Power Corporation of Canada

TSX:POW

Earnings Call Analysis

Strong Earnings Growth, Robust Dividend

Adjusted net earnings soared to $1.7 billion from $520 million the prior year, translating to $1.52 per share from $0.78. Great-West delivered solid results, spearheaded by U.S., Europe, and Capital Solutions performance improvements. IGM earnings held steady with contributions from IG Wealth and Mackenzie. GBL faced a $1.2 billion non-controlling interest liability due to put rights related to Webhelp's increasing value. Fundraising faced challenges amid a tough investment climate, with $1.2 billion raised and a focus on future deployment despite slower transactions industry-wide. Technology investments strengthened IG Wealth's advisory platform, and the company's restructuring aimed at growth across Great-West Lifeco and IGM's repositioned wealth platform, with a future emphasis on NAV-based assets and investor value communication.

Robust Earnings and Dividend Declaration Amid Growth and Restructuring Efforts

The company has showcased a remarkable improvement in its financials with adjusted net earnings from continuing operations soaring to $1.7 billion from the previous year's $520 million, reflecting a significant per-share increase from $0.78 to $1.52. The adjusted net asset value per share similarly rose, reaching nearly $50, marking an uptick of over $8 since year-end 2022. Contributing to these robust figures are strong performances from Lifeco and IGM, buoyed by strategic mergers, acquisitions, and disciplined cost management, with additional growth stemming from newly launched initiatives in Europe, specifically the establishment of Unio Wealth and a joint venture with AIB.

Challenges and Strategy in Fundraising and Deployment in a Difficult Environment

Despite raising $1.2 billion in the quarter, the firm faces challenges in both fundraising and deployment attributable to a slowdown in the broader investment climate which impacts transactional activity and consequently the launching of new products. Ultimately, these conditions are delaying profitability, as the company invests in enhancing its suite of products to build a diverse and relevant portfolio for investors. This approach may delay breakeven but is anticipated to forge higher value businesses in the longer term.

Focus on Value Realization and Communication to Address Net Asset Value Discounts

The company's disciplined investment strategy has yielded competitive returns despite a recent widening of the net asset value discount. Management identifies communication as a critical focus area to ensure shareholders understand the intrinsic value within the company's diverse business segments. Particularly, the company underscores the transformation at Great-West Life and IGM, which constitute a significant proportion of the portfolio, as primed for growth, thereby presenting further opportunities for value realization.

Cash Management and Return of Capital to Investors

Even with a substantial cash position of $1.2 billion and continuous strategic investments, the firm remains committed to returning capital to shareholders, with a year-to-date purchase of $452 million worth of shares. By adhering to a conservative financial policy, which involves maintaining liquidity at roughly twice the charges including financial charges, it assures a strong balance sheet and the sustainment of high ratings by principal agencies.

Strategic Expansion and Selective Investment for Long-term Growth

While maintaining a cautious approach, the company engages in selective expansions and investments to foster long-term growth. This includes an active transaction front focused on organic growth coupled with prudent external transactions. The organization's strategic decisions in product offerings and mergers are driven by value maximization over the horizon, sometimes at the cost of immediate profitability. This is evidenced by its investments in technology and digital transformation initiatives, which are expected to strengthen its position and yield dividends in the future.

Valuation Process and Profitability Outlook

Valuation of the company's investments is based on a rigorous process involving projected cash flows, which are assessed yearly rather than quarterly, unless a major event warrants a reassessment. Moreover, while the journey to profitability is impacted by multiple factors, including the launch of new products and the scale of existing ones, management remains cautious about providing specific margin guidance at this early stage as the company progresses towards a more mature stage.

Earnings Call Transcript 2023-Q3

[Operator]

Good morning, ladies and gentlemen, and welcome to the Power Corporation Third Quarter 2023 Earnings Conference Call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. Instructions will be provided at that time for you to queue up for a question. If [Operator Instructions]. I would like to remind everyone that this call is being recorded on Tuesday, November 14, 2023. 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. Thank you for joining us this morning for our Q3 results call. And I am joined by Denis Le Vasseur, who is the Principal Financial Officer at this point of PowerCorp. Denis has been with the group for over 30 years and is going to be covering off on the financials with me today. A number of you have asked about Greg Tretiak, and I'll just make a brief comment. Greg is doing well. He is at home. He's recovering in good spirits. And that's about all I can say at this point. So that's all good news and nothing further to comment at this point. So with Denis and I will go through the regular presentation. You've got the forward-looking cautionary statements on Pages 2 and 3 regarding forward-looking information and non-IFRS information. On Page 4, you have a picture of Denis. I don't know whether that's a recent photo, I'm looking at you and looking at this picture at this time. It's a little different than --that's what I was going to say. So we've got Denis and I, and I'll go right through then to the rest of the information. You're going on Page 6, a number of other recent disclosures by our group companies. And with that, I'll spend a few minutes on Page 7. So the highlight for me is just continued strong financial performance by our 2 main operating and income-producing businesses, Great-West Life and IGM, and Great-West Lifeco continues to show very strong growth in earnings, and the quarter, in particular, was well balanced. It was very clean even a lot of noise. And sometimes in the insurance side, you do get noise going one way or the other is a very clean quarter and just demonstrating what we've been saying to the market for some time that we see strong growth in organic earnings coming from Great-West Lifeco, IGM has well produced very solid results. Not the easiest environment, both Asset Management and wealth management are in outflows at this point, and the markets have been very choppy, and they produced very solid results and continue to demonstrate that they can invest in the future growth of the business while managing their costs very effectively. So for me, those were the 2 kind of highlights in the quarter. Just moving towards the bottom part of the page, it is noteworthy, however Great- West continued to make good progress on its previously announced acquisitions. Prudential is on track, in fact, ahead of track in terms of a number of the metrics, and Great-West Life also focusing on the wealth side with some acquisitions that they are in the process of completing. GBL, a bigger earnings quarter for GBL, Denis going to comment on that in the middle in a moment, excuse me. But TVL continues to be active on returning capital to shareholders through buybacks. Sagard closed the transaction that we announced in the last call with ADQ and BMO and so bringing in outside partners to continue to grow the [indiscernible] franchise. The alternative platforms had good fundraising in the quarter, $1.2 billion of new commitments in Q3, and a very difficult funding environment, but continued solid progress there. And power itself continues to be active on the buyback side. Page 8, the environment is one where money is still flowing into cash products slowing into CDs and the money market funds. It's also Canadians and Americans are engaged in debt repayment. And so you've got obviously, interest rates are having a big impact on the behavior of consumers, the behaviors of investors where it's not flowing. So you've got outflows going on in Asset Management. You've got outflows going on in long-term investments, and that's showing up in some of the headwinds that we're getting at this point in the cycle in our various franchises. With that, I'll turn it over to Denis to address some of the financials over the next few pages.

[Denis Le Vasseur, executive]

Thank you, Jeff, and good morning, everyone. Please turn to Page 9. And as Jeff just noted, we saw strong earnings contributions from both Lifeco and IGM this quarter. Adjusted net earnings from continuing operations were $1.7 billion, up versus $520 million in the same quarter last year. This translates into $1.52 per share compared with $0.78 in Q3 of 2022. I'll address the drivers of this increase shortly. Our adjusted net asset value was $48.26 per share at September 30 and then just under $50 at $49.98 yesterday. This is a $1.12 higher than June 30 and $8.07 higher than the year-end 2022. And finally, the Board declared a quarterly dividend of $0.525 per share yesterday. Turning to Page 10. Great-West strong performance across the segments, including an increase in year-over-year earnings from the U.S. Europe and Capital Solutions, partly offset by Canada, but it should be noted that for Canada, the pretax earnings were up this quarter when we compare to the quarter third quarter of 2022. The combination of recent acquisitions, operational improvements, and disciplined expense management has translated into solid results for Great-West this quarter. IGM earnings, they were consistent year-over-year and supported by strong performance from both IG Wealth and Mackenzie. Contributions from IGM strategic investments included the year-over-year earnings increase from China Asset Management, CAMC and decrease in its proportionate share of Great-West earnings. This was driven by IGM's partial sale of its great-West shares in Q1 of this year as well as a true-up related to the actual Q2 earnings disclosed by Great-West. Moving to GBL's contribution this quarter, Webhelp completed its previously announced combination with Concentrix. As you may recall, GBL had built a noncontrolling interest liability over time-related to put options extended to founders and management of Webhelp. As the fair value of web help increased, GBL was required to recognize an accounting expense related to the fair value of these put rights this totaled $1.2 billion at GBL.This liability was extinguished without any cash impact, and GBL recognized a meaningful gain on deconsolidation of EUR 1.3 billion, of which PCC share is recognized this quarter in the amount of $323 million. In other investments in stand-alone businesses, this quarter's results was comprised largely of interest on cash and cash equivalents. Finally, I'll highlight the corporate operating expense line where this quarter, we had an $8 million loss from our cash-settled compensation liabilities versus a $2 million gain in Q3 of '22. Going forward, we would expect less volatility from this item due to the hedging actions that we have taken to date. I will now turn to Page 11. We break down the 486 net asset value as of September 30. Great-West remains a large component of our NAV and modest gains in its share price this quarter were more than offset by the impact of IGM's trading performance. I'll note that following the completion of the ADQ and BMO strategic partnership where both parties acquired minority interest in Sagard Holdings management, we have begun recording in our NAV, the sagard management company at its fair value. So this is NAV, this is not in the earnings and the prior quarter's NAV was at carrying value. So we get a bump there in our NAV. With that, I will turn it back to Jeff.

[Robert Orr, executive]

Thank you, Denis. So moving along to Page 12. I'll just pick up a few highlights for the various companies. Great-West Lifeco has been putting emphasis with its communication with the market to reflect its internal focus on building up its wealth management businesses. with the new disclosure that Great-West Lifeco has been doing around its value drivers. It highlights the size of the wealth business within Great-West Lifeco, and they are very focused on building that across the various geographies. In Canada, obviously, a couple of acquisitions, a small one with value partners but also the IPC acquisition, which the closing is still pending, builds up their position and their breadth and wealth in Canada and makes a pretty loud statement about their commitment to the sector. In the U.S., Empower Personal Wealth is one of the key drivers of growth around that business. Fed largely by the rollover coming from the DC platform, but also there's a very important direct-to-consumer market there. And that business has grown 30% year-over-year. And it's now at USD 65 billion of AUA on the Empower personal wealth platform. And in Europe, they've been making a number of moves, including in Ireland with the launch of Unio Wealth and a new joint venture with AIB. So a lot's going on on the wealth side, and you'll hear more about that from Great-West Lifeco as we move forward. I'll turn to Page 13. This is just a wing yet, a snapshot of one element of a broader story. The broader story that we have been talking about, IG management has been talking about is that the IG Wealth platform, formerly known as Investors Group has really undergone a very significant transformation over a number of years here. And we've talked about the difference in the recruiting model. The price -- the difference in the products, the pricing, the basically whole value proposition. One element we haven't talked that much about is how much has been done on the technology front and on the platform that advisers and clients experience. And this is a snapshot out of the recent investment executive dealers report card. And you can see in the upper left, the scores that the advisers at IG Wealth give I have been continually improving over the last 5 years. And then you've got a relative positioning against some of the major dealers. The platform has really been digitized over the last 5 years in a significant way. And it's one of the great strengths and the company continues to invest in its technology delivery for both advisers and for clients. On Page 14. So just as I mentioned earlier, the ADQ and the BMO investment into Cigar were completed. So this will provide greater funds within the GP in order to invest as well as LP capital. And as part of Cigar's strategy to give itself greater strength, greater breadth. And that's important in what is a pretty challenging fundraising environment and it's going to be help them, I think, over the next couple of years tremendously. I'll turn to Page 15. We can -- this is just a slide you've seen before, I say we continue to be active on the transactional front, notwithstanding the amount of time we focus on organic growth, we continue to look at external transactions to reposition the group for greater growth. And with that, I'll go to 16. So in terms of the fundraising platforms, $1.2 billion was raised in the quarter, USD 600 million was in Power Sustainable launch of its U.S. infrastructure credit fund. We got a great team that has been hired. Sagard Healthcare did an additional closing and then the power sustainable equity infrastructure partnership, which is a Canadian venture had additional fund commitments. But notwithstanding that the environment is difficult, and it's difficult not only on the fundraising side, but the deployment side is challenging as well. You'd all be aware there's less transactional activities. There's less M&A going on. We read about it all the time. That also means that investment managers and alternative investment managers are putting less capital to work than they would be in a more active environment. And of course, when you turn around and do your next fundraising and your next product, which adds AUM to your platform, you do that once you've deployed -- or mostly deployed the previous fund. So if you're deploying at a slower rate, it's not only fundraising the slower, but your ability to go out and launch new products has lessened. So it's hard -- our group is not alone in that. It's a factor across the industry. Page 17 just speaks to the ongoing financial results, and we've got Cigar at the top, which has got had from an FRE point of view, the third line, so $42 million in fees and it's just operating slightly below the breakeven level from an ongoing basis and power sustainable, making progress on the revenue side, but still ways to go before it is at a breakeven point. And again, we talk about the overall AUM of our platforms being just under $24 billion, but the fee bearing is the one that actually pays the bills, and we're at $16.7 billion across the bearing capital. On Page 18, our growth has been active returning capital to shareholders. We continued that through Q3. And post Q3, we've purchased $452 million of shares so far in the year, million shares or 1.9% of the participating shares. And our cash position at the end of the quarter is $1.2 billion, and that would be prior to having acquired the additional $112 million subsequent to the end of the third quarter. We do have a loose target of roughly 2x 6 charges, including financial charges that we like to keep on the balance sheet. So that's about $800 million. And our ratings continue to remain very strong with our principal rating agencies. Page 19, Power has delivered over the last 5 years, 3 years, 12 months, strong relative returns compared to our principal benchmarks. It has been -- so that is good. And that is notwithstanding what is on Page 20, which is that our net asset value discount has gapped out in the past year and a bit, going back to the middle of '22. So we had worked hard through the period around the announcement of the reorganization made good progress on decreasing the discount, and it has gapped out in the past 18 months. So I guess if I look at that from a glasses half full point of view, we've delivered competitive returns nothstanding that we've had the last 1.5 years where the discount is gapped out. And so I view that as an opportunity. Having said that, this is on us. We've got to continue to communicate the value that we have in our different parts of our businesses and make sure that investors understand how that value is going to translate into value for them. And so we will continue to be highly focused on communication as well as looking at our strategies to realize value to ensure that they meet with our investors' expectations. But that's going to be a focus of our group, an increased focus of our group, I suspect, in the quarters ahead. And then I'll just conclude and wrap it up on '21. The fundamental strategy hasn't changed in the last number of years. I will say that the -- I am really, really pleased with the repositioning that has taken place at Great-West Life and IGM over the last number of years. I think that's 80% of our gross asset value and a much higher percentage of the part of the portfolio that is earnings-based. And if I go back to 2019 prior to us announcing the reorganization and then look today, both Great-West Life and IGM have been significantly repositioned for growth. Great-West Life, if you go back to 2019 going into the year in the United States had 3 businesses being our insurance business, Empower and Putnam. Collectively in 2018, they earned, I think, CAD 385 million after tax -- you fast forward to today, there's one business in the United States with the sale of our insurance business, the pending sale of Putnam, and the 3 acquisitions we did at Empower. And over the last couple of quarters, the U.S. business of Great-West has earned in excess of CAD 260 million a quarter. So you annualize that compared to where we were 4 or 5 years ago is now 30% of the business of Great-West Life. It's one business. It's growing very strongly organically and still as we move forward, potential future acquisitions. And so -- and that's at the same time, the rest of the businesses of Great-West Life have been strengthened. So Great-West Life really repositioned over the last 4 or 5 years. And I would say equally with IGM, IGM has got 2 strong areas, wealth management anchored by a repositioned IG Wealth, not the greatest environment today but well positioned for growth in the future. And then 2 other avenues with Rockefeller in the United States and WealthSimple in Canada. And on the Asset Management, a very strongly positioned Mackenzie with a large position in the Chinese market through CMAC and then as well in the alternative Asset Management space. So IGM and Great-West are 2 principal assets have been repositioned for significant growth. So then the focus comes to the 20% of the portfolio, which is NAV-based being GBL, and across our different power platforms, we've got good value there, and we're going to double our efforts to communicate that and to make investors realize the value that we've got.And with that, I will wrap up my comments, operator, and open it up to the audience for anyone who's got questions, and we'd be pleased to address them.

[Operator]

We will now begin the question-and-answer session. [Operator Instructions]. Our first question comes from Jeff Kwan of RBC Capital Markets. Please go a head.

[Geoffrey Kwan, analyst]

My first question was on the alternatives platforms with Sagard and Power Sustainable what kind of AUM do you think would kind of get you to Cal or on that level of profitability for each of them? But also, too, just trying to understand how to think about OpEx growth at each of the platforms as you get to scale. Is it -- how does that grow? Is it some sort of OpEx ratio? Or is it -- how does that OpEx growth compared to revenue growth? Or how should we be thinking about that?

[Robert Orr, executive]

And I'll try not to be evasive, but it's -- the answer is it depends. If I look to Cigar actually both of them, it depends on how you get the growth -- so if you're getting the growth by launching additional strategies in the same buckets in the same categories, you scale them and you get positive cash flow and earnings. And to the extent that you are launching new strategies, you go through a J curve and the J curve is typically you're going to lose money for 2, 3 years in the particular strategy. So AUM, if you have got all the strategies you would like to have and you're out there doing fund #2, #3, #4 in those strategies, you start to make a lot of money. Our platforms are at a stage where they are still building out their product suite. And you can imagine that, that is something that makes you more enticing to investors if you're walking in and you have one credit fund in one category, that's an interesting conversation. But if you have 2 or 3 different strategies around the same strategies, it might be lower credit, it might be an adjacency, you're more relevant to investors. So our group's sagard is very close to breakeven. It's got a very good revenue base, but it continues to launch new products that are adjacent to its current product suite, which delays its breakeven but ultimately creates greater value 2, 3, 4, 5 years down the road. So that's the trade-off. That's the discussion that we have all the time is that we're going to build stronger, more valuable businesses over time if we enhance the suite of products, and that delays the breakeven point. I'm not trying to avoid the question, but that's what it's at. So if we tried to -- if we wanted to get to profitability, here's before I turn it back to you, if we want to get the profitability quickly, we could just stop new product launches and kind of pair the OpEx growth that comes with that and you get to profitability more quickly. But have you maximized value over a 3-, 4-, 5-year horizon, I don't think so. So I hope that helps.

[Geoffrey Kwan, analyst]

My other question was looking at the corporate level. The OpEx there after adjusting for the share appreciation rates in the past couple of quarters of Q2 and Q3, I think it's been roughly about $40 million. And prior to that, I don't know I guess, past year or a bit, that quarterly OpEx number was kind of in the low 30-ish. So I'm just wondering, is that $40 million kind of the new kind of OpEx figure? And if so, what explains the increase that we've seen?

[Robert Orr, executive]

I'll let Denis handle it there. But there is a little bit of noise around the edges. But Danny, do you want to...

[Denis Le Vasseur, executive]

Yes. But I think Jeff is mentioning without the hedges. So just a $41 million, I think that would be our new ongoing number that we would be looking at. It is a bit higher than last year. It is very consistent with what we've seen during the year here. So there's been a bit of a jump from last year, there's inflation. And we're in full travel mode and so on. Now we're back to -- we're really back to normal. So at $41 million, I would look at that as being more of the ongoing number. [indiscernible]We had some noise going the other way in some of the quarters in... We have some ways going we have noise going -- and this one also there's a couple of million dollars that is not recurring in our expenses. So that's why I put it around $40 million, $41 million, $42 million as an ongoing number. Yes. I have by memory, we were about $150 million run rate annual, if you go back a couple of years. And so if we're in around a little over 160 right now, there's been some inflationary growth, but we're not far off the mark in terms of the basic business model. Jeff hasn't changed. It's not like we built up a whole bunch of people or anything, but we do have extra travel, and we do have some inflation pressure going on, obviously.

[Operator]

Our next question comes from Graham Ryding of TD Securities.

[Graham Ryding, analyst]

I could just touch on your cash levels. You've been very active with your buybacks, but your cash level is down a bit lower now compared to maybe where it was earlier in the year. So maybe just some color on how you're feeling about your discount to NAV, how much excess cash you feel like you have and what's your appetite to continue to buy back shares?

[Robert Orr, executive]

So hope feeling about the discount is not great as the honest answer, but it is what it is. So -- and these things jump up and down. So that doesn't, in any way, diminish our conviction and enthusiasm to lower that discount over time. We're enthusiastic also to buy shares back. And the cash is a little bit lower as we've been active in the last several months, buying shares back. So we're going to continue to look at share buybacks as one of the key tools to arb the discount and to lower the discount and create NAV, of course, as we buy shares back at a discount, you're actually increasing the NAV as you do so. And in terms of our cash position, I wouldn't make a specific comment other than you're right, it's lower. And so we've got 2 things on that. It's not just -- there's a number of things working. There's share buybacks. We have some commitments that we make to our platforms that sometimes some quarters were in inflows. Some quarters, we're putting money into seed capital. So it's not kind of consistent. And we'll be looking at our cash flows and our sources of cash in the upcoming quarters to figure out how we can continue to fund buybacks at a regular pace. That is the goal. That's what we said we're going to do, and we will do that I wouldn't anticipate kind of a high -- much higher level or a much lower level of buybacks in the upcoming periods, if that's where you're trying to get to. With your question.

[Graham Ryding, analyst]

So I saw that you flagged that Sagard asset management company, you're now holding it at fair value. Is that the $270 million that you flagged within your NAV? And like am I looking at the right number there? And is that -- does that reflect your 55% ownership stake in sagard...

[Denis Le Vasseur, executive]

Yes, that's exactly yes, that's exactly what it is. The 270 is our 54% share.

[Graham Ryding, analyst]

And my last question, Jeff, just for you. I know you're always close with Empower. They did see some outflows, I think, in the quarter. Is that just a reflection of the headwinds on retail flows broadly in the industry? Or is that also maybe related to some attrition on some assets just given the active acquisition activity that's been going on in the last couple of years in that platform.

[Robert Orr, executive]

Graham, you just broke at one point, did you say Empower? Is that what you were talking about?

[Graham Ryding, analyst]

Yes. Yes, there was some oufluence there. So I just wanted some color on what you think is driving that.

[Robert Orr, executive]

Yes, sure, absolutely. So there is nothing systemic about that at all. Empower continues to win in the marketplace on an organic basis and is in strong inflows. So there's a couple of things going on in the quarter, in particular, in the large market. There were some deconversions and no large wins that were brought on the platform, and some of those deconversions are related to the assets that have been brought on from Prudential. I think it would be better if they broke though the outflows from Prudential out, and it would give you a more normal number because you bring assets on and you have an attrition rate that the company, I think, is published that they expect over a period of time that they're going to lose x percent of the assets and they do, but then they don't break them out of the flow number. So it kind of masks what's actually happening in the open market. But this quarter, and specifically addressing your question, in this quarter, it was in the large market. I think there were a number of deconversions, basically companies that were going to other platforms, no large wins, and it resulted in a blip in the large market sector and a good part of that was related to Prudential. So nothing -- the underlying message is no change in the confidence in the growth and what's happening in the marketplace, continued strong organic growth. And in terms of the actual Prudential conversion and retention of assets, we -- they are ahead of what they had anticipated at the time that we underwrote the transaction. Okay. That's it for me... You mentioned Wealth Management. I thought in your question, you mentioned Wealth, this is a DC issue, not the wealth management. The wealth management isn't strong inflows.

[Operator]

Our next question comes from Jaeme Gloyn of National Bank Financial.

[Jaeme Gloyn, analyst]

First question, just I apologize if I missed this, but the cadence on the dividend has suggested that next quarter, we might see a little bit of a bump. Do you anticipate maintaining that cadence and just refresh us on your dividend payout ratio targets or otherwise?

[Robert Orr, executive]

Yes. I think this is the third quarter in a row that we've been at $0.525. So we would have been in a cadence for the fourth. Denis, you're correcting me.

[Denis Le Vasseur, executive]

Yes.

[Robert Orr, executive]

Thank you. So the -- we would follow -- our dividend policy as we follow the dividends that we receive from our principal operating subs and the bulk of it, almost overwhelming it comes from Great-West Life and IGM. So we'll take our Qs from Great-West Lifeco and IGM as to what they do with our dividends. And then we typically flow through the increase directly to shareholders. So we'll -- I don't see any reason -- I don't want to get ahead of the board in terms of them declaring dividends in the future, but in overall expectation would be we do it on cycle in the ordinary course and see where our subs are on their dividends. So Great-West Life is the biggest part of it, and you mentioned our payout ratio. So we don't think of it as power first of all, as a payout ratio. We think of it as a flow-through on the dividends. When you look to Great-West Life, I think they've been clear in their own communications that they see -- they've given kind of medium-term objectives for earnings per share growth in the 8% to 10% range. And they also communicated going back a couple of years ago that the dividend payout ratio, they were targeting was in the 45% to 55% range. I think they're at the high end of that band right now. All things being equal, you would, therefore, expect that if they're targeting around 50, you might see a little bit of -- the dividend growth may lag the earnings growth a little bit. I mean that's a logical conclusion, but it's not a big deal like if they're at 54% and they're targeting the center of the range around 50%. You might expect a little bit of lagging on the growth in the dividend over the next few years. That's -- so that's everything I can tell you about our dividend payout ratio. I would expect it to continue to happen in the ordinary course.

[Jaeme Gloyn, analyst]

Yes. Great. In terms of GBL, we don't dig into this often enough. But I'm just curious, is it a great market for monetization necessarily in North America. And curious to get your take on the European market or any specific themes or asset classes within the GBL portfolio, some nice gain, obviously, from Webhelp this quarter and just looking to get a broad take on what you're seeing over there at the GBL portfolio.

[Robert Orr, executive]

Yes. I mean I think the themes are consistent. They are continuing to move into more private and less public. And so realizations on the public side are less of an issue than they would be if you're in a private equity business. And so that's one theme. I think investments they've made from everything I see. They've done a couple of large healthcare acquisitions, and those are panning out well, but they're early days. So they're being -- that side of their business is doing well. But there's nothing particular from a liquidity point of view that's different in the European market than we see in the North American market. And again, a lot of their portfolio is listed and are liquid. So liquidity is not necessarily the issue there.

[Jaeme Gloyn, analyst]

Got it. And then lastly, as we're looking at Sagard on a fair value perspective, are there some key investments in the Sagard portfolio like Portage or private equity that we should be zeroing in on to just sort of get ahead of what those movements in fair value could be on a quarter-to-quarter basis or some broader macro indicators that would help us sort of guide how that moves on a quarterly basis as well.

[Robert Orr, executive]

The fair value that we gave at the NAV is really the fair value of the management company. It's not the investments, the LP investments themselves. So this was the valuation of the management company following the investment by ADQ and BMO. So it is only tied to the stream of management fees that the management company is getting. Yes. So you think about -- and we do think about it, they're related, but they're different. So we have an asset manager, which is what we report on when we do the FRE and then we show you the carry. And that is where ADQ BMO and also Canada like put in some more investment as part of that as well. And that round of equity raise at the asset manager level gave rise to a mark, which allowed us to market in our books the way we have this quarter. Then we have the seed capital that Power invests in cigar and in power sandal capital. and that's a little over $2 billion. And that's a myriad of investments. I haven't counted how many different strategies, but it's a cross-spectrum from VC, fintech to debt funds, private equity infrastructure. It's across the board basically most of the strategies of which there would be 20. I'm guessing there's -- if you added it up somewhere, it's in the 20s. We've got -- we're typically a lead seed investor as they're launching products. So that would be a long question -- I don't think you're asking the question on our LP investments as a seed investor because that's just a broad, broad base across the portfolios.

[Operator]

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

[Nikolaus Priebe, analyst]

Okay. Just on Slide 16 of the presentation, there's still $2.3 billion of Power Corporation's proprietary capital invested across that alternative Asset Management business. The proportion of third-party AUM has grown over time. So do you foresee that commitment declining further over time? Or is $2.3 billion, roughly speaking, consistent with what your expectation would be for the long-run commitment to that platform. Just some updated thoughts on capital intensity of the asset manager would be great.

[Robert Orr, executive]

Thank you, Nick. That's a great question. And we've been explicit in our communication with the market and our communication with both Sagard and Power Sustainable Capital, that Power was going to was not looking to put more net new capital into the LPs into our LP positions. We were looking for the 2 platforms to grow using capital away from power. So the $2.3 billion is roughly the same as what it was when we launched the strategies or when we changed the strategy 4 years ago, it was right around a little over $2 billion. And our plan going forward is not to see that increase is to recycle it. Now it doesn't go in a straight line. So sometimes you've got 4 funds that are being launched over 2 quarters, and you don't have a lot of realizations and you're net-net, adding $200 million, I'm making up the numbers here over a couple of quarters. And then you go a couple of quarters where there's -- where you're getting realizations and you're getting capital back. But roughly speaking, we're expecting that at this point to stay in the low 2s and hoping that the bars on pace not dark blue under the funded AUM bar there where you've got the 16.8%, that, that gray 14.5% continues to grow and the 2.3 stays just about where it is. And as we do that, than the GP, the fee-related earnings should grow and ultimately get to profitability. We don't have a lot of comments on Cigar. Ones are getting to breakeven, and those are good questions, but the fact is that it was not a very big business going back 4 years ago, and we just had some third-party investors come in and validate a value that we've marked the GP now up to $270 million... Or share... Our share. So that's evidence of value creation, and it's been done with other people's capital. So that's the way I'd answer the question.

[Nikolaus Priebe, analyst]

Got it. Okay. That's very clear. And then with the sale of the minority interest in Saga being completed in the quarter, have any of the proceeds been upstream to the holding company? Or where would that reside in terms of its geography on the NAV schedule? It would be in the 270 the investors bought into treasury and they didn't buy PowerPoint sell any shares, and that would stay in the GP, and the GP would use that to build out this business, including potential other strategies or acquisitions that they might want to make.

[Operator]

Our next question comes from Tom MacKinnon of BMO Capital.

[Tom MacKinnon, analyst]

So just to be clear, with respect to the movement in the sagard on the NAV schedule from $970 to $4.44, the $970 million was a carrying value number reflecting your 78.5% ownership and the 1,244 is a fair value, reflecting your 54.5% ownership. Do I have that correct then?

[Denis Le Vasseur, executive]

No, I think you -- these are -- these are the assets, the proprietary capital that you're looking at, it's the with the transaction, we're really looking at the asset manager itself the $270 million, that went up from something like $60 million last year to $270 million. Last year was carried at book value. And this year, we marked it at fair value. But the other numbers that you're quoting are the assets that we're holding... The LPL Yes.

[Robert Orr, executive]

Thank you it, Tom, is that we -- when we launched the strategy -- or when we announced the new strategies 2 years ago, we had about $2 billion invested under sagard and under power standable capital and investments in different funds and different strategies. Most of those -- a lot of those were just for our own account. We were the only investor. We launched these businesses, and we have, with the goal of making the asset manager, the general partner, the GP, more valuable. And the GP has been marked up in the case of sagard from roughly $60 million previously to $270 million, and that is as a result of third-party investors coming in and validating the value of the asset manager. And the asset manager is -- and that's what we...

[Tom MacKinnon, analyst]

970 movement in sagard quarter-over-quarter to 12.44.What's driving that movement then?

[Robert Orr, executive]

I don't see that 974.

[Tom MacKinnon, analyst]

Yes. Well, so in your second quarter, you had in your -- any adjusted NAV statement. You had second quarter for sagard, you had it at $970 in that NAV statement. That was on Page 6 of your second-quarter press release. And then Page 6 of your third quarter press release, you have a sagard at 1.244%. So what drove that increase?

[Robert Orr, executive]

Okay. The 1.244 is the now. It's a $974 million of the investing activities plus the management company of 270. So if you look at -- it's a lot clear if you look at our MD&A on Page A62, it is clearly divided into the asset management company, 270 and the investing activities of $974. So on that summary page, we combine the LP investments with the GP value on that summary page. And most of the growth in that $977 to $244 will come from the markup on the GP. But as you say, you get it broken down with pages at on the MD&A 600, you get it broken down between what's the LP investments and what's the GP value. Yes. And that $270 million -- sorry, just was in the area of what was that in the business. So in the second quarter, it would have been about 100 60, so Well, it was 60 at the end of the year, and it did not really move -- this is a book value. This is a book value figure. It was -- it was about  Okay. So really, the $200 movement is the markup. Is that -- that's... Okay. That's -- and now this -- okay, so now you've got the $270 million sitting at fair value then and before you had it at a carrying value, right? Understood. Is -- and if I look at the treatment of the $1.37 billion that you have for power sustainable that sits on this statement, is that -- what do we have on that? Is there any carrying value, fair value? Is that kind of held the same way you've got for sagard -- or is there any difference there in terms of the treatment of that number?  Okay. So... There's a difference here with regard the 10 is a book value figure. We have not marked up to fair value our sustainable manager yet because we don't have -- we are waiting for third-party confirmation, say, on a transaction to market up to fair value. So the 10% is more similar to the 60 of last year in Sagard... You'd have to go back to the MDA, and you will find power sustainable, the GP is valued at $10 million, which is its spot. The rest of the $1.7 billion, the bulk of it is our LP investments. Correct.

[Tom MacKinnon, analyst]

Okay. All right. I appreciate you walking me through that piece. And maybe just one other quick numbers question. The $1.276 billion that GBL made in the quarter. if I multiply that by your 15.5% ownership and the euro to Canadian dollar rates that you disclosed, I get something in around 288 yet you've got a 35% contribution from that. Is there something that I'm missing here? Or was there something else that would have made that calculate?  Also in this other earnings in GBL. The gain itself will yield $323 million. That's at 15%, and I would say an exchange rate of something like 1.5%, but there's other activity in GBL that will lead to the figure that you're getting.

[Robert Orr, executive]

No, not just a gain, the EUR 1.276 billion that they reported as earnings. Correct. The 1.276. -- if you simply took 15% of that at the exchange rate at the average exchange rate for the quarter, you should get to our figure.

[Tom MacKinnon, analyst]

Okay. I didn't. Sorry. Maybe I'll take that one off-line.  Okay. But there's no other noise other than multiplication of 2 figures, one being 15.5% and 1 being the 1.458 exchange rate that you guys disclosed in the report that should, by definition... You that... For... Okay. We'll have to have that arithmetic discussion offline then.

[Robert Orr, executive]

Thank you, Tom...

[Operator]

[Operator Instructions]. Our next question comes from Doug Young of Desjardin Capital Markets.

[Doug Young, analyst]

Hopefully, these will be a few quick ones. I don't want to beat a horse to death here, but just a few additional ones on Sagard and I kind of get the fair value versus carrying value. But I guess my question is twofold. I mean, how do you drive fair value? I assume you're going to do that every quarter. Is it of assets? Is it off just cash flow? Just trying to understand that. And then, Jeff, maybe as you look out over the next few years, and I understand how the mechanics are going to work in terms of driving towards breakeven, but what's the proper margin for this business?

[Robert Orr, executive]

Well, on the valuation, I think we -- it is really done on a cash flow basis, projected cash flows and discounted back to do it every quarter. I don't think it's going to be done every quarter. It's more something that we would do yearly. And on a quarterly basis, just to ensure that there's no major change, but we would be -- we will probably keep the value constant throughout the quarters until year-end, unless something major has occurred. And Doug, I'm going to defer on your question on margin because I can talk about where asset managers get to when they're mature, but I don't want to offer -- I don't want to offer a margin. I'm not trying to be evasive, but I already mentioned in the question of how quickly do we get to breakeven. It depends on external factors, depends on how the AUM grows, let alone the company still look fair ways away from full maturity. So I'm going to defer on that and maybe we can have a more informed discussion where I don't want to mislead anybody in terms of putting out a number there and having everybody expected. -- because we're still at a pretty early stage of development with these businesses even though that doesn't mean we're not -- I think the most important thing I could say is we had some very sophisticated third-party investors come in and say this business is worth money, even though it's not yet breaking even. So Doug, if that's all right. I'm not going to offer a margin at this point.

[Doug Young, analyst]

That's fair. And then just -- I know it's early days and you had a transaction. I'm just trying to go through -- I'm trying to think about the evolution of carried interest, and I understand how the mechanics work down the road, and when it kicks in, do you share the carried interest in all the existing products with these investors? Like they would get full ownership of everything that's in the pipeline. Is that correct? You're not leaving some with yourselves and only on new product launches, like just...

[Robert Orr, executive]

Yes. So the way the business works is that we've got a GP and the owners of the GP, which includes power, it includes at this point, ADQ BMO and Canada Life, and it includes management through ownership of GP, some of which is awarded to them and others in which they put up cash and buy shares, okay? So those are the shareholders. And they share in all of the fee-related earnings, which are basically your annual fees, whether it's anywhere from 75 basis points to 2 percentage points on an equity fund. And then the carry is awarded as it is in the industry, the Kerry points are awarded, and that those are a mix between the investment management teams that are working on their specific strategies. The management team at the top of sagard would get those points and then power I shouldn't say power, excuse me, all of the GP shareholders would share in the carry points. So you have carried -- on an equity fund, you got 20% carry. It will be lower as you move down into fixed income. That carries got points attached to it and the GP has a good chunk of that carry. It's -- and that is shared equally amongst the GP shareholders. I don't know if that start...

[Doug Young, analyst]

No, that's clear. It's just like some... Standard...

[Robert Orr, executive]

We would look like... The other alternative asset manager, by the way on the plan, I think on that... Yes. Yes. And Denny, I guess on GBL, any additional noise on web health, like that's done, I assume, like we're not going to have any further adjustments going forward.

[Denis Le Vasseur, executive]

No, it's all done. It is finally done... But we do own equity in the... We do own equity in the merged company Yes. But the transaction is closed. But the transaction noise is done. Okay. And then just the cash... And the puts are behind us.  Yes. Yes. That's Okay. And then... I noticed -- I want to say we haven't crowd on the big gain because we -- for the last 2, 3 years, we've been saying we had to put liability that hurt our net income, but it's just to put liabilities because the value went up on web help. And so we're not crowing about the reversal either because it is what it is. It's just the reversal of a bunch of pain that we unfortunately had to go through and there are no put liabilities left on these investments.

[Robert Orr, executive]

So... Correct. No. No, I get that. And then just lastly, the cash down quarter-over-quarter. I guess we went through some mechanics, it just looked lower than what we would have thought. And I guess the buybacks, you get some cash in from Bellas. It doesn't seem like the cash in the Sagard went up to the holdco. Is there anything else unusual? It sounds like maybe there was just some funding of some sage project... And I think that's right. I think we've got, as I was trying to say earlier, even though on the earlier question about are we increasing our LP investments and we're not. The explicit goal is to keep them flat and have parties grow the AUM. But that doesn't mean that we're not seeding new strategies. And the seating comes from, over time, realizations that come out of the existing strategies, but it's not a straight line. And we'll go through a few quarters where all of a sudden, we're net cash out and in other quarters were net cash in. It's kind of lumpy. So we don't want to take -- well, that's it. We just have to manage that, but the goal is to keep it flat. So -- so that's effectively it. If you think about it, we take dividends up from our 3 public subs, we pay our expenses, we paid a lot of that out in dividends. And then we have realizations and reinvestments into the seed capital and hopefully -- and then we've got other assets that we monetize. That's the equation. But quarter-to-quarter, it can be a little lumpy.

[Operator]

Ladies and gentlemen, there are no further questions. So this concludes the conference call for today. Thank you for participating. You may now disconnect your lines.