IGM CEO says value surge by Wealthsimple validates Power's fintech strategy
Last week's fundraising round for online brokerage Wealthsimple Inc. shows how Power Corp. of Canada's fintech investments will pay off for the financial conglomerate, IGM Financial Inc. chief executive James O'sullivan says.
Not only are those investments profitable in their own right, as Wealthsimple's surging valuation illustrates, but they keep managers at Power Corp.-controlled companies, such as IGM, “alert” and thinking about the future for their industry, O'sullivan said in an interview.
Wealthsimple raised $750 million last week from venture capital firms and private investors including rapper Drake and actor Ryan Reynolds. IGM is the largest shareholder, with a 23 per cent stake worth about $1.15 billion.
“It's tremendous exposure not just to the business as it exists today, but to the business as it might exist three years or five years down the road,” O'sullivan said.
“That interaction between our management team and the management team at these fintech companies that we have investments in is very, very valuable.”
Wealthsimple, which offers online trading and automated-investing platforms, raised the money at a US$4 billion valuation, more than triple what it was worth in October.
Wealthsimple's rise has helped lift IGM'S stock to a 30 per cent gain so far this year.
The Winnipeg-based asset manager hasn't gained 30 per cent over a full calendar year since 2013; its shares are below where they were before the financial crisis.
Power's venture-capital arm, Portag3 Ventures, also has investments in Conquest Planning, which offers a financial-planning platform, and Koho, which sells a suite of online financial services.
“Power Corp., through Portag3, has shown a remarkable ability to pick winners, support winners, nurture winners and deliver returns for their investors,” O'sullivan said.
“Wealthsimple is perhaps the most well-known company in the portfolio, but I can tell you there are several others that we are indirectly investors in, and they are very attractive not just from an investment perspective, but again for potential linkages through to our business.”
For IGM'S core asset management business, O'sullivan sees markets boosting asset levels, and sales of mutual funds and ETFS continuing to be strong, though possibly not at the “incredibly robust levels we saw last quarter.”
He also cautioned that investors should expect one or two corrections of five per cent to 10 per cent a year.
Regarding the pandemic, O'sullivan said most of the company's workers won't return to offices until late in the fall or early next year.
“I think the new normal is going to be a hybrid,” O'sullivan said.
“I'm inclined to encourage a hybrid, and I want to think creatively about all the things we can do to make it as attractive as possible for employees to come into the office regularly.”