Power Corporation of Canada

TSX:POW

Earnings Call Transcript 2021-Q4

[Operator]

Good day, and thank you for standing by. Welcome to the Power Corporation Fourth Quarter and Year-end 2021 Results Conference Call. [Operator Instructions] Now it is my pleasure to hand the conference over to your first speaker today, Mr. Orr, President and Chief Executive Officer of Power Corporation. Thank you. Please go ahead.

[Robert Orr, executive]

Thank you, operator, and welcome, everyone, to our Q4 and year-end 2021 results call. I'm really pleased that you're here with us this morning.

And I will get right into the presentation. On Pages 2 and Pages 3, you have the normal disclaimers regarding forward-looking and non-IFRS and non-GAAP financial measures. On Page 4, you've got the smiling faces of myself and Greg Tretiak, who is our Chief Financial Officer, is here with me this morning. And together, we'll be going through the results.

If I move you to Page 6 in the presentation, you just have some highlights there of some of the recent either earnings releases, earnings calls or capital markets presentations that Power and its group of companies have been involved in over the last month or so. And welcome all of you to go directly to Great-West Life, IGM or GBL, for any information you have with respect to their results. And I know they would be pleased to engage with you.

And so with that, I will turn to Page 7, which is really the summary of some of the highlights that I'd like to talk about today. I think 2021 and the fourth quarter both evidenced the strong earnings growth and momentum that we've been talking about for quite a period of time saying we have believed that our underlying businesses have strong organic growth and as well those has been helped with acquisitions. So we'll talk a little bit about that during the presentation.

Another highlight of the last quarter was on the 5th of January. The group announced the consolidation of our interest in ChinaAMC under IGM. So that continues as a further step to simplify our corporate structure, which continues to be a theme of our activities as is returning capital to shareholders. In addition to the dividend increase that was announced in November and which was -- that dividend, and of course, was also declared yesterday at the same heightened level of $0.495, also relaunched a new NCIB in February. And we will talk a bit about that as we go through the presentation.

And another theme I would like to pick up on is the continued growth of the alternative asset management platforms with significant fundraising throughout 2021, including in the fourth quarter and then the acquisition by Sagard of EverWest from Great-West Lifeco, which was -- added more AUM and scale to our asset management activities.

With that, I'll turn to Page 8 and pass the microphone over to Greg.

[Gregory Tretiak, executive]

Thank you, Jeff. We'll just do quick highlights on the earnings per share for the year and for the quarter. We don't usually do the year, but given that it was a record, we thought we should at least acknowledge that. And you can see that the adjusted earnings for 2021 were $4.77, up significantly from 2020's $3.07.

With that, I'm just going to go straight over to the Q4 results and give you a little color on the detail. We're reporting adjusted earnings per share of $1, up $0.07 from Q4 of '20's $0.93. You would have all participated, many of you and seen the results that were reported by our publicly traded companies. And you can see that they contributed $1.04 versus $0.89 in Q4 of last year.

Our alternative asset investment platforms, which basically is Sagard and Power Sustainable Energy that includes not only the management companies, but it also includes our seed capital or proprietary capital devoted to seed capital to those platforms. And you can see relatively routine quarter contributing $0.05, which was the same as last quarter -- or last year's $0.05 as well. And CAMC, of course, has already reported its results, and IGM has shared that with you. We're showing it as contributing $0.02. In reality, it was $17 million versus $12 million in last year. And that is a significant increase, and they continue to do well. And we'll have more to talk about later on in another slide in the deck.

The stand-alone businesses, no realizations in the quarter of significance other than GP strategies. And also I would say that the 2020 number included a gain on Easton, which is in that $0.07 that you see there. And finally, the corporate line, you can see that it's $0.13 negative versus the $0.10 in Q4, and that is due to a tax benefit that we recorded in Q4 of '20. With that, I'd take you to the next page, which is the NAV. And again, some very quick highlights. You'll see that the NAV was $52.60 at the end of December. Not a lot of change over Q3, but up 27% from $41.27 in December of '20.

You'd be wondering what the Ukrainian and Russian war has done to the markets in terms of the NAV. And you'll see that on March 17, we have it at $50.11, so it has come down slightly during this period of volatility. And the only other comments I'd make on the NAV slide are that, of course, we announced the CAMC deal, and we marked it at that particular transaction price. Here, you see it rounded to $1.2 billion. It was actually $1.15 billion.

And Lion, which is in the stand-alone businesses, is down about $200 million from the prior period. And the other thing I would say is cash is $1.6 billion at the end of the year, and we'll have comments on that later on.

I'll pass that back to Jeff.

[Robert Orr, executive]

Thanks, Greg. And we're calling it adjusted net asset value from this quarter forward based upon accounting guidance is my understanding. But adding the word adjusted actually doesn't change anything. It's the same definition it's always been. It's just we call it adjusted net asset value. I'm a wannabe CA, as you know. Greg, you're aware of that.

Okay. So let me turn to then the next few pages. And the next 3 pages, I'm on Page 10, is just a restatement of our strategy. I'm not going to go through these pages. Most of you on the line have probably heard me and Greg go through them many, many times.

But I am conscious and we are conscious of the fact we may have some new listeners on different calls, and people often go to our last quarterly results when they're looking for a deck to describe us. So as people get introduced to Power Corp., we continually reemphasize the playbook that we are following. And you can see it again on Page 11 in terms of how we talk about the different levers that we are pursuing to create value. And then on Page 12, we talk about the strategies that our major public companies are pursuing themselves, which is part of our overall value creation strategy. So thank you for indulging us as we go through those 3 pages and continue to have them in our presentations.

I'll go to Page 13, and I talked at the outset about the year and the quarter evidencing the strong earnings growth and momentum, which we have been talking about for some time. It was both organic and M&A-driven. Very, very strong results in 2021. Great-West Life had record net earnings. We could say they had record base earnings, but since they've only been covering base earnings or calculating them for a few years, it wasn't a very meaningful statement. But had they been, we expect it would have been a record. But on a net basis, it was a record earnings.

Q4 had a little bit of weakness from Q3. The -- a few things. I think Great-West Life went through that. Empower was down a little bit from Q4 -- from Q3, excuse me, sequentially. Some of that was a little bit of one-timers, and there's a little bit of higher expenses in the fourth quarter. There's nothing in that quarter that changes our view as to the progress that Empower is making or the earnings trajectory that we see for the business going forward. So we thought it was a solid quarter, and overall, a terrific year for Great-West Lifeco.

Same thing with IGM. In their case, it was virtually all organic growth. We have been telegraphing for some time that we thought the very strong momentum that IGM had been experiencing in the marketplace would result in earnings growth as the top line was growing. It had been driven and continues to be driven by Mackenzie, but IG Wealth really illustrated in 2021. And as we went through into even the first part of this year with their sales that there's good momentum at IG Wealth. So we're really pleased about this part of our story, which was -- which we think at the end of the year, we look back at and say, terrific growth in the underlying earnings.

Page 14, just a few comments on the transaction to move the 13.9% stake that Power owned into IGM. It does a number of things for us. First of all, it is very consistent with our overall strategy of simplifying the group. The second thing it does is we think that having the entire stake of ChinaAMC in IGM will result in much better value recognition. Think about the size of the overall 27.8% block and the earnings and the earnings growth within IGM. It's a meaningful part of IGM, and we'll continue to grow, we assume over time.

So that's something that we think will get recognized, kind of get lost within Power Corp. as an investment of $1 billion or so within our overall stream of assets. So we think it will get better value recognition within IGM. And it belongs there, quite frankly, from a partnership and industrial logic point of view. We were really pleased to buy more shares of Great-West Lifeco, very keen on what Great-West Lifeco was up to. So we were pleased to facilitate the financing of the transaction for IGM by taking in effect half of the money that we received in buying shares of Great-West Lifeco.

And then finally, it provides cash to Power Corp. to continue with our return of cash to [indiscernible] shareholders. And so that's after the purchase of the Great-West Life stock and paying a little bit of tax in China that we anticipate still provides a good chunk of cash that will help fund our buybacks. So there's 4 good reasons why we love the transaction, and the business of CAMC continues to progress very well.

Let's spend the next couple of pages, starting with Page 15, just talking about GBL and looking at what GBL has done over the year. They recorded very strong growth in their NAV, 13% per share over the year. The theme at GBL is very strong rotation of the businesses that they own. And you can see how the NAV traveled from the start of the year to the end of the year and really a greater emphasis on private companies. From -- over the 12-month period, they went from having 17% of their assets in private companies to 25% of their assets. And it's a rotation that's continuing, Webhelps, The Canyons. You can see some examples of where they are putting their capital.

Sienna Investment Managers not only are they getting into private assets, but they're also starting to get into the asset management business themselves with third-party asset management. So a real change happening at GBL. You see some of that on Page 16 played out, in terms of some of the actual disposals of public companies like Holcim or Umicore and then more money into private, some more money into Sienna. And I would encourage you to look at the March 11's results presentation that's referred to on that early page. If you go on their web page, it does a very good job of describing the strategy that GBL was pursuing and the amount of energy going into building out that business.

Okay. Then the other theme on Page 17 is the alternative asset management businesses that we are building at Power Corp. and stop at the end at the year here and say, down to the lower right, we ended the fourth quarter or the year 2020 with $8.5 billion under management or committed, so funded and unfunded AUM. And we ended the December 31 of this year with $19.1 billion. That was as a result of fundraising, a result of the EverWest transaction and a result of capital appreciation on the position. So all 3 were driving it.

On the funded side, on the lower right of the slide, you'll see that the funded went from $5.6 billion to $14 billion . So obviously, the difference between funded and unfunded, we've got investors who have committed to put money up, but the money actually has to get invested in these funds. So that's the portion that's been invested. And you see the growth there, and you see in the dark, the Power [ portion ] of that really has stayed constant. And the growth has come from third parties, including, in this case, some Canada Life involvement.

The overwhelming majority of the external funding is coming from parties other than Power and Canada Life. But in the EverWest case, of course, a lot of the EverWest money was Canada Life -- or was Great-West Life Company, I should say, and Canada Life money. And so they are investors in that. Let me flip to the lower-left side of the page, and you see some of the profitability from the asset management company. So Sagard, just from a management fee alone perspective, had $100 million in management fees in 2021, basically getting close to breakeven here on a fee-only basis.

They had a very good year for carry. A lot of that was the carried interest. A lot of that was driven by their fintech investments. That is quite an unusual -- quite a very high number. It's not to say it won't be done again, but we would not expect that to be an annual event on that level of profit. So this business is -- Sagard is getting a lot of scale and getting very close to the point where it's going to be contributing earnings to the company. Power Sustainable is -- got -- is not as far along in terms of its development. And to remind everyone, the Sagard business had some businesses that were already in the third-party funding business. The fintech strategy Sagard in Europe had been funding from third parties for a couple of decades or 15 years at least.

The strategies in Power Sustainable had really -- when we switched strategies 2 years ago, we're really 100% Power Corp. strategy. So that group has -- is out and have to build up their third party, their distribution, building up their activities. And they're making good progress in terms of third-party funding but are not -- but still have a ways to go in terms of getting the scale on their management fees. So just a little thing yet into the profitability.

I'd just draw your attention to the last bullet point on Page 17, the fee-bearing capital. We just break it out here, is at the year-end is $11.4 billion versus the $14 billion that you see at the bottom of the page at the bottom right. And of course, the difference is you get paid on the committed capital, not on the capital appreciation when you're running these businesses. So we just break that out to help you reconcile if you're looking at trying to tie fees to assets.

Okay. I'll switch over to Page 18. And Page 18 is just a little more detail as to how the strategies play out between Sagard and Power Sustainable. And you do see at the top of the page, the breakout between the growth in the AUM that came from fundraising, $4.2 billion, very significant and then -- but we did have the acquisition of EverWest in the fourth quarter. And you see now under Sagard in the bottom right that now real estate -- investing capability at the U.S. real estate platform is a significant part of their AUM.

I'll move to 19. And on Page 19, we just talk again about what are we doing here building out alternative asset management businesses. Well, firstly, we had a lot of these capabilities that have been built at Power Corp. We're now adding to them. But even prior to us shifting strategies, we had these teams that had very good track record. So we're building from a position of strength. We've been able to attract very good teams at Power and within these platforms. But also there are synergies with Great-West Life and IGM and GBL are doing, and we're helping each other here. And you've got some of the points there.

Great-West Life is looking to advance its strategy to put alternatives on its own balance sheet. It's looking for those assets to help with its own products and its own solutions for its clients. And it's in the financial services business. So being around a very active fintech ecosystem is very, very useful for them to understand what's happening in their businesses.

And then on the case of IGM, very much the same strategy. Their purchase along with Great-West Life of Northleaf is evidence of that, but they're also investing in some of the strategies at Power. And then GBL, I've already talked about their shift into private assets and their own shift into investment management. And so this is really a group effort. And there's a lot of benefits that are going back and forth between the public companies and Power Corp.

Shifting gears on Page 20 to our efforts to monetize assets. And this is not just to create cash to return it to shareholders, but it's also part of the simplification of the group. You see at the top 4 transactions. There are 4 transactions we highlight over the year that resulted in proceeds coming into Power. I think we've talked about each of them, and so that creates cash. And then in January 5, the announcement of ChinaAMC as I mentioned in my comments, that also when you take it -- when you -- after the fact that we purchased Great-West Life shares [indiscernible] tax in China, there's another $500 million that is freed up for capital that we're able to return to shareholders.

I've said in all of our comments that while we plan to buy shares back, we will always prioritize if one of our operating businesses is doing some sort of transaction and needs our support for capital, we would prioritize that. But we're always trying to do those deals without putting much capital into them, if we can. And -- but that would be the priority if they had a transaction that required an equity infusion. But in the absence of that, our intention is to return the capital to shareholders.

Page 21. Those were the 4 stand-alone businesses that we identified when we launched the strategy. GP Strategies at the bottom has now been disposed of. And on the other 3, we are going to continue to support the buildup of those businesses with the management teams and in some cases, with other shareholders. And we will be looking to monetize that at the appropriate time that makes sense for Power and makes sense for our partners in those businesses. So that still is very much on -- in the playbook and part of the strategy. But we're not putting any kind of timeline to our -- and pinning ourselves into a corner that we have to do something by such and such a date. That's not the right way to maximize value for Power Corp. or our shareholders.

Greg, I'll turn it back to you to talk about -- make some comments on our capital and we'll share buyback topic.

[Gregory Tretiak, executive]

Great. Thank you, Jeff. So I'm on Page 22 and start with capital transactions. You will have all seen that in October, we took advantage of some attractive rates on perpetual prefs. And as some of us are -- want to say, this is a security that is traded by appointment, and the windows to actually take advantage of those opportunities don't present all the time. So we were pleased to do that. That's going to yield about a $3 million reduction in our annual financing expense.

You'll recall that back at the time of [ Next ], we said that we would potentially entertain redeeming some prefs to reduce our financing expenses as well. I think at this point in time, we see greater opportunity for shareholder value creation to buy back our own common equity. And so we have reinitiated our program, normal course issuer program. And you can see that we bought $153 million worth of shares through '21. And in '22 year-to-date, we've done about $112 million. And I'd just say that we -- I mentioned earlier on that we have cash on the balance sheet of about $1.6 billion. There is a dividend that's payable usually in the first weeks of the coming quarters. So we usually keep a little less in -- when we think about that number. So about $1.3 billion is what we think is the cash on hand.

And as you can see in the bullet point there that we keep 2x our fixed charges, which is roughly about $800 million. So that's about $500 million of cash that we have available to repurchase stocks. And of that $500 million, as I said, we've done about $112 million. So we've got about $400 million that we are looking to utilize to repurchase stock in the coming months. And of course, then when CAMC closes in the second quarter, we should have an additional $500 million to work. And we'll revisit it at that time and certainly talk to you about it.

That takes me to Page 23. We've achieved our goal. We were almost there in Q3, but we've gotten there. And we have achieved our targeted expense reduction of $50 million. You can see our run rate and targeted run rate are $38 million a quarter. I'd just say that in addition to this, well, as we were rationalizing some of the businesses and in particular, our real estate business, we have sold or have commitments to sell 5 properties of the 6 that we actually hold. And that's going to yield another $60 million in terms of additional cash that we can use. And I think that's the end of the story on expenses.

Jeff, I'll turn it back to you.

[Robert Orr, executive]

Okay. Thanks. And just before I wind up comments, I'll just stop on Page 24 and make a comment on the discount to NAV. We're obviously pleased after having historically been around 15% and actually at certain times, even lower than that.

We had then traveled for a period of time where our discount was closer to 35. And over the last 3 years of work starting with the sale of the U.S. life insurance business by Great-West and the 3-way buyback and then the reorganization and then the new strategy, and all the things we've been doing, we've been driving that discount down.

We think that aside from the expenses that we have at the holdco, which gets you -- if you discount those, gets you to somewhere around a 3% NAV discount. The rest of it is all open season for us to work on through our simplification and proving that we can -- we add value at the Power Corp. level. So the discount has continued to come down. It has widened out in the last couple of months here as we've gone through some, I would say, shakier markets. And we just view that as an opportunity at this point. But we continue to be very focused on driving this as an additional -- the discount down as an additional lever of value creation.

Page 25 just speaks to what our group is doing on the ESG front. And every company and every public company is focused on this. Every company should be focused on this. We think we're very well-positioned to continue to make progress on it. I just highlighted at the top of the page there that in 2021, Power is 1 of only 3 companies in Canada to receive an A leadership rating on the carbon disclosure project, but you've got there for Great-West, IGM and GBL. All of our companies are very active on their ESG strategies, on their net zero commitments and so -- and on their launching of funds and launching our products for their clients as well.

So they've got their own corporate activities. They've got their own balance sheets, and then they've got the money that we're managing on behalf of clients. And they're all under intense focus from where we're -- what we are doing on the ESG front. And I'll conclude with just the standard page on -- we're still very optimistic. We've got lots of opportunity across these 3 levers of value creation. We obviously have done a lot -- we've put a lot of capital to work in the past 18 months. And no question from -- in terms of the size of the capital and in particular, if you look at Great-West Life, they've got -- have got a period of time where they're going to need to rebuild their balance sheet.

And they've also got 3 integrations going on with Pru. The Prudential Retirement transaction has not closed yet its targeted close date at the start of Q2. And so they'll have 3 integrations going on. So that is obviously a focus of Great-West Life, but it is not stopping us from looking at what comes next and laying the seeds from where we take the M&A strategy going forward across the group, including at Great-West Life. So very excited about what we still have to do.

And with that, I will conclude my remarks, and we can turn to the period of the meeting where we take your questions. And so operator, I would ask you to open up the floor to questions.

[Operator]

[Operator Instructions] Your first question is from Geoff Kwan with RBC Capital Markets.

[Geoffrey Kwan, analyst]

My first question was when you think about the potential acquisitions that Great-West and IGM could make over, say, the next few years, if there was a need for them to raise equity, do you see the plan to maintain your ownership stake in them? Or would you be willing to dilute down your ownership stake?

And the reason I'm asking that is I'm just trying to understand how you think about Power's balance sheet in terms of potential uses of cash, both from the cash that you've got right now but also as you monetize some of these noncore assets and whether or not that ultimately see greater focus on share buybacks given where the discount to NAV is today.

[Robert Orr, executive]

So thank you, Geoff. The -- there's not a specific black-and-white answer to the question, so let me answer it based on the principles we would follow. As I mentioned in the call, if one of our operating businesses needed to raise capital and equity capital to do an attractive transaction, we would prioritize that over buybacks any day. That would be our first priority.

The second piece of your question, though, is we don't have a bright line as to dilution or nondilution. We're not in favor of diluting ourselves in general. But if you look at the history of the acquisitions, London Life, Canada Life, for example, while the group put up capital to support the transactions, there were big deals in the context of what Lifeco was doing. And there was some dilution.

In other words, we -- Power Financial in that case and at that point -- at that time, participated, but we participated less than the public. There was a little bit of dilution that occurred. It wasn't part of a grand master plan, well, let's get ourselves diluted by a point or 2. It was just simply we had an incredibly attractive transaction. It needed a lot of capital to get done and needed the public markets. And we kicked in, as I recall, $400 million or $500 million. I might have those numbers wrong, but that order of magnitude.

So we would support transactions. We typically don't like to issue equity if we don't have to in our deals. That's not the playbook we like to follow. But if it's a very attractive transaction, when we need the equity to get it done, we will certainly do so.

We will support those. And whether we dilute or we don't dilute at the margin, I think it depends on how much cash, how much -- what's our financial position at the time, how big the deal is. It will be very situation-specific. I hope that answers the question.

[Geoffrey Kwan, analyst]

No, it does. And then my next question was you have classified Sagard and Power Sustainable separately in your financial reporting. I'm just wondering, is there any merit to merging those 2 entities together whether or not it's giving greater scale and synergies or other reasons as you look to build up your third-party asset management business?

[Robert Orr, executive]

These are businesses that have capital in them, but they actually are people businesses. And they run and they succeed based on the people and the teams that are in place, just like any other asset management business.

And in these cases, these businesses actually were -- came up within Power with different groups operating them. They have different histories. They've got different people involved in it. And as we look at that, we think that trying to combine those would actually do more damage than trying to leave them where they are. So that's the first reason.

And it's the reason, as you go across our group and many other groups in asset management, whether it is public securities or trading or private securities, you have different investment management companies existing across big financial groups. It's because of the cultural aspect that everybody came to work at a certain place. They bought into what was being done. And if you try and combine it with someone else, you can really destroy -- you can think you're saving costs and getting scale, but you actually lose all bunch of your key people, and you're destroying value.

So we are happy to pursue it at this time. And they are pursuing slightly different strategies in the market as well in terms of their positioning. So that's the answer to your question. No plans at this point, Geoff. We think that would do more damage than help at this point.

[Geoffrey Kwan, analyst]

Okay. And just my last question was on GBL. They have their CN Investment Managers business. Just wondering if that's something you could see as a source of collaboration by partnering to distribute some of their strategies in place or even if it's a business that at some point down the road might be interesting to acquire to scale up, again, your third-party asset management business.

[Robert Orr, executive]

Yes, good question. So very good question. So GBL, in general, and Sienna specifically, they have been cooperating with Power Corp. They've been cooperating with Sagard Europe. They are -- there is a lot of communication, as you can imagine, across the groups in terms of both getting product for their clients as well as deal flow.

And I will just go back to the history of Sagard Europe in Power, which is going back to the private equity business in France was really came out of the GBL investments was one of the key motivators for it. GBL was focused on doing larger transactions in the European market. And then we're getting all these opportunities that were below their radar screen. And that was part of the thinking in starting the Sagard Europe private equity business that we can get a deal flow here.

We've got -- we own the second-largest holding company in Europe. They're all over the deal flow in Europe. And so that's the whole starting of Sagard Europe was, in fact, cooperation with GBL. And that continues as we get into private alternatives to an even greater extent. Greg, did you want to add to that?

[Gregory Tretiak, executive]

Yes. And I think you'll see, Geoff, that, in fact, Sienna has invested in some of the Sagard vehicles. And that collaboration also extends right up to the governance structure of those organizations, where some of the senior officers of each of the groups will sit on each other's boards. Paul III is very active at GBL, and also [ Colin Hall ] is the CIO at Sienna. He sits on the Sagard board. So there's a lot of cross-fertilization, if you will.

[Operator]

Your next question is from Graham Ryding with TD Securities.

[Graham Ryding, analyst]

Could you maybe just elaborate or provide some color just on the fundraising outlook for 2022, maybe what are some of the sort of strategies? Or what does the pipeline look for -- look like across your different verticals in that alternative platform?

[Robert Orr, executive]

So your question is with respect to the alternatives, right, not across all the asset management?

[Graham Ryding, analyst]

Yes, alternative platform.

[Robert Orr, executive]

Yes. So continued -- the plans are continued robust fundraisings in the existing strategy as well as the launching of new strategies. And I could talk a bit about that.

And the question mark is the current environment, Graham, of kind of market instability and the geopolitical instability of what's going on in Russia and Ukraine. That's kind of got a, obviously, a question mark over everything is how does this play out, and how much risk is in the market.

And I think -- so that's there. Part of the backdrop even before the geopolitical issues has been with inflation coming to a higher point and a much greater concern in the market in the last -- going back, let's call it, till the start of the fall.

You've had a sell-off in the tech sector. So public valuations of tech companies overall has been well off, as you're aware, that NASDAQ is down, I think, 14% year-to-date alone. So that -- so in terms of the tech side of it, what does that do to fundraising on the fintech side.

We've just raised a bunch of capital, by the way, in Portage III, as you, no doubt, have seen. And so maybe that's a good thing because we get into an investment cycle where valuations pull off a bit but for future fundraising.

So there's question marks out there, Graham. I mean, I think that we were -- the businesses had a great year-end fundraising as you saw, and I went through on the slide. And they had ambitious plans for 2022.

And we're just all aware of the environment is a little bit more challenging right now than it was 3, 4 months ago. And so we don't know how that's going to play out, but it's not a positive development, so we could get through -- could go through a harder period here in the quarters ahead. I think, Greg, yes?

[Gregory Tretiak, executive]

I'd just add that they are investors, and they're cognizant of the environment and understand the challenges, obviously. And there's going to be dislocation for sure, which brings sometimes opportunity.

But they are also in spaces where there's a lot of money that has to go in, if you will, the green movement in terms of infrastructure and things like that. So there's lots of work that has to be done. And there's capital that has to be put to work not only in the parts of the world that we are operating in, but in particular, our own country.

[Robert Orr, executive]

Great. Does that answer your question, Graham?

[Graham Ryding, analyst]

Yes. That was helpful. And then I'm just wondering about sort of the outlook for rising rates here. And as you sort of at the Power Corp. level, you look across your publicly traded operating companies and also your alternative investment management platform, maybe at a high level, what parts of your business are you thinking that rising rates might be a headwind? And where might it be a benefit?

[Robert Orr, executive]

Yes. So that's a big -- it's a great question and it's a big question. In general, in our -- in the insurance part of our insurance business, which is a funny way of saying it, but as you know, not everything that Great-West Lifeco does is pure insurance.

In the insurance business, higher rates typically been a very -- a good thing, and lower rates has put a squeeze on profitability. Now as you know, Great-West Lifeco runs a very matched book. So we don't have an existing book that benefits from rates going up because we're matched.

But in terms of the profitability of new products that are being written, when rates are higher, there is more room for margin and spread, and profitability has typically been higher. So rates in and of themselves is a good thing.

Inflation is in and of itself a bad thing because all of these businesses have operating costs. And so when you got operating costs that are going up either because labor is costing more, people costs are going up or there's shortages of supply and you've got costs going up in terms of other systems and whatnot, that can put a squeeze on profitability and hurt margins.

So that would be 2 off-the-top comments. And then what does the impact of inflation have and rising rates, what does that do to the equity markets? What does it do to corporate profitability overall? How does that get translated? If yields are higher in bond markets, and we've got inflation pressures across the corporate spectrum, what does that do to equity valuations and the whole mood around capital markets? That's a bigger macro question that is less related to our business specifically.

But of course, we earn a lot of fees on the market levels, and we -- our businesses grow better when there's a lot of investor confidence and money flowing into investment funds. So those bigger macro questions would have an impact on our businesses. But it's too early to tell at this point. I don't have a crystal ball where it's -- everybody is kind of thinking about and trying to get a handle on. So that would be my answer to the question, Graham.

[Graham Ryding, analyst]

Yes. That was helpful. And then my last one if I could. Just I know you did a financing round for [ Coho ] subsequent to year-end. Is there anything material there from -- I think you're involved in selling piece in that financing on. Anything material on your NAV there? Or is that too small of an investment for you?

[Gregory Tretiak, executive]

Yes, it was very small. I'm trying to remember the number. I thought it was like about $20 million to $30 million, Graham. Earnings a little.

[Graham Ryding, analyst]

Okay. That's it for me.

[Robert Orr, executive]

Another example of the strength of our fintech franchise there and the kind of investments they've been making. So thanks for highlighting it. Is that it, Graham? Okay. I think Graham's gone. Operator?

[Operator]

Your next question is from Nik Priebe with CIBC Capital Markets.

[Nikolaus Priebe, analyst]

Okay. Maybe continuing on the conversation around your fintech platform. I just want to start with a pair of questions on Wealthsimple. I just wanted to confirm that the fair value of that investment has not been updated in your NAV since the investment round in May of last year, right? And how well funded is that business for 2022? Are they going to need to come to market again here?

[Robert Orr, executive]

So do you want to answer that? Yes, go ahead, Greg.

[Gregory Tretiak, executive]

Well, the fair value has not changed. And I wouldn't answer necessarily for Wealthsimple about their plans with respect to their capital. But I would say that I'm not aware of anything on the horizon that would cause the coming back to the market. But Jeff, I don't know if...

[Robert Orr, executive]

I don't have a clear visibility into that at this point as well. They raised a fair bit of capital. But we did a secondary. As you know, we -- ourselves and IGM sold $500 million. There was, I think, $250 million of cash that went into treasury or thereabouts.

And with that, they have continued to expand their marketing and their outreach into new parts of the market with the introduction of new products. And as a consequence, they're spending -- they're getting more aggressive in the market. And the investor base that came in to support them expects them and wants them to do that.

So I think they're well funded, but they're also out there building businesses. And they are, as a consequence, using up that cash. I don't have clear visibility. I'm not even sure their Board does at this point as to -- but I don't have clear visibility specifically as to whether they need -- at what point they're going to want to raise more capital.

[Nikolaus Priebe, analyst]

Okay. Understood. And then just a point of clarification, and this one might be for Greg. When interpreting the asset management earnings contribution presented on Slide 17, which I believe excludes mark-to-market gains on proprietary capital, does the earnings contribution of $41 million include fees and carried interest earned on proprietary capital as well?

[Gregory Tretiak, executive]

The -- sorry, I'm just going to the slide, first of all. I lost it. Okay.

[Robert Orr, executive]

So the question is, does the carry, I think, include gains on the proprietary capital as well? I think the answer is yes.

[Gregory Tretiak, executive]

Yes, it does. Yes. Yes. So you're Page 17. So in the $41 million of asset management contribution from Sagard and Power Sustainable, it does include the carry on proprietary.

[Robert Orr, executive]

And Nik, the way to think about it is we think about the business in 2 buckets. We have an asset management business that we own a majority of the GP -- all of the GP, the general partner in the case of Power Sustainable and a majority of the GP management and now Canada Life with the EverWest transaction owns part of that GP.

And we think of that as we earn fees and we earn carry. And the carry, of course, is split between the professionals and the business gets some of the carry, and then the GP gets some of the carry. So the source of the carry is all the capital, including the third-party capital and the Power capital.

We then have a second part of the business that we think of as we're a limited partner, and that's our seed capital. So we have roughly $2 billion or what have you across the strategy is invested in the seed capital. And in that context, we're getting different kinds of returns depending on the strategy. And in effect there, we're paying the carry.

When there's a big gain, the limited partner investors, of course, provide carry to the GP when there's a realization. So that's conceptually how we think about it. And what's on Page 17 is looking at it as an asset manager, the GP only.

[Nikolaus Priebe, analyst]

Understood. Okay. Yes. I was just trying to get a better understanding of what the GP earnings might look like, excluding fees earned on proprietary capital. Maybe we can take that one off-line, but yes, that's helpful. So.

[Operator]

Your next question is from Tom MacKinnon with BMO Capital.

[Tom MacKinnon, analyst]

It has to do with you simplified the structure here with respect to ChinaAMC. And just continuing that simplification question with respect to Wealthsimple here owned in [indiscernible] at both IGM and the Power Corp. level. So the question kind of is where do you think it's best to put Wealthsimple to optimize Wealthsimple and to get the best value recognition throughout the Power Group?

[Robert Orr, executive]

Tom, good question. So the simplification -- I'm going to -- I'll go specifically to your question, and then I'll go more general. The -- just the history of Wealthsimple is that we started with a fintech strategy at Power Financial at the time, and the initial rounds were done there.

And as Wealthsimple started to really grow, we started to realize that this could be a very significant distribution in a company in Canada. And our wealth distribution business, IGM is a big part of that. And the management at IGM had been part of sourcing the deal originally.

So the subsequent rounds, I think we did 5 or 6 rounds in total when we invested the 300 over 3 years or so, subsequent rounds came from IGM so that they could get a direct stake in it. And that's how it ended up being in 2 places.

I know that's not your question, but it was done for -- we didn't try to complicate things. We didn't set out to complicate it, but we ended up with it in 2 places.

I think we will wait and see. With respect to Wealthsimple, we've kept our optionality open in answer to questions that you and others have had as to where do we go with it in the future. We own -- after having put in $300 million and taking $500 million back between ourselves and IGM, we own between 43% and 48% of the equity of Wealthsimple depending on how the options of management play out over the next few years. They've got condition-based options.

So we're still very, very large and significant shareholder. And how do we -- what do we do with respect to Wealthsimple in the future? Do we continue to grow and be a major shareholder? Do we let others fund it? I -- we're not making those decisions today. And so we'll make them in the future as the business unfolds.

We don't need to. And so why not keep -- we will keep our options open. We're delighted with what's happened so far, but we're going to keep our options open.

I don't think in the short term we would have as a high focus trying to concentrate it in one place or the other. I think we'll wait on that one to see how it plays out and ultimately decide where our position resides.

So that's not kind of if I look at things that we'd be working on in the next 12 months or so, that's not going to be high on the focus, unless there's some event at Wealthsimple that would bring it into focus. But I don't anticipate that at this point.

I want to go more broadly on your simplification point because I think just to say it's got 2 dimensions in my mind. One is where we have complications, we get rid of the complications. And that -- examples of that would be Power Corp. and Power Financial, 2 holding companies; GBL, Pargesa, 2 holding companies; CAMC in 2 places.

In some ways, the ownership of Great-West Life, which through the transaction for CAMC, IGM took a step in terms of their own simplification and the groups by using that to help finance that acquisition and get more Great-West Life up at Power Corp. So that's structural simplification.

And the second piece of simplification is what we actually are. And Power Corp. has historically through our diversification strategy owned many different businesses at Power Corp. itself. And none of them in particular being that material or meaningful.

Therefore, when investors look at that, they don't know how to value them. They don't really know which part of the business is meaningful. And therefore, it becomes complicated to even understand who we are.

So that part of the strategy is also simplification. And that is raising capital in a smart way from the stand-alone businesses and ultimately disposing of those businesses and getting Power Corp. simplified into being a profitable asset manager with some seed capital that's supporting it.

And that simplification of what we are at Power Corp., which is not necessarily structural but in terms of what our portfolio is. So I'm sorry I went beyond your question to make a more general comment. We think about simplification in 2 ways.

[Tom MacKinnon, analyst]

Yes, that's good. Just when you did the bit of the history here on Wealthsimple, I think you mentioned that I think it was started off as a fintech strategy at Power Fin. And then as it started to grow, it seemed like you started thinking there's distribution opportunities at IGM with Wealthsimple. Has that ever materialized?

[Robert Orr, executive]

I didn't mean it from a context of necessary synergies although there are synergies already that Mackenzie is getting -- has got some -- is providing some products into Wealthsimple. I think if you go to the IGM material and talk to the IGM management, they've been talking about some of the flows that they've got and providing some products on that shelf. And it's in the form of ETFs.

So that's -- there is that synergy, but I didn't really mean it that way. What I meant is when you think about IGM, we are in the wealth management business in Canada at IGM through IG Wealth, the traditional business. We're in that business through IPC, which is kind of a window on to the -- a different part of the distribution chain.

And to the extent that Wealthsimple is becoming a financial services brand and stop for a large part of the Canadian population, it becomes a distribution brand in the Canadian market. And where does that best belong under the scenario where we own it for a long time, and it becomes -- I think it will become a very successful business management, it's doing a great job.

Where would we own that? I think over time, it's part of your first question. If we're -- if that ends up being something as real as it looks like it could be, and we own it for a long time, probably wouldn't keep it in 2 places over time. We'd look to put it in one place and IGM.

Our thinking in the subsequent rounds was IGM is a more logical place for that than Power Corp. But -- so that's -- that's kind of sharing how we thought about it. I hope that helps.

[Tom MacKinnon, analyst]

That's helpful. So it sounds like it -- in terms of anything with Wealthsimple, it doesn't sound like it's something that's necessarily in the near term. But as Power evolves, we'll see where Wealthsimple takes us. Is that a good way of summarizing it?

[Robert Orr, executive]

It is. And the only asterisk I would put on your comment is Wealthsimple is never sitting around doing nothing for long. They have a very active management team. They got active shareholders. And so I sit here saying, well, I don't see anything in the near term in terms of our agenda. And we can be here next quarter talking about something because they are -- Michael and the team and the Board are always looking at doing things. So I just want to put that little asterisk on your comment.

[Gregory Tretiak, executive]

I was going to say I think Tom [indiscernible] Power evolves [indiscernible].

[Robert Orr, executive]

Exactly. That's it.

[Operator]

[Operator Instructions] Your last question is from Jaeme Gloyn with National Bank.

[Jaeme Gloyn, analyst]

First question, just on the impairment in the project under construction in Power Sustainable Energy, could you give us a little bit more color as to what drove that impairment specifically?

[Gregory Tretiak, executive]

Yes. That was -- COVID has hit many industrials through the supply chain. So that, in particular, wind turbines have to be manufactured, and we don't have any capacity to manufacture that type of equipment in Canada. So it's usually the Germans or the Chinese who are manufacturing that type of equipment. So there have been construction delays that have been basically due to the turbines and also the repricing of turbines. The other thing is you'll probably know that the carbon tax rebate on -- or credit, I should say, in that industry have been undergoing a change.

I think the federal government had put out $170 per ton sort of high watermark. And I think the industry has probably settled on something that's quite a bit south of that, probably $110, $120, most of the big purchasers of those credits. It's not a big group of companies in Canada.

So the pricing on that is not -- I would say, it's not a fluid market. It is one that is dominated by just a few people. And so there's a lot of volatility. And so we took a bit of a mark on that for that reason as well, too. So that was just, in general, some of the reasons for the mark at this time.

[Jaeme Gloyn, analyst]

Okay. Fair enough. Does -- did that mark also factor in any of the recent developments in Russia, Ukraine and the disruptions that, that might create as well on supply chains and this market or even in other markets as well that could cause an [ impairment ]?

[Gregory Tretiak, executive]

Yes. No, it was not a forward-looking mark. It was for events that have happened and that we've got really have line of sight on it. And I don't think there's anything direct with respect to those events in Europe that would affect the manufacturing of our -- other than generally inflation.

And I think if I can, I'll digress on your question there, Jaeme. One of the things that we didn't say on the call was that we do not have a lot of exposure to either Russia or to the Ukraine in our portfolio. It's de minimis. We have gone through an exercise of looking at all the portfolios in the group. So I just share that with you as well.

[Jaeme Gloyn, analyst]

Okay. Appreciate it. You decided this quarter to pull out a -- the Sagard private wealth platform, seems to be generating some losses. What's the -- what was the thought process and purpose of pulling out that platform and disclosures?

[Gregory Tretiak, executive]

Well, I'd say just general transparency. It's -- as you know, it's not a large operation. It's GrayHawk. So that's the firm you're talking about based in Calgary, a high net worth firm that has got a wonderful product. I'm a client, by the way. So I wanted to make sure that those guys are doing a good job. So I made sure that we got disclosure in the MD&A.

[Robert Orr, executive]

That is not what -- that's called humor, Jaeme. So -- but also, it is different, right? We have alternative asset management businesses that are running money for clients. And there's a distribution business that Sagard purchased, which is a window into the high net worth market, family office market. And that market purchases a lot of alternative asset management businesses.

So it is a -- it's got a link and a synergy. It's a distribution outlet for a product and a window into a market. But it's not an alternative asset management business in and of itself. So -- and it's at a stage where it's -- it has not -- got a lot of scale to it right now. So I think pulling it out separates its profitability from the core asset management business. That was the answer that Greg intended to give you as opposed to saying he was a client.

[Jaeme Gloyn, analyst]

Yes. Yes. Okay. I appreciate that, Greg. Does it speak to any read-throughs for the future? Or like any other plans that you pulled out, should I be thinking of this in a larger scale down the road? Or was it really just to clean up the asset management side of the disclosure?

[Robert Orr, executive]

It was -- I think it was for good disclosure, and I won't comment on what we might do in the future, how big it might become or not. I think that would be speculative at this point.

[Gregory Tretiak, executive]

Definitional purposes only, just to make sure that it was clear.

[Jaeme Gloyn, analyst]

Okay. Last one for me then just around third-party capital-raising initiatives, 6 funds in process today. Portage III, I think, is done. But what I'm curious to learn is that blue sky, what would a good year in terms of third-party capital raising look like Sagard and Power Sustainable on its alternative asset side? So we did $4.2 billion last year, like what would a good year look like in 2022?

[Robert Orr, executive]

Yes. So without being evasive, so $4.2 billion was a good year. And the platforms are now bigger, and they have more products they're launching. So over time, we would hope to have the fundraising total continue to grow off that 4.2. But where I want to hesitate on what you -- because you put 2022 in your question. In any given year, it's hard to predict what the number is going to be, and fundraising is always specific to what the environment is.

And that's why I made some comments that the environment has got more risk in it right now. People are being more cautious. Technology in and of itself as a sector is not -- is getting beaten up a little bit. So I just -- I had a note of caution. I would think we'd hope that the 4 would grow every year as the platform grows. But I don't want to get into what 2022 will look like, and we have a lot of risk around in the environment right now. So that's I think the most complete way I can answer the question.

[Jaeme Gloyn, analyst]

Right. Fair enough. What's on the book so far, if I can ask that?

[Robert Orr, executive]

You mean committed? Everything that's committed on the book. I beg your pardon?

[Jaeme Gloyn, analyst]

What's been locked in so far in terms of fundraising in 2022? There's the Portage III.

[Robert Orr, executive]

It's [ 19.2 ] that you saw. When we have committed on that page, I think it was [ 17 ], I can't remember in the deck here. We had funded, and then we have committed and funded. So that difference between the 19 and the 14 is what has been committed by investors that has not yet been put to work. And there's nothing else committed. There's people out there talking about doing additional fundraisings, but that's all that's committed. Is that correct? Anything to add to that, Greg?

[Gregory Tretiak, executive]

Nothing to add to that.

[Operator]

And there are no additional questions at this time. I will now hand the conference back over to Mr. Orr for final comments.

[Robert Orr, executive]

Okay. Great. I have no final comments other than to thank everybody for their participation and wish everybody a good day. Thanks very much. Bye-bye now.

[Operator]

Ladies and gentlemen, this concludes today's conference call. Thank you for joining. You may now disconnect. Stay safe, everyone.