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Power Corporation of Canada
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Good morning, and welcome to the Power Corporation Fourth Quarter and Year-end 2020 Earnings Conference Call and Webcast. [Operator Instructions] Please note that this call is being recorded today, Thursday, March 18, 2021, at 8:00 a.m. Eastern Daylight Time. I would now like to turn the meeting over to Mr. Jeffrey Orr President and Chief Executive Officer of Power Corporation. Mr. Orr, you may proceed.
Thank you very much, operator, and welcome, everyone, to our fourth quarter results call. And I hope everybody is well and healthy. With me today is Greg Tretiak, Chief Financial Officer of Power Corporation. And we'll get right into the presentation on our results for the fourth quarter. Just we got a few pages upfront on disclaimers. And on Page 4, you've got pictures of Greg and I in a former life, which looking forward to being back in a suit at some point in the upcoming months. I'm going to move right forward to Page 6 on the presentation, and the Power Corp part of our communication of our group is a very important one. But you've also, of course, got reference to our public companies, Great West Life, IGM and GBL, all who have their own recent material and released and earnings calls and participations in conferences. So all of that material is available on the various websites that you see there for your -- if you have specific questions on the operating companies. I'm going to flip rate forward then to Page 7. And we continued -- since our last call, I think it was November 11 or 12, continued with a strong pace of activity across the group. Some of that was closing transactions that we had previously announced. There was also a fair bit of fundraising going on across the alternative asset platforms. We also made progress on surfacing value on some of our stand alone businesses, all being the obvious example, and we'll talk a bit about that in the presentation. And also continue to receive recognition for the work that we continue to do across the group in terms of our corporate citizenship and got a fair number of recognitions across , which I'll talk about in the presentation as well. So with that, I'm going to pass it over to Greg to speak specifically to the results for the quarter. Greg?
Thank you, Jeff. A good quarter, strong quarter. You can see the NAV at $41.27 at the end of December, up 18%, an additional 8% when we marked it on March 17. And net earnings for the quarter at $0.92. Adjusted net earnings at $0.93, the $0.93 compares to the prior year's $0.84. And the difference between net earnings, the adjusted earnings largely due to the write-down of the DTA in 2019 of Putnam. The Board of Directors declared a dividend of [ $0. 75 ] per share. So now I will turn you to the next page, a little review of the net asset value. Left hand panel, which is in per share, you can see that the per share of $41.27 at the end of the year, that's $6.33, up 18%, as I said earlier, contributing -- obviously, all components contributing to this strong increase in the NAV. The publicly traded companies, collectively representing $5 of that $6.33 increase. The alternative investment platforms also contributing $0.24, and the increase largely driven by Power Pacific Investment management, which continued strong out-performance relative to the benchmark, just give them a kudos. Their 10-year out-performance record is something like 9% over the MSCI index. And then, of course, Lion, which had a November announcement, a merger with Northern Genesis and that valuation that we have at December 31 is the $10 that this pack was launched at. And in our number, there is a interest of $780 million with respect to Lion. On the right-hand side of the panel, it is in billions of dollars. And you can see that the publicly traded Lifecos, representing about 80% of the NAV, hasn't changed significantly from the prior period. Well simple is in the Sagard Holdings number and the entire group of the platforms representing about 9%, 9.5% of the NAV. And then, of course, the stand alone businesses. We have a couple of slides later in the deck. I won't go in any detail here, but you can see they represent about 4%, and that kind of rounds out the net asset value. And with that, I will take you to PCC's earnings per share. As I mentioned earlier, $0.92 net earnings for the quarter. The adjusted net earnings $0.93, which was up sequentially from the $0.65 in Q3 of '20 and the $0.84 and '19, as I previously mentioned. Just looking at the Q4 results. No surprises given that the publicly traded companies have reported earlier this quarter. So looking at the first-line below the publicly traded companies, you can see the alternative asset management platforms contributing $0.05. A strong contributor there was KOHO, which is in the portage funds. The KOHO announced in December a close of a successful financing round. Our collective ownership in the group dropped below 50%. So given the accounting conventions, when that happens, you have to remeasure and, at that point, we remeasured to the that round of closings value. And I think that KOHO was valued at $250 million. Our gain in the quarter as a group was about $71 million and PCC's direct investment was $30 million. So you can see that contributed to our earnings in the alternative investment platforms line of nickel there. Of course, China AMC also contributing. We have a slide later on, so we'll address it at that point in the deck. And the stand-alone businesses Lion, obviously, contributing in the quarter. And this is the earnings contribution. We control Lion, so -- or have a control position in Lion. So this increase, which is about $0.03 and the $0.07 is really the valuation of the call rights that we have with respect to Lion and that particular transaction was announced in November. And we also have dedicated a slide to Lion to discuss it in some detail. And with that, Mr. Chairman, or I should say, I'm back in the Board meeting still, Jeff. So I'll turn it back to you.
I won't tell Mr. Desmarals that you've appointed me as Chair in his absence, Greg. But thank you. So the next 3 slides, most of you will have seen before, so I'll go through them pretty quickly. But just on Slide 11 to remind folks that we are focusing on financial services, not diversification. That's been our strategy since we closed the reorganization in February. And each of the public operating companies are pursuing their own organic and inorganic strategies. But at the power level itself, we're focusing our attention on 2 things really, building our alternative asset management businesses as well as managing our stand-alone businesses in a manner to realize value. That's the lions of the world. We're doing that in a smart, timely way, not honoring our commitments to our partners. We are doing it so that we surface value to maximize value over time. And -- but that is also a very big focus, and we're glad we made progress on that in the last quarter. Also managing our costs carefully, and our financial position continues to be something we manage prudently. We do have a focus on returning capital to shareholders, but we do that in a -- mindful of our financial position. And then at the bottom of the page, communicate, communicate, communicate. We are really on a [ tear ] across the group here to make sure that we're out in front of the market as we -- and honoring our commitments that we made to be very transparent so that people understand what we're doing and what we're focused on. Page 12 is just another way we think about it. Our value creation strategy is focused on 3 key levers. And the first 2 focus on the public companies, and they are 80% of the gross asset value of the business. So that's a key part of our value creation. But we do have down to #3 at power, a lot of, I would say, low-hanging fruit that we can focus on, and we can do a lot of simplification to service additional value at Power Corp, which is taking a lot of our attention as well. Page 13 again, I think some of you will have seen this in different presentations, but it is -- as this is still a fourth quarter earnings call, we can look back on 2020 and it started with a bang with the collapse of the dual holding company structure up in February, but we followed that up with just, I would say, a blizzard of activity across the M&A front through a good part of the year and then a couple of transactions that were financing rounds down in October and November, that in the case of well simple, I think, shown we had, I think, that was a 3x on what the group had invested and then Lion was significantly more than that. So we did a couple of transactions at the end of the year financing that started to surface the value of some of the investments we've been making over the last couple of years. Okay. Let me move forward then to talk a bit about the public companies. And Page 14, just kind of tries to do a high level as to what's going on at those companies. And the first bullet point there, capitalize on significant past investments to drive higher earnings and cash flow growth. That's -- those are really Great-West Life and IGM points. GBL is more of a net asset value company in terms of valuation than an earnings company. But for Great-West Lifeco and IGM, which are the bulk of the portfolio and the asset value. The focus there is that the management teams are both trying to capitalize on what the companies have invested in over the last 4, 5, 6 years to strengthen their positions in the marketplace and turn that strength into -- and the momentum that they're starting to show in top line growth and market share gains into higher earnings for the shareholders. And we've done a lot of investment, and done a lot to improve our client experiences. We've done a lot to invest in our businesses and our technology, time to focus on creating shareholder returns here. And the key to that is getting higher earnings and cash flow and being able to then demonstrate that to the market on a sustainable basis. So we have to execute on that, but that's core. And then the second bullet, and I don't have to say too much about it because pursuing M&A transactions to enhance earnings and strategic positioning, we've been -- we've obviously, on the page I showed previously, had a lot of success and that augments what we do under the first bullet. So with that, I'm going to just move forward to Page 15 and just -- they've got some highlights. I'm not going to walk through all of these points for you, but there is strong momentum across each of the groups. A couple of things on Great West. They've continued momentum organically at Empower, in addition to what's going on with the acquisitions, continued focus on digitalizing or digitizing the platform. You see in the third bullet point there. Canada Life in Canada continues to digitize and made some big moves in the quarter. At IGM, really tremendous momentum. Mackenzie on Fire, best quarter in terms of net flows in the company's history. IG Wealth, what we used to call Investors Group, had its best net flows in over 2 decades. So significant momentum showing at IGM and continued successful growth in GBL. They did successfully complete the reorganization transaction with the Pargesa [indiscernible] Holding company -- the 2 holding companies into one, and that was finally completed in the fourth quarter. And along the bottom of the page for each of Great-west Lifeco and IGM and GBL, you see just some recognition of the whole focus on what companies have been doing to be focusing, not just on shareholders, but the broader stakeholders in their group, their communities, their clients. And we all -- as every company and every public company knows, this is not just about driving returns for shareholders. You've got to be contributing across all your stakeholder groups, so you're not going to be in business very long in the world today. And we're just highlighting the fact that those are big focuses at our group, and we're getting some recognition for it. Okay. Let me turn to Page 16. A couple of highlights on specifically, I'd like to drill down on, on Page 16. We've talked a lot about the MassMutual on Personal Capital acquisitions. It's just a way to summarize what we've done. The first bullet point is that we enhanced Empower's clear #2 position in the DC market. And it's -- we did so on what we expect will be a highly accretive basis to earnings and cash flow. But the Personal Capital acquisition also did a lot for the group. First of all, it added a high-growth direct-to-consumer wealth business, and Empower already has a growing wealth business. So that's where individuals are dealing directly with Empower. And Personal Capital enhances that, and it also provides tools that will enhance the capability of Empower's DC business. So we think this is a market where we have a lot of opportunity for growth. And down to the bottom of the page, you see a little bit of perspective on it. The Personal Capital's business had been growing very quickly organically. You see the assets on the platform from 2016 to 2020, that's without acquisition. They had been growing quickly with the market, but growing much faster than the market in terms of the quality of that platform. And they were at $735 billion in AUA at the end of the year without MassMutual, with MassMutual that jumped to $925 billion. And then you see on the bottom the direct -- the wealth management platform of Empower, which is really when folks are coming out of their DC programs, either they retired, they're in a job change, Empower has been focusing on having them come into an Empower retail offering, where they're no longer on their corporate employers plan. And that business had been growing smartly from $6 billion to $16 billion of assets. And then when you added Personal Capital, it's up to $33 billion because Personal Capital had a direct-to-consumer -- has the direct-to-consumer business about $16 billion. So we doubled the size of that. So that's a little bit of a breakdown of what the businesses are going on at Empower. And as I said, that -- those assets, $925 billion plus $33 billion crossed $1 trillion mark on January 31 and a little bit true market, but largely through some very big employers coming on the plan at Empower on their DC platform. So very excited about what we're building there, and we'll continue to talk more about that in the months ahead. Page 17 is just a note on Putnam. We've been kind of quietly going along without talking or making a lot of fanfare about it, but Putnam, over the last several years, has really reduced its cost footprint and starting to get some revenue uplift over the last few quarters. And that has translated into the best profitability we've seen at Putnam, I think, since we've owned the franchise. This is material from the Great-West Life disclosure, but it's looking at Putnam on a Putnam basis before you allocate financing charges or acquisition amortization. It's just a straight Putnam number. These are the numbers of Putnam Board, for example, would look at. And it's basically, revenue minus costs on the line in the graphs. And you can see we've been running at a margin of revenue pretax of about 12% in each of the 2 quarters, Q2, Q3. And then Q4 was a big quarter, above 20%. Now there's a little bit of non-repeatability in that and that the market was up. So there's some -- a little bit outsized gains on seed capital, and there were some performance fees that were realized in the fourth quarter. But basically running at about a 15% margin to revenue when you look at it before you allocate financing or capital charges to it. And the numbers along the bottom, these are U.S. dollars or the same numbers after tax. And so you end up with -- we're starting to see some profit contribution here coming through for Putnam. And I just -- before I leave the page on Putnam, there were also in the Barron's performance survey of all the U.S. companies on a 10-year basis, I think they were 3rd of the 50 or 60 companies -- third best track record. So they've really made the point many times that we've really been focusing on making sure they have good investment performance, and they have a great long-term track record, which sets them up well, we think, for continued success. 18 is then a focus on continued traction in Mackenzie. I made the point earlier, but you see it expressed on the left-hand side of the page in terms of AUM. So with the organic growth at Mackenzie, plus the acquisition of GLC, plus the acquisition of Greenchip , which is an ESG manager, they've been working with Mackenzie that's now part of Mackenzie. They've got AUM of [ 187 ] at the end of the year. And then another way of looking at Mackenzie's success and traction is on the right-hand side of the page. The dotted line is the net flows into the retail investment funds, including ETFs as a percentage of the average assets. And you can see that, since about 2017, Mackenzie has been very positive and it flows, up and down a little bit with the market tone, but on a 12-month trailing basis now at 5.5% of average assets. And at the bottom of that graph you have in gray, the estimate of the mutual fund net flows of the industry. And that's taking the best information we can get from all the mutual fund company disclosures, but we're gaining -- Mackenzie has been gaining market share on a pretty significant basis here now for about 3 years, years 3.5 years, and that seems to be accelerating. So we're really thrilled about what's going on in Mackenzie. And I turn here to some of our other businesses and just a note on Wealthsimple, it's been having a tremendous year in 2020. Huge growth in its assets under administration, 94% growth over year. Those bars down on the bottom right are every 6 months, they're not annual. If you show it it annually, of course, it's a lot steeper than that. And then we did already talk about the third bullet point. The leading investors in the U.S. back in October put a value of the company at $1.4 billion pre money. That's a big jump on our -- the group's position. And business just continues to grow quickly. And it's across all the platforms. We've got -- it's not just kind of started off as the invest business, but they've got a cash business, they've got a trade business, they've got a tax business, and so they're really broadening out the ways in which they can serve their clients. So we're quite excited about what's going on at Wealthsimple. Page 20, I think Greg went into the numbers as to what we've done at Lion. I think we had CAD54 million invested in the business, when we announced the transaction. The -- this has been -- obviously, it's extremely exciting and very successful at this point. You may have seen this week that also the Canadian Québec governments -- we've got the Prime Minister and the premier of Québec together announcing their support for expansion of the manufacturing facility in Québec here. And so there's lots of excitement, and we're really pleased about how this is working out and very optimistic for where Lion goes in the future. I take the next 2 slides to talk about fundraising and growth in our alternative asset management platforms. So a lot of momentum that was highlighted on the earlier slide. We've got, at this point, $5.6 billion in AUM across Sagard Holdings and Power Sustainable that is funded, and another $2.9 billion in commitments. And the bullet point, the third bullet point illustrates that, of the $5.6 billion that's funded, 46% is from third parties. But of the $2.9 billion that's unfunded, so that's the newer fundraising or people that have made commitments that haven't -- the money has been put to work it, 80% of that is from third parties. So this is just making the point, we are turning these businesses from being originally diversification vehicles for Great West for the most -- or excuse me, diversification vehicles for Power Corp into third-party asset management businesses. And on the bottom right-hand side of the page, you've got the funding split between power and third parties. Sagard Holdings at this point is majority funded by third parties and Power Sustainable the current capital is all power corp., but they are moving quickly to a third-party model. And I'm going to show that on the next page, if you flip forward to Page 22. Actually, I'll just start at the bottom of the page to continue along that Power Sustainable did announce the launch of a $1 billion sustainable energy infrastructure partnership. It's not funded yet, it's not closed, but we are having third-party capital coming in from [indiscernible] a National Bank, another -- a third-party investor in Great-West has got some money in there as well. And on the Power Pacific platform, which Greg talked about, that's our team in Shanghai, been managing money since 2005, amazing long-term track record. They've got $100 million of third-party capital that has been committed to go onto that platform. So good progress by Power Sustainable Capital on its fundraising. Up at the top of the page, continued success of Sagard Holding on its fundraising, and you've got some of the highlights of some of the recent announcements on funding. Some of those, like Sagard Credit and Sagard Healthcare, those are not new, the credit Fund II or health care royalty partners, but the amounts have been increased. So we had previously announced, for example, I think at the Credit Partners, a $450 million funding, it's up to $650 million. So continued strong momentum at the platform. We're very pleased about the progress. Page 23. Greg mentioned what's going on at China AMC, and it continues to do really grow well. It is, we think, the leading asset manager in China. Certainly, if you look at long term funds, it is the leading asset manager in China and it continues to grow its assets. It continues to grow in sales. It continues to grow in its profitability. So I'll leave it at that, but that's -- and again, remind those who are not aware, we have 13.8%, 13.9%, I can't recall, at Power Corp, and we have an equivalent size share down at IGM. Page 24, our stand alone businesses. I won't spend much time on this page. We've talked a lot about Lion, but we do have 3 other businesses there that are, we think, strong businesses that we're also focused on, creating servicing value and ultimately realizing value for the benefit of Power Corp's shareholders. Page 25, continued progress on our expense reductions. And we think we're 61% of the way there in terms of the $50 million target that we've announced. So continue to focus on that. We're -- a lot of attention on building the businesses and in growing the top lines and values, but we're also following a very disciplined approach to our cost at Power Corp, and will continue to drive and hopefully make good progress on that in the quarters to come. Page 26 is just a reminder of our commitment to communicate, and you've got a number of the progress points that Power Corp, Great-West and IGM have made over the past 12 months. You got a Power Corp -- not that IR is just a function of how many people you talk to, but it is one tangible measure and a proof point of the energy we're putting into it. We had 93 meetings with institutional investors or analysts in 2020. And as of last week, we were at 41 year-to-date already. Those, again, institutional meetings or one-on-one analyst calls, but they are actually -- they are not even analyst calls, I should say, that's with analysts and investors. We're not talking about like a one-on-one call and analysts. These are actually meeting with investors and analysts. So a lot -- continue to be very active on that front and continue to enhance the disclosure. You're seeing some of it in our -- in Power Corp's results this quarter, you're also seeing it at our -- at Great-West Life and IGM they just a couple of weeks ago, came out and had a call where they've announced that their new segmentation results to bringing all the way down to the net earnings line that had been at the EBIT line previously. And so we're continuing to put a lot of energy into how we communicate. Page 27 is a look at our net asset value discount. We had been -- and what you're looking at here, I should say, is the discounted Power Corp looking right through the power Financial discount and counting both of them. So some people had looked at Power Corp's discount before the reorganization on taking Power Corp at its trading value, this is taking -- Power Financial, excuse me. This is taking Power Financial on a look-through basis for Power Corp all the way down to Great-West Lifeco, IGM Pargesa at the time and then the Power Corp. assets. What you see is that the discount had really traveled in the range. And it averaged pretty steadily in the period of 2015, right through to the end of '18 at about 34%. You can see it bouncing around, but it was pretty well around the mid-30%s. We announced in January of 2018, the Great-West Life was selling its U.S. life insurance business. And at that time, we also announced they would be considering taking the proceeds and buying shares back to mitigate the dilution. We followed that up, I think about 5 weeks later with the announcement of the 3-level buyback and then continued to communicate. We started our IR efforts pretty heavily through the last half of '19 when we announced the reorganization. We continue to narrow the discount. We had a bit of a blip as we went into the pandemic. Holding companies around the world have their discounts widened out. But we've been continuing through 2020 with all the transactions we've announced to grind away at the discount, and we've got it down right now. It's about 26%. We don't control it, of course, but we can influence it. And we're continuing -- we think if we continue to execute on our strategy, we're optimistic that there's a reason that we can continue to have that discount shrink. We've had it much lower than the 26% if you go back historically. And so we think we can continue to whittle away at that as a value driver. And with that, I will go to Page 28 and kind of try and summarize here what our value creation strategy is. We are -- first and foremost, the first 2 bullets, as I said, 80% of the value of the businesses are in our public operating businesses. So getting higher earnings growth at the operating businesses organically, and adding to that through M&A is job #1. If we get higher earnings growth, we'll have higher earnings. And if we might even get a multiple revision relative to our peer group, if we execute on that, so that would be a big driver of the net asset value. And then secondly, we've got a holding company levers that we're using in #3, and we're creating and surfacing value as we've demonstrated in this presentation, communicating and -- with some good execution potential to lower the discount. All of those levers add up to a pretty exciting value creation story, and we're working on all of them, and I'm quite excited about it. And then I'm going to -- before I finish, I just want to come back to a point I made a few times during the presentation, but just a couple of the recognitions we've had recently. The Climate Disclosure Project recognized Power Corp and Great-West Life as 2 of the 3 Canadian companies that received the top score of A. There's only 3 companies across the country that got that. We had 2 of them, which is great. IGM also scored very well on that score. And then Corporate Knights recently recognized both Power Corp and IGM is 1 of the top 50 corporate citizens in Canada. And IGM itself was ranked 29th overall globally amongst all companies and was the top ranked -- #1 ranked financial services -- or investment services company globally and top-ranked financial services company in North America. So this is -- this has been a focus of the group for decades. In the last few years, we started to communicate what we're doing in a much clearer way, and we'll continue to put focus on that. Obviously, with all that's going on at in the ESG across everybody's businesses, this is a key part of our focus as well, and we're starting to talk about it a little bit more. And with that, operator, I'm going to end my remarks. And you can open up the meeting to questions from those that would like to ask questions.
[Operator Instructions] And your first question comes from the line of Nikolaus Priebe of CIBC capital market.
Starting on the investment management platform. You've achieved good progress on external fundraising. As you strive towards an improvement in the scale and profitability of that business, is M&A a lever that you would consider to accelerate the strategy on that front? Or is the build-out of that platform, something that you might prefer to do organically? Just some thoughts around that would be helpful.
Yes. Thanks, Nick. I think the answer to that question is organic is really where we're focused. I wouldn't want to exclude M&A. It is possible that we could add some capabilities there. So it's -- but I think the main energies are on organic. These are people businesses, right? So people have gone and their culture businesses, their investment management businesses. What you could see potentially is if there's a capability that is not within the platform that we could add. That, I think, would be something that would be feasible. But buying somebody who has the same capabilities and merging them together, maybe, but that's certainly not the focus. So primarily organic, but I don't want to shut the door there on whether we could do anything outside.
I just add, Jeff, that speaking of capabilities and where they might help leverage the proposition -- the consumer proposition to the clients of the various platforms, GrayHawk is probably the best example, which is capability that the Sagard Holdings platform acquired in the fall of, I think '20 or '19 some time, and they've been with us for about a year, and they're bringing capabilities in the individual wealth management component of the business.
Yes. I get -- that's a great point, Greg. Because I was answering Nick's question from an investment management point of view and Grayhawk comes at it from a -- as distribution. In the high net worth for the products is kind of the primary benefit there. So thank you for adding that. Nick, your next questions?
That's helpful. Yes, just one other for me. I mean, you've called out the strong growth of China AMC has experienced since acquisition. And I recognize it's a small component of your NAV. But when I look at 2020 alone, I think AUM was up more than 40%. And when I look at the fair market value of your investment, I think it's only increased in the single digits over the same time frame. Can you just remind us how the fair market value of that investment is determined in your NAV calculation? And whether there's any event, I suppose that could figure a revaluation there?
Yes. I'm going to pass this to Greg, but it's a private company, of course. So it was not like we have an immediate market recognition on the stock market. So Greg, why don't I throw that one to you?
Sure. Nick, our practice has been to mark that when there is a catalyst story, an event-driven opportunity to remark the position. The last time it was marked was when we traded, or I should say, purchased the 10% component. And that's when IGM acquired their interest, and we participated in it as well. And that was back in 2016. Boy, has it been that long? So the mark is rather dated. And as you know, we have a partner who is the aesthetic securities organization in China. And they're a publicly traded company as well. And so our practice there is to recognize when we both think the opportunity and the event presents to green market. So it's carried at that old mark for the time being.
And your next question comes from the line of Doug Young of Desjardins Capital markets.
Jeff, just going back to the low-hanging fruit at power to surface value. And one of the things you suggested was returning capital to shareholders. Your sitting on $1.2 billion of cash and cash equivalents. I think you're still planning on purchasing $350 million of first preferred shares, correct me, if I'm wrong. And so I'm just trying to gauge, how much of cash you want to retain on the balance sheet, thoughts on buybacks? And I know your biggest ownership is Great-West and Great-West has a moratorium on dividend increases and buybacks. And how does that factor into your thinking when you approach buybacks? This is something I get questioned a lot on. So I'm just curious your thoughts.
Yes. Good question, Doug. I'll take rip at the ball. And then Greg, you jump in and add any thoughts you might have. So you're quite right. We have talked about returning capital to shareholders. The low-hanging fruit I talked about was, in fact, servicing value within the various stand alone businesses, doing a better job of explaining -- simplifying it so that what we're left with is alternative asset management business is doing a better job explaining the value creation there. And as well, the surfacing NAV and then having the opportunity to buy shares back potentially at a discount to NAV, and that creates even more value. So all of that is kind of, when it comes together, adds nicely to what we're doing at the operating businesses. Specifically, your question, we had talked about doing share buybacks. And we, basically, under COVID-19, have really stopped those buybacks with the exception of nullifying potential option -- dilution from options. So we've had a little bit of activity. So we've been pretty conservative through the COVID period. And at some point here, we will move into a new mode where we're more open with our buybacks, and we're looking forward to that as we move forward. I do want to point out on the buyback front, though, that we have always supported our operating businesses if they have some sort of an opportunity to make an acquisition and probably need -- I'm using your question to just highlight that. So -- and I've said it in, I think, every investor presentation we've been in, in the last several months at least, that if we get an opportunity, great with life or IGM have some great acquisition, we will prioritize building out those businesses for attractive acquisitions they might make. But absent that, because those are kind of episodic, if I can put it when they actually have a deal and they need capital, our plan is to reduce our cash and buy shares back. We have not changed our view on buying back. I think it was $350 million of ] that we haven't done anything on that under the current environment. And as for the final part of your question, the amount of cash that we would like to hold, I think we have kind of a guideline that 2x our operating expenses and financing charges would be kind of a minimum we'd sit on. And maybe, Greg, I'll pass it to you on that, and you can complete the answer to the extent you want to add anything?
Sure. Yes, that would be about $750 million to give you a rough ballpark, Doug, in terms of the 2x and that's what we generally target. And it's not a firm number. When an opportunity presents, I think, we could go lower, but that is, generally speaking, where we target. And we have traveled above that for some time you observed on that earlier. So the only other thing I'd say is just the line of sight, if you will, on the 2 balancing equations that Jeff mentioned are important when it puts -- comes back to getting the share buyback program more active. And that is basically line of sight on surfacing the value from some of the opportunities we talked about. But not only that, when we have opportunities that present in the M&A sphere, we'll balance those 2 to guide us in terms of how much we would -- and how aggressive we would be in buying back.
And Doug, I just want to point out that while we've surfaced value for our stand alone businesses, we haven't monetized anything at this point. So the Lion transaction is great in terms of showing the underlying value we have there, but it's not -- we haven't monetized anything, hasn't done anything to our cash. We -- the company has done a [ spack ] and -- but just not -- we haven't sold any shares, of course.
Yes take me to my next question, just on the stand alone businesses, and we look at what you have in your NAV. Is there any way that you -- you've given the amount that's related to Lion, but there's still substantially more that's in that kind of bucket. And maybe I've missed it somewhere, but is there any way you can break down the value that you attribute to some of these larger items in the stand-alone businesses that's in the NAV?
So Greg, I'm going to throw that to you. I think the question is, can you break down the number between the stand-alone businesses into the individual parts? I'm going to throw that at you.
Yes. I think I'd take that question away for you, Doug. We haven't actually broken those down in the past. But GP Strategies is a publicly traded company. So I think you can figure that one out. So the other 2 would represent the amount that is the remainder. So I leave it...
Yes, that's fine. And I can always come back. But just last quick one. Just trying to get a sense on the expense side. You showed $20 million corporate expenses, I know that's after tax. And so let's call it $30 million pretax. I'm just trying to triangulate that back to what you show on Slide 25, the $35 million to $45 million. If it's easier to chat on this off line, I'm happy to do that as well.
So I'm not sure where you were growing there. We have $50 million of cost savings pretax on Page 25. And we think we've got $30 million of that reduced, and we have $20 million to go. Those are pretax costs at Power Corporation.
Yes, just...
yes. Go ahead.
Yes. No, I was just going to say, in the financials to get to adjusted, it just shows corporate expenses of '20. I'm sure there's something else that's somewhere else. And I know that's after tax and so I can follow-up if it's easier to go through it up line, that's fine as well.
So sure. I just -- we can follow it up offline, Doug, but 1 of the things -- there's a couple of one-timers in the quarter. So that may be what it's accounting for the difference when you're looking at it. I'm having trouble looking and finding it on my slides right now, but that's probably what the difference is.
Your next question comes from the line of Geoffrey Kwan of RBC Capital Markets.
Maybe asking maybe a slightly different way in terms of some of the servicing value stuff that you've done, obviously, a number of things over the past couple of years on simplifying the structure, servicing value, that sort of thing. But based on, I guess, how you think about what additional opportunities you could undertake to further simplify the structure, surface value, but assuming no acquisitions involved in that, like if we were to use the baseball analogy, like what inning do you think you are right now in terms of this whole process of, again, simplifying the structure, servicing value?
That's a good question. Every time you think you're in the third inning, 3 years later, you're still -- you've got lots of innings ahead of you. It never ends. I guess that's maybe a flip answer, but let's start with Power itself. I think the right place to be at Power is where we have a business, which is simple. It's financial services, i.e., it's alternative asset management. We're making money on our capital. We're already doing that. We're making good money on the invested capital. We're making money as asset managers. And we're probably depending on where you go and what platform it is, kind of 1, 2 to 3, 4 years, it depends on the fundraising, really getting more scale there. But we're -- so 3 years from now, 4 years from now, we've got a clean Power Corp that's got seed capital in it, that's got investment management fees and carry and is making money as an asset manager. And we're doing a good job of explaining all of that. We have good disclosure that people understand what we're making on the seed capital and what we're making as an asset manager. That's a simple business model at Power, and that's where we're aiming to get to. If you then ask what are the opportunities across the broader group to simplify things that exist? There's other opportunities out there, and we get asked the question a lot. And there are things we talk about. We have China asset management in 2 places. We have asset management businesses across the platform. Are there things that we can do to put those in a more logical structure? And those are things that I don't want to get ahead of ourselves and start speculating when and if they -- those could happen, but we talk a lot about those. So it's a little bit, but there's still lots of opportunities within the operating businesses where we may be able to create more dynamic companies, stronger companies and companies where the market would give greater recognition for the businesses they're in. So I don't know whether that -- what inning that puts us in, but there's still lots of opportunities, I guess, is the way I'd conclude on your question, Jeff.
Jeff, it just -- I was getting all anxious because I thought he was -- thought Geoff Kwan was going to be asking about the baseball on allergy, and I was going to say that yes, we have $0.03 on the sale of Rawlings in the quarter. So that's where I thought you were going to.
My other question was just kind of at the corporate level, the -- in 2020, you had tax recoveries of, I think it was $52 million. It was -- I think, it was $43 million in 2019. Can you talk about, I guess, how we should kind of think about how that tax line might play out in 2021?
I know who's answering this question.
Yes. That's highly dependent upon the amount of gains that we will recognize going through the year. And if you look at our financials, you'll see that we still have a fair number of tax losses carried forward that we can apply on an ongoing basis. So that will be the determinant in terms of how much we will realize going forward.
I guess, maybe I'll ask it another way then would be if we had -- if there were no gains that you're booking, would that mean that the number would be like a normal kind of assumption on taxes? Or just wanted to understand the mix as to what's driving the tax recoveries. Obviously, you mentioned gains, but just trying to understand if we make certain assumptions around how 2021 goes, what that might mean for the tax line?
Yes. So you have to look at our tax line between what's payable and what is cash taxes, Jeff. And so the accrual accounting is basically a topic I was talking to on a cash basis. So we are not paying taxes at this point in time on our earnings, quite frankly, because we're applying our previous tax losses to our income. So at the holding company right now, we're not paying tax. Does that help you with your understanding?
Yes, it does. Thanks.
And next question comes from the line of Tom Mackinnon of BMO Capital.
Just taking on the simplification that Jeff was discussing, just taking that a little bit further. IGM owns 4%, it's great west. Great-West owns 3.9% of IGM. You do have China AMC in 2 places, Well Simple in 2 places. Like how should we think of any kind of cleanup associated with that? And what is -- I assume some of these things are core and some of these things are noncore. And how should we be thinking about, as that gets simplified, do you just did this whole reorganization to avoid having 2 NAV plays. Like shouldn't the entire NAV play be at the top and then pure plays down below? I'm just curious as to what your thinking there.
Yes. So good question. And I'll start by saying all of that is where it sits as for historical reasons that made sense at the time. So if I go to Well Simple, when we first started Well Simple, it was part of a Fintech play. We were running it out of -- primarily up at the power financial level at the time. And as we turned it all out well Simple, we realize this is something actually that be a very -- it's not just a Fintech play. This could be a part of the franchise long term. And IGM maybe is the best place to start to build that out. And they started -- so the Power -- it was funded at the top in the initial rounds and the next round went in an IGM. So you end up with it in 2 places. And I agree that's not simple, but it was also -- it was also quite a venture capital bad at the time, right? And so it is where it is right now. It's a more complicated story on the cross ownership between Great-West and IGM. Those go back to many, many years ago when some large transactions were being funded, and the group was trying to encourage cooperation across common buying and common systems. And anyway, those are there, and we're aware that, that's something that we also talk about from time to time. You know the story in China Asset Management. We would have put it in IGM at the first time that we got an opportunity to buy a block, and we were not eligible at that time in 2011, I think it was when the first block came. We either bought it at Power or we didn't buy it at all. When the subsequent blocks came available, IGM had been qualified to be a buyer and we got IGM involved. So there's a history -- that's not a direct answer to your question, Tom, but that's just a little bit of the history. So we do still have opportunities to look at all of those things. They're all opportunities for us to look at to Simplify and put things in a more logical place and assemble assets where they're in one spot and they get and they're in the correct spot. You asked whether -- I think part of your question as well was whether these are long-term holds or not? And I think we've invested a lot of money in China Asset Management in the last several years. We think that's a great place to be -- a great market to be positioned. We have a very unique position in the Chinese Asset Management business. I don't think there's any other non-Chinese party that's got as much long-term assets when you look at our 28% collective group. I don't know that there's anybody who's got more of the Chinese Asset Management than our group. So that's a great asset. Wealth Simple has got lots of momentum. But I don't want to say that -- and we haven't identified Wealth Simple as a business that is stand alone, I mean, it's financial services. But we'll make -- we're going to make -- obviously, not going to paint ourselves in a corner as to what we do with respect to any of those assets in terms of how we realize -- how we turn those into value creation for the company. I don't know if I answered your question? I think what I said was that they're all -- they're in different places for historical reasons. They're all opportunities to simplify, but I'm not going to speculate on how -- when -- I won't go that far.
And yes, is the thinking to have -- I mean, before you had a sin underneath Power Core and that was like an NAV under an NAV, is part of the simplification to have peer -- we don't need to have an NAV story underneath an NAV story.
No, you don't -- yes, that was -- yes. Sorry to jump in. That was part of your question I missed. So when that happens, it's because there's an industrial logic, if I can call it, to put it there. So let's say, IGM, it's got China Asset Management, which although it's an earnings driver, it's such a high-growth earnings company that it's -- if IGM should be at a multiple of x, it should probably be a 2x, right? So you start to say, "Hey, you can't just have this be capitalized at IGM's multiple." You try and call it out and say there's a lot more value here than just 11x or 12x or whatever IGM is trading at because of its growth. You have other opportunities for example, when IGM is invested in Wealth Simple or when they had an investment in personal capital, they're not making those investments as a DC because they want to make money as a venture capitalist. Each of those investments at IGM were done because those companies could have potentially and may still, in the case of well simple, be part of their long-term business model. But you're at very high-risk stages of their company's buildup, so you're not funding it all along. You've got partners coming in. Those partners provide capital, but also, in many cases, expertise to build the businesses. But they're down at IGM, not because IGM wants to become an NAV play because they're making those investments because they could be very important parts of their long-term business franchise. At Power Corp that isn't -- we're prepared to do NAV businesses We are doing NAV businesses, as is the case in GBL. So I hope that clarifies. We don't have a strategy at IGM or Great-West Lifeco to go out and put a whole bunch of NAV businesses in place. But you do things, sometimes you got to buy stuff that's not earning money because you're looking 5 years out, you're saying this could be an important part of the franchise. Actually, I'm going to go on and say Personal Capital for Great West and is Powers part of that. They didn't buy it because it's -- they want to become an NAV play. They bought it because they think it's going to drive earnings. It might be 3, 4, 5 years out that it's really going to drive earnings, but they acquired it for that reason, not because they want to turn themselves into an NAV play. Am I going at the one that's .
That's good. It's just -- I think the distinction was that it's a part of the long-term business franchise I justify long-term there is.
And then you swallow hard. But Tom, then you swallow hard when you're -- if your IGM are great with life, and you feel you have to buy something that's not earning anything because it could potentially really drive your business 3, 4, 5 years out. You swallow hard because you may not get any value recognition for it, and you do your best to try and point out to the market, "Hey, there's value here," which is what IGM is doing in their new segmentation and trying to draw attention to that.
Right. And just a final quick one on Lion. I think it says in the slide, you're 34.6% ownership. Is that fully diluted? And what would that be if this acquisition close today, what would that ownership be? What we do...
Greg, I think I can answer it, but I'm going to go ahead and throw that to Greg.
Yes, that is the fully diluted number, Tom.
And that's assume get it close to date because I think it was based on the subscription or based on the...?
No, that would be based upon the value of the $10 on announcement.
And that's not going to change. That's...
Well, it could change depending on where the price is, right? Like it's -- that will be the determine of how much the dilution will be. So -- and I can't give it to you whether on the that we're -- what it's trading at today. Right now, I don't have that at my fingertip.
Because you're basically saying it's a dilution gain for accounting, not a mark-to-market gain through the books, is that what you're saying, Greg?
No, I think it was going.
We're trying to get the fully diluted ownership, if we want to attract the price of this thing, what would be the -- so the 34.6% was when it was $10, but it's not $10. So is it it's more like $20 and would that still be 34.6%?
So Tom, I don't have that number handy right now. I haven't calculated it, and it would affect the fully diluted number. So I'll endeavor to get that back to you.
And your next question comes from the line of [indiscernible] of TD Securities.
If I could just jump to your investment platforms for my first question. So specifically under the Sagard Holding, so the management fees and then like they've been increasing nicely with the increase in your funded AUM. But if I were to compare that against the investment platform expenses, I guess what level of third party AUM would you need to reach to make that line item consistently profitable?
Again, I'm going to take -- I don't have the numbers in front of me, but Sagard Holdings itself, from its fee revenue and carry, I don't think is too far away from being at a point where it is breaking even, maybe -- but I don't have the exact number, but that includes fee revenue that it would earn from the fees that Power Corp has invested in its own seed capital. So Power Corp is a limited partner when we put seed capital in just like any other third-party investor. And if you think about that Power Corp, if we were investing seed capital elsewhere, we would be paying those fees as well. So on its total fee basis, Sagard Holdings is, I would say, a year or 2 out on its breakeven point. Power Sustainable has probably got another couple of years to go there in terms of its fundraising depending on the pace of that fundraising. That's the way I'll answer the question big picture, and I'd invite Greg if you wanted to add any further detail to the answers to the question?
Yes. I think there's a very good illustration of where the profitability of the platforms is currently. If you go to, I think, Page 48 of the MD&A, you'll find it, and you can reference it. And if you have any further questions, you can give us a call.
Okay. Sounds good. And just a sedan to Power Sustainable Capital. So the $1 billion infrastructure fund, would you be able to share the amount of third-party AUM you're targeting over there?
We haven't disclosed that yet, but I think we will be shortly. But I don't think we've disclosed that at this point. So I don't think we're in a position to say that, but there will be, hopefully, further announcements here as we move forward in the short term. So that's the best we can do right now.
Yes.
I didn't mean -- I didn't -- yes, go ahead, please.
That answered my question. Okay. I was just going to the -- my last question. So in the whole simplification process. I had a question on GBL. And I mean we asked this because of your focused towards financial services companies. So I'm just wondering how you see GBL fitting into the strategy? And I appreciate that you've already collapsed Pargesa and reduce one holding company over there. But going forward, do you have any plans? Or are you thinking about doing anything in GBO?
Yes. So it's a very good question and one we get a lot. And I think when you look at GBL, it's -- you could certainly make the case it's not a financial services company at this point. It's maybe some version of a closed-end fund with an active to close end investment manager with a very different business model with an influence model in Europe where it buys large positions frequently goes on the Board adds value. So you can debate whether that's financial services or not. I think what it is, is very unique, let me start with that. And so we -- the change in the strategy that we announced a year ago, we certainly have gone from kind of diversification to just focusing down on financial services. GBL itself is a 7%, 8% of the total value. But it's whether or not it's financial services, it's actually a great asset we have. So we don't have any plans to be not being part of GBL going forward. It's something that we've built up starting with Paul Demer Senior in 1980. It was actually financial services back then. We've got really the largest -- I think it's the largest holding company in Europe, a deal flow through the relationships that we and the fair family and the whole group that are in GBL have built up over decades, has made a lot of money for the group in the past. I can go through periods when European economy or the global economy, I should say, because the losses are global businesses are not doing well. It's gone through some periods like that. But over time, it's created a lot of value for Power Corp shareholders. So we don't have any plans to change it or to dispose of it. But I would agree that it is probably not a pure financial services company at this point. But you got to be -- you got to be -- we are focused on creating value, and we think it's a source of additional value. I think that's the best way I would put it.
[Operator Instructions] And there are no further questions coming through at this time. Gentlemen, please continue.
Okay. Well, then I would -- not much more. I'll just wrap it up and thank everybody for your attendance here, and we'll be back actually pretty soon because I think Q1 is just around the corner. And so I wish everybody a good day, and we'll talk to everybody soon. Thank you very much.
Thank you, sir. Ladies and gentlemen, that does conclude your conference call for today. Thank you for participating, and you may now disconnect.