Power Corporation of Canada

TSX:POW

Earnings Call Transcript 2022-Q2

[Operator]

Good day, ladies and gentlemen. Welcome to the Power Corp Q2 2022 Earnings Call. [Operator Instructions] I would like to remind everyone that this call is being recorded on August 8, 2022.

I would now like to turn the call over to Jeffrey Orr, President and Chief Executive Officer. Please go ahead, sir.

[Robert Orr, executive]

Thank you, operator, and welcome everyone to our Q2 results call, and happy Monday morning to all of you. I'll kick off the call here on the Pages 2 and 3. We have our disclaimers on forward-looking information and on non-IFRS measures. Page 4 with me today is Greg Tretiak, who is EVP and Chief Financial Officer of Power Corp. and between the 2 of us will go through the presentation and answer your questions. Page 6 is just a reminder of various sources of information that you can look through that have been recently released by either Power or our 3 principal operating public subs, and you can reference that material at your leisure.

And then I'll start my remarks focusing on Page 7. So I think 2 key highlights from our perspective for the quarter, really solid earnings in what was a pretty challenging environment, obviously, we have a lot of our earnings across different parts of the group are tied to market levels. Markets were shaky, flows were negative in certain parts of the industry and in certain -- both in Canada and other countries. So a challenging environment, but on the 2 main earnings drivers for Power Corporation being our interest in Great-West Life and IGM really solid results. Great-West Life, really the diversification of its business. The strength of those businesses performed well and offset a lot of the market weakness, which was most pronounced in their results in the U.S. businesses. And then IGM continuing to roll along with its business strategy and showing good results in a challenging environment.

The second point from my perspective, and this was really a quarter really focused on execution. So in previous quarters, we've come along and said, "Hey, we did 2 deals or 3 transactions. We've done a lot of transactions over the last couple of years. The group is heavily focused on execution, not to say we're not focused on what could other deals and other transactions in the future. We're always focused on it, but everybody's got their head down focused very hard on executing the strategy that we've already articulated. It was most pronounced in the U.S. with progress made in Empower.

Again, IGM continuing to move forward. GBL, executing on its strategy in the face of difficult markets, continuing to fundraise at the platforms and then continue to return capital to shareholders. So those are some of the themes, solid earnings results and execution. Page 8, could have picked a whole bunch of slides and examples, you all live it. But on the left-hand side, really challenging markets. And the S&P, I think it was down up to June 30th, I think it was 21%. It looks like it's about 20% of that. I've got 21% in -- from Jan 1 to June 30th in my head. And also the Barclays ag, so the bond market fixed income market, down 10%. So it's been a long time since we've seen those 2 act in that way. And so investors really got whacked in the face on both the fixed income side and the equity side.

And on the right-hand side, is just one example. These are Canadian mutual fund sales. So we are certainly in a lot more markets than just that. But it's a very concrete example. You're looking at the second quarter mutual fund flows for the last 10 years in Canada, and this is the worst quarter Q2 on record. I think if you go back in history, this is the worst quarter that the industry has suffered certainly from a gross dollar outflow point of view. So a challenging environment on the market side of the business. Greg, I'm going to turn it to you to walk us through Page 9 and the next few ensuing pages. Greg?

[Gregory Tretiak, executive]

Great. Thank you, Jeff. I'm going to go straight to Page 10, where we have a little more color on the results for the quarter. And so as you know, in a challenging environment, but delivered solid results from the operating companies. I'm going to go basically down the page on the right-hand column and just give you a few points on some of the significant items here. So first, starting with Great-West Life, as you alluded to, Jeff, a diversified business mix that delivered in this environment, Great-West Life's insurance businesses across all geographies were strong and offsetting some of the market induced weakness in the wealth and asset management businesses. IGM was basically right on Q2 '21.

With the exception of the mortgage business, it was a little softer and seed capital marks that management referenced in their call last week. Otherwise, the earnings would have been right on last quarter. GBL, we've tried to enhance some of the disclosure and give you a bit more insight into that business. Their management focuses on cash earnings and dividends in addition to NAV, but principally, they're focused as a key performance indicator where their NAV is traveling, of course. And they had a negative $44 million contribution to us in the quarter, and that reflects some impairments that they took on their tech book in the quarter.

Down the page, alternative investment platforms as well. We've enhanced the disclosure, I think, hopefully, you'll see those changes. We do cite one of the big reasons for the change in contributions quarter-to-quarter and primarily being the China public equities portfolio where this year, we realized losses on the portfolio, whereas last year at the top of the market, they were harvesting some gains so those are reflected in the results.

But I would -- in the appendix of this particular presentation on Page 33, there is a significant amount of detail on the alternative asset investment platforms, both cigar and power sustainable. But I would invite you to take a look at over the course of the next couple of days. In the corporate operations and others, 2 points to make. Operating expenses, our run rate is about $35 million, which is in line with our post synergy targets as we completed our $50 million synergy target.

So it's running right in line with where we expected it to be. The $76 million number is lower than you might expect, and it includes a $17 million net gain, which is associated with certain options that were designated as cash settled in the quarter. So you would have probably been expecting something a little higher. So just point that out. And with that, I just flip over to the next page, which is Page 11, net asset values. Certainly, our net asset value is reflecting the market environment down from March 31, $49.92 down to $49.92 and just to note that almost 90% of the portfolio is actually mark-to-market. So certainly, that is reflected here.

And with that, I think I turn it back to you, Jeff.

[Robert Orr, executive]

Okay. Thank you, Greg. So I'm going to move forward to Page 12. And let's just pick up a few highlights within the company's go exhaustively. But key message at Great-West Life is that the Empower management of its 3 acquisitions over the last couple of years are on track. MassMutual is the furthest along in terms of its integration, and they are tracking very well. Management reaffirmed their -- that they're going -- expect to hit their synergy target on the expense side and revenue retention is actually tracking ahead of their own models. There are 6 of the 8 waves that have already been completed, and they're on track to complete all 8 by the end of the year. So MassMutual is moving along well. Prudential closed during the quarter. So that's great and adds significantly to the position of Empower in the DC market.

And then the Personal Capital work continues and the tools of Personal Capital are starting to be rolled out, both within the core DC program. So $8.5 million of the participants of now starting to get Personal Capital tools, including messaging tools, so we're enhancing the experience of participants as well as those tools being incorporated into the retail wealth management strategy of Empower on the retail business, where effectively people roll into -- roll out of their DC plan on retirement or when they change jobs. And of course, Empower has got a strategy to try and capture an increasing share of that.

So really good progress and feel very good about all of the original goals that we have announced at the time we announced those transactions. Page 13. IGM overall, I talked about the results. I think really focusing on the strength of the IG Wealth Management business is the core point I'd like to highlight. We have talked about it for a number of years how there's been a lot of investment into that business. Things have changed. It's been a multiyear journey, and we felt we had good momentum building. And in this difficult first part of this year and through the second quarter and into July, the flows at IG Wealth continued to be really, really strong, which is just great news.

And on this page, you just highlight a bit of that on the left-hand side was a slide that IGM used in their presentation. But new flows from new clients continue to grow, and they are attracting clients to the platform at an increasing rate, and it's coming across different wealth bands, including mass affluent and higher net worth clients contributing and the redemption rate on the right-hand side continues to be very solid as you've got advisers basically very pleased with the platform and new advisers joining the platform. I think IGM and their call highlighted some of the marks that they're getting on the different surveys of advisers and on how well the IG Wealth platform has been rated by advisers. And so lots of good stuff happening. We're really pleased with the progress being made at IGM and with IG Wealth in particular.

Greg mentioned GBL, a lot of the earnings was really marking -- related to marks on their private investments in the sector, but they are continuing to execute on the strategy and made a couple of big acquisitions in the health care space during the quarter, continuing to make a rotation and returning capital to shareholders and their dividend is actually up this year and that they've announced for May 2023. So they are -- the cash earnings we're getting from GBL continuing to increase in outstanding the noise around some of the private marks.

Okay. And going to flip Pierre over to Page 15 and just talk about what we've actually done to try and lighten the capital intensity of our model and create cash. At the time that we announced the reorganization and subsequently, we put a lot of focus on the stand-alone businesses and as being a source of capital that we could liquidate and a lot of questions were on it. And that's the way we were thinking at the time. But as we've reflected on our activities, we've actually been looking to realize and monetize assets wherever we can as we move to a more capital-light model. And the standalone businesses actually have been less of a source of capital than we would have anticipated for reasons like I'm happy to discuss. But it doesn't mean we didn't have other tools in the toolkit.

And so what you've got on Page 15, is an example of a series of transactions, the most notable being selling -- having an opportunity to sell our interest in the Sagard 3 fund, some money we took off the table at Wealthsimple, of course. But if you go through here and you see about $1 billion from the start of 2021 through to 2022. And those are pretax numbers. And then another -- the cash we're going to get pending the sale of CMAC to IGM being another source of capital that is still -- and cash has not closed at this point. So we've been taking a lot of steps here to monetize assets. This is not a reconciliation. We actually do invest in the platforms and in the seed capital. And so this is -- but this is more an example of the action steps management has taken to create cash.

And then on Page 16, just adding it up, going back to the same 2021, we returned $2.4 billion of capital to shareholders. Obviously, the dividends are the biggest part of that $1.9 billion, and that was also impacted by the dividend increase we announced last November. But also the buyback program, we bought back about 2% of the participating shares, 2.4% of the public float, $50 million, $11 million. And the bulk of that, of course, is in 2022 because we were not active really in 2021 as all of you, I think, are aware. And at the bottom of page, it's just a statement of our current cash position. So that's a little different perspective on how -- what we've been up to.

Page 17, speaking of the stand-alone businesses, they're continuing to make good progress. Lion, you've got some talking points there, even though the capital markets are less keen on the electric vehicle space, Lion continues to make good progress in building out their business. LMP been affected by supply chain issues quite a lot over the last 1.5 years, but their business remains very healthy. So we've said all along right from the time we announced the reorganization, we're going to support the growth of these businesses. We're going to do what's right for the businesses. We do not have a gun to our head to have a deadline by which time we need to realize value. We're going to do what's right for Power Corp. We're going to do it and our shareholders.

We're going to with right for the partners or the other shareholders in those businesses and the management teams with which we partnered prior to us changing our strategy in late 2019, and we continue to support these businesses and ultimately, we'll realize good value for PowerCorp when the time is right and most opportunity.

Okay. So I'm going to carry on then to Page 18. Greg mentioned there's -- we continue to enhance our disclosure. It's a work in progress, but we're just trying to continue to get greater clarity on these businesses, and you've got some disclosure on the P&L here, including fee-related earnings for the businesses, which is down in the lower left-hand corner in the third line. So that's basically the fees not including carry or performance fees, basically the management fees less the expenses. There is a little bit in the Sagard line where we have $4 million of pretax profit there. There's someone-times in there that probably think of that business more as running at a breakeven at this point.

And then as Greg mentioned, you've got some negative carry going on during this quarter. And we are also trying to put emphasis on the lower right-hand corner, you get the AUM and then you get the AUM, which is funded and unfunded. And you also see the Power Corp. portion of that. But of course, the fees are not on the AUM. The fees are on the fee-bearing capital. Sometimes, the -- so there are some funds that have been committed that have not been put to work yet. There's also on some of like the private equity funds you get paid on the initial amounts, not the carrying value. So the fee-bearing capital is the one that's most important when you're looking at the fee line, [ Tim ], you've got that on the last bullet point. My overall message here, businesses are continuing to make good progress, and we're continuing to try and enhance our disclosure to get greater understanding for all of you.

On Page 19, continued good fundraising notwithstanding a difficult market, continued good progress Power Sustainable closed and agri sustainable agri-food private equity fund in Canada, Sagard is up to $400 million on their Canadian private equity fund, and Portage launched at a late-stage fintech fund, which is just in the initial capital raising stages. So good progress there. Continuing on with the businesses on Page 20, the original capital that Power put in the China strategy back in 2005 is now the seed capital in our power sustainable capital China strategy. And this is just to say, notwithstanding the weakness in the Chinese markets and some losses that we took on realizing positions during the quarter that Greg alluded to with capital we've had in the strategy has been a very good one for Power Corp over many, many years. And it's not just because the market has done well.

The team has outperformed the market both in their security selection and in their asset allocation decisions. And I'll move to Page 21. Just a comment on our fintech strategies, attention around we're taking groups taking a write-down on its wells simple position. Just reiterating, we're just delighted with our fintech strategy. As we've said many times, the strategy started back 6, 7 years ago, and it was primarily to get our group on top of what was happening with technological change, make sure we knew where it was coming from. We had visibility. And we were on top of it, and our operating management teams are on top of it. And this has been a huge success. It's a subjective point, but from the point of view of senior leadership for the group, it's worked well. We made 2 significant investments, Wealthsimple and Personal Capital, where we put more significant amounts of money in and we're delighted with the outcomes of both of those businesses.

And then Portage was really our main window into what was happening in about 5 different verticals around the financial services space that we carried out around the world, and that has not only done well for its shareholders and for the other LPs, but it's also succeeded in getting our group and other LPs, by the way, really up to speed and on top of where technology is impacting from asset services. So very pleased with what we've been creating in our fintech strategies.

And then just to comment on China AMC. It has continued to build its business in a difficult market and grew its assets over the first 6 months of the year and has been really driving its profit forward, its assets forward, really good progress at China AMC the business is doing well. And then on Page 23, comment on the on the discount. We have continued to say that as we execute our strategy and communicate what we're doing and simplify our model and get the market to understand the value drivers that we should be able to narrow that discount, and we continue to make good progress. It doesn't always go in a straight line depending on you good bumps in the market from time to time, but that continues to drop, and we continue to believe that that's an additional source of value as we continue to execute.

For all the market turmoil that's been going on in geopolitics, et cetera, almost like the ESG agenda has been taken off the front page of the paper, Page 24. But of course, it's still there as it should be, and our companies continue to be very focused across the board on moving forward on the various ESG initiatives that are touched pretty well every part of our businesses. So just a note on that, and then I'll wrap up on Page 25. And we haven't changed our strategy. We've been -- we've got a playbook. We're following it. The theme right now is execution, execution. We've got lots of opportunities to continue to drive forward. But this is the playbook that we're following and I'm pleased with the progress that we have been making.

So with that, I will stop the formal part of the presentation, and we can turn it to questions. So I would ask the operator to open up the lines for questions from people who want -- who have questions. Operator?

[Operator]

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

[Geoffrey Kwan, analyst]

My first question was on the China AMC deal. If I recall when the deal was announced at the start of the year, the expected closing was sometime in the first half of this year. IGM mentioned last week that it may be more late this quarter, maybe even slipping into Q4. So just wondering what's changed that's causing the delay for the deal from being completed? And what is the likelihood that the deal may not even get approved?

[Robert Orr, executive]

Yes. So good question, Geoff. You're quite right. We had anticipated that we would be closing earlier, and the cause of the delay is changes different waves of changes in regulations in China that have caused refilings that basically, information that was provided on the basis of the rules that we -- that existed at the time that we announced on Jan 5 have then changed a couple of times. And it's just the nature of the -- there's a lot of change that goes on in their regulations.

So we've had to provide new information and refile. Nothing to my understanding, and I'll ask Greg to confirm that was at all specific to this transaction or to us or to China AMC or to IGM or Power, nothing specific because of us. It was just the rules changed and all of sudden what we filed originally was no longer what adequate, and we had to file different information, and that's taking time. And I think there's still some filings that are pending. Greg, do you want to add any color to that? Did I answer the question accurately or did I miss something?

[Gregory Tretiak, executive]

Yes. No, I thought you've got it. There was a change during the Chinese New Year that I don't think anybody expected. So that came out after everybody returned from Chinese New Year and there was a new regulation or a new set of regulations. And then later in June, there was an addendum to it. And so it is part of the regulatory regimes changes to modernize its regulation with respect to asset managers in the country. As you know, there's been lot of change in China with respect to opening up its financial services market, and this is just part and parcel of that. So I don't see anything that is preventing us from moving forward on the transaction.

[Geoffrey Kwan, analyst]

Are you able to elaborate like what was the regulatory change as you also mentioned there's an addendum?

[Robert Orr, executive]

Greg, I'll let you... Take that to the extent you want to.

[Gregory Tretiak, executive]

Yes. They're quite elaborate. They're filing requirements with respect to the type of filing, the amount of information, the financial statements that have to be filed. It's quite a laundry list, Geoff.

[Robert Orr, executive]

It’s very technical in nature...

[Geoffrey Kwan, analyst]

Yes. So I gather. Second question -- the other question I had was just how do you think about in terms of the co-investments that you have in your strategies as LP investors, do you think of it in terms of whatever strategies that we do end up launching the alternatives platform. This is the ballpark percentage commitment we want to make? Or is there perhaps like an aggregate dollar amount you want to commit to this part of your business?

[Robert Orr, executive]

Yes, it's a great question and one that we spend a lot of time talking amongst ourselves and with the platforms. So the answer is, and I'm not trying to be evasive it depends. So when you launch a new product, and it's the first time a strategy has gone out, the sponsor being Power Corp is expected by the third-party investors to show a real commitment. So think of Portage the first fund, we needed to be a big investor to get it off the ground. By the time we got to the third fund, the LP community, the investor community didn't really need power to put a lot of money in order to launch a third fund. The fund's track record spoke for itself.

So an initial fund requires more capital commitment. That can be different, whether it's an equity fund or whether it's a debt fund and what's the track record of the investment team. Then when we come at it, our overall goal would be to minimize our capital commitment because I don't know how much, notwithstanding all of our efforts to articulate that we're going to get good returns and have got good returns on our LP commitments.

I don't know how much the market fully values that relative to investing in things that produce earnings. And so we are committed to -- we think we're going to get good returns on the capital and we're building the business out to get to profitability, but we're trying to minimize our capital commitment while we do so. And so that's the discussion that happens every time there's a fund launch. And the more there are new products that they introduce, the more we are asked to put some capital in. We're trying to run it so that we are not over time here going to be putting more capital in.

We're trying to run it on a pretty balanced way. But it goes to recent waves at times some years you're putting in and other years, you're taking more out. Geoff, I don't know if that's giving you a sense of it. I think bottom line is that we're supporting the businesses to grow, and we're putting capital in to support the platforms while we're, at the same time, trying to minimize our capital position and change our mix, if you will, at Power Corp to have more -- really at the margin, more earnings driven and less NAV-driven businesses as we go through time here.

[Operator]

The next question comes from Graham Ryding of TD Securities.

[Graham Ryding, analyst]

Sorry, I was on mute there. Apologies. Just with the China AMC assuming the deal does go through with IGM $575 million in cash proceeds, pretax, what your plans being there for that? Would that be further support of your share buybacks? Or how should we think about that?

[Robert Orr, executive]

Yes. Good question. I think we -- we have the number disclosed where Greg, I have the number in my head. I just don't want to get ahead of our disclosure. The after-tax number we disclosed what we think that is in terms of proceeds, I thought we had.

[Gregory Tretiak, executive]

Yes. I think it's about $60 million is the tax...

[Robert Orr, executive]

$515 million. Got it. I knew the number I just didn't -- I didn't want to get ahead of our disclosure inadvertently here. Yes. So $515 is the after-tax proceeds, Graham, is what we've estimated. And the answer is we'll look at it at the time. What we are always doing is trading off buying shares back, which financially is attractive for a number of reasons, and that is our go-to playbook, but we're also looking at different opportunities from time to time. And our subs are looking at different opportunities from time to time.

So we're trading off -- the go-to playbook is managed to our minimum cash level and buy shares back, but would always prioritize buying business, either supporting our principal subs and something that they might want to do or if some opportunity came up at the power level that was financial services. Those would be priorities over buying shares back, but I don't want to create expectations in answering your question that way. I'm just stating that would be our priority. But in the absence of that, buying shares back would be the go-to playbook. I hope that answers the question.

[Graham Ryding, analyst]

Yes. That's helpful. And you've been active with your buybacks year-to-date. Is that a reflection of you just feeling like you're sitting on some excess capital? Or in addition, are you of the view that your shares are undervalued? Or is it because they're trading at a discount to NAV, you just think that's a worthwhile way to deploy capital?

[Robert Orr, executive]

Yes. I would say that we're just following what we said we're going to do and why that makes sense is the second part of your question. In terms of buying back, it wasn't so much said, “Oh, my goodness, the markets down, we should buy some shares.” As you remember, through 2021 and going all the way back to COVID, we had stopped aggressively doing buybacks. I think we had a minimum program in place to manage dilution on options.

And we were being super cautious through the COVID period until ultimately, our major source of cash, which is dividends from Great-West Life, when OSFI basically in the fall said, okay, the restrictions on dividend increases are pulled off financial institutions. Nothing special turned on that, but that was the event for us to say, Okay, we can we can get back into the market buying shares.

So the fact that we bought in the first part of 2022 happens to coincide with a weak market, but it was more related in our perspective from the fact that we haven't been buying shares back, and we've been selling a bunch of assets, as I showed it on Page 17 or whatever the page was that I went through the divestitures. What happens, think about it when we sell an asset that is -- particularly an asset that's either noncore U.S. nonfinancial services. And typically, if it's a Power, a lot of them are NAV-based we sell an asset at NAV.

And then we turn around, we buy our shares back and we buy our shares back, we're buying them at a discount to NAV. So that's a good thing. We're [ arbing ] that. But the other thing that's happening is we're at the margin every time we do that, increasing the percentage of our company that comes from earnings because if you see of the value that PowerCorp has about 75% of it, I'm just being simple, but Great-West Life and IGM. But 75% of our value is really earnings and dividend growth based and not to oversimplify, but the rest of 25% is for the most part, NAV-based, so you sell an asset at NAV at $1, you buy stock back at $0.80.

And when you're buying the stock back at $0.80, you're actually buying 75% of that value that you're spending is increasing earnings relative to what you sold. So I'm just going a little financial math with you there. As we buy the shares back, we're actually arbing the discount, but also changing very slowly, but over time, more meaningfully the mix of earnings versus NAV. So we think it's -- in the absence of one of our subs doing some transaction where they ask us to finance it, that's a good use of our capital right now.

[Graham Ryding, analyst]

Okay. That's fair. And then just my last one, if I could. This late-stage fintech fund is a little different than your previous ones, Portage, they were more venture focused. So what are you seeing in the market that makes you think there's an opportunity here for more late-stage focused fund?

[Gregory Tretiak, executive]

A whole bunch of capital having enrolled in the fintech in the last 3, 4 years with a lot of companies that are not yet to the point where they're cash flow positive, having markdowns on their values. We've experienced some of that ourselves and going to be needing capital to get themselves to the stage where their profitability where they're profitable, but not necessarily a lot of venture money ready to jump in now because the momentum has been lost on the trade and on the investment. So to us, that smells an opportunity to use our network and our expertise to fund later-stage companies that are -- when I say late stage, they're still venture, but they're later-stage venture. That is the opportunity that the Portage team is seeking to take advantage of.

[Graham Ryding, analyst]

Okay. Understood. Any size that you're targeting here or too early to a number on that?

[Robert Orr, executive]

I would know that -- I'm not going to -- we can get back to you on that, that would probably be in the public domain. Greg, do you have a tip your -- I don't...

[Gregory Tretiak, executive]

I don't know that it's in the public domain yet. -- use what true target will be, Geoff. I think that's still on the come Gram, that more fulsome disclosure, but we'll certainly let you know when it's available.

[Operator]

The next question comes from Nik Priebe of CIBC Capital Markets.

[Nikolaus Priebe, analyst]

Maybe as a bolt-on to one of the earlier questions. You had a page in the presentation dedicated to highlighting some of the progress you've made in making the platform increasingly capital-light over time. When you look across the various businesses, is there any other low-hanging fruit that you see to advance that a little further, whether it's the sale of a secondary sale of LP interests or sale of a standalone business. I'm just trying to understand what the road map might look like on that front over the next year or so.

[Robert Orr, executive]

It's a good question, and I'd love to be able to give a good answer, Nik, but I'm not sure I can. And I'll just give by way of example, when we launched the strategy and said, we're going to be looking to move capital light, we're going to move these to a fee business based on third-party capital. And we're going to try and raise some capital from our stand-alone businesses.

Well, look at the way the world actually worked out. We got into a COVID case and all of a sudden LMP, which we thought was going to be part of that. Their business got impacted. EV took off electric vehicles and also in Lion, which we really had a lot of focus on in terms of being a major source of cash, became a very, very meaningful value creator. But in order to realize that, you got to support it to a stage where it's got its business a little bit more developed. So a bigger opportunity, but it's going to take longer.

And so the standalone business is we did liquidate GP strategy, which is on Page 15, but that's a small part of it. We really didn't have in our playbook that Sagard 3 would be an opportunity to raise capital, but there is such an interest by some secondary funds that, that became an opportunity if they were out fundraising for Fund IV that they've got interest in Fund III. Wealthsimple financing, we didn't have in our playbook, we'd be doing a secondary. So I guess I'm trying to give you an example that we have an overall approach across a pretty wide variety of assets that we have to realize cash.

But looking forward, do we know where the opportunities are going to be? I can't kind of give you a road map on that. I can just say that the way we think and we'll look for opportunities to do so. But I can't tell you this is going to be sold or that's going to be sold. I just don't know at this point. Sorry, that's not helpful. On the China AMC, I mentioned like China AMC was really not predicated on trying to raise capital, but you kill 2 birds with 1 stone, and that you say it does make sense in terms of power simplification strategy to not have China AMC in 2 places. Let's get it in one place where it belongs, where you can get better value recognition.

And then you work out the economics of all that and land behold, we're taking back only half of the proceeds in Great-West Lifestock, which is in furtherance as well to simplification. But we're taking half out in cash, which -- and so you got another opportunity to raise cash right there at the power level. So we're just -- we actively manage this. We're looking for opportunities.

Maybe we'll go through a period where we don't realize anything. Maybe we'll go through a period where we realize a lot. I can't tell you. The market's being down and this environment is probably less conducive to selling assets right now than it had been over the period of 2021. That is an overall tone here of caution that we don't have -- the capital is not running around chasing transactions the way it was in 2021. So that's a bit of a note of caution, Nik.

[Nikolaus Priebe, analyst]

Yes. No. Fair enough China AMC is a good example of that. On the fundraising front, are you able to give us an update on just what the third-party demand looks like for power sustainable strategies specifically, which I think historically you've been a bit less advanced with respect to their reliance on LP capital or let's call it, third-party assets. I'd just be interested in an update on how the outlook appears for scaling those strategies.

[Robert Orr, executive]

Great question. Yes. And for sure, the strategies that existed within the power sustainable capital realm had really been built for Power's on balance sheet, both the China strategy and then the energy infrastructure, which is an equity strategy. So if I start with China, great track record. They got off to the races early by raising third-party capital, but putting money into China right now is not at the top of every investors list, right?

It's just there's uncertainty around the market. So we think that, that will be successful over time, but that's not exactly the hottest area right now. And the energy, we had a portfolio of assets that were and still are to some extent, under development. So greenfield, wind and solar projects, for example. And those were at such an early stage that they were not necessarily ones that you could raise, you could put into a fund.

So some of those assets remain on the Power Corp balance sheet and with the funds that we have raised the energy infra fund the $1 billion as those assets come to fruition, they get transferred into the funds. So we'll get some more cash as that goes forward. Your question was on fundraising, however. And I do think that we're optimistic we can do more fundraising in the energy infra fund. And there are some other product extensions that we think we can do in the energy area that we think can raise some capital.

In addition, I mentioned the Canadian sustainable agri fund that we did raise over $200 million on a first close here. And so there's good interest in that area. So I think lots of progress and lots of opportunity to continue to build that business out, but it really started as a that was the most capital-intensive part of the whole thing.

And it was -- and it is -- it was never geared to be a third party. So that -- the Power Stable capital team comes with a bigger challenge than the Sagard holdings team that was already to a large extent in some third-party funding businesses around Sagard-- excuse me, around Portage and fintech around Sagard in Europe and then the transaction you did with EverWest with the Great-West Life that was already in third-party funding. So they're just at a further stage in their development. I hope -- I don't know if I answered the question for you.

[Operator]

The next question comes from Doug Young of Desjardins.

[Doug Young, analyst]

First on the Wealth Simple, just so I got this right, because it's consolidated, Greg, you don't take the earnings hit from the valuation decline, and you actually get an earnings pickup from the revaluation of the product and liability. Do I have that right? I apologize, it's Monday morning, and I'm still kind of on low year, but -- and what -- if that's right, what was the positive impact from the revaluation of the put option liability this quarter? Greg, you're going to take that?

[Gregory Tretiak, executive]

Yes, sure. So yes, because it is consolidated, we don't get to enjoy the mark up or mark down on the asset, if you will. And it's really the carry that was affected by the valuation adjustment in the period. And I think I'm remembering it right, but I think it was $34 million, $36 million negative. And you see that in Sagards asset management activities line. And if you go to that page in the back of the deck, Page 33, you'll see the color there. However, there is also an offset to that of $25 million, where it is in the Portage fund, which is, of course, taking the other side of that transaction because that's who the carry is paid to.

[Robert Orr, executive]

Okay. So there's no put option anymore. It was extinguished at the funding round last year. As part of that funding round, we negotiated with management that the has gone that part of our financials did exist, but no longer does.

[Doug Young, analyst]

Okay. So then that answers my second question. Okay. Then maybe, Jeff, on to you, bigger picture. I mean one of the levers, you talked about 3 levers to surface value and you've been very consistent in that, and we've seen some actions on this. But one of the levers you talk about is actions between the HoldCo and the publicly traded operating companies and investments. China AMC makes a ton of sense. You've talked a lot about that. What else can you do between Power and IGM power and Great-West Life in terms of shifting things around to surface value? Like what's your vision there? Is there more to be done? Can you maybe kind of flesh some of that out?

[Robert Orr, executive]

Yes. It's a good question. And it's not a linear answer in terms of -- it's only this thing that we do or that thing that we do. I think when you -- I would bring your question up a level to say, we have a simplification strategy because Power Corp has been far too complex for investors to understand. And the simplification is on a whole series of dimensions. One of the dimensions is our structure.

So we've done a lot with respect to the Power Corp reorganization, our financial, the GBL, another is where we hold things. So CAMC is in 2 places. IGM owns a big chunk by stock. Those are things that like complicate life and investors go rightly like why would you own it there? Some of those things were done for valid business reasons. It's not like they were done without thought. They were usually at the time of those transactions, either constraints on where you could buy things or a need for capital or what have you but straight. -- cleaning that up over time in a way that makes sense when the opportunity is right seconds the second piece of the simplification strategy.

And the third piece is to simplify what we do and not have it to 20 different things. It looks like they're all in different industries so the people go, "I don't get this.” Is to try and simplify our business. And the main focus there is financial services. So the move over time to transform the Power Corporations from diversification to financial services without blowing up the assets that we have are blowing up the management teams that came and worked for us and signed up because we're a good long-term shareholders.

So doing things in a methodical smart way that honors our commitments to people, but simplifying what we own, so that it's financial services while we communicate is all part of the strategy of getting greater value and having the market appreciate the value. You're also hearing a little theme playing into it that getting over time, greater focus on earnings and increasing the earnings, I think, will reward all PowerCorp shareholders well at the balance at the margin getting more earnings driven. Those are all the themes we're playing into it.

So no, that was -- I got really big picture, but that is the way we think about it. And so whether there are other specific examples, the co-ownership structure do know a lot. We go on right now. We still got some great life stock in the IGM balance sheet. There's a further opportunity. But when and how that gets realized, will be told in the future, I don't know the answer to it. But it's the bigger picture, I think, is where you got to go. We are on a simplification strategy…

[Doug Young, analyst]

Where it's going and I think just it makes a ton of sense and you look around the portfolio between Great-West, IGM and Power. You've got asset management at Great-West and Power, you've got asset management, obviously, in IGM, and you now have some asset management up at the Power level. Like I guess where I'm going, would make a ton of sense and it's a lot more complicated than you being an armchair quarterback here, but does it make a ton of sense to have asset management in one particular sole so is that something that is goes into the simplification? Is that just something that just is not on the table? Or is that something that you think about?

[Robert Orr, executive]

It's a great question, and I should have gone there because I should have actually -- I don't know, when you said it, my mind didn't go there, but that's a great question and an obvious one and when we spend a lot of time thinking about it. So the answer is yes, but it's also got to be doable and practical and not kill the businesses. You've got to do what's right for the business always. So the examples of us having done so, as you know, in Canadian Asset Management, we took all the IG, Investors Group Investment Management and put it into Mackenzie. And then Canada Life was managing its Canadian shelf. -- of public equities and debt, and that looked like it was duplicative and I won't say an easy move, but one that was easier.

So we then transfer that business and negotiated between the IGM and Great-West Life teams. And that was an effort of consolidating our asset management. When you then get to the other obvious questions, which is the Great-West got investments like [ Putnam ] and we've got Mackenzie, it gets more complicated. You've got different business models. And typically, when you're doing a transfer, there's a big synergy to make it work. They're not always obvious when you're going into different markets that may be long-term benefits. So it's something that we have -- I've been asked a lot, and we look at from time to time, but we don't do any. There are some impediments to us doing that at this point.

So that's at the [ Putnam ] level. At the asset management level at Power, you go with where the opportunity is. And the fact is we had the teams at Power, and we've got people investment managers in the alternative space who were working for us and for the group. They weren't working for one of the subs. They weren't working for one of the public opcos, they were working for Power and that -- those teams have an ability to attract additional talent to them. And that's the key, as you know, in investment management. It's all about talent, the investment management talent, we're able to attract them.

And so we've got the businesses at power and they're running and they're growing. And you don't just turn around and say, "Hell, why don't you all go work somewhere else, we're going to move you to another company.” It doesn't work that way. You can destabilize them. So I guess I'm going to come back to a high level. We are trying to simplify, but we do have a number of public companies, and we have businesses in those public companies that are people businesses, and you prioritize not doing anything that would -- you -- the first priority is to make sure the businesses succeed, and that trumps putting them all in one place, which on paper looks good, but if there's not real synergies and doing it, you don't do it. So long answer, maybe too long for you, but that's the way we think about it.

[Operator]

The next question comes from Tom MacKinnon of BMO Capital.

[Tom MacKinnon, analyst]

Just taking this power simplification theme a little further and may have been asked in prior quarters, but Wealthsimple here, owned in 2 places. You took some money off the table, which in hindsight is good, given the markdown. How does this -- you've got another retail wealth management strategy that plays a bit into fintech space being the -- or robo space as well in Personal Capital.

And that seems to have been probably closer to breakeven and more successful leverages into Great-West, and we can see how that happens. Just with respect to Wealthsimple, you've got a lot of windows into this fintech space through other means now. How does it leverage into the company in terms of -- does it just provide Intel? Or -- and what's the longer-term plan for it with respect to joint ownership and where it fits overall in the whole power group. So a lot to chew on there, sorry, but anything you can get that's great.

[Robert Orr, executive]

Tom, thanks for your question. It's a good one. I'll start by saying -- addressing the Personal Capital and Wealthsimple. Financial services are really a regional market here. When I say here, they are a regional market. It's not because somebody has a franchise in one country that you then just port it to the other side of the border. The regs are different. The competitive reality is different financial services at the individual level is a regional market and Wealthsimple and Personal Capital have extremely different business models. They are both emerging in the fintech space, but they are not the same business model at all, either in their technology, their approach to market or the clients that they focus on.

So that's not a marriage made in heaven, I guess, is what I'm saying. And even Great-West Life has purchased Personal Capital where the synergies are very, very significant over time, we think. Wealthsimple, if I flip there, that is a good example. I think it was on the next question about complication about how we end up with things in different places. It's not that we try to complicate life. But when Wealthsimple came along, it was -- the opportunity came through and it was the team in Portage, Paul, and Adam and the whole team there that were close to it.

And so the initial providers of the Capital at that time was Power. We saw the opportunity, and we funded the first few rounds. And we said to Wealthsimple, “You've got a good thing. We want to support your business, we'll provide the capital assuming you make your business plan goals.” And the first few rounds happened out of Power because that's where we had the interest in IGM was less focused on at that time.

As time went on, the whole -- Wealthsimple, it became obvious, was a way for our group to get exposure to a direct-to-consumer digital model going after the next generation in effect and creating a franchise there. So we said, well, let's put some capital in there. We don't know where this thing is going to go, but we're not exposed there and we should be because how those financial service is going to emerge over time? And how big is digital going to be?

And what's the next generation you're going to get in… So we decided to invest in that area without necessarily having a clear idea where it was going to go. We didn't bet the farm in total between ourselves and -- Great-West, we invested [ CAD 315 ]. And so it wasn't like we have no crystal ball here. It was to position ourselves in the sector and see where it goes. So it is -- that's where we're at right now, and we have the investment in 2 places for those historical reasons. Where does it go in the future? We said all along, and I think IGM and James Sullivan will say the same thing. We are going to continue to support the growth of this business, and we have full optionality.

I don't know what we're going to do in the future. We have taken all of our initial 350 off the table and then a little bit more than that. We own between 43% and 48% of the company between ourselves and IGM based upon how management options get realized over time. So we've got all the optionality in the world, and we'll just decide how we're going to play it as the world unfolds.

I haven't made any like -- those are future decisions. So I've given you, I think there hopefully the explanation of why Wealthsimple and Capital are different, how we ended up with -- Wealthsimple in 2 places and how we -- why we did it in the first place. And going forward, we're just kind of going to continue to watch it development future. Tom, that's -- I'd like to go further, but we don't -- we are at any further. That is where we are in our thinking.

[Tom MacKinnon, analyst]

So it sounds like -- I mean, you're playing with the house money here. Do you continue to think you're going to have to put more money into it? Or if more money is needed to change it or grow it, does that just come from more third parties? Or would that come from Power or IGM?

[Robert Orr, executive]

Yes. We haven't crossed that bridge. They're pretty well financed right now from the previous rounds of financing. And I think we'll make that decision in the future. And one way to look at it is it's simply a financial bet we put money in and we took the money off the table and it's house money, and that's true. So good, we feel great about that.

But I don't know that Wealthsimple could be part of the Power group for the next 50 years, like it could become a core part of the franchise or maybe we don't play it that way. When I say about optionality, it's not just a venture capital bet. We're in financial services, and we got in there because we wanted to see what was happening and had a leg in the digital emerging space, as I said. And then whether we're decide that we're going to be there long term or we're not, I think those are decisions in the future. Just I just don't know.

[Operator]

The next question comes from Graham Ryding, TD Securities.

[Graham Ryding, analyst]

Yes. I just wanted a follow-up question, if I could. Jeff, just you talked about some themes. I wanted to sort of revisit GBL. It's a sizable investment for you, 7% of your gross asset value, but you talked about simplification of the business and looking to own financial services and then also a greater focus on earnings, less focus on that. So how should we think about GBL -- it's not an obvious fit with those themes. Maybe we can sort of revisit that?

[Robert Orr, executive]

Yes. So my comments were directionally, yes, looking more on earnings, but not doing anything that destroys value, short or medium or long term through taking actions that destroy what we've got or hurt what we have. So GBL in its own right is making a switch into more private and asset management. When you look at what you're building with [ AMC ].

And therefore, there's some of that going on within business. I've always said on GBL, that's a part of Power that doesn't -- and this current configuration fit the definition of financial services perfectly. I acknowledge that, and we've acknowledged that. But we also have a 40-year history of having built up a business that is the second largest holding company in Europe and has a flow of transactions both at the GBL level, at the [ AMC ] level, but also with the genesis of Sagard equity way back when it was launched, the private equity funds because there was a deal flow in the private space and at the time and still to this day might have been too small or out of scope for GBL.

So we've got this machine over there and this presence in Europe that brings a lot of information, a lot of knowledge, a lot of windows and has created value over time. So you don't just turn around and say, “Well, that's no longer -- that's not pure financial services or it's not pure earnings, that's just exit that.” That's not the way we think. We think about many, many other things that we can work on to simplify, create value along the strategies I've articulated and GBLs carrying on its own strategy of rotation in the private assets and more towards financial services, and we'll just see how that goes. But there's no -- short-term, we have no current plans to be divesting. If that's underlying your question, that's top plan.

[Graham Ryding, analyst]

No, I just wanted to get a updated view on how it fits with the overall strategy, but that's helpful. I'm going to go back to Tom MacKinnon's question on Wealthsimple. Tom, I don't know if you're still on the line, but I didn't say that notwithstanding the markdown that Wealthsimple has been -- that's gone on with Wealthsimple and that's obvious in terms of valuations of tech companies and then a slowdown in market activity and business activity in certain areas, but Wealthsimple have done an unbelievable job, the management team in creating a brand and then going out.

I think we've got I think, 1.6 million clients, if I'm right. The -- our disclosure will be elsewhere, but it's created a major client base, a major brand, happy clients with good experiences in an area of the market that is going to be is the next generation. And so they've done a great job. And so valuations go up, valuations go down. But I don't want to let this quarter go through and talk about a write-down on the thing the company has done a great job, and they're very, very well positioned going forward in the future and well-funded at this point. So I'll add that, Tom, if you're still listening.

[Gregory Tretiak, executive]

I'd just add that you're right, it's the $1.7 billion -- or 1.7 million clients, but $17 billion in AUM as well. So...

[Robert Orr, executive]

$1.7 million...

[Gregory Tretiak, executive]

Yes. $1.7 million...

[Robert Orr, executive]

For the day when the CEO was picking up a decimal place on the CFO. Greg, we off to a great start already.

[Gregory Tretiak, executive]

I'm thinking 10 years ahead.

[Operator]

[Operator Instructions] The next question comes from Geoff Kwan, RBC Capital Markets.

[Geoffrey Kwan, analyst]

I just have one follow-up question. We've seen other alternatives, private equity managers that have looked to distribute their funds through proprietary wealth management arms. Is that something that Power is looking to do? So for example, whether or not IG Wealth or whatnot? Or is it maybe perhaps given you've got a number of different strategies, a number of them are relatively new that maybe you'd wait for future iterations of those funds before looking to distribute those through your retail wealth management channel.

[Robert Orr, executive]

In terms of examples and Greg, I might kick it to you in a second. But in terms of examples of others, I haven't -- I'm trying to think of where there are where you've got -- we'll come back to you on that. But what I am going to say is that definitely the teams that Sagard, Power sustainable Capital and Northleaf within IGM are in discussions with our retail platforms to look to see how they can be distributing product. They can be a bedding product, particularly in multi-asset strategies.

If you think about the mass affluent market may not be appropriate that an investor who's got whatever portfolio that they'd be making direct investments, but if they've got an asset allocation program and some portion of that program that's got a portion of its assets invested in alts that can make sense, and the teams are working hard on that with Northleaf and with our group at Power Corp to get access to product because they want that kind of product across IGM, and I think you'll see it through Great-West Life over time. So that's very much a focus. And I know other groups who are -- have been in the liquid asset management business who were buying into capabilities in nonliquid are looking to feather those strategies through their distribution. And I'm sure some of it's dropped, but I can't articulate all the names there. Greg, do you want to add anything to what I said to -- in answer to Geoff's question?

[Gregory Tretiak, executive]

No, I don't think so, but just certainly Northleaf, that's where my mind went to, has already been exploring those type of opportunities. And I think you're quite right that not only our own distribution channels, but others were like our major manufacturers like Mackenzie and their relationship with distributors are looking to provide this type of product as well through their efforts.

[Operator]

Thank you. Ladies and gentlemen, there are no further questions at this time. This concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.

[Robert Orr, executive]

Thanks, everybody. Bye now.