Power Corporation of Canada

Thank you, operator. Good morning.

and thank you for joining the call to discuss our second quarter financial results. Before we start, please note that a link to our live webcast and materials for this call have been posted on our website at powercorporation.com under the Shareholder Reports tab.

Please turn to Slide 2. 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 3 on the use of non-IFRS measures and clarifications on adjusted net asset value. To discuss our results today, joining us on the call 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 welcome, everyone. Thanks for joining us this morning for our results call.

We are on Page 5, if we can just move it forward. Got all 4 companies in the group that are reporting and have presentations over the last week, including GBL, which did their semiannual calls.

So you've got all of that information available to you. I'd just draw your attention to that.

And with that, I'll move to Slide 6. This is a really strong quarter.

It was strong from an earnings point of view from our 2 main earnings drivers, Great-West Lifeco and IGM. They also had strong business momentum across basically all of their franchises.

So really good from an earnings point of view and really good from a business momentum point of view. We had a quarter continued with our buyback strategy, and we finished the quarter with a very strong cash position for a variety of transactions that occurred.

And so we're in a good position to continue with our stated objectives on share buybacks. And the alts platforms, the alternative asset managers had a very strong quarter contributed to our results from an earnings point of view and also had very strong performance from a fundraising perspective.

And so overall, a very, very strong quarter. I'm not going to spend any time on Slide 7, other than to say it's kind of around the horn snapshot of a lot of the positive developments that are going on across the company.

And with that, I'll pass it to Jake to give his comments.

Great. Thanks, Jeff.

Good morning, everyone. I'm going to begin on Slide 9.

As Jeff noted, Power Corp is happy to report very strong second quarter results. Adjusted net earnings from continuing operations were $883 million in the quarter, and that's up 19% year- over-year.

If we look at that on a per share basis, Q2 adjusted net earnings were $1.38, up 21% from last year, and that delta in growth rate reflects the buyback activity. Turning to the contributions from our publicly traded operating companies.

As Jeff noted, they were strong across the board. Great- West contribution to Power's adjusted earnings was up 12% year-over-year.

The positive results reflect Great-West's fifth consecutive quarter of base earnings in excess of $1 billion. IGM's contribution to our adjusted earnings were up 15% year-over-year as IGM reported record second quarter adjusted EPS.

These results were driven in part by record high AUM&A at both IG Wealth and at Mackenzie. Partially offsetting was the decline in GBL's contribution to Power's adjusted net earnings year-over-year.

The decline in GBL was due in part to a reduction in the fair value of GBL Capital's investments. Meanwhile, GBL's share of earnings from Sanoptis and Affidea were also down.

It is worth noting away from earnings that during the quarter, we did receive $175 million in cash dividends from the previously announced EUR 5 per share dividend related to GBL. Moving to our alternative investment platforms.

Sagard's contribution to earnings was $106 million, up from $27 million last year. The increase was primarily driven by fair value increases in private equity.

Sagard also reported higher net carried interest. Power Sustainable's results saw FRE improvement and a small contribution from its energy infrastructure fund.

The higher loss in our corporate operations and other line this quarter was driven primarily by the negative impact of FX, including U.S. dollar and euro cash balances.

Overall, we're pleased with the group's second quarter results and expect continued progress in the second half of the year. Moving on to Slide 10.

Power Corp's net asset value per share was $64.76 as of June 30. I want to remind everyone that 83% of Power's gross asset value is attributable to our earnings-based businesses, which is comprised of Great-West and IGM.

I'd also just quickly note that this quarter, we've revised this NAV presentation table to show year-over-year versus quarter-over-quarter. We think this timeline looking year-over-year is a better presentation of the view in NAV.

Looking year-over-year, NAV was up 28%. Quarter- over-quarter, it was down 6%.

Focusing on the year-over-year growth, it was led by Great-West, its strong underlying results have been rewarded by share price appreciation. Great-West continues to report base earnings ahead of its medium-term guidance and earlier this week, announced an increased NCIB.

At Investors Group or at IGM, we're also seeing underlying earnings performance that is exceeding medium-term objectives, which is also being reflected in IGM's share price. Turning to the alternative platforms, Sagard's NAV increased year-over-year driven by the fair value increase in venture capital, including Wealthsimple as well as private equity.

The Wealthsimple fair value increase was based on an increase in public market peer valuations as well as Wealthsimple's business performance and revised revenue expectations for the company. The reduction in Power Sustainable NAV related to the sale of 2 assets that generated just over $260 million in cash proceeds for Power during the quarter.

So well less of a contribution on the earnings side. If you look at the NAV table, you can see a reduction in Power Sustainable's NAV with a corresponding increase in cash.

So they're helping us with our available cash. And on that topic, we ended the quarter with about $1.7 billion and we remained active in our NCIB program during the quarter, as Jeff noted.

We repurchased 1.4 million shares worth $74 million, and that takes us to 4.4 million shares year-to-date. We consider about $1.3 billion of cash to be available, which factors in dividends declared by Power and IGM, but not yet paid as well as maintaining a buffer for fixed costs.

And with that, I'll turn it back to Jeff for some more comments.

Okay. Thank you, Jake, and I'll move it right along to Slide 12.

Really strong quarter at Great-West Life. Their earnings -- base earnings growth well ahead of their medium-term objectives of 8% to 10%.

And that was broadly based from different parts of the group, strong earnings growth in Wealth and Group Benefits. It was a strong quarter at Empower, although the base earnings on a reported basis were flat.

We had some noise in the quarter in credit and then some offsetting positives in the previous quarter. So the earnings growth really came from across the franchise.

And that was strong to see, as we've said, we think we have good momentum across the businesses. Great-West Life is really generating a lot of capital at this point.

You've gone from a period in the U.S. market where we were putting together the businesses, building the earnings and also repaying some of the debt.

The cash flows are -- so the debt levels within Great-West Life have been reduced to strong earnings generation turning into cash, which I think the company has done a nice job of illustrating to the market, and that's across the different franchises. So a lot of capital generation, the cash level is built up, and they have announced, as you would have seen earlier this week that the $500 million buyback that they had announced earlier for this year, which is [ substantially ] completed, they've added another $500 million target to the buyback.

And so strong performance and still lots of financial firepower left at Great-West Lifeco in the context of a buyback of that size. So very pleased with the results at Great- West Life.

IGM on Page 13, like just broadly based good news going on across the businesses at IGM. The 2 main earnings drivers in Wealth Management and Asset Management being IG Wealth and Mackenzie had very strong earnings growth, and there were very strong flows and improving flows at both IG Wealth and Mackenzie.

IG Wealth has been in inflows for some time. But the market in and of itself across Canada for funds has continued to improve.

If you want a macro picture, money not going in at this point to as much into cash products into the CD products and moving back into a longer term and higher risk investments. And so that has certainly helped IG Wealth and Mackenzie, but their relative performance is also -- relative shares have been very strong.

So a good flow picture, Mackenzie, in particular, had a strong quarter and improved as the quarter went on. So they're back into inflows on the retail side as well as they've got some strong inflows on institutional, which are more sporadic in terms of how they show up in the flows, but they've got both the retail business and the institutional business firing.

So that's good news there. And then the platforms themselves -- or I should say the -- excuse me, the strategic investments all did really well.

I'll come back to that in a minute. So a good quarter and IGM is also now active in share buybacks as their earnings have been increasing and you've seen that.

I think that was addressed by James in the call, James O'Sullivan in their call yesterday. So let's flip it forward then to Page 14.

Really, really strong performance across the board. Wealthsimple, easy way to illustrate it on this slide, $44 billion in AUM or AUA, I should say, a year ago and $85 billion at the end of a year later, just very, very strong continued growth.

I think we've got 2.8 million Canadians now that they have as clients. So what can you say?

And Jake already addressed the markup and the value at Wealthsimple. Rockefeller also continues to execute its strategy as we had hoped and as they had outlaid to us when we made the acquisition, which we announced in April of 2023.

I think you see that 21% year-over-year growth in their AUA and client assets is coming from broadly based organic growth advisers, bringing in new client money, new adviser joining the platform and market appreciation. Then we flipped to our strategic investments in asset management.

China AMC really having very, very strong flows and gaining market share. I think the market share in the -- in long-term funds is up about 1 point in a 12-month period, which is -- I think it's in the mid-5s to mid-6s.

I don't have the number in front of me, but it's like 3% or 5.4% up to 6.4%. It's -- I'm not off by more than a decimal place there, if I'm off.

So very strong growth in their flows. And as you are probably aware, there have been legislated reductions in the fees across a lot of retail products in the Chinese asset management business over the last couple of years, and they had some modest growth in net income, notwithstanding quite material fee reductions because of the strong asset growth that they're experiencing.

And then Northleaf had another strong quarter of growth, $1.7 billion in fundraising. That's $5.2 billion of fundraising over the last 12 months.

The reason the assets aren't up by that much as they have a number of strategies where there's some strong return of capital to their shareholders. But in a very difficult fundraising environment, they continue to perform extremely well.

So just across the board, great news across at IGM. GBL, Page 15, just as I mentioned earlier, just had their call.

So Johannes Huth, the new CEO, came in, in May. So that's kind of the big news in the quarter, installed himself.

He reiterated and the company reiterated their target of creating double-digit TSRs, and they're doing that through a variety of strategies, but it is essentially monetizing certain assets using those proceeds and bringing a good chunk of that to return shareholder -- return money to shareholders through dividends and buybacks. As Jake mentioned, we just received the larger dividend this quarter and then also reinvesting in private assets as they move forward.

So the NAV was down -- or the earnings, I should say, in contribution were down in the quarter. The NAV and share price has been up because I think that investors are focusing on the changes going on at GBL.

Let me move to the alt platforms, Page 16. I won't reiterate the way we think we can create value.

I would simply say this quarter was a good example of the strategy being validated. We had earnings contributions from the platforms overall.

That was from carried interest. And then the capital itself and our proprietary capital, the investing activities, we had good returns as well.

So a nice quarter, demonstrating what -- what we've laid out here on Page 16 is the value creation strategy. And on 17, continued growth in the assets.

The BEX transaction, which we had previously announced was closed. So that's where Sagard acquired a strategic stake in BEX, which is a secondaries platform, they do secondaries fund to funds, a co-investment.

So that added about CAD 3 billion in AUM to their platform, and Sagard raised over $2 billion in Q2. So again, difficult fundraising environment, but Sagard continuing to get additional net flows into the platform and grow the scale of the business.

So then moving to a big picture at Power. Very pleased that the discount was reduced in the -- over the last period of time.

And I'm sure we'll have a discussion about it, probably get some questions on it. But I think we just continue to hammer away in terms of how across the platform, not just Great-West Life and IGM but within the other parts of Power Corp, we can create value.

And we have continued to expand our efforts to communicate to different shareholders and different potential shareholders. And so we -- maybe save the discussion on that, but we're pleased to see that the discount has come down, and that's another source of value for Power Corp shareholders, whether the discount comes down or whether you're buying the asset base at a discounted value and you get the return through an effect higher returns than we're getting on the underlying assets.

It's a value creator either way, but we're really pleased with the progress we've made. So then that rolls up on the Page 19.

These are obviously very, very strong shareholder returns, and there have been competitive shareholder returns over the relevant periods. And so I think the longer-term returns going back to the end of [ '19 ] would be more in line with where we're targeting as opposed to -- it'd be nice to say we can do 65% every year.

But we don't have a business case that will sustain that on a continuing basis. So I'll talk about that in a couple of slides.

Page 25, I'm just going to state that all of these levers are still in place. There is no change to the high-level strategy.

We're working on all 3 of them. The operating organic levers happen all of the time, 2 and 3 are more episodic as we take and see opportunities to deploy capital, change structure, et cetera.

But they're all in place and they continue to be very much how we look to the future. And looking to the future, I'm going to conclude my remarks on Page 21 by just kind of restating what -- where we are from a valuation point of view and from a value creation point of view.

It is what I stated in the last quarter, but it remains true. Notwithstanding the strong performance of our shares and the assets that we have, Great-West Life and IGM.

Great-West Life and IGM themselves, which are 83% of the value of Power Corp are trading -- have got guidance in the market of basically being able to create 8% to 10% earnings growth, and they have yields that are in the mid-4s. So you can figure out that -- just do the math on that, that gets you a return if nothing changes from a multiple point of view and they execute and that's a big thing to execute is not a given that you're going to create or meet the guidance that they've given, but under ordinary market conditions, assuming that they would meet that with no change in valuation, it creates TSRs and their stocks in the 14% range.

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

And we're showing that we can monetize a portion of that, even though it doesn't create regular earnings. I think we've demonstrated we can monetize and drive cash from that and turn that into growth in earnings and dividends by buying shares back.

And that formula hasn't changed. And so that is the view going forward.

And then the second thing I would say about that is notwithstanding the change in our values. You look at the valuations, and it hasn't been valuation-driven Great-West Life and IGM, I think, are trading about 10.2x, 10.3x consensus earnings for 2026.

So those are not big multiples in the context of strong diversified financial services companies. And in the rest of our portfolio, we're still trading at a 15% discount.

So we think that the returns that we've created have not been on the back of material changes in valuation. Obviously, the discount has narrowed in a little bit here.

That has certainly helped. But we look at where we are from a valuation point of view and say it's pretty reasonable and we've got good plans going forward.

So that's maybe a long way of saying the whole thesis on how we're creating shareholder returns and what we're targeting hasn't changed a bit. I think the quarter is just 1 more quarter of reinforcing that we're on track.

So with that, operator, I would conclude my remarks and invite you to open up the lines for questions from -- for any questions that we might have.

Maybe the first question, over the years, you've sold down noncore businesses. This quarter, there are 2 renewable projects that you sold into a fund.

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

I mean you've received a nice check from GBL, a special dividend from a cash flow perspective, anything else similar to that? And where I'm going is just trying to kind of understand as you simplify the structure as you sell down businesses, noncore stuff and new stuff into funds?

Like I'm just trying to think of extra cash flow that could be coming up to the Power level.

Thank you. You don't mind if I call you Doug?

Yes, no. Doug's good.

Thanks, Doug. So a good question.

So I mean, in terms of assets that are slated for sale or that would be noncore, we've got in the portfolio of stand-alone assets. There's still Lumenpulse at some point.

But that basically is -- that bucket for the most part is gone, is -- that the whole stand-alone and most of that is behind us. So as you look forward, that's not going to be a big source of capital.

But we do have, and I think we've demonstrated that we've got within the seed capital, that produces returns. And that -- and while the returns from the seed capital are not steady like dividends every quarter, they do over time, and through a period over year produce cash flow.

We get returns. We occasionally sell positions.

And so that $2-plus billion is producing we think about a 10% return. That's a source of cash.

We still have some residual energy assets that are within Power that are wholly owned, that could be a source of cash as we move forward. One of the things that we are contemplating as well is on the Great-West Life share buyback that was just announced.

We have not been participating in that up till this point, and that has resulted in us building up our position in -- and increasing our ownership position in Great-West Life. I think our intention would be to support Great-West Life in their buyback activities, which would also put more cash into Power while maintaining our ownership position.

So subject to going to -- and we're very supportive of what they're doing on the buyback program. We want to support them.

So subject to going to TSX and getting regulatory approval, it would be our intention if we do get regulatory approval to participate in the buybacks going forward on a pro rata basis. So we want to think about 68.5% to 8.7% of Great-West Life.

So it would be our intention to do that to support them. That would be another source of cash that would -- once we get through those approvals that would be coming in.

So we've got -- we've always got lots of levers. GBL itself have said that they're going to be continuing to kind of liquidate assets as they reinvest some of it, but return money to shareholders.

That's through dividends. Are there other opportunities going forward?

I would hope so. But we'll see there.

I don't want to -- not leading on any specific plans. Lots of pockets, I guess, Doug, is what I'm saying, lots of pockets to continue to recirculate our capital and fund buybacks.

Perfect. Just 2 follow-ups on this.

The residual energy assets that could be sold. Any size, like sizing of those?

It's hard to parse it out. I can't see it.

But like any kind of size to that?

Less than this quarter.

Yes, less than what we did this quarter. That's the right way to put it.

Okay. And then, yes, I know you still made a question on the buyback.

So your plan would be to proportionally participate not necessarily on your current ownership, but maybe on the 68% -- like the target 68%, like was there kind of a certain ownership stake that you'd be keeping?

Yes. So we -- I think we -- it's a 68.7% we own directly.

Yes. So we would proportionately -- our plan would be to proportionately participate in it once we have regulatory approval.

And I think if you've obviously listened to -- it's Jake here. You've listened to the first part of the call.

Great-West has had amazing results. We haven't seen a big uplift in multiple.

We don't think it's overvalued. We think it's a great investment, not even investment, it's a core piece.

So I would want anyone to read pro-rata participation into being a view on the company. We think it's in great shape, bright future and have full confidence in it continuing to exceed its medium-term objectives and guidance.

The math just makes sense. You sell it into market at market, and you buy back at a 15% discount, I think to your own stock.

Okay. The other one that I had is just Wealthsimple.

Clearly, it's hitting on all cylinders. You had another revaluation this quarter.

Can you remind us, and maybe it's in here, but like the value of Wealthsimple within your NAV. And then like the carrying value and then the future plans within Wealthsimple.

Like is it just status quo? Or is there other rounds of financing that are going to be done?

Just kind of maybe kind of flesh that out.

Yes. So we have just under $1 billion, I think it was [ 990 ] something, directly in [ 970.

]

[indiscernible]

Thank you. Sorry, just under $1 billion.

Thanks for the precision. On directly help like Power Corp and then IGM, not in our NAV, but in the IGM, they have $1.5 billion.

And how much we own on a fully diluted basis is a calculation based upon how much dilution there are for management options. But we're just -- we're in the high 40s is the way I would put it on an expected basis, given expected performance criteria on management options.

So we're the controlling shareholder. I think we have the majority -- the way the voting works, we have a majority of the votes, just based on some of the employee shares not having both.

So that's the status quo. You asked me in terms of what our intention is going forward.

We acquired and funded Wealthsimple, not as a venture capital flipped, but we saw it as a strategic asset that would represent a material part of the Power Corp and IGM franchises over the long term. And we started investing in the company back in the early -- the very, very early rounds.

And that view hasn't changed as to how the company develops, what's their need for capital, what are the potential opportunities to acquire more shares, not acquire more shares, do financings. I mean it's really hard, Doug, to get into a crystal ball gazing, and we will reserve the right to make decisions as to what we do with our stake in the future.

So it's not to say that we're -- we'll take each step as it comes. But the context in which we will make those decisions is that we establish the position in Wealthsimple as a long-term strategic position and that view has not changed.

So I don't know if that's helpful.

Maybe no plans to IPO this, like I've had that question before?

I'm not going to go there. I look at -- I'm not going to comment on what future steps would be.

You will know that you've got the Power Group as the major shareholder. You've got management with a chunk.

And then you've got a number of very large institutions that have come in over the last several years, and those are financial institutions and funds. So the horizon is not forever, as you would know.

So at some point, there's going to be discretions around how do they get liquidity. And all the options will probably be discussed.

But I don't know what the outcome of all that would be. It's premature to have that discussion right now.

And so for me to telegraph one way or the other, I think, is just misleading. I don't know the answer.

Okay. No, that's fair.

And then just lastly, did I hear you right that you had $2 billion of net inflows with the alt platform that's staggered in Power Sustainable in the quarter?

Yes. It was at Sagard.

That's Sagard. And what funds or like what areas were most of that capital goes to?

Yes. So PEM is a recent acquisition that they made.

I think BEX had some inflows as well.

Continuation funds.

Yes. we can get you -- can we get a list of that?

Yes. We can give you a rough breakdown.

It was across PEM, which is the Performance Equity Management platform. They had some continuation funds as well, but we'll come back with a more granular breakdown if you like.

Question really just about the fee-related earnings at Sagard and Power sustainable. If I look at what you've got from asset management activities, you've -- it's negative $16 million in the first 6 months of 2025.

And it was -- I mean, that's better than the negative $32 million in the first 6 months of 2024. But with $36.5 billion in funded AUM in these 2 alt platforms what sort of size do you think it needs to be before we can get kind of some sustainable fee-related earnings from these platforms?

Yes. Tom, good question.

So if I start with Sagard. Sagard has got a lot of assets, but they've also got a lot of strategies.

So you need scalability at the strategy level to create enough contribution. So broad platform, good momentum, great performance, by the way.

So tough fundraising environment. But also because of a lot of strategies, and they continue to build the breadth of their franchise with our products and capabilities.

You still have it so that you've got a slight negative contribution. Their FRE is slightly negative.

I don't have the revenue number on the fee side, and I'm looking around the table, we were around $200 million in fee revenues. It's not far off, okay?

So just if it's -- it's not far off that number. And so their slight FRE loss is kind of single -- low single digits.

So they're close to breakeven. But your question is they need more scale and individual strategies or they could stop adding new strategies because every time they have a new strategy where they think the market is going, you have a J curve.

So they've been on a growth trajectory. So we're not kind of pushing them hard like, hey, you've got to get this to breakeven.

You've got to get it to breakeven. They're clearly got momentum in the market.

They're creating good value through the carry, and we're getting good returns on the seed capital. So overall success story, but that's a great question, it's how do we scale this so that we get it into an FRE positive basis.

When I -- if I flip to Power Sustainable, different issue, really good strategies. They've got 4 strategies.

They've got infrastructure equity, infrastructure debt, which has been launched in the U.S. market.

They've got a Lios Agri fund, and they've got a Decarb fund that they've launched as we -- announced last quarter. So really good strategies.

But there, there is more of a scale issue in terms of needing some fundraising to get more fees on the board to get them to a breakeven point. So bigger challenge there, and that's where the fundraising stall that's gone into the market has hurt them relative to the plans that they had.

In the big scheme of things, the relatively small loss of FRE compared to the earnings that we think we're going to generate on a carry basis and then what we're earning on the seed, it's still a very -- I think it's contributing to us right now, the overall strategy. If you pick on that part, we spent a lot of time talking about it, but it's funding.

So the bottom line of your question is we need funding. And if you ask me, how much funding do we need?

Well, that's a harder question to ask because it depends on what strategy? What kind of fees are coming in?

It'd get very complicated at that point. I hope I answered your question.

That's good color. Your $2.7 billion investment in these.

Is this kind of how much we think this should be at going forward?

So in there, you have our stake in Wealthsimple, by the way, it gets picked up in Sagard. And even though we think of it as a strategic investment, not an alternative asset management investment because the investment into Wealthsimple was sourced out of Sagard.

So it gets reported in their numbers, but we think of that portion of the NAV really is as well as simple and not per se alternative asset management businesses. So if you thought about $2 billion as the seed capital number that we would expect to be, the capital that we have supporting those businesses going forward, that would be about the right number.

We'll launch 3 funds in a 6-month period. And all of a sudden, we put more capital to work, and then we get some returns.

And so the number bounces around. But we talk about a $2 billion number that we're recycling.

Okay. So that kind of means if you're targeting 10% return on that, that means really, your investing activities would be in the area of like $50 million a quarter or something like that if you kept and you want to get that flat.

And then I guess the final question is...

Can I correct you? Can I jump in?

But it's not -- but it isn't $50 million a quarter, okay? Like it will be nothing for 3 quarters and then all of a sudden, you get a distribution.

No, I got. Yes, totally.

And then how do you balance buying back stock versus -- hey, I'm looking at Slide 25, this venture capital fund here with a targeted IRR of 12% to 20%. I want to just -- how do you balance buying back the stock versus putting it into this venture capital thing where you can get -- it looks like a pretty good return on that?

Yes. Well, we're looking at the proprietary capital as being what is required to support the buildup of the alt platforms, and the earnings that we can get from an FRE basis, as you mentioned, and from a carry basis.

And we're looking at the success of those businesses as being the primary goal as to where we put our capital. So while we might have a preference for higher return businesses, higher return strategies, the real discussion is Sagard is saying, "Hey, we really need to launch a strategy here."

We think it's going to be very strategic for us. It's going to complement this strategy.

We're going to be more relevant to our institutional shareholders. This is going to provide us better access into the wealth market.

We need to have this fund. We have a team and we need $100 million of seed capital to get this thing off the ground.

That's what's actually happening as opposed to us going, I think we'd like to pick as a third-party investor this one over that one because it meets our book better. That's the reality.

We're not like an LP or a pension fund trying to figure out with this part of our portfolio. How we meet our long-term obligations to our policyholders or to our beneficiaries, we're actually trying to work with the alternative asset management, Sagard and Power Sustainable to put capital into the things that they need.

And then the 10% kind of falls off the bottom, if I can put it that way. But it will be something like this because they have credit strategies and they have real estate strategies and they have venture strategies.

So it works out that is 10%-plus, and that will change over time. That's actually how it really works.

So I don't know if that answers your question. And generally, the -- can I also say the venture funds and the equity funds, while they typically need a little bit more of our capital as a percentage, they're smaller funds, like your lower-risk funds when it comes to credit real estate tend to be larger funds than the higher-risk VC type funds.

So there's -- that's another phenomenon that happens.

I just wanted to start with the Trump Executive Order to open up private equity for 401(k). I mean not a huge surprise there.

But just wanted to get your higher-level thoughts on that segment of the market and the opportunity that, that could present for the alt platform at Power Group. And have you put anything to work there?

Is there a component of the individual investor market that flows into Sagard today? Maybe some high-level strategic thoughts on that opportunity.

Thank you. It's a good question.

Empower and Ed have really played a very vocal role, if you may have seen in the last 2, 3 months, advocating for allowing private assets into the defined contribution space in the United States. It's $27 trillion of alts right now in the capital markets around the world, and institutions and high net worth individuals are participating, smaller individual investors and retailers having some opportunity to participate, 401(k) in the DC business is a big chunk of American savings, and it's not -- it's very difficult to put those strategies in right now.

So Ed and our group have been advocating it because it's good for the customer and it's good for the channel because it provides more competitive and more balanced returns so that they can participate in it. I think, to think of it as a short-term sort of big income opportunity would be over -- I wouldn't bake it into your models.

So I'll go 2 ways. I'll start from Empower.

And I think Empower and the whole industry will have better returns for their beneficiaries, for their participants, and that's good for their businesses over time. And Empower and the other participants do end up making some money on the products that are on their shelves.

It's a complicated question, but more assets, more returns end up generally making more money. Your specific question is whether our alt platforms will benefit from that.

And I think they will. I think they'll benefit initially through getting some positions on the shelves, but these are fiduciaries in the DC plan, right?

So the 90,000 plan sponsors, i.e., employers who are in the Empower platform, they each are fiduciaries and they make with financial advisers or with the mercenaries of the world, they make the product decisions. So they control the shelves.

But having said that, Empower announced that they were partnering on an alt platform program that they were putting into their products, and Sagard was one of the 7 players that are on that shelf. The 6 others would all be household names that you would know.

So yes, we're trying to use our distribution, might to help promote Sagard and Power Sustainable, and we'll continue to do so. But I think you shouldn't turn to your models and say, wow, that's going to drive massive flows in the short term.

And I'll say one more thing before I got to stop on this topic. Before you get meaningful private assets in 401(k), you're going to need safe harbor for the employers.

And I haven't read the executive order, I saw it in the headlines. We knew it was coming.

I haven't had a chance with our Board meetings to read it. I'm not sure how far that went providing a safe harbor.

And then you got to get adoption by the plan sponsors and by all the advisers. So this is going to be -- this is still spade work, I guess, is the way I would answer the question.

And we'll be talking about it in a few years that it's, hey, that's starting to get some traction. But over the short to medium term, it's still spade work.

I hope that answers your question.

Yes. No, of course.

Maybe more specific, the carried interest that flowed through this quarter. You've had some slides in the past talking about carried interest as well.

Can you just kind of refresh where the balance of carried interest is today? Do you have any other funds or opportunities that could be flowing through in the near term?

Maybe just an update on like the timing, expectations around that. Obviously uncertain, but you do have some visibility in terms of when some of those returns could be flowing in.

Do you want to answer that?

Yes. Thanks, Jaeme.

So we'd be in excess of 100, I think, in total carried interest across the strategies. We can look at revisiting.

We're going to be putting out a supplementary information package in coming quarters, and we'll look to be including that info. In terms of this quarter, we did have a bit of a move up, a portion related to Wealthsimple.

So as Jeff noted, when we were talking about the proprietary capital, there is a portion of the Wealthsimple position across the group that's managed by Sagard. So there was a bit of a carried interest bump resulting from that as well as you would have seen on the investing activity side, there was a really good quarter of realizations in Sagard close to $100 million.

And so there were some realizations, I think, over the first half of the year and some of the private equity strategies, including in Europe that would have added to the carried interest also during the period.

Yes. Okay.

And then thinking about that seed capital of $2 billion. Maybe just talk us through like why is $2 billion the right number to sort of settle around?

Why not more given the opportunities that are presented there? Is it really just a constraint on the supply side, I guess, so to speak from your group?

Why is it $2 billion and not something higher, I guess?

Yes. Good question.

And it's something that we could revisit from time to time. So nothing in business is ever frozen, as you know.

But the -- it's really about doing the trade-offs on the allocation of capital. So the trade-off would go.

We've got capital and we can invest it in our seed capital or we can invest it in buybacks. We've got dividend incomes.

We've got -- we flow through dividends to our shareholders and then we got buybacks versus seed. And the extent to which we make that trade-off depends on the opportunities, but also trying to be sensitive to our public shareholders, and our public shareholders, I think, are very focused on earnings and dividend growth.

And so we've been trying to manage that bucket in a way that reflects what we think our public shareholders want, and buybacks have been part of that equation. So it's another way of kind of going, do we really get proper value recognition within the power world for assets that don't produce steady income, produce maybe very strong returns, but the returns are episodic, they're a bit volatile.

And then they sit there and increasing your NAV and do you really get value recognition for your public shareholders? So we have adopted a strategy to this point that says, well, we're going to -- we think we can build the alternative asset management businesses, we'll support it with $2 billion of capital.

We'll get good returns on it, but we're not going to throw everything at it, and we're going to balance that with the need to be buying shares back, which is in a way a fashion of taking the returns off the seed capital and our other assets and monetizing it by reducing the share count, which increases earnings per share and -- earnings and increases our ability to pay dividends. So it's that -- that's the trade-off.

Good question, when we talk about from time-to-time, of course.

Jaeme, it's Jake. I just -- I'd point again to or point to Slide 24 in the appendix, I think it is.

Our seed capital isn't a precursor to growth here. And so if you adjust for the Wealthsimple on the right side in Q2 '25, that number moves you down sub $2 billion.

We've gone from the original $2 billion we had back in Q1 of 2020, and $3.7 billion in total with third-party. We've been able to go up to $37 billion largely on third-party growth.

So it's not a precursor. As Jeff noted, we're there to support getting these up and running.

And if there is -- it will be episodic, it will ebb and flow and could go higher as more strategies are launched and then come down, but it's not a precursor to growth for them for sure.

Yes. And the last point I'll add on that is when we launched the strategy 5.5 years ago, we did say to the market, and then I turned around and we turned around to the alts platforms and said, we're going to try and grow this on a third-party.

We're going to try and keep our capital constant and recycle it. And so that's been what we've said internally, and we've been trying to work around that parameter.

So -- but nothing is frozen. We can -- things we can revisit as we move forward.

Maybe just on the buyback theme. You mentioned that you are thinking of participating in Great-West Life's buyback scenario on a proportionate basis.

Have you sold into their buybacks in the past? Or is this a different approach for you than what you've done in the past?

Graham, thanks for the question. We have not sold in to their buybacks.

Over time, their buybacks' up until the last few quarters have been principally to basically offset dilution from options. So it's really in the last -- I may not have it exactly, but the last 6 months that they've really stepped up their buyback activity.

We had not participated and that's resulted in our position, our direct position in Great-West increasing from about [ 68.2 to 68.7 ] kind of inadvertently. And it's not that we don't want to own more Great-West Life, but it's not -- we're happy with the position we have, and we're also happy to have the public shareholders with a healthy group of public shareholders is participating with us in Great-West Life.

So we have made the decision as they continue to bring in more capital and are increasing their buybacks to support them in that. And I think that's something they'd like to see us do.

And so we're supporting them in that. And so we're going to make the applications to the TSX and the OSC.

I think to the AMF and the various regulators to participate on it on a pro-rata basis. So it is a change.

But it's all -- but it's kind of new is also what I'm saying, it's not like Great-West has a long history of reducing their float. That's really only in the last few quarters, they started that.

Great. Okay.

That makes sense. I guess the history is more on the M&A side.

And then on the same theme with GBL sort of rotating its portfolio and active on some buybacks as well. Are you planning to participate in that as well?

Or will you just let your ownership stake migrate higher as that plays out?

Yes. I -- we have not been participating in buybacks.

We don't have an immediate plan to participate in buybacks. I think we just watch that one.

We've got a new CEO in place and he's -- and the public -- the strategy they've articulated hasn't changed, but we'll watch the pace at which that strategy gets executed, and I think we'll continue to have that discussion. So I don't want to tilt it one way or the other.

I think at this point, we're participating in dividends. But we will note, we expect there's going to be continued distributions to shareholders through buybacks, and we'll continue to talk about that.

So short answer, no immediate. We have not been participating, no immediate plans to change that.

Okay. Understood.

And then obviously, the discount to NAV has tightened year-to-date, which is I'm sure what you guys were planning and hoping. Can you sort of talk about the drivers there from what you're sort of seeing and hearing from investors?

Do you think this is more the performance of the operating companies and that message coming through? Is it your marketing efforts, your buybacks?

What are the pieces here that are really contributing most to the tightening of the discount? Or is it just a combination of everything?

That is the hardest question that we will get at this meeting, obviously. But it's a good question, and it's obviously hard for us to get in the minds of all the buyers and all the sellers of the stock over a given period of time.

You just can't do it. But we do talk to investors actively.

My own -- I guess a couple of things I would say. I think that there is more confidence broadly with a broader group of investors, both institutional and individual that all the different parts of Power Corp are contributing to value creation.

And I would say, if you go back 5 years ago, the question wasn't, are they are all contributing? It's, what do you guys own anyways?

We don't know. And I think we're well through that phase.

People understand the pieces a lot better, including, I think, the simplification of what's within Power. And I think there's a growing appreciation within the investors that we talk about that the 13% that is not Great-West Lifeco -- and 17%, excuse me, of our asset value that's not Great-West Lifeco and IGM, actually is capable of creating value, and we're capable of monetizing it as per my answer to Jaeme's question earlier.

The second thing, though, is that I do think that there's overall enthusiasm with the momentum across the group. And historically, when there's overall enthusiasm with Great-West Life and IGM, a number of people like to participate in that through Power Corp.

There's -- you can either buy the pieces or you can buy the whole. When you buy the whole, you get a slightly more diversified source of earnings, and you get additional upside from our other assets.

There's greater liquidity. There's a number of reasons why a number of people participate.

So I have also found over the years, generally when the businesses are doing well, you get more buying activity overall and the discount tends to narrow. So like I've said many times, I get to 2% or 3% discount based on the NPV of our expenses here.

And when it's at 2% to 3%, then I think Power Corp is fair valued. And at this point, it's still a mission to continue to chip away at it.

Okay. Great.

And one last. There was just some commentary on sort of your targeting the 10% returns on that proprietary capital.

If going forward, if you could give us some sort of like what you're actually generating from an IRR perspective, that would be -- a number that would be appreciated to be broken out. It would be interesting to see.

It is an excellent question. I agree.

We need to do that, and we are working on that.

Just wanted to follow up on Sagard and the scale discussion. So I'd love to get your thoughts on within Sagard for strategies, VC, PE, credit and real estate, like which ones in your view, are easier to scale, which ones are a bit tougher to scale?

And then maybe we could tie that into with Sagard's M&A strategy. So we've seen recently back, the secondaries platform, there was PEM fund of funds, co-investment platform.

So that's the direction of travel that we can expect for future M&A by Sagard?

Bart, thanks for your question, and it's a really good one. The strategies that are more scalable would be on the credit and the real estate side.

And the private equity strategies that Sagard has and the venture cap. Venture cap is hard to scale.

You can make really good returns, but it's hard to scale. And private equity, we're not in the large cap.

[ Lookout, ] Blackstone, here we come. We tend to be in the small mid-cap part of the PE market and those tend to be niche strategies.

So you make good returns, but they're hard to scale. Private credit and real estate on the other hand, are very scalable.

They tend to be lower fees and you need scale to make money at them, and we're gaining scale, but we're still not at a scale where we're making big contributions. So that's a more kind of, I guess, detailed question to, I think it was Jaeme that I answered the question earlier on.

So then your question was on secondaries and PEM and BEX. And that is very much the direction that where I think Sagard is traveling.

So what's going on in the alt world in general is that you've just had a massive influx and proliferation of managers who are providing primary funds, i.e., your classic go out and raise a credit fund or an equity fund, we're going to make 10 investments of 10% each, and we'll invest over 3, 4 years, and then we'll realize the value and do another fund. I mean that's kind of what we all think of as the model over the last 20, 30 years.

What's going on and what is strongly happening right now is that solution providers are coming up with bundles of fund of funds, of secondaries, of direct investments, direct -- of primary participations and kind of bundling more diversified strategies to meet the needs, either of institutional investors by creating SMAs for them or creating more diversified products that can then be sold into family office and retail channels and wealth management channels. And that's where a lot of the activity is going on, and BEX and PEM are both a result of Sagard's strategy to position themselves in that area, and that is going to be, I think, where a lot of flows go in the future, and they are very much focused on that as a big area of growth going forward.

So I hope that answers your question. Did you want to add to that, Jake?

Bart, were you asking , I think, was the tail end just around M&A pipeline and activity?

Yes, exactly. Exactly.

Yes. Well.

Yes, what you want to say about that? I mean so they're looking, they're always looking and that's where -- that would be an area where they're looking.

And again, they've announced 2 transactions in the last 6 months with PEM and BEX for the last 12 months, I guess. They've both been in that space.

Okay. Great.

That's helpful, guys. And then just one quick follow-up on the U.S.

retirement opportunity. Is there an expense spend required upfront by Sagard to tap into that?

Or is it just a matter of you get on Empower's shelf, and then I recognize the revenue opportunities longer term. But is there anything there to consider for like a build out on the ground in the U.S.

by Sagard or no?

Yes, I think that -- I'm going to answer your question more generally. To get into defined contribution spaces or to get into retail wealth management space does require an investment in distribution.

You're going to have product specialists, you've got to have sales and wholesale teams. You got to have a brand.

You got to have a presence. It is a pretty strong build-out.

And the brands and the positions in the Canadian market are much stronger than our brands would be in the U.S. market.

So it's got to be a very targeted strategy to get into the U.S. DC and wealth space.

Now obviously, we've got some -- we've got some distribution that were associated with down there, whether it's with Empower, whether it's our investment in Rockefeller. But to do it on a broad basis is a significant investment.

So I think our alt platforms will be doing kind of targeted approaches, picking on a number of distributors to start with getting some entry points and getting some momentum kind of -- that would be the strategy. Your question is bang on.

There's a lot of money if you want to go after the retail space in the DC space in a broadly based way.

Thank you, everyone, for joining us today. A telephone replay will be available later this morning, and the webcast will be archived on our website.

We look forward to discussing our third quarter results in November and wish everyone a great rest of the summer. This concludes our call for today.

Thanks.