with it. Somewhere around there, we started to participate. We've ended up with a lot more cash than we had originally planned for the reasons that I stated. You know, we end up where we know we want to continue to participate in buybacks. Do you go and all of a sudden all this cash is coming in, do you go and do it all immediately or do you wait and pace it out? We have those discussions. That's something that's clear.
That's a priority for us. The use of capital is not whether we're doing something because Sagard is buying something and we're going to put some capital in to help it or, you know, there's fundraising. I'm giving examples. Wealthsimple does a financing back in the fall of September last year. We put some money in IGM put some money in. Those uses of capital that are M&A related or funding, they're hard to predict. We're not sitting on them and you know that in four months you're going to do. Sometimes you do have some visibility, but generally speaking, they're harder to predict. We've kind of sat on more cash than we might otherwise have guided the street, and that we've talked internally about it. Answering your question, therefore, is difficult.
You're really asking, you know, what kind of deals are we going to do upcoming and what's the visibility on them? Even if we had them, it's hard to talk about. Those are the two things. We basically sit there saying we got buybacks and we have episodic uses of capital. That maybe not crystal clear answer to your question. I'll come to a higher level, which is to say buybacks are a high priority use of capital. We're sitting on more cash than we would normally sit on. I think I mean all things being equal, you would expect higher levels of buybacks going forward than maybe we've done in the past, absent something that comes up and we decide we want to deploy the capital. That's Jake.
You said, Jeff, I thought you said it good during your remarks. At 18.2% discount to NAV, it still represents a great value creation opportunity for us. Each time we buy back a share, it does create value for our shareholders. We don't want to rule out other options at this stage, but buybacks is a pretty simple one that's right in front of us and easy to execute.
Great. Thank you. Congrats again, Jeff.
Thank you, Jaeme.
Our next question comes from [audio distortion] with RBC Capital Markets. Please go ahead.
Great. Thanks for taking my questions. Good morning, everyone. Wanted to start with the dividend and just ask around how you guys calibrate the growth rate. You know, Great-West IGM increased their dividend 10%, Power 9%. Simplistically, I think about it as kind of the Great-West dividend funds the Power dividend. Maybe walk us through, are there other factors that you consider when thinking about how much to increase the dividend?
Thank you for your question, [Berg] . The way we think about the dividend is that the sources of the dividend are the predictable cash flows, and the predictable cash flows are the Great-West Life, IGM, and GBL dividends. Everything else that we might get is episodic, for lack of a better word. We're selling an asset. We're putting some money out to work, et cetera. We then deduct the predictable expenses, being the expenses of running Power Corp and our preferred dividends and the little bit of interest we have on the debt that we have at Power Corp. You end up with basically internally net operating cash that is available for dividends.
We have typically flowed through most of that number, but we've been building up a little bit more of a positive cash flow. We have lagged a little bit the growth rate and the dividends of Great-West Lifeco and IGM. We have that discussion every year. It's not to say that it's, you know, it's cast in stone. If you look at the cash flow, what I just went through the equation, the dividends minus expenses, the pref and interest. You know, we have moved over the last 6 years from a position of having slightly negative cash flow to having quite positive cash flow, and we like that.
As we have been disposing of the non-core, you haven't been around for the last six years, I don't think, on the strategy, but we had a lot of non-core assets. Previous disclosures, we've talked about the fact that we raised about CAD 3.6 billion over the last six years. About CAD 1.8 billion of that was reinvested into supporting the platforms and other acquisitions of assets, and about half of it went to buybacks. We're now in a position because of having lagged the dividend rate and shrunk the shareholder, basically the share base of Power through the buybacks. We're in a positive cash flow position from that predictable the equation I just went through. We're now positive cash flow, and I would think we'd continue to want to increase that cash flow as we move forward.
That'll be a decision will be made kind year by year as we go. There's a long story there. I can summarize it, but we flow through the dividend and have been keeping a little bit more to increase our cash flow, is the short answer.
Got it. No, that's very helpful. Thanks, Jeff. Just on Sagard. I mean, the FRE is negative, but we did see positive operating leverage this quarter. With the close of Unigestion now, could you let us know if that's a profitable business and pro forma, the combined business? Like, could we be at a tipping point where we see profitability later this year or 2027?
Jake is on the board, I will let Jake answer that question.
Great. Good question, [Berg]. Yes, we will start incorporating Unigestion starting next quarter. It is a profitable business, as was BEX that has been acquired. Tough to draw a straight line to say, "Oh, we'll have immediately have profitability in this quarter," because there's lots happening elsewhere in the business. They're building out their private wealth capabilities. They're building out retail distribution. They're strengthening a bunch of the investment capabilities across the platform. The goal isn't a profitability goal at Sagard at this time. It's to continue to get that scale, to continue to get that brand and reputation with capital allocators and get that capital formation strengthened.
I don't want to give profitability guides at this stage, and I don't think we will because we don't want to miss opportunities to make a better business long term. What that means for Power shareholders is obviously we have the largest stake in the GP, and our stake in that GP over Sagard's history has gone four or five-fold in value for us. We want that strategy to continue to play out at this stage where they're creating value at the GP. They're creating value through carried interest. We're getting returns on our seed capital, but we're not going to hold them to a quarter, have to make CAD 5 million or you have to break even at this stage. We want to build a great durable business long term.
Got it. Thanks, Jake and Jeff. Look, great capital allocation, transparency increasing, and ultimately value creation. Wanted to echo the congrats.
Thank you, [Berg]. Much appreciated. Thank you very much.
There are no further questions. I would like to turn the conference back over to Mr. Stephen Hung for any closing remarks.
Thank you, everyone for joining us today. Following the call, a telephone replay will be available later this morning and the webcast will be archived on our website for one year. We look forward to our next update at the Q2 results. This concludes the call, and have a fabulous day.