Power Corporation of Canada
TSX:POW

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Power Corporation of Canada
TSX:POW
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Earnings Call Analysis

Q4-2023 Analysis
Power Corporation of Canada

Company Repositioning with Strategic Growth

The company has notably transformed, with significant restructuring and strategic acquisitions. Great-West Life is no longer the company it was five years ago; the U.S. has become its largest market, thanks to the growth of Empower. IGM repositioned for higher future growth despite current macro headwinds affecting wealth and asset management channels. Power Corp has simplified its structure and is engaging in unfinished work with considerable opportunities ahead. Assets under management grew from $3.7 billion to $17.6 billion in less than 4 years without additional capital injection from Power Corp. There is an emphasis on private assets, reducing positions in some public equities, and achieving a record year of returning capital to shareholders. The company expects continued growth and buybacks, and prepares to utilize its cash reserves of $900 million, which is slightly above their preferred level.

Company's Reinvention and Strategy Update

The company embarked on a transformative journey starting in 2019 that led to a reorganization, repositioning itself significantly over the last few years. It has implemented a three-pronged approach to value creation, altering the company's trajectory and strategic focus.

Performance Highlights and Transactions

Great-West Life has evolved, with its U.S. business Empower emerging as a strong contributor and achieving positive flows, especially in wealth management, despite wider market outflows. The wealth channel and asset management segments have seen repositioning to promote future growth, with IG Wealth and Mackenzie as core businesses complemented by growth drivers. Significant transactions included the sale of Putnam to Franklin, and acquisitions by Canada Life and IGM, broadening their wealth management capabilities in Canada and bolstering growth prospects.

Simplifying Structure for Efficiency and Growth

Power has seen considerable simplification in its structure and strategy, moving from three businesses to a singular focus in the U.S. This includes offloading the insurance business, making key acquisitions, and merging wealth management entities to create Empower Personal Wealth.

Financial Objectives and Shareholder Returns

The company has set medium-term financial objectives, with EPS growth for 2024 expected to be in the 15% to 20% range. In the past year, it achieved net asset inflows into wealth and asset management businesses totaling $9 billion. Dividends have increased by roughly 29%, marking a substantial return to shareholders. However, the company did not fully hit its return on equity (ROE) targets, landing between 13% to 17%, showing room for improvement .

Earnings Call Transcript

Earnings Call Transcript
2023-Q4

from 0
Operator

Good morning, ladies and gentlemen, and welcome to the Power Corporation Q4 2023 Earnings Conference Call. [Operator Instructions] I would like to remind everyone that this call is being recorded on Thursday, March 21, 2024. I would now like to turn the conference over to Mr. Jeffrey Orr, President and Chief Executive Officer of Power Corporation. Please go ahead, sir.

R
Robert Orr
executive

Thank you, operator, and thank you everyone [Break] for joining us just to go through our results for the quarter and a little bit of a look back on the year as well and maybe even a few comments over the last -- as we look back over the last several years as to where we are at Power on our journey as we execute on our strategy. I'm going to just remind you of the disclaimers on Pages 2 and 3 regarding forward-looking information and non-IFRS measures. And then say that we're -- I'm here today with Denis Le Vasseur, who is VP and has been acting as our Chief Financial Officer effectively over the last several quarters. And then he will be working with me today to go through the presentation. We're also joined by Jake Lawrence, who is on day 4 with Power Corporation to welcome Jake. We're not going to ask Jake to play a starring role in today's presentation. But just to say he is here, and we're delighted to have him on board. As we move forward here, going to start off with the Q4 results and remind you, we'll make some high-level comments on Great-West Life, IGM and GBL in terms of our perspectives, but each of those 3 companies have just recently come out with their results and gone through with extensive earnings releases, review of results. GBLs was just a few days ago, IGM and Great-West Life a few weeks ago, plus IGM had its Investor Day in December. So there's lots of material if you're trying to dig deep into any of the 3 public companies that you can reference or speak to those management teams. So if I go to Page 7, just kind of reflect on where we are. From an earnings point of view, it was -- and from both the quarter and the year, we had really strong results at Great-West Life, and they were broadly based, clearly led by the emergence of Empower, but strong growth and strong results across the diversified portfolio. IGM reported really solid results with an environment of headwinds with what's going on in their businesses right now, but we thought the results were very, very solid.And then as I move down on to some of the key points as we reflect on the quarter and the year. The first one is with the Prudential integration coming to a successful close here, the sale of Putnam to happened on January 1, it really highlights and is the completion of a 5-year repositioning of Great-West U.S. business, and I'll make some comments on the presentation on that. Great-West Life's financial performance really for this year and over the last 5 years has been great. I'm going to touch on that. Really pleased with the positioning of IGM. And I'm going to make a couple of comments on the way we think about their positioning going forward. And as I mentioned, they got an Investor Day where they've laid out medium-term financial objectives the way Great-West Life had done back in 2021. GBL continues to focus on executing its strategy and had a record year in terms of returning money to shareholders. And then we've continued to build the scale of Sagard and Power Sustainable; and Sagard entered into a number of transactions, which I'm going to walk you through very, very briefly to enhance its growth. And then not to be forgotten, as we were -- we had our biggest year of share buybacks in 2023 and in Q4, and we announced a 7.1% dividend increase yesterday. So lots going on, and we're excited to share it with you and get into questions that you might have. On Page 8, the market environment hasn't changed too much. We've got high rates. And in some ways, that's good like a lot of financial institutions, when you got some parts of your businesses where you have cash, you have short-term investments. So obviously, earnings from those parts of the balance sheet helps on the earnings front. But then we all know what's going on overall in the market. You've got high inflation, high interest rates, that's squeezing a lot of people that are clients -- also clients of our various businesses. It means that for a lot of the client base is people are trying to figure out how they make ends meet. So you've got less money flowing into wealth channels, less money flowing into the asset management products that are on those channels. And where is money going, money is either going to repay debt to try and pay bills for certain parts of our client base. If they are investing, there's more flows on an absolute basis going into new money products, including bank CDs and out of traditional wealth channels. So there's -- so I guess bottom line rates being higher can help your earnings here and there. But from a flow point of view and wealth channels and in asset management on balance, it's a negative, and you've got a couple of indicators there of that in the Canadian channel, but we're seeing that across the markets where we operate. So let me then with turn the baton over to Denis to walk us through our financial results and net asset values. Denis?

D
Denis Le Vasseur
executive

Thank you, Jeff. Good morning, everyone. I will go to Slide 9. This is our Q4 financial highlights. Adjusted net earnings from continuing operations in the quarter were $579 million. This is up from $395 million in the same quarter or corresponding quarter of last year, translates into $0.89 per share compared to $0.59 in Q4 '22, and I'll address the breakdown of earnings shortly. Adjusted net asset value per share was $53.53 at year-end compared to $48.26 at the end of Q3, and our net asset value per share yesterday was $52.93. At its Q4 meeting yesterday, as Jeff mentioned earlier, the Board of Directors declared a quarterly dividend of $0.5625, our 2.25% on an annual basis, and this represents an increase of 7.1%. Turning to Slide 10. Great-West once again delivered strong results across all segments, including an increase in year-over-year base earnings from Canada, the U.S. and the Capital and Risk Solutions, notably, you'll see that -- Great-West U.S. retirement and wealth business Empower surpassed $1 billion in base earnings in 2023, exceeding the objective announced at the beginning of the year. IGM's earnings had a solid performance, reflecting a challenging market environment. Earnings at IGM were impacted by the partial sale of Great-West shares to Power as part of the CAMC transaction. And IGM also reported losses in Q4 on hedging instruments. However, we must consider this as a timing issue and going forward, IGM will realize higher income, which will offset these losses. As a reminder, IGM's Q4 adjusted net earnings exclude the gain on its sale of IPC to Canada Life and which, in turn, is eliminated on consolidation at Power Corporation as it is an intercompany sale. Moving to our NAV focused businesses. GBL's contribution in Q4 includes an impairment recorded by Imerys. And note that while GBL's private assets saw fair value increases during the quarter, these are not entirely reflected in the results as some of these companies are consolidated. Sagard contributed positive earnings this quarter, driven primarily by the fair value increases in our investments in the private equity funds and Sagard Manager continues to make strong progress despite market headwinds, slowing down capital fundraising and deployment. Finally, as we have seen in the past, Power Sustainable negative contribution was driven by an increase in the fair value of third-party capital in the infrastructure fund. This loss in our P&L results from consolidating the infrastructure fund where the corresponding fair value increase of assets is not reflected. However, we must recognize the increase in value of the units held by the noncontrolling unitholders of the fund. If I turn to Slide 11, we break down the $53.53 net asset value per share as of December 31. The shares of our publicly traded operating companies performed well in Q4, with -- Great-West delivering a 13% increase. Great-West remains a large component of our net asset value and its performance essentially explains our quarter-over-quarter NAV per share growth.As a reminder, we now record Sagard's management company, the value of the management company at fair value and our NAV in Q4 power share of the management company value was $265 million with quarter-over-quarter changes only due to foreign exchange movements. Power Sustainable management company remains at carrying value. Cash and cash equivalents decreased quarter-over-quarter as we bought back shares at a higher pace in Q4, and this is also reflected in our participating share count decreasing from 658.9 million shares in Q3 to 652 million shares in Q4. And with that, I will turn it back to Jeff.

R
Robert Orr
executive

Okay, Denis, thank you. So then I got to move forward to just a bit of a look at the last 4, 5 years, really, even though this is a quarter-end report, it's also -- we're at the end of the year. We're at the fourth anniversary of the completion of our reorganization. And in my mind, I go all the way back to 2019, where there was a lot of activity in 2019 through the year that led to the reorganization. So a little bit of a look back here. And the overall comment I'd make is that over the last 5 years, our company has really repositioned itself. There's been a tire work done, and it's -- we've been describing it through the 3 levers of our value creation, but we really have repositioned each of the businesses.If I start with Great-West Life, it's a different company than where it was 5 years ago. I think it has got strong businesses across its different platforms in its different markets. and of course, the emergence of Empower, which was not a large contributor 5 years ago and our business in the United States with now the U.S. is emerging as the largest part of Great-West Life is probably the most significant change, but there's been very significant investments across the rest of the platform as well. IGM, again, right now, we're in an environment where wealth channels are generally in outflows, asset management channels or in outflows in Canada. And so people are going, "Well, that's not a -- you've got a lot of macro headwinds. But it does not -- when you look at it from a multiyear position here, this business has repositioned itself as well for much higher future growth. In its wealth channel and its wealth segment. It's got the core business of IG Wealth, and that's got a couple of very high growth drivers for the future. And in this asset management segment, it's got its core business in Mackenzie, which is in a strong market position and then some very high strong growth drivers, and I'm going to come back to that as we go through the presentation. And then at Power, really, really big change from where we were 5 years ago. Obviously, a simpler structure, a much simpler strategy. And I would say as I look back, lots of great progress made in terms of raising funds, selling assets, buying shares back, enhanced communication. But I would also say, unfinished work here, lots of lots of work still to do. There's a lot of opportunity. I can put it in a positive way, but lots of things that we had set out to do and some of them were difficult over the last 4, 5 years, if you think about the environment we've been in. So -- but just overall, it's a different company, and we still have lots of opportunity ahead to execute on the strategy. I'll flip over then to the next page, which is Page 13, just to remind folks, we did have another busy year from a transactional point of view. It was highlighted by the acquisition of the Rockefeller position by IGM by Canada Life acquiring Investment Planning Counsel, which really enhances its position and its scale in the wealth business in Canada, which is going to be a key focus for them going forward. And then ultimately, the sale of Putnam, which closed on January 1 of this year, to Franklin. So those were the 3 highlights, but I'm going to come back to the 3 on the bottom and what Sagard announced over the last little bit here because it's interesting how Sagard is used in transactions in a difficult fundraising environment to enhance its scale and its growth prospects. Page 14 is just kind of a look back on Great-West. Great-West had, I think, a version of this slide in their deck. I'm not going to belabor each of these points. Notwithstanding the very difficult market in wealth, they had a lot of positive flows. A lot of that -- the majority of that was in the U.S. because Empower is gaining market share and growing organically in the D.C. market, and they've got a wealth business, of course, which I think is up to now somewhere around USD 70 billion with the combination of the Personal Capital acquisition and the existing wealth business they had. So -- and they've got strong, strong flows into that business. So that is a bright spot in terms of a difficult wealth market. And then down at the bottom of the page, just to highlight, we are in both of Canada and the United States. We've got much stronger brands than we had even a few years ago. I remind folks that have followed us for a few years ago back 3, 4 years ago to Canada like we were operating as Canada Life, Great-West Life and London Life. So it's only been a few years that we've emerged with the Canada Life brand, and then Empower is investing heavily and we'll continue to invest heavily in building up its Empower brand in the U.S. So we've got 2 strong positions here, and we are very much working under what we think are very strong brands. Okay. Page 15 is probably on the page in terms of change. There's been -- as I mentioned a few slides ago, there's been change across power. I think nowhere more dramatically, if I can use that word, I don't think it's too strong a word as in Great-West U.S. business. If you go back to the end of 2018, -- Great-West on the left-hand side of this page, we had 3 businesses. It had Great-West Financial, which was its insurance business for those that followed us, it was [ Indiscernible ], there was some closed life blocks. It was actually the largest earnings contributor at that time. It had Empower and it had Putman. And all 3 of those businesses in 2018 were earning less than CAD 400 million. I think I've got $388 million in my head, but it's -- someone will correct me if I'm off, but I'm off, I'm not off by much. You go through what happened over the next 5 years. We kicked off 2019 in January with the announcement of the sale of the insurance business to Protective Life -- Great-West followed that up with 3 acquisitions over the next couple of years, 2 defined contribution acquisitions, Mass Mutual and Credential and the Personal Capital acquisition and then start of this year -- or in the middle of this year, announced the sale of Putnam and also the merging of Personal Capital and Empower's own wealth business into what's now branded as Empower Personal Wealth. And where are we today? We have one business in Power. It's the second-largest retirement provider in the United States. It has got 18.5 million clients. It's got USD 1.5 billion platforms. It's growing organically at a very strong rate. And in 2023, as Denis said, it earned more than $1 billion and -- Great-West at their recent call are calling for that growth to be somewhere in the 15% to 20% range for 2024. So Empower is now the largest single business unit contributor in -- Great-West and the U.S. is approaching somewhere 30%, 32% is the largest segment. So the whole group has changed, but this is really the biggest piece of the story. And then we talked 4, 5 years ago about -- at the time of the reorganization, really upping our game in terms of communication with the market transparency, accountability. Part of that was in June of 2021, Great-West came out. And for the first time in our group announced their medium-term financial objectives, which you have on the left-hand side of the page and at their recent call, they reported, what you have on the right-hand side of the page, their performance in terms of EPS growth, 11% for 2023. The 5-year growth is 11% on a CAGR compounded growth rate, which is above the growth targets they set. You've got their ROE performance there and their dividend payout ratio, which was above their range and will work its way down slowly as we expect or use -- well, the rally has been that the earnings growth has been higher than the dividend growth and through that, a little bit of noise as they went to IFRS 17. But our expectation is that we'll move over time that payout ratio down towards the middle of the range. It will bounce around from year to year, of course. Over on 17, just some comments on IGM and what they achieved in 2023, I think the Rockefeller acquisition is a significant transaction. It will offer them the opportunity to have a much larger exposure to the high net worth -- ultra-high net worth business and starts to give them as more of a North American wealth presence. As we forget, but the ChinaAMC deal, which we talked a lot about, I guess, back in 2022, it actually closed at the start in the first quarter of 2023, and we think that's the right place to concentrate that position. And notwithstanding the challenges that China is facing right now and investor apathy. I don't think that's -- that's not a strong enough for it in terms of their views of China. That business continues to do really well. There's a lot of savings going on in China right now in ChinaAMC's relative position continues to strengthen. So that's going to turn out, I think, over the long term to be a great acquisition for IGM. And then this old IPC, as we mentioned, to Canada Life to allow them to focus their time, their energy, their capital on building up the businesses that they had. Importantly, there was an Investor Day held in December by IGM. And a couple of things were announced there. They recast their segmentation into wealth and asset management and basically no longer segmenting around their strategic investment segment, which I think is the way we think about it and they think about it and the right way to do it. And they came out with medium-term objectives for the first time very much the way at Great-West Life, I just mentioned, did in 2021. And the best slide to describe that is the following one. Page 18, where you see the segmentation on the left, and I'll just go back to my comments earlier, they've got a core franchise in each of wealth and asset management and then they got to very much high growth drivers for the future. And their earnings, EPS objectives on a 5-year basis or 9% overall earnings growth. That's a specific number. It will obviously -- if they execute a range around that, -- and it's 7% coming from the core franchise is more mature. Those are the bigger franchises paying the bills right now, if I can use that expression, but they're more mature franchises and then they're expecting higher growth out of the other parts of the portfolio here.These assumptions assume normal market growth. There's normal stock market and growth assumptions in that. There's obviously some volatility on a year-to-year basis in those businesses. Okay. A couple of comments on IGM and GBL and just to say, a record year for returning capital to shareholders. Second point is they're refocusing their portfolio, basically putting more emphasis on private assets. They sold out of 3 positions, and they reduced their position in Pernod Ricard and they created value in their private asset portfolio. So they continue to drive forward with their strategy. A couple of slides on our investment platforms. It's just a little bit of a look back here to when we announced the new strategy. We said at that time, we were going to try and grow the investment platforms without putting additional seed capital from power into it. We were going to rely on parties other than power and you got to look back there from -- on the funded assets under management, $3.7 billion to $17.6 billion. That's over just slightly less at end of Q1 to the end of Q4, so it's a little less than 4 years. And then the dark blue bar, Power Corp. has got effectively the same amount of capital invested in it. There's some mark-to-market in some of those numbers. We've effectively done what we said we were doing, but still a long way to go clearly to get these platforms into a point where they're contributing from a value point of view and the way we're able to communicate that contribution to the market effectively, but lots of progress. Page 21 is , I think, is really interesting. Sagard, everyone following the all market, the private asset market knows it's been a difficult funding -- it's been difficult to fund. It's been difficult to actually deploy capital. So the businesses across the world are really kind of finding this has been -- 2023 has been a difficult year from a growth point of view. Sagard has done 3 transactions -- so there's one thing to go out and ask people to invest in your fund, but they've done 3 transactions to expand their scale and their funding and their growth going forward. We talked about ADQ and the BMO now ADQ now called Lunate coming in as a GP and committing to provide future seed capital for the funds, but also investing capital and cash into Sagard. So that was a growth strategy. But then in December and closing in January, Sagard announced the acquisition of a strategic interest, and that means we've got significant equity interest, and there is a path to control eventually in that transaction of a USD 9 billion manager called Performance Equity Management and basically gets Sagard into the fund-to-fund secondary and co-investment space; which is a very important space, particularly if you think about the shifts and flows going forward in the alt space from having been historically institutional and pandemic led and now moving more into high net worth family office and ultimately into retail. Those products are very well suited for that. And then they just announced a couple of weeks ago the acquisition of a 40% stake in HalseyPoint, which is a CLO manager out of the United States. And Sagard has got credit products. This will extend their range in the credit market. And again, we'll give them other avenues for growth. So a difficult funding environment, but they've got the capital and they're doing the transactions to expand their scale and expand their growth prospects through a different form, which is using M&A... Okay. And back to wrap it up here before I open it up for questions. So Power, you see our buybacks across the top of the page. I remind you, we had COVID. We're a little slow out of the blocks getting transactions done in monetization that has picked up in 2022 and 2023. A look at we increased the dividend, as I mentioned, for buybacks going forward, our cash at $900 million is just a little bit above where we like to keep it. So we are very much focused on getting additional buybacks through 2024, and we'll be looking to continue the monetization of noncore assets as the key funder for that and all at the same time, maintaining our very strong credit rating. I have to at least pause on Page 23 for a second on our total shareholder returns. We're long-term shareholders, but we are very much in business to create shareholder returns. And while these -- all of these numbers are always very sensitive to start dates and end dates, as you know, we do very much keep our eye on what kind of total shareholder returns we're providing to shareholders. And then you've got some benchmarks there. We've done very, very well against the key benchmarks that we look at in terms of those time periods of outperformance. On Page 24, notwithstanding that the discount has widened out over the last 18 months or so. And we're working hard on ensuring that shareholders see the value across all of the assets we have, including the assets that are at Power. And we do believe that that's -- we don't ultimately control that, but our behavior and the actions we take and certainly have an impact on it. So those returns were created even though we have widened that discount out a little bit. And again, I view this as in the opportunity category. Page 25 just kind of summarizes; operator, we'll be going to questions in a second. Our 3 key drivers and walk through where our businesses are today. And we -- I'll summarize the way I started. We've got lots of work done here, but lots of opportunity to keep driving the strategy going forward. With that, operator, I would ask you to open it up for questions.

Operator

Thank you. We will now begin the question-and-answer session to join the question queue. [Operator Instructions] The first question comes from Graham Ryding with TD Securities.

G
Graham Ryding
analyst

Just on the Sagard and the minority stakes year-to-date into those private equity and private credit managers or CLO manager. What's the thought process there in terms of taking minority stake positions here as opposed to controlling majority positions? [Technical Difficulty] [Audio Gap]

R
Robert Orr
executive

I think you should think of it as a path along the road. So I mentioned, for example, we've got a path to control in the first in the first instance. And so these are people businesses you buy in, you establish a major position, and then you negotiate your ability over time to take a controlling position. So I just -- I don't think the intent is to stay in a minority position is the bottom line, but to work with those platforms and ultimately be in a position to control brand, but it's tactical is what it is. [Technical Difficulty] [Audio Gap]

G
Graham Ryding
analyst

Okay... Yes, understood. There were some, I think, fair value gains within Power Sustainable that triggered you booking some noncontrolling interest charges. Can you maybe just give us some color on what drove the gains and just make sure we're understanding that correctly.

R
Robert Orr
executive

Jake, do you want to take that? [Technical Difficulty] [Audio Gap]

J
Jake Lawrence
executive

Yes. Well... The gains were primarily in the Portag and the private equity It was a power sustainable capital question, I think, exactly. I'm sorry. Just a noncontrolling interest in the interest fraud. In the infra fund, the noncontrolling interest is we've explained before the accounting mismatch that when you have an increase in the value of the fund itself, we have a redemption feature from the noncontrolling unitholders and that turns into what we call the noncontrolling interest charge because we have to record on our books the increase in the value that goes to the NCI -- so put another way, we consolidate this fund because between our position and Canada Life's got a position in it where we consolidate it, when the value of the fund goes up, we don't recognize the increase in the value of the fund. But we do recognize the value of the minority nonpowered non-Canada Life shareholders. And at that value flows through as a liability and flows through the P&L. So every time we have good news and the value goes up, we have a P&L loss with the current accounting. So it's just -- is that a non-talent description of the outcome as opposed to the technical description of Yes. But I think it is good news on the value side results and bad news on the earnings side. [Technical Difficulty] [Audio Gap]

R
Robert Orr
executive

Yes. We should start every presentation Graham. And really good news in our sustainable capital. We had another loss. Like I mean, it's -- it is what it is. But the bottom line is the value went up and we don't recognize that, and we recognize the minority shareholders increasing value as a liability through the P&L.

G
Graham Ryding
analyst

Yes. Okay. And what drove the increase in the fair value gain within the fund?

J
Jake Lawrence
executive

In the quarter itself, the fair value gain in the fund was essentially looking at the future electricity rates. And there has been a shift in the electricity rate. So that when you do your DCF of all of your projects that did turn into to increases in the value of the funds. At other times, you will see derisking events as we've seen in the past, but that was not the case in the current quarter.

G
Graham Ryding
analyst

Okay. Understood. And my last one, if I could. Just I think you mentioned $0.9 billion in cash, so slightly above sort of that minimum level that you like to that. So if you're able to, I guess, continue buybacks this year at a similar level to what we've seen in 2022 and 2023, what are the, I guess, assets of stand-alone or otherwise, what are the assets you're most likely looking to monetize if you're going to be able to continue to buy back shares at this level?

R
Robert Orr
executive

Yes. Graham, I'd rather -- I don't want to name any specifics because you've got in the portfolio. We've got a series of assets that are clearly nonfinancial services. So we've said for some time that those long term are not in place. I've said before publicly, I don't think I would have anticipated 4 years ago that it still be -- we still have as much capital tied up in those, but the world unfolded the way it did. So those are there. You've seen in the past that we seed capital into the strategies of Arsenal Capital and Sagard -- and when there's opportunities to do secondaries, we've done that. So we sold out of positions because we seed them and then ultimately to get to a more mature state, and there's lots of secondary buyers for positions. So that's another tool that we have. So we've got a bunch and how we execute on them will depend on markets, buyers and negotiations and all of that. So I don't want to pre-anticipate that. So I don't mean to be evasive, but I think it would be misleading to kind of name 1 or 2 because I actually -- the year will unfold the way it's going to unfold, and we'll do what we can -- we'll exceed it doing what we do, and that will have a bearing on the rate of buybacks that we execute on.

Operator

Once again, -- the next question comes from Doug Young with Desjardin Capital Markets.

D
Doug Young
analyst

Just back to the acquisitions in Sagard Performance Equity and House lead. Can you talk about purchase price or what this should have in terms of financial terms and earnings? And I know it's at the margin. But what I'm trying to understand is the amount of capital that's being deployed and the potential return on the capital. And how do we -- what are the metrics we should be using to kind of gauge your progress as you kind of build this franchise out? Is it earnings, EBITDA, hoping to get some color.

R
Robert Orr
executive

Thank you. We're not in a position -- it's not -- first of all, it's not material to Power, we would have disclosed it. And then secondly, we would have liked to disclose it. But as I mentioned in Graham's question, you're dealing with people businesses here and often in these circumstances, the principles are the foundries and we have -- in the agreements we have confidentiality agreements to state that we can't state the purchase price at this point. So that's offered from a disclosure point of view, but it's not material amounts of money. So that's a polite way, Doug of saying I can't tell you the answer to the first part of your question. I think the -- where you went there with the metric system, what we're looking for. I think at this point, when Sagard is doing these transactions, it's about value creation right now, and ultimately, it's going to be at the GP level about earnings, but they are building up their scale big time. And so they're at $15 billion of AUM. They got another 9 U.S. out of the performance equity transaction, but also in a great new sector. The CLO is a smaller AUM than that, but gives them additional products. And the ADQ, Lunate, and BMO deal, they bought an equity position, diluted us in that process, but put cash into Sagard. And that validated the value creation. So we marked -- if you remember, we marked Sagard up on our books. I think it was a double in terms of the value. It was somewhere around a double. So there is a metric of success. It's not producing earnings that will move the dial at power for the time being, but the value that validated 2 third parties coming in and -- and double the value we had at Sagard, but they also put cash into Sagard. So the acquisitions that they're making of performance equity and Healthy point, it really -- that's not -- we didn't have to throw cash in there as power. That's cash that Sagard now has in its treasury through those transactions. -- and other sources through the ADQ and the BMO and they had some cash in there. So we haven't been injecting capital, but they're building out their scale, they're building out their value. And therefore, what do I expect out of that. I expect that you're going to see continued increase in the value of our position in Sagard over time as they build out their scale and their position and ultimately, it will be producing earnings. The final thing I'll say on it is that there's a little bit of a -- how much do we want to show profit today versus how successful do we want Sagard ultimately to be. And so we're at a point where if we wanted to drive some earnings through it, there's enough revenue there that we could drive some earnings out, but is it going to make a difference to Power or on our P&L? No. And so you end up saying, well, let's keep investing. We got some cash here, let's keep building out the scale and they make this into a much bigger business 3, 4, 5 years from now. And that's kind of the internal discussions that we have. Final thing, I think we disclosed the fee revenue for Sagard and I think it was like -- got it -- I'm looking at someone here. We have it in our statements. I think if you go back, if I'm wrong, just in the past year is US 135 million, 137 million, which... 5 million CAD 175 million. So $137 million, USD 135 million, I'm just going that memory here. So that's the run rate for the last year. So we've got a -- regards built-ups just on the fees, the steady fees they're earning from their funds, they've got CAD 175 million. This is a real business. It's got scale, and they're trying to build that scale by these transactions is something even bigger. And ultimately, that produced contribution Long answer, Doug. But as kind of... Yes, there we go.

D
Doug Young
analyst

I appreciate it. And so the cash that you're using to buy these entities or the stakes in these entities is actually not part of the $0.9 billion at the [ hold ]. This is coming out of liquidity at Sagard. Does that -- do I have that correct?

R
Robert Orr
executive

Yes. Okay.

D
Doug Young
analyst

And then -- and back to -- just on Graham's question as a follow-up on that one in terms of buybacks. It sounds like either you're going to use the liquidity at the [ hold ], which is about $100 million in excess of what you want to hold it sounds like. And then otherwise stand-alone businesses being sold, is there any other kind of lever you can pull to kind of finance buybacks?

R
Robert Orr
executive

For sure. Secondaries, capital out of some of our positions in the strategies that we have that was -- that was part of what I answered Graham. We did -- we raised, I think, over $300 million by doing a secondary of our position in Sagard 3, which is CAGR is a European private equity fund, and I'm looking around here -- it's over 300 on... 330 330... So we did -- we raised $330 million that was a couple of years ago. We've done some other small secondaries. We look across the funds. So what ends up happening, you launch a new fund, Doug, and the sponsor, especially on the first front, say, well, we want to see the sponsors put up $200 million of capital if you're going to raise this $500 million fund. So we end up putting up a bunch of capital on the first fund -- and then it grows and 3, 4 years later, the fund has done really well. We're under the second fund. We won't have to put up $50 million in the second fund because we were successful. And now our $200 million has got a position of $350 million because I'm making these numbers up, okay? Like I'm just giving you an example. And the fund is 3, 4 years old, and there's a lot of buyers of secondary positions because a lot of -- for a bunch of reasons I won't get into, but a lot of buyers and secondary positions. And we, at that point, can take our 300 off the table and go and sell it. So we're always looking at the $2.5 billion that we have in the seed capital pool and saying, where can we harvest that and where can we take a couple of hundred off here or 200 off. So it's not just a stand-alone, it's actually harvesting. And some of that goes back into seeding new funds and some of that comes back to Power Corp., and we buy shares back.

D
Doug Young
analyst

Okay. Okay. That makes sense. And then just on the stand-alone businesses, just correct me if I'm wrong, if you were to sell them, and we kind of show what you hold at carrying value, I mean that would be marginal. -- it's marginal, but it'd be marginally positive to operating EPS, and that frees up cash to buy back shares. Like do I have that right?

R
Robert Orr
executive

You have it perfectly right. So to make your point, when we closed the reorganization in February of 2020, we had on closing 683 million shares outstanding, and we bought back $38 million over the last 3 call it, 4 years. We had 8 million -- 7 million options exercised. So we net bought back 31 million shares. So we have 652 at the end of the year. So that's $31 million less. We have a dividend at this rate of 2.25%. So you can do the math. We have about $70 million less in dividend obligations in the aggregate, which flows through to our cash flow. And we've raised $750 million or $1 billion wherever is on selling a bunch of other assets, and we put that back into cash flows. That's another 25 million shares at $40 -- you can do the math. So every time we do this, we're increasing our -- not only our NAV, but when we're buying back shares at a 25% discount. We're increasing our earnings because we've got less shares outstanding, and we create a lot of more cash flow. So that's -- you got it exactly. Yes.

D
Doug Young
analyst

And then just lastly, maybe this a question or a new statement, but it's like the $48 million negative impact, I got to understand the mechanics of how it works. Why is that not an adjusting...

R
Robert Orr
executive

I am that's a... I'm not touching that one. was, this is the one for Jake. You've been here...

J
Jake Lawrence
executive

Okay. I think that is a fair question. That is one that we showed with in the past. That could be a candidate for just putting it into the adjustments, and it would be more in line with what we see as the type of adjustments that Great-West does. And just on fair value like kind of unexpected fair values how they affect your earnings as opposed to your run rate. So they would be in our earnings, but it would be -- it could be. I'm not saying it will be, but it could be part of the adjustments. That's... Yes, yes.

D
Doug Young
analyst

Appreciate it.

Operator

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

R
Robert Orr
executive

Okay. Thank you again, everyone, for being with us this morning, and we look forward to talking to everyone soon, and have a great day. Thanks a lot. Bye-bye. Thanks, operator. You can terminate the call.

Operator

This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.