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Great. This is my first Montreal conference hosting you, so I'm glad to have you here. Let's start off at the high level. As you look at Power Corp today, how do you think about the next phase of value creation, given that the company's simplification of standalone businesses is now complete after you sold the final non-core holding with the announced sale of Lumenpulse Group or LMPG with Q2 earnings? Just looking to get your sense of the next phase of value creation.
Sure. I think before I look forward, I'll just start looking back, and there was a reorganization that took place back in 2019. I think with that, as you've alluded to, we identified some standalone businesses. We came out with the mandate of focusing exclusively on financial services companies, being an international financial services holding company at Power Corp. I'd say in the subsequent years, we did a few things. Largely, entirely under Jeff Orr's leadership, started to scale some alternative platforms. I'm sure we'll talk about that today during our time. Repositioned some of the operating businesses, IGM and Great-West. I know we'll get to that as well. Make some investments that we're really fortunate Power to be able to do with long-term vision, which would be something like Wealthsimple, which I know comes up in most conversations with investors these days.
There were some non-core pieces, and so we've been selling those off. We've been taking those net asset value or NAV-based businesses and frankly, taking the proceeds from them, buying back stock, or redeploying capital into some of those growth financial services businesses. A lot of hard work's been done. I'd say as James O'Sullivan comes in, just a couple of months ago as the new CEO of Power Corp, it leaves a nice slate to kind of plot that next growth of plans moving forward. When we look at where the next areas of value creation can happen across our group, organically, it can happen within Great-West and IGM. Within some of our more strategic investments, whether it's something like Rockefeller at IGM or Wealthsimple, which sits at both Power Corp as well as IGM.
I think that's been a home run already, but still has further growth to go. Finally, our alternative investment platforms are also a spot where we're going to get further value creation. I look at something like Sagard, which 5- 10 years ago, Paul III started building. We've put CAD 75 million of seed capital into the GP, and it's gone up to $400 million US now. So it's been a fantastic investment and really creates a business that's growing and a potential stream of earnings in the future. Lots of value creation can happen, and I'd say the work that's been done in the past really sets the stage for what can happen in the future.
Well, great. Lots to touch on there, and I think we will dig into most of those as we continue the conversation. Let's start with the operating companies more specifically, and we will talk about the key growth opportunities at both Great-West and IGM, because I think those are the ones that people are most focused on.
Yeah.
Yeah.
Yeah, we spend a lot of time discussing those businesses, and they are fantastic businesses. I think Power Corp is very pleased to have the percentage of ownership we have in both of those companies. I think traditionally in these forums, I have tried to start with Great-West Life, just given its scale, but I am going to start with IGM today because I think it is quite interesting. The stock has done quite well in the last year, and I often think it is a story that is still not fully appreciated by the investment community, notwithstanding its performance. I think often when I meet with the buy side, when they think of IGM Financial, they think of Mackenzie, which is the asset management business.
In fact, Mackenzie is a key part of the platform, but that business has been re-architected at IGM Financial over the past decade, in large part under James's leadership, and now under Damon Murchison, the new CEO at IGM Financial. It is a very, very strong wealth management platform. They have fewer clients and fewer advisors than they did five years ago, and they have way more assets. They have done a great job using financial planning to deepen relationships with customer, grow share of wallet, and really grow loyalty with both advisors as well as with clients at the end of the day.
I think I am starting with it because I think it is a business that has been underappreciated within our portfolio of companies, and I want to highlight the wealth business. Under Luke Gould and the Mackenzie team, I think they have done a fantastic job driving for better performance.
Their quant product has been doing fantastic. They have recently moved back to retail inflows, which I think is outstanding. They have had good net inflows, including the institutional numbers, for a few quarters now. That is all positive and sets up a good earning stream. Then they have got their strategic investments. On the asset management side, China AMC and Northleaf both continue to perform as expected. On the wealth side, two very exciting businesses, Rockefeller and Wealthsimple. Rockefeller is an ultra-high net worth platform in the U.S. that IGM owns just under 20%. Did a recapitalization exercise at the end of last year, which took our mark on. It was almost a double in a two and a half year period. That is a business that is an investment. It is not a transaction. We are not looking to flip it.
We may want to own more of it in the future, and it's going to be a great growth engine for IGM for earnings in the future. Wealthsimple, I know we'll likely get to if we follow the script today, so I'll save something on that. Moving to Great-West. Largest piece of the net asset value and frankly, the earnings contribution, the biggest portion of our dividend contributions up at Power Corp. It's had a fantastic run. It's another business that has probably been repositioned over the past decade. Now the U.S. business, Empower, which is one that often gets discussed with the investment community, is in fantastic shape. Delivering good double-digit growth for a strong period.
It's really been a big part of the engine of Great-West being able to deliver strong earnings growth for four, five, six quarters in a row, they've been in excess of CAD 1 billion. Two or three quarters in a row now, they've been north of 19% ROE. Strong growing earnings, highly profitable businesses on the ROE, and it's really led to a strong cash generative business. I think year to date, 90% of earnings have been cash generative, which allows them to have great optionality. They added a defined benefit capability in the U.S., buying Milliman's defined benefit business in the past quarter. We've increased the dividend 10% plus at Great-West at the last dividend increase. They've got plans to buy back north of CAD 1 billion in stock. I think Great-West is quite exciting.
The businesses in Canada, Europe, continue to perform in line with expectations. The CRS business is one that's had a strong year, and it's been just taking advantage of market conditions in the capital solution space. The core businesses, which are a big part of what makes up Power's value, I think they've been great at continuing to deliver strong earnings, but they also have been showing great growth prospects and some good strategic investments for future growth.
Well, there's certainly a lot to like there.
Yes.
As you look across the Power group of companies, now you have a pretty full portfolio of financial assets, financial services businesses.
Yeah
Whether it is insurance, asset management, wealth management, fintech. Beyond just providing capital from the top level down, what does the Power group offer this portfolio of businesses?
Yeah. I think James has done a really good job as he has come in to really help us sharpen our articulation of that value proposition. He has done it around two words, which are active ownership. I think Power historically has not been an outward communicating or an outward active company. The visibility of that active ownership to the investment community has not been apparent. It is not just providing capital. It is active ownership, as we were talking before. This week, I had board meetings for Irish Life and Canada Life UK, traveled back from those meetings yesterday. I myself sit on the board of Wealthsimple. I chair the risk committee at Great-West Life. We get quite involved in kind of steering four key areas of the business.
When we think of strategy at the operating companies, when we think about capital allocation across the group, major risk issues or leadership, Power is quite close to those items. The day-to-day execution of the strategy, the ongoing competitiveness in the marketplace and the responses to it, we have great management teams at companies like Great-West and IGM that deal with it. I think bringing our support, our expertise in, is valuable to those companies. I think part of our job up at Power Corp with our shareholders, is to help them understand how that active ownership is playing out, and so how it plays out at the operating companies, and then how it creates other opportunities.
When I look at IGM, James has been in a great seat to articulate this because he was the recipient of active ownership and what that looked like. It led to IGM making an investment in Wealthsimple. It led to them partnering with nesto around their mortgage business. It led to them working with PolicyBook to sharpen up their capabilities around insurance policies for their clients. ClearEstate planning for their clients. Getting exposure to fintechs. That wouldn't have happened without active ownership and creating opportunities between maybe portfolio companies in the Portage portfolio at Sagard, and some of the operating companies like Wealthsimple. I think over time we need to sharpen how we articulate and probably be a bit more loud in talking about what active ownership looks like. Frankly, give the investment community tangible metrics to kind of measure it off of, evidence of it.
Right. If I think of a recent example that stood out to me was Sagard announced the AI fund—
Yeah.
—where an opportunity for the Power group to sort of collaborate across the different companies. Maybe you could just quickly touch on that, but then also maybe other tangible options where there could be collaboration across the group of companies—
Yeah.
—in terms of actual tangible output.
Yep. Just to set the stage on what Scott's referring to, earlier this year, we announced a CAD 150 million AI fund. That is an investment fund that is going to be led by the AI team at Sagard. CAD 50 million went in from Power Corp, CAD 50 from IGM, and CAD 50 from Great-West. This approach is not unlike what we did with fintech. I am not going to draw many parallels between fintech and AI because I do not think they run as deep as people want other than just them being quite transformative, can be quite transformative to the financial services industry.
This capital will get deployed, we will have an influence on how it is deployed, and it is going to get deployed towards areas of the business that are going to be relevant to Great-West, to IGM, to Power Corp, and to other parts of our businesses at the end of the day. It is not going to go into areas that do not make sense for financial services. When we think about how that collaboration can be strengthened, how it will actually play out at the end of the day, and how we can influence things coming closer together, I am going to use advisors as an example, financial advisors.
Mm-hmm. Yeah.
We would have wealth managers and financial advisors within Sagard's wealth business. We would have the same roles within Empower and Great-West w ithin Canada Life in Canada, also within Irish Life, and then finally within IGM. There are five spots in which we have advisors, five-plus spots, advisors working within the group. If we identify tools within AI that are going to help an advisor be more efficient in how they do their job, tools that through AI, a platform that is going to help them engage with their clients more effectively.
There is a spot where we can then leverage it across five different geographies and businesses within the group. You do not have to build five times and deploy five times. You can hopefully either identify and invest once and then deploy multiple times, taking the learnings from different experiences. That is a good example of where we are able to use homogeneity to be effective.
There are other spots where diversity is a huge advantage. There are lots of AI companies in the world today. There are lots of companies rebranding as AI companies. We have got pilots going on across traditional consultant groups, maybe some of the large accounting firms, but also Mistral in Europe, LEVEL8 out of Switzerland, Palantir out of the U.S. We are able to figure out what tools are going to be best for us, what partners should we be using in our business. That is another area where Power can step in, take a leadership role in the initiatives, work with the operating companies to figure out what is most effective for their business, their current tech stack, their client segment, their business processes, and really have an influence on how decisions are made.
That is really interesting because if you think of how IGM is committing pretty hard to leveraging technology and investing hard in that, I sometimes think exclusively through the lens from IGM because I also cover that company. But it is helpful to step back and say, "Oh, what they are doing there," there are learnings that you can take across the group.
Yeah.
Really interesting.
It's a great point, Scott. There's board representation across the group, and I think one of the powers of that is lessons learned.
IGM gets the benefit of, okay, we're going to spend money on a new tech platform for, let's say it's going to be for our financial advisors in tracking funds and investments. They're going to get the benefit of spends that have been done in other businesses.
Right.
Even on larger businesses like Great-West.
There are some economies that can come out of that, and I think it's our job as active owners to help realize those economies of scales within the operating businesses at the end of the day.
Just to close the loop on the active ownership discussion, is there anything you think that is misunderstood about Power’s role in sort of as the owner, as the top of the house?
I read that question on the way here today, and I was like, I think I want to recharacterize it because there is a lot of smart people in the room, and I don’t think they misunderstand much at the end of the day.
Good point.
I think our job is we need to do a more effective job on demonstrating and communicating what active ownership looks like. I looked at where we closed last night, and Power closed at a 20.1% discount to our net asset value. I kind of smile because 90%+ of our net asset value is publicly traded. So it is not a closed-end fund with a mark to market that is made up. It is largely Great-West, IGM, GBL in Europe, and that takes us to about 90%- 92%. Then 4% of our net asset value is actually cash. Depending on how you want to mark cash, you have about 96% of the value of the company is pretty visible every day at the end.
I look and say we got to do a better job being both active owners and communicating the value of that so that we can see that discount to NAV hopefully evolve from where we find it at the close last night.
Mm-hmm. Yeah. Well, you don't control the discount, but you do control the message.
Yep.
Right.
Agreed.
Let's move on to Wealthsimple. I think it's grown from a relatively small fintech investment into one of the most valuable assets within the broader ecosystem.
Right.
As its scale and importance continues to increase, how do you think about Power's role in the long-term success of Wealthsimple, and what are you most excited about in their next phase of development? There are many different things going on there at the same time.
Yeah. We have 13 minutes left. I will endeavor not for us to do 13 minutes.
I imagine the crowd would probably appreciate that.
I know. We can open it up for questions now. Wealthsimple is an amazing business. My view of it has evolved from, at one point being a supplier to it or a partner to it in banking, to being a member of the board of directors. The Power group across IGM and ourselves would control 55% of the voting economics roughly, and 45% of the equity stack in it. We find ourselves in a fortunate position. It is worth remembering how we got into Wealthsimple. The team at Power was concerned about fintechs and the disruption of core businesses, IGM, Great-West, et cetera. That led to identifying opportunities like Wealthsimple and investing capital, and we invested CAD 300 million at that point. Our economics have grown to north of CAD 4 billion now.
We have taken a little bit of money off the table. That was not because of a view around we thought it was overvalued. We needed to create room in the capital stack to bring in other investors from the space that would add value through their participation, through their board representation. We have been able to buy some more. Last year, there was a capital raise. We participated in that, both at Power and IGM, for around CAD 200 million. We are happy with where we find ourselves. This is not a trade. This is a long-term investment. It is a core piece of the Power group of companies. I mentioned long-term thinking. We intend to be in this business for the long term. We see a bright future for it. I give a lot of credit to the leadership team there.
Mike Katchen, the CEO, Brett Huneycutt, the Chief Product Officer. Maybe it is Chief Commercial Officer, I may have his title wrong. They have done a great job building an agile business that really meets the needs of Canadians. Best evidence of that, IGM and ourselves added some disclosure last quarter. They had CAD 17 billion in net flows last quarter, which was quite substantial when you look across the financial services space. That is across deposits, across investments, it is across digital assets, it is across a variety of different touchpoints in financial services. So it has been an amazing investment to date. We obviously are quite involved in the company, from governance on down. We take an active ownership role again. Paul Desmarais III is the chair. James and myself are on the board, and we have some other independent appointed directors.
I think they do a great job at challenging themselves to become better, to innovate, to meet customer needs. I think they have really reached a point now, +CAD 150 billion in assets under management, where I think at an event like this 5-1 0 years ago, we might have questioned what is the viability of the platform. I think it has become more clear that there is a place for them in financial services, and I think there is a place for them at the table of the major financial services providers to Canadians these days. Canadians have said as much, right? More than one in 10 have a product with them at the end of the day.
Hard to argue with that, given the size of the AUM growth—
Agreed.
—on the platform. Yeah.
It's been quite impressive, and they do a fantastic job with the client.
Before I move on to some questions on capital allocation, I do want to just ask the audience if there's any questions at the moment. No? All right.
All righty.
Moving on. Power's continued to actively repurchase shares, I think, maintaining the flexibility to support growth initiatives across the group. How do you think about balancing buybacks against investments in opportunities, whether that's Sagard, Power Sustainable, or other long-term growth—
Yeah.
—at the Power level?
I think we have lots of options for capital allocation, which I think is fortunate, right? There's some businesses that we'll present today, they may be land-locked, they may be product-locked. We're fortunate. We can obviously invest in our existing core companies to support their growth, or if they're doing an equity raise as part of acquisitions, we can allocate capital there. We can go into new spaces, invest money in an AI fund, right? We've got growth platforms within our business, like Sagard and Power Sustainable, that we allocate capital to. First of all, we're fortunate to have optionality around capital allocation. When it comes to buybacks, they're a great investment tool at the end of the day. It's not overly strategic, so as the CFO sitting up here and saying, "You guys should be really excited about buybacks." It's not, right? It's not strategic.
There's no big model. We don't have a special call to announce an acquisition, and all the accretion numbers in that. We're going to have synergies from this and synergies from that. But it is unbelievable in terms of value creation. If we look at what it's meant for Power Corp over the past five years, we've bought, I think, roughly CAD 4 billion back in stock. Increases our net asset value for the remaining shareholders per share. Allows us to grow our dividends per share, because fewer shares to pay dividends on, dividends coming in. So it's got all kinds of great financial benefits for shareholders. Again, not strategic, not sexy, not exciting. We love it. We believe in our portfolio companies. We believe in the value of those investments.
If the stock market has Power Corp trading at a 20% discount to NAV, I don't know. I'll give you CAD 8. Do you want to give me CAD 10 back? It's a pretty good trade. That's the trade we're doing with buybacks.
When we even look at it on a components piece, the simplest way to look at it is, if you buy a share of Power today in the market, you get CAD 0.98 of a share of Great-West. Almost one for one. You then get the IGM ownership up at Power, you get the Wealthsimple ownership we have, Sagard, Power Sustainable, GBL, and the cash on our balance sheet for free. So buybacks is pretty amazing. If we are trading at a 20% premium to NAV, I'd have probably a different view, and we may not be as active, but the market's affording us a great opportunity to create value, I'd say, both in the near term and in the long term for our shareholders by executing these buybacks.
Right. I think anyone here can understand the value of buying back your own shares at a discount to the NAV—
Yeah.
—but, if it persists, you might as well continue on.
Yep.
Then for anyone that might be less familiar with the impact of participating in the Great-West buyback, can you just quickly walk through that dynamic and how you're planning on using the excess cash that surfaces from that?
Yeah. On the excess cash point, we would have roughly CAD 1.7 billion-CAD 1.8 billion available cash up at Power Corp right now. Quite a substantial amount, I'd say.
A big portion of that cash, north of +CAD 1 billion , has come from buybacks in the past, in 2025 and 2026 from Great-West. We have participated up at Power Corp in those buybacks pro rata. That was a request from the Great-West management team, and I think is good evidence of the partnership between the different companies. Great-West has a lot of capital. I mentioned their cash generation capabilities, their growing earnings, and they want to return it to shareholders. The trick for them is, if they just go buy in the market, they don't want to shrink their public float too much with Power Corp owning just under 70% of the company. So they said, "Will you come and participate pro rata?" Again, those same dynamics with our buybacks, it helps them grow earnings per share, it helps them grow dividends per share.
Lots of virtuous positive benefits from them buying back stock. With us participating pro rata, we're essentially taking most of that cash, almost all of it, one for one, and executing on that value creation opportunity we just articulated. So I sell a Great-West share in the market, I turn around and buy a Power share. So I won't be receiving the dividend from Great-West once I participate in their buyback, but I'll turn around and cancel the Power one, and then the remaining Power shareholders get all those benefits around NAV per share that I mentioned and those ownership interests in the other vehicles. For now, we'll continue to do it. It makes sense. I think we've stated that intention for the buyback that's in place for Great-West through the balance of 2026.
But it is something we can revisit if we would like to use the cash for other purposes or choose not to sell into the NCIB.
Okay, great. In the last five minutes we have here, I want to just shift gears to the asset management platforms.
Yep.
Start with Sagard. I think Sagard has been growing both through fundraising and with some M&A in the business, including some expansion of the private equity capabilities. As the platform enters maybe the next stage of development, what should investors be looking at to assess whether Sagard is on track to creating value for shareholders?
Yep. I'll start with the first point. I mentioned it a bit earlier, they have created a lot of value for us today.
Right.
The IRR to date on our investments have been north of 15% with our seed capital, which is north of CAD 1 billion, and that's been fantastic. The MOIC has been around CAD 1.65 billion. So they're creating value on the seed capital. We're obviously receiving proceeds at the GP, which we own 45% of through carried interest. Then the value of the GP has increased substantially. I mentioned that it's going from 75 at investment to 400 in value for us now. The current value levers are around carried interest, returns on the seed capital, as well as the value of the GP. In the future, over the next five-plus years, Paul III and the team want to scale the business to CAD 200 billion.
It is currently around $50 billion U.S. right now. They are going to continue to do that through consolidation, which I will come to in a minute. Increasingly, the FRE will become a positive marker for that. The fee-related earnings and positive fee-related earnings will be the marker that you should look for over the next five years. Maybe not in the second half of 2026, they delivered it in Q2, but they are at a point where the industry, I think, is starting to evolve or has been evolving from a growth phase to a consolidation phase, and they have been at the front end of that, and we want to continue to support it.
Okay. That is great. Thanks. On the other side of the asset management house, you have Power Sustainable. There, there was a recent announcement that you plan to deploy CAD 10 billion of capital with partners in Canada over the next five years. Can you just discuss those plans and whether you think there is an opportunity for Power Sustainable to accelerate the fundraising given the current positive momentum we are seeing in the Canadian investment landscape?
Yeah. Power Sustainable, which is our second alternative investment platform focused around sustainable energy, sustainable food. They do it through private equity, infrastructure equity, as well as private credit, infrastructure credit. It is a very good business. They currently have four strategies on Fund One, and they are now starting to move to Fund Two, which is an important inflection point in the growth of these GPs because a lot of companies, allocators do not want to allocate to Fund Ones. They are moving on to Fund Two for Lios, the agri-food strategy. They are moving on to Fund Two for the infrastructure energy one, Fund Two for the credit one, and they are starting to deploy capital in their decarb private equity strategy. I think very fortunate timing with where we find ourselves in Canada. Obviously, we had the Invest Canada Summit last week. Power Sustainable mentioned their intentions.
Nice story in The Globe and Mail to mobilize CAD 10 billion of capital around this movement. Whether it is helping build ports or mid-market sustainable strategies, they are going to be able to, through funds they have raised through investors, through debt that they are taking as part of a financing transaction, co-invest opportunities with investors, their goal is to mobilize CAD 10 billion around it. It is not anything new in our financial plans. I think the Invest Canada Summit gave an opportunity to codify that number, put it out there, and really show Power Sustainable's commitment to supporting the growth of infrastructure and other projects here in our country.
Great, thanks. With the last minute we have here, I will ask you to sort of do a lot in a short amount of time. But we've covered simplification, capital allocation, the portfolio across the business. As you look ahead, what are you most excited about for the next phase of Power's evolution?
Yeah. I've passed my two-year point at Power Corp, and there was points probably in my first three months where I didn't think I'd lead that type of answer with the words I'm going to. I'm excited about both momentum in the businesses and optionality. I think if we work through what we've discussed today, looking back, a lot of the work that's been done since the reorg in 2019- 2020 has given us a lot of optionality, right? I think the cash we find on our balance sheet today, CAD 1.7 billion-CAD 1.8 billion of cash. Power has CAD 60 billion of gross asset value and CAD 900 million of debt on the balance sheet with the earliest maturity in 2033. A lot of financial flexibility, 2% leverage up at the deconsolidated basis up at Power Corp. I'm excited about the optionality that exists up at Power Corp.
I'm also excited about the optionality that exists down at our operating companies. Great-West and IGM have never been in a better spot under the leadership teams of CEO David Harney, CFO Jon Nielsen, and the business leads at Great-West. At IGM, I think Damon Murchison stepping in as CEO, leading the wealth business, Keith Potter, the CFO, and Luke on the asset management side. They've never been stronger. Share price reflects it. You obviously cover the name. That gives us great momentum in the business to go out and execute on both organic and inorganic strategies. I think mixing in Power's active ownership and the long-term approach we take to that really allows them to be thoughtful about how they execute that as we move forward.
Great. Well, we are at time. Thanks, everyone, and thanks, Jake, for joining us today.
Thanks, Scott. Well managed on the time.
That's your job.