Power Corporation of Canada

TSX:POW

Earnings Call Analysis

Strong Earnings and Strategic Growth

Power Corporation showcased a robust quarter, propelled by strategic actions and solid earnings across its main subsidiaries, particularly Great-West and IGM Financial. Adjusted net earnings from continuing operations surged to $727 million, up from $588 million in the same period last year, translating to earnings of $1.12 per share compared to $0.88 previously .

Great-West's Milestone and Strategic Investments

Great-West delivered remarkable earnings, surpassing the $1 billion mark for the first time. This underscores the impact of strategic initiatives taken in recent years. IGM Financial also posted strong results, driven by growth in its wealth and asset management segments. Notably, the Power Group's investment in Wealthsimple increased to $1.3 billion from $1.1 billion, reflecting Wealthsimple's solid performance and updated revenue expectations .

Alternative Investments and Platform Progress

GBL's shift from public to private and alternative investments yielded positive contributions, while Sagard benefited from performance and investments in credit and royalty funds. Power Sustainable's earnings remained flat year-over-year. The quarter saw a non-cash impairment charge in one stand-alone business but overall, Power's alternative investment platforms made progress despite market challenges .

Net Asset Value and Share Buybacks

Power Corporation's net asset value (NAV) per share was $53.10 as of March 31, slightly down from $53.53 at the end of December. The company strategically wound down its public equities fund to reallocate resources, boosting cash and cash equivalents to $1.6 billion. Approximately $100 million was spent on share buybacks, reducing shares outstanding and demonstrating liquidity generation capability .

ChinaAMC and Other Growth Prospects

ChinaAMC continued to outperform the industry, increasing its market share to 5.6% from 4.3% in the individual funds market. This growth is attributed to a high savings rate and the shift of savings from real estate to funds. The management team at ChinaAMC has consistently delivered strong performance, contributing optimistically to the group's future prospects .

Strategic Partnerships and Fundraising

In a challenging funding environment, Sagard and Power Sustainable turned to partnerships and acquisitions to grow their scale. Recent partnerships, like that with Great-West Lifeco, have been instrumental. Sagard's assets under management notably increased to $27 billion following acquisitions, highlighting their strategic growth trajectory .

Looking Ahead

Power Corporation remains focused on scaling its businesses and leveraging partnerships to optimize synergy across its assets. The strategic wind-down of underperforming funds, alongside capital redeployments into promising ventures, sets a stage for improved earnings and value growth. The company is well-positioned to balance share buybacks, new investments, and enhanced stakeholder value in the coming years .

Earnings Call Transcript 2024-Q1

[Operator]

Good morning, ladies and gentlemen, and welcome to the Power Corporation Q1 2024 Earnings Conference Call. [Operator Instructions] I would like to remind everyone that this call is being recorded on Thursday, May 9, 2024.I would now like to turn the conference over to Mr. Jeffrey Orr, President and Chief Executive Officer of Power Corporation. Please go ahead, sir.

[Robert Orr, executive]

Thank you, operator, and welcome, everyone. Thanks for joining us for our quarterly results call this morning, and I'll kick it right off. We've got our title page here, and I'm going to move into the most exciting part of the presentation, the disclaimers on forward-looking information and non-IFRS information on the first couple of pages.Joining me today and his first official capacity on his first call as CFO is Jake Lawrence. And Jake, welcome to the call.

[Jake Lawrence, executive]

Thanks, Jeff, and good day, everyone. Before we get into the results, and I turn it back over, Jeff, I just want to take a moment to express how fortunate and how honored I am to be the CFO of Power Corp. It's a fantastic job I've learned in my past 8 weeks, and I also want to acknowledge the great groundwork that's been laid by my predecessor, Greg Tretiak. Greg had a very impressive 40-year career at the Power Group. The last 10 as CFO of Power Corp. So I obviously wish Greg and the rest of the team wishes Greg as well in his continued recovery.Looking ahead, as I've shared with many of you, I'm very excited about the opportunities that I see for Power. I look forward to bringing my experience and skill set to both complement and partner with Jeff, as well as the broader Power Corp team and group of companies to help create further value for our shareholders in the coming years. Since I started back in March, I've had the opportunity to meet and speak with many of the investors that are on the call today, and as we move forward in this journey, I look forward to further engaging with all of you.

[Robert Orr, executive]

Great. Thank you, Jake. We're all looking forward to it. So with that, we'll turn to the results. And I will flip you forward through Page 6, which is information on our companies and different sources recently from different presentations that have been made.And then I'll move it over to Page 7 and just kind of give the overall introductory comments. A strong quarter. We're feeling good about the momentum that we have across our businesses. We're feeling good about the positioning that our companies are in. The businesses, I think, right across from the 3 public companies to our alternative asset management platforms. All of the businesses have very clearly defined strategies. They're executing on those strategies. The environment is pretty good. I wouldn't say it's a perfect environment. We've got some areas where we've got some headwinds out there in the macro world, but it's not a bad environment. But notwithstanding that, we're moving forward growing earnings, growing the businesses. And so that leads us to feel good about what is happening.In this particular quarter, I'll let Jake address the earnings in a few pages here, some of the highlights of the quarter. The Empower integration of Prudential was essentially complete at March 31, all of the defined contribution recordkeeping. Participants had been put on to the Empower systems. There are a couple of smaller blocks of business that were getting cleaned up this quarter. So that's a big step. And Putnam closed this quarter. So that really does mark a really complete retransitioning of the U.S. business over a 5-year period, and we'll talk a little bit more about that as we go through the presentation.A lot of activity on the alternative asset management platforms, there's fundraising going on, but a lot of use of partnerships and transactions to grow scale as that continues to be a big focus. So that's all I really say in terms of my opening highlights, and then I'm going to pass it over to Jake to talk about the financial results. Jake?

[Jake Lawrence, executive]

Great. Thanks, Jeff. Picking it up on Slide 8, Power Corp reported strong earnings of contributions, as you noted from the momentum in our main operating companies, and I'd say particularly Great-West and IGM Financial. Recall that these 2 companies generally drive the entirety of our recurring earnings.Adjusted net earnings from continuing operations was $727 million. That's up $139 million from $588 million in the same quarter last year. On a per share basis, which is really relevant given our buyback activity, adjusted net earnings in Q1 was $1.12. That compares with $0.88 in the same quarter last year. I'll address the breakdown of earnings shortly.Adjusted NAV was $53.10 per share at March 31st, that compared to $53.53 per share at December 31st. The change in NAV quarter-over-quarter slight change was primarily due to share price performance at Great-West, while IGM shares stayed relatively flat. As of yesterday's market close, Power's NAV had increased to $53.43 reflecting strong share price performance at IGM following their Q1 earnings last week. Finally, the Board of Directors declared a quarterly dividend of $0.5625 per share, in line with last quarter, and that's up 7.1% from Q1 2023.Turning to Slide 9 to break down the earnings. Great-West delivered record earnings with strong contributions to growth from each of its segments, including Empower. This marked the first quarter with Great-West base earnings exceeded $1 billion. These results reflect the deliberate strategic actions that Great-West has taken in recent years and it's producing results.IGM also reported strong earnings driven by both of the operating segments, recall that's wealth and asset management. Average AUM&A grew year-over-year despite challenging flows in the market. IGM also saw strong growth in its strategic growth investments. That includes Rockefeller, Wealthsimple and ChinaAMC. In Q1, IGM wrote up its investment in Wealthsimple by 19%. That's reflecting the strong business performance we saw in Wealthsimple, revised revenue expectations for the business and an increase in public market peer valuations. Power Group's combined investment in Wealthsimple is now valued at $1.3 billion. That's up from $1.1 billion at Q4. Of that $1.3 billion, Power share is $490 million, up from $413 million, excuse me, just last quarter.Moving to our net asset value focused businesses. This quarter, GBL results benefited from the shift from public to private and alternative investments. GBL's results included positive contributions from fair value increases in its private equity portfolio as well as a gain on sale of a private investment during the quarter. Also, I'd note that the comparative quarter included expenses related to the revaluation of Webhelp's put right liabilities, an item that no longer exists following its merger with Concentrix.Moving to our alternative investment platforms. Sagard contributed positive earnings this quarter, driven primarily by performance and Power's investment in Sagard's credit and royalty funds. Power Sustainable's contribution to earnings remained flat year-over-year. Both Sagard and Power Sustainable managers continue to make strong progress, building their platforms despite market headwinds impacting fundraising and capital deployment. During the quarter, we took a non-cash impairment charge on one of our stand-alone businesses, resulting in a negative contribution in that line item compared with Q1 of last year.Finally, you'll recall that in prior quarters, the impact of revaluating non-controlling interest liabilities related to Power Sustainable Infrastructure Fund produced a meaningful amount of noise as it generated expenses to Power every time the fair value of the fund increased. After reviewing this item, we've decided to modify the definition of adjustments to include this impact. We believe that this will result in an adjusted earnings metric that better reflects the underlying operating performance and the economic reality of our financial performance.Turning to Slide 10. We break down the $53.10 net asset value per share as at March 31st. Our NAV remained relatively flat compared to December 31st. As mentioned earlier, the slight decrease is mainly attributable to Great-West, whose shares traded down slightly during the quarter, while IGM shares stayed relatively flat.In Q1, Power Sustainable made the strategic decision to wind down its public equities fund and reallocate those resources to other strategies that have been raising third-party funds. As part of this wind down, Power repatriated cash, which is reflected as a decrease in Power Sustainable's NAV line. As a result, Power's cash and cash equivalents grew to $1.6 billion at March 31st. This further demonstrated our ability to generate liquidity from different sources at different points and at different velocities. I'll note that we spent close to $100 million on share buybacks during the quarter, which is reflected in the decrease in our shares outstanding. As I mentioned earlier, Power's NAV has increased to $53.43 as of yesterday's market close, reflecting that strong share price performance of IGM last week.With that, I'll turn it back to Jeff.

[Robert Orr, executive]

Okay. Thank you, Jake, and we'll move forward to the next page here. And that's just a list of our transactional activity. We continue to be very active with the focus over the last few quarters, in particular, on building out the scale of our alternative asset management platforms.And I'll then roll forward to the next slide. You've seen the format of this slide before. I guess, you'll make an observation that there's some past tenses on this slide. It used to be filled with the future tense. We were talking about all the things we're going to do. And all of a sudden, we got like repositioned in the past tense. And it's just to reflect that 4.5 years into the strategy, 5 years into [ really ], as I've described getting back on our front foot, we have really repositioned the businesses in a material way. Great-West Life is significantly repositioned with obviously a big driver of growth in the U.S., but each of the businesses are in a stronger position and experiencing stronger growth.IGM has not only continued to strengthen IG Wealth and Mackenzie, but it's got a group of businesses in each of wealth management and asset management, which represent the very good prospects for enhanced future growth and could be meaningful parts of the IGM franchise in the future. And in terms of the sustainable or the alternative asset management platforms that we have strong progress, but still a work in progress, still a lot of work to do there, but we're very focused on that as hopefully you see.I'll flip over to the page. I was going to say, I'll promise this is the last time I'll show this slide, but I don't want to -- I don't want to commit to things that I'm not sure I can do. As I said, the Putnam has closed this quarter. The Prudential acquisition is essentially the -- all of the synergies have been, or the re-integrations have been completed. The synergies will start to flow in completely in the next quarter. But this really looks back over a period where this business has been substantially repositioned from 3 businesses into one business, the U.S. business. Now Great-West is emerging as the largest contributor to Great-West Life. It wasn't quite there in the first quarter, but it was closed. And given the growth prospects that Great-West has [ enunciated ] for Empower that should continue to grow in share. So really, that's a very meaningful transition, and I will then move on.I'm going to spend a few minutes in this presentation talking about IGM. IGM has gone through, as I mentioned a few minutes ago, a lot of change. They did in December focus on a few things. As you know, they have resegmented their business into wealth management and asset management in order to give investors a better understanding of how they think about the businesses. They've also come out with earnings guidelines and IG Wealth and Mackenzie have got solid growth. The investments in those businesses have continued. They're well positioned. As you know, the environment is not great for either IG Wealth or Mackenzie with what's going on with interest rates, mortgage rates, you've got a part of the client base under pressure in terms of their own financial affairs not going from savings to potentially pulling money out. You've got in this kind of environment with high rates, you've got money going into CDs and other products.When I looked over the past decades when wealth management or asset management goes into outflows, typically it's because there's fear in the market. It's a different phenomenon this time. It's not like the market is full of fear. You just got a lot of people under stress and you've got alternative investments. But those positions -- those businesses are confident they're going to grow at solid earnings rates. And then as I mentioned and as IGM has put out, we believe there's a lot higher growth in earnings that are going to come from the other franchises that they have in those buckets.So I'm going to just touch on 3 of them here. So on Page 15 of the presentation, Rockefeller, a little over a year after we announced this transaction growing really, really well along the lines that we had anticipated. You see here strong client asset growth in AUA and strong adviser growth. The AUA is coming from organic growth, inorganic growth, meaning advisers who are joining and then market growth. So terrific progress to Rockefeller.Wealthsimple, Jake already mentioned, as did IGM on their call that we've written up the value of Wealthsimple, I think that's a second write-up over the last few quarters, and that's just because the business continues to perform exceptionally well. Very high growth. If you look at the client count on this slide, 2.36 million Canadians now [ our ] clients are Wealthsimple. It's across a myriad of different services and products particularly when you get in the under 40 age group, the penetration is quite meaningful. Mike and his team are doing a great job, and we're thrilled with the performance of Wealthsimple.And then ChinaAMC, it just continues to perform really well. The management team there is doing a great job. First on the left of this slide, you'll see that the ChinaAMC's AUM has grown, those bars are just going back to the start of '21. That's quarterly growth, not annual growth. The industry is growing, but ChinaAMC is growing faster than the industry. You see its position on the right side. It's got a 5.6% market share of the Chinese market. That's up a full percentage point from a year ago. And second bullet point there you see on the individual side of the market, the share has grown from 4.3% to 5%. They've moved into a #2 position when it comes to individual funds. So continued strong growth.The overall industry here is benefiting from some of the difficulties that the economy is facing in China in the real estate sector. So real estate has been a big focus of Chinese savers for many decades. Some of that money is now flowing into the funds industry. Savings rate is continuing to be very high and the industry and ChinaAMC, in particular, is benefiting. So I think it goes back to 2011, if I'm not mistaken, when we made our first investment in ChinaAMC. This has been a great investment for the group, and we continue to be very optimistic about the future prospects.Okay. I'm going to then spend a couple of comments on our alternative asset management businesses. I mentioned earlier, in a difficult funding environment, the both Sagard and Power Sustainable capital are turning to other means of growing their scale. Sagard did the partnership that they announced last year with Lunate and with BMO. And then you saw that Power Sustainable Capital announced earlier this week its partnership with Great-West Lifeco. In addition, Sagard has done a couple of acquisitions.In particular, on this point, when you see the funded AUM slide on the right of this slide, you see it's jumped up quite dramatically to $27 billion from -- I think it was around $15 million, if I'm not mistaken on the slide last quarter. In the Performance Equity acquisition, which was the fund-to-fund and secondaries platform that was announced by Sagard. The position the Power -- that Sagard has in that, I think it's 38% ownership with a hard option for it to get over 50%. We've determined we're going to -- we need to consolidate that both for financial purposes, but also here, you see the AUM is included in Sagard numbers. So that adds is about USD 9 billion in assets. It adds about $12 billion.And you see the growth in the management -- in the assets under management of our platforms going back to the first quarter of 2020. And obviously, a very strong growth, and it's all been done through third-party funding, huge growth in third-party funding, which is exactly the strategy that we announced. The -- you'll see the Power's capital steady at $2.1 billion. We're going to spend some more time, I think, going forward, getting into that a little bit more. That $2.1 billion actually is not the same $2.1 billion it was at the start. There's a lot of velocity to that business. That number has changed because we have taken capital out. We've had returns on the capital. We've reinvested the capital. We've managed it to be flat, but it doesn't mean it's just sitting there in active. It's actually there's been a lot of activity in that. And as Jake mentioned, some of that capital or some of the earnings come out and provide funding that we can use for different purposes, including share buybacks.Okay. And then as we move to the P&L, I think Jake actually commented pretty well on the P&L. You've got -- I don't think I'll add too much. You've got the numbers here, and if you want to come back on questions, we can do so. Last one on the platform is just the partnership this week that was announced by Power Sustainable and Great-West. Great-West is able in working with Power Sustainable and Sagard to tailor some of the strategies that they launched to meet their own needs and get a position where they can provide seed and put capital to work. And that's certainly been true in past strategies. So that has been formalized now into an agreement where Power Sustainable will have Great-West as a partner. You've seen that elsewhere at Northleaf, Great-West has got a 20% stake. I think in Northleaf, you've got Great-West Lifeco again a stake in Sagard. The stake is just slightly below 20%, and it works for Great-West. They get to put capital to work, have influence on what's being done, who's being hired while they -- and get their capital deployed in areas that they're looking to deploy it. And obviously, our platforms benefits because we get committed capital and we get more growth in the platform. So a win-win for everybody, and we're thrilled about that.Page 21, I'm going to go down here and see if there's any points that Jake didn't pick up. And that I think you picked it up in terms of the return of capital and the growth in cash to $1.6 billion. So I think we've got all that covered. And then I'll move forward to Page 22, we track our TSRs pretty quickly, pretty closely. They jump around. It's -- you drop off a quarter of performance and you had a quarter of performance for those of you who are on the line managing funds. You know what that's all about. These numbers are end-date sensitive. We continue to be very focused on returns to shareholders, and we're also a competitive bunch and like to watch how we're doing against our key peers. We're feeling good about the performance, and we'll continue to be focused on shareholder returns.The last few slides just speak to our discount on Page 26, which we continue to monitor. And we conclude on Page 24, with an overall statement that just says we're still executing on the strategy. We're not in the late innings here. We're still in early to mid innings. There's still lots of opportunity to execute going forward. We're feeling good about the direction.

[Operator]

[Operator Instructions] The first question comes from Geoff Kwan of RBC Capital Markets.

[Geoffrey Kwan, analyst]

My first question was, is there any other opportunities to bring in third-party capital into the alts platform, whether or not at like the GP level or ways that they can come in at the LP level that would allow you to reduce the amount of money that you're kind of investing in the various strategies. So it can free up capital that you can do things like, for example, more share buybacks?

[Robert Orr, executive]

Geoff, thanks for your question. You've seen 2 of those transactions in the past few quarters. And there's other parties that are always kind of in conversation. But I wouldn't -- so you're asking there's other opportunities to bring in other GPs. I guess the answer is yes, but I don't want to leave anyone with the impression that we've decided we're going to do more transactions when those will be evaluated first and foremost by the Sagard and Power Sustainable Capital teams, and then we obviously get involved because it changes our percentage ownership. But I don't want to leave the impression that, yes, we're about to do a bunch of others. There's a lot of conversations that go on. It's a tool. Expectations there that may or may not happen.We are being really careful in ensuring that we rotate the capital that we have that's underpinning these strategies. We not necessarily have a decision or are trying to reduce it. Those are decisions we make actively based on the opportunities. So for example, we've got some strategies particularly in Power Sustainable Capital, which is we've been focusing. As we've said from the beginning since for over 4 years, and we're going to put our money where we can get third parties to fund the growth. Power Sustainable Capital has got some ideas and some strategies that thinks it's going to be able to launch where we can really fund them with third parties. But we'll put capital into those strategies to get them seeded.So what am I saying there? I'm saying, yes, I guess there's opportunities, but we're kind of happy with the approach we've been on, which is to recycle the capital we have, take out some of the -- on some of the returns we've had on it and just continue to see the platforms grow. That's still the main strategy, Geoff.

[Jake Lawrence, executive]

And Geoff, were you also wondering if that opportunity exists down at the LP level?

[Geoffrey Kwan, analyst]

Yes. Just I mean for the capital is there instead of -- instead of maybe taking an x percent stake in the fund, you have a lower amount and therefore, like I said, kind of a little bit more capital to allocate elsewhere.

[Jake Lawrence, executive]

Yes. So let me comment on that. It's very strategy specific. So if you are launching a brand-new product, the LPs are going to expect that the sponsor being Power in this case or it could be Great-West is if they have an appetite for the product is going to take a big chunk of the initial fund. And if you're on your second or third strategy, and it's been successful returns, then the LPs will not require as much seed capital from the sponsor. So that's a hard one to answer because, obviously, we'd all like to be adding second and third funds because you scale the businesses, you scale the teams, the economics get better and you don't have to put as much seed capital in. So that's kind of nirvana. But we're also at a stage where we still have to launch and create some breadth in the portfolio to get products that are giving traction. So that's the dynamic at play, and we don't have a hard and fast rule book. It's kind of where does opportunity in the market meet our need and our ability to grow and put teams in place and that's why it jumps around a little bit from fund to fund. I don't know if that answers your question, Geoff.

[Geoffrey Kwan, analyst]

It does. And just my second question was for the 3 non-core assets, you've talked about looking to realize or crystallize value at some point. In order to monetize those investments, how much of it is just wanting to have better financial performance or improvements in the balance sheet versus needing more favorable market conditions?

[Robert Orr, executive]

I think it would be more favorable market conditions would be the -- where you need to underline that. Obviously, we're not going to give away the assets. It's something that's less than their market value. But I think it is really whether there's liquidity and whether there's enough opportunity in the market and not kind of getting in the way of the company's teams own plans and needs for capital. You could look at lion in that way, and I'll just -- it's an obvious one that we could comment on. But lion has been out looking for capital themselves, and we haven't been trying to compete with that in terms of our own ambitions. So we're not getting in the way of their own company development and being a negative for them is a perspective on that.We've tried to be supportive, as I said from the beginning, we changed our strategy. These 3 companies are not financial services, but we've tried to do that in a way that we really protect our reputation of being a great partner of honoring our commitments. And at the same time, I would point out that the buybacks and the freeing up of capital, I guess, it hasn't come from the stand-alone businesses. That's a future opportunity, which we'll get to. But we managed to do a lot of buybacks because of the things I've talked about rotating the capital, creating returns on the seed capital, doing other transactions and raised a lot of capital without having really dented that portfolio in a very serious way yet.

[Operator]

The next question comes from Graham Ryding of TD Securities.

[Graham Ryding, analyst]

My first question is just on the capital that you've received from Great-West for this 20% stake in Power Sustainable. What's the plan? How do you plan to use that capital?

[Jake Lawrence, executive]

The capital will go into the treasury of Power Sustainable Capital and they'll use it for their own operations at this point. So that's -- it wasn't the secondary that we did, they actually put capital in. You have the financials on Power Sustainable Capital, so you can derive from that, that I think we announced the numbers when Sagard brought in outside capital, that Sagard is a bigger company and is -- and a lot more revenues, a lot more mature stage in development. So this is a smaller business. The numbers are less material overall, but capital that came in, went into treasury. I don't know, Graham, if that gets to your question or not.

[Graham Ryding, analyst]

Yes. So just to fund operations going forward. Okay. That makes sense. And then what level of AUM commitment, can you disclose like what Great-West is committed to going forward? I think they've invested already $1 billion into Power Sustainable. Can you disclose what they're committing to going forward?

[Robert Orr, executive]

No, I can't. And I'm not even sure that was an explicit commitment in the agreement. And they are committed to $1 billion, as you know, they're in the infra fund, they've got a little bit in the [ Leo's ] fund. The strategy that the Power Sustainable Capital has launched in terms of the infra debt fund, which is a U.S.-based [ global ] fund led by Tom Murray and his team, they've committed a fair bit of capital to that strategy, which is really, I think, right up their alley in terms of the kind of assets that they're looking for. And we're pretty optimistic that, that strategy is once it's got a few investments done is going to get some really good traction with third-party investors. We'll see how that goes, but we're optimistic. That's kind of the main one that they've done so far.And as I said, they have an ability in working with Power Sustainable Capital to say this is something else we'd be looking for and work with Power Sustainable capital to help them go out and actually conceive strategies and look for teams. So it's more than just coming in and saying, we'll spend this much money. It's actually kind of a working partnership here that helps Power Sustainable Capital and Great-West.

[Jake Lawrence, executive]

I do think, Graham -- it's Jake here. I do think their interests are aligned, right? When you become a, call it, approximately 20% owner of the business, your interest is to obviously invest in the business. So no explicit number of commitment to share at this point, but I don't think they became a partner in the GP not to influence or participate at the LP level.

[Graham Ryding, analyst]

Yes. Okay. Makes sense. And my last question would just be sort of in line with your decision here to wind down the public equities platform in China. Are there other areas still within your platform where you see opportunities for further simplification?

[Robert Orr, executive]

I think that most of the strategies that are currently in the alternative platforms are either being primarily funded by third-party capital or we are optimistic they will. I just mentioned the U.S. infra debt fund where it's currently not, but we're optimistic it will. That would be my quick summary on the various portfolios. I don't want to preclude in any asset manager. They're always opening new funds and making decisions to close other funds over time. So I don't want to say we'd never do any of that, but there's nothing at this point that comes to mind.

[Operator]

Next question comes from Jaeme Gloyn of National Bank Financial.

[Jaeme Gloyn, analyst]

First question, just wanted to drill into the Sagard asset management activities profitability. And so we see management fees stepping up quarter-over-quarter, but also exactly in line with the investment platform expenses quarter-over-quarter as well. So just trying to get a sense as to whether there's any sort of onetime drivers in there. Obviously, PEM is included and was PEM sort of operating at like full profitability for the quarter? Or were there some other factors that were at play here?

[Robert Orr, executive]

Jake, do you want to take that? I'll go ahead, and then you can jump in, Jake. Yes. Good question. Thank you. So yes, I think by memory here at $55 million of expenses, $51 million of fees. So a slight loss. There is a little bit of a catch-up that was not in the quarter on a fund that was expected to close. So that probably overstates a little bit the run rate profitability of Sagard is probably not quite at breakeven right now, but it's not -- that gap is overstated because some funds we expect to get in.PEM came in and specific answer to your question, it is above breakeven, not contributing a lot, but it is making money. So it was not a further drag. It would have contributed a little more revenue than expenses. The overall statement I would have, and then I invite Jake to add anything else is that Sagard has been growing, adding strategies, adding staff. The fundraising environment in 2023 slowed quite a bit. They actually took an action and reduced their expenses and headcount, but they grew their expenses through the year and revenues have grown in a comparable fashion but not to the point where the fee-related earnings jumped in they were positive.So they're just under breakeven right now. I'd stop back and look at the forest instead of the trees and say they've got a run rate fee of over CAD 200 million from where they're standing today and that the business really didn't exist 4 years ago. So it's been an incredible growth in breadth and in-depth. But the current environment has been a challenging one, and that's reflective in the time at which they get the positive contributions.Jake, I don't know if you want to add to that?

[Jake Lawrence, executive]

No. The only other favorable variance I'd highlight is the venture capital line, which ties into some of the discussion we've had around Wealthsimple where it had a favorable variance quarter-over-quarter around $7 million, and that's largely related to the performance within that Wealthsimple franchise.

[Jaeme Gloyn, analyst]

Okay. Great. Stay and staying in this lane here with the acquisition of PEM. Can you maybe just refresh us on like what were the key drivers of that acquisition, I guess, like key benefits from bringing in PEM? And what, I guess, what gaps did it fill? And then related to that, what other gaps do you see that you would seek to fill through acquisition in the asset management business?

[Robert Orr, executive]

So PEM is primarily a fund to fund and secondaries player and fund to fund effectively going out and buying a whole bunch of different strategies from different managers. And secondaries, of course, is buying the same thing from LPs that are selling. And what that does, that product suite is very well suited to family office and smaller family office and even getting into the [indiscernible] retail accounts. Why? Because you have diversification. And two, you don't have the [Technical Difficulty]. Imagine if you go in to buy a private equity fund in an institution, and we say, great, $50 million or your $200 million of [ premium ] will come back to you 18x in the next 4 years and draw down your money as we invest it. And then we send you checks over the next 5 years as we divested it. That for an individual investor or family office is really a very, very difficult thing.So the fund to fund business gets the diversification and it doesn't have this long investment period, typically, you invested almost right away. So it broadens out the product suite and the distribution that Sagard has, and that is particularly relevant given that institutional investors are -- they've grown a lot in the last 20 years and alts, the growth rate is probably going to come more from other parts. By saying that, I do not want to say that there are no institutional investors in secondary. And if they also, investors -- institutional investors might go into a secondary to fill in part of their portfolio where they don't have the team themselves. They'll use a secondary or a fund to fund type strategy to fill in their portfolio, but it gets -- it opens up all those doors for Sagard and that's why highly strategic for them. I hope that answers the question, Jaeme.

[Jaeme Gloyn, analyst]

Yes, it answered the PEM part and then the second part was what else could you be looking at in terms of M&A to help drive that asset management platform?

[Robert Orr, executive]

Yes. I mean I'm not going to comment there, the lead on like the Sagard team and the Power Sustainable Capital team will be out hunting and in discussions with people all the time, and then we've got something that they're interested in, they bring it forward and we end up getting in discussions. So I don't want to avoid the question, but I'm not sure I can give you anything that you can have your hat on.

[Jaeme Gloyn, analyst]

Maybe I can word it differently in the sense of as we're thinking about asset management, reaching breakeven and turning it into a profitable business, like how much in your strategic outlook is that driven by organic drivers versus inorganic? Is that maybe a better way to ask it?

[Robert Orr, executive]

Okay. Yes, that depends on the environment, and hopefully, it's both over time. It's like these things get actively managed. You have a lot of tools in your toolbox, and if you're in an environment of bad fundraising, you're using one tool more than you're using another. If we get back into an environment where there's lots of fundraising, the team is going to quite naturally spend more of their time focusing on organic growth. It's just -- that's what -- that's my answer. It's -- we've got a toolbox and we use the ones that are most appropriate at the time.

[Operator]

The next question comes from Phil Hardie from Scotiabank.

[Phil Hardie, analyst]

Want to start off seeing a big picture question and kind of revisit a theme. But I guess if you look back to the slide back and you consider, I guess, all the changes across the Power Group for the last 5 or so years, what any now do you think we're at in terms of maximizing some of the operational synergies across that broader group? It feels like quarter-to-quarter, there's new transactions, new strategic agreements. What do you think is ahead of us?

[Robert Orr, executive]

Well, that's a tough question to ask. I think let me first look in the rearview mirror. A number of the transactions that we did between the group was to kind of put things in the right place. And it wasn't because it was necessarily an error in the first place, but just the market has developed. Examples of that would be, if you look at the sale of Great-West Life's asset management business, GLC to Mackenzie. That has been a strategy for Great-West Lifeco and Canada Life for a long time, but scale required and the scale that they had in asset management, they were -- was not being optimized, whereas Mackenzie was in a better position to utilize the scale, provide better performance, et cetera. So that was an obvious one.ChinaAMC was another one. We didn't start off with a view that we should have the asset in 2 places. I think I've told the story before, we actually wished when CMAC first came in 2011 that we could have had IGM be the buyer. It was within the fund and asset management business, and that didn't work out because of regulations. And we were able to buy it there. So we'd have to go into Power Corp. And then when IGM was able to buy, we ended up having it in 2 places. So there was a -- what are we doing with this asset in 2 places, let's simplify it, put it in one place. So a lot of the transactions were in that nature. Are there any of those left? Yes, I would say there probably is. If we -- if you look at the way, Wealthsimple is positioned, it's in 2 places that was because it started off as part of our fintech strategy that we were driving at our financial. And as we got into subsequent rounds of funding, it's clear that this company was going to become something real and maybe that belongs more in our operating businesses and up at Power Corp.So there's an example of, we're in 2 places. Does that ever get moved? And I do not want to create a speculation that we're about to announce that, please, in answering your question, but there's -- we still got some opportunities for those kinds. The second kind of transaction are the synergistic ones where the companies have an ability to work together either by providing their product through the distribution of the other organization or -- and they cooperate. And that there continues to be a lot of opportunity to basically take the distribution we have at IGM and the distribution that we have at Great-West Life and see where there's opportunities to distribute each other's products. And then between our alts platforms and the needs of Great-West Life and the needs of the clients of IGM, there's lots of synergies there that we're going to continue to -- continue to try and monetize for the benefit of everybody, clients and the shareholders of all the group. So that's my summary of what we've done, and I want to see going ahead, Phil.

[Phil Hardie, analyst]

Excellent. Great color. Maybe one follow-on. I think I remember the question you had this morning are more, I'll call it, near-term capital priorities and kind of thoughts. And the same thing, I just want to keep in this big picture a mid- to longer-term theme. But can you talk about, call it, mid- to longer-term capital rebalancing. Again, how you kind of look at balancing between investing in new growth at Power, [ deeper ] retiring preps, buybacks, increasing, decreasing stakes in Great-West and IGM. Again, more in the context of kind of 3 to 5 years out. So how does this look in the midterm?

[Robert Orr, executive]

Yes. So good question. I'll say the -- let me answer the question that you didn't ask, which is in the short term, we're balancing buying shares back. We're trading at a 26%, 27% discount. That is clearly creating benefits for shareholders. I think I mentioned on the last call that if you just looked at the buybacks over the last few years, most of which came in the last 2 years because during COVID, we just kind of suspended the buyback activity. I think I made the comment we've done the math that we had $72 million additional cash flow that would not have been there had we not bought the shares back and that was available to and contributed to the increase in dividends that we're able to comfortably fund at the Power Corp. level. That would also be true in terms of buybacks, increasing our earnings per share and then buybacks obviously increasing the NAV because there's an arbitrage going on when we take cash at an NAV and we buy shares back at $0.75 on the dollar, you buffer anything.So lots of benefits to buybacks, but we're not planning on the growth of the business simply to return all the capital to shareholders and buy it back. We're in the business of trying to also build businesses that can create, firstly, earnings second -- excuse me, excuse me, first and foremost, value growth. Second, earnings come and then third, cash flow comes is kind of the sequence. And we are very much looking to balance that Power Corp. businesses that can do that, create value, create -- ultimately, earnings and create cash flow.Your question about buying more of Great-West or buying less of IGM. That's a lot harder one to kind of answer on the slide, Phil. I mean, I think typically, when you're making those changes, it's because of some opportunity that exists in the market. We love our position in Great-West. We love our position in IGM. And whether we would increase or decrease, I think, will be decisions we'll make in the future depending on what opportunity might exist. It may be some M&A transaction or some other opportunity that would make the decision at the time. But we're -- they're both long-term holds for our Group, and we're happy with their ownership. But I think about it as far as I want to go in terms of your -- the longer-term nature of your question. I'll stop there.

[Operator]

The next question comes from Tom MacKinnon of BMO.

[Tom MacKinnon, analyst]

I jumped on the call late. So hopefully, this question wasn't asked, apologies if it was. But with respect to Power Sustainable, it looks like some money was moved out of Power Sustainable and into cash. What was the driver of that? Was that not funding some other mandates taking some money off the table with respect to Power Austainable? And how do you juggle then the need to, I guess, invest in these platforms, seed money into these platforms versus put money into cash and try to buy back stock?

[Robert Orr, executive]

Thanks for joining us. Yes. So the strategy there is we're putting our capital in Sagard and Power Sustainable in strategies that can fund themselves for third parties. And there were questions on that earlier. So we've taken money out of one strategy that is really not yet going places in terms of getting third-party funding and it's gone into cash right now about $450 million somewhere around there, $435 million is the number, I think. On that basis, we've taken that out of the strategy. It's currently sitting in cash. As I mentioned earlier on the call, Power Sustainable Capital has got other strategies that we are planning to launch. So some of that capital is going to support new strategies where we think we can be getting third-party funding.And as the primary driver, we've said that, like, we've been saying that for 21 quarters in a row, that's what we're about. We're going to try and take the capital we have. It recycles, you missed the comment. The $2.1 billion that's been kind of the Power Capital under these strategies is actually recycled a lot and we're going to try to come forward with some information on that, and we've taken money out through returns, but we're basically trying to grow the platform, and we have been using third-party capital. That strategy wasn't getting there. So we're redeploying it. Some of it can be used for buybacks, and we're going to redeploy some of it in supporting the business of our platforms going forward. And we've got some product launches that we're anticipating in the near future

[Tom MacKinnon, analyst]

Okay. Yes, that's great. And how do you juggle the need to -- are you just recycling capital and Power Sustainable and Sagard? Or are you in a position where they would, for lack of a better word, kind of remit capital back into cash?

[Robert Orr, executive]

Yes, good question, really good question. They -- their GPs, they run their GPs to managers, and there's a little bit of cash in there. I guess Sagard has some from the ADQ, the Lunate and the BMO transaction, they've been using for acquisitions. But this capital that I'm talking about, the $2.1 billion that we always talk about is not managed by Sagard or by Power Sustainable Capital is managed by power. We're an LP, if you will. We own the GPs, but we're also a limited partner. And so we will invest in their strategies typically as a seed investor, as I was saying earlier on a new fund, we might take a bigger share to get a new fund going on a second fund that's launched, we might take less.So we're getting returns. Sometimes we're selling our interest in those LPs after a period of time. We're only getting money back. It's recycling, and we manage that portfolio. And then we're in discussions with them. Power Sustainable Capital will come and say, "We want to launch a new fund. We think we have a team that's going to join us. We think we can raise $500 million going to $1 billion, but we need Power Corp to put $100 million or $150 million to get the thing going." And then we have those discussions, we negotiate with our GPs, and we make a decision, okay, we're going to support that. That's the process.Power Corp. the folks around this table and our folks here at Power, we manage the LP in support and in discussions with Sagard and Power Sustainable Capital, and we manage that bucket. That's clear. Does that help you?

[Tom MacKinnon, analyst]

Yes, that's a fulsome response.

[Operator]

The next question comes from John Aiken of Jefferies.

[Robert Orr, executive]

Hello, John are you there?

[Jake Lawrence, executive]

John, you may be on me?

[John Aiken, analyst]

Yes. Sorry, it's me and technology, my apologies. Just wanted to follow along from Jaeme's line of questioning in terms of Great-West investment in Power Sustainable. With the injection of capital and their investment in funds and presumably bring in third-party funds through their distribution channels, does this materially change the time line to breakeven for the platform?

[Robert Orr, executive]

I think that it advances it, but I'd hate to make a prediction exactly, that's clearly something we're focused on. We've got Sagard to over $200 million in fees. And we're not quite at breakeven, but we're very, very close from an FRE point of view. We're not there yet with Power Sustainable Capital. We need more scale in Power Sustainable Capital, but we have products that are very ripe for the market. There's a high demand. We've got good teams, and we have the potential to raise a bunch of capital here, bringing in Great-West Life as a partner, getting more commitments from them is going to help that. But I want to stop short of saying, when is it going to break even. I'll just say we're putting a lot of energy and effort into making sure that it gains scale.And I also mentioned -- and what they did is consistent with kind of the playbook of the last few quarters, which is that in a difficult funding environment, we're using partnerships, we're using M&A to try and get more revenue and spread the cost of a broader base, but that's part of the playbook as well. So all of those -- and we're not -- we don't have anything else we're about to announce here, but all of those are part of the playbook in addition to launching good products to get this business to scale.

[John Aiken, analyst]

Fantastic. And Jake, well, first off, congratulations on the move. I know you basically just stepped in the door. I completely understand the change for adjusted earnings from noncontrolling interest in Sustainable. But is there anything else in the works that may be coming down the pipeline or a similar change like this? I mean I know the focus of power on these are actually net asset value, but there are implications in terms of your EPS as you obviously illustrated with this change.

[Jake Lawrence, executive]

Yes. No, nothing complicated at this time. And the change that we did elect to make here, John, and it ties a bit with your last question is we really want to represent the economic performance of these businesses, including Power Sustainable. So we felt it made sense to make the change at this time. It also was a bit reflective of some of the questions we had thought internally around the treatment of it as well as feedback from the investment community. So I think it was a good exchange from the investment community that helped us realize that, that probably doesn't represent the economic performance of the platform most appropriately. So that's why the change was made. And as we look forward, there's nothing imminent on the forefront to change net adjusted earnings.

[Operator]

There are no further questions. I would like to turn the conference back over to Mr. Jeffrey Orr for any closing remarks.

[Robert Orr, executive]

Thank you, operator. No closing remarks. I do thank all of you for being with us today. We look forward to talking to you in the weeks and months ahead, and I wish you all a good day. Thank you very much.

[Operator]

Ladies and gentlemen, this concludes your conference call for today. Thank you for participating, and you may now disconnect your lines.