Guardian Capital Group Limited (GCGA) Earnings Call Transcript & Summary

Ladies and gentlemen, I'll now call the Annual Meeting of Shareholders of Guardian Capital Group Limited to order. Allow me to introduce myself to you. I am the Chairman of the Board of Directors of your corporation, James or Jim Anas, if you prefer. With your consent, I will act as Chairman of the meeting. No one, not consent. Matthew Turner, our Corporation Secretary, will act as Secretary of the meeting, and Matt is furthest to my left over here. Also present is George Mavroudis, the President, Chief Executive Officer and a Director of our Corporation, who will be making a presentation after the formal part of this meeting. I'm also pleased to introduce the other directors of your corporation who are present today, Michael Christodoulou, who is also an Officer of the Corporation; Petros Christodoulou; Marilyn De Mara; Harold Hillier, who is Chairman of the Compensation Committee; Edward McDermott, who is Chairman of the Corporate Governance and Nominating Committee; and Barry Myers, who is Chairman of the Audit Committee. Also here today, representing KPMG LLP, the corporation's auditor is Mr. James Loewen. We shall now proceed with the business of the meeting. If there are any proxies not yet deposited, they should be deposited immediately with the secretary. I'm seeing none. With the permission of the meeting, I will appoint Louise Waltenbury of Computershare Investor Services to be the scrutineer of the meeting and would ask her to submit to the Secretary, the report as to share representation at the meeting. Matt has it, the secretary has it. Thank you. The report of the scrutineer as to share representation at the meeting is now available. And I'll -- are you going to read this, Matt? And I'll ask secretary to read that.

Thank you, Mr. Chairman, scrutineers report indicates that there are [indiscernible] shareholders in person, representing 30,000 shares; 24 shareholders by proxy, representing 2,411,270 shares for a total of 32 shareholders. The total issued and outstanding shares at the record date was 2,738,379, meaning that the percentage of outstanding shares represented at the meeting is 89.15%.

Thank you. Notice of this meeting dated March 28, 2024, has been distributed to all of the shareholders of the corporation. An affidavit of mailing of the notice has been filed with us. And since all shareholders have received the notice of meeting and accompanying materials, I would suggest that a motion be made dispensing with the reading of the notice and accompanying materials and that they'd be taken as read.

Mr. Chairman, I second the motion.

Mr. Chairman, I second the motion.

Thank you. All those in favor, please so signify by raising your hand. Contrary, if any? I declare the motion carried and direct that the affidavit be filed with the records of the meeting. Service of notice calling the meeting, having been duly approved and the quorum being present, the meeting is regularly called and properly constituted for the transaction of the business of the meeting. The previous meeting of shareholders was held on May 12, 2023, and to save time, I suggest that a motion be made dispensing with the reading of the minutes of that meeting and taking them as read and verified.

Mr. Chairman, I second the motion.

Mr. Chairman, I second the motion.

Thank you. All those in favor, please so signify by raising your hand. Contrary, if any? I declare the motion carried. I have before me and placed before the meeting, the corporation's annual report, including the consolidated financial statements of Guardian Capital Group Limited as at December 31, 2023, which were approved by the Board of Directors of the corporation and reported upon by the auditor. The annual report and financial statements have been sent to all shareholders of the corporation that requested them and are available on SEDAR+ and the corporation's website. So I would suggest the following resolution. Resolved that the reading of the annual report, including the consolidated financial statements of Guardian Capital Group Limited as at December 31, 2023, be dispensed with and that they be taken as having been read in full at this meeting. It's going to have a mover and seconder for the resolution.

Mr. Chairman, I so move.

Mr. Chairman, I second the motion.

Mr. Mavroudis will be making a presentation at the end of the meeting of the corporation's businesses, and there will be an opportunity for you to ask questions at that time. Are there any questions or comments regarding the annual report at this time? As there are no questions at this time, would all those in favor of the resolution, please so signify by raising your hand. Contrary, if any? I declare this resolution passed. We will now proceed with the election of directors for the ensuing year, and I declare nominations open.

Mr. Chairman, I nominate the following persons for election as directors of the corporation to be ensured here: James S. Anas, A. Michael Christodoulou, Petros Christodoulou, Marilyn De Mara, Harold W. Hillier, George Mavroudis, Edward T. McDermott, Barry J. Myers, and Hans-Georg Rudloff.

There being no further nominations, I suggest that a motion be made that nominations be closed.

Mr. Chairman, I second the motion.

Mr. Chairman, I second the motion.

All those in favor, please so signify by raising your hand. Contrary, if any? I declare the motion carried. The election of directors is taking place on an individual basis. As such, substantially all of the management proxies received have given instructions that they be voted in favor of the election of each of these nominees as Directors of the corporation. Therefore, and since there are no -- there is no contest for the election of the directors, I will request that the secretary cast a single ballot of the meeting -- of this meeting for the election of each of the foregoing as directors. The secretary having done so, I declare the following nominees to be elected as directors of the corporation to hold such office until the next Annual Meeting of Shareholders or until their successors are elected or appointed. James S. Anas, A. Michael Christodoulou, Petros Christodoulou, Marilyn De Mara, Harold W. Hillier, George Mavroudis, Edward T. McDermott, Barry J. Myers, and Hans-Georg Rudloff. The next item on the agenda is the appointment of the auditor. May I please have a motion to appoint the auditor of the corporation for the ensuing year and to authorize the directors to fix their remuneration.

Mr. Chairman, I'm moving that [indiscernible].

Mr. Chairman, I second the motion.

All those in favor, please so signify by raising your hand. Contrary, if any? I declare the motion carried. The business of this annual meeting has now been concluded, and I would therefore request that a motion be made to terminate the meeting.

Mr. Chairman, I so move.

Mr. Chairman, [indiscernible].

All those in favor, please so signify by raising your hand. Contrary, if any? Thank you. I declare the motion carried. Mr. George Mavroudis, our President and Chief Executive Officer, will now make a presentation about Guardian and its businesses. Following his presentation, there will be a chance for all of you in this room to ask a question. Over to you George.

Thanks, Jim. Okay. Well, good morning, everyone. Thank you for those who have made the effort to be here in person on a Friday morning. And I know there are several of them who would have dialed in today virtually to hear our presentation. So I look forward to receiving any questions at the end of today's presentation. It's going to be brief. I think the presentation is relatively simple. The execution is very difficult. So -- it's easy to lay out the strategy of what we want to do over the next number of years. Very confident that we have an exciting period ahead of us. And hopefully, I'll share some of that vision with you today. I want to also -- before I get started, thank the Board's continued support over the past year. They've always been there with their wisdom and counsel, and that's much appreciated. And of course, there's -- much of what we do couldn't be done with the hard work and effort that is from our staff across the Board. This is a people business. And without the commitment and the passion to work hard to succeed, this business has no other foundation other than its people. So thank you to all our employees that have worked so hard not just this past year, but certainly for the last decade plus, many of us have been here. It's been a great journey. And hopefully, the next decade will be just as enjoyable and fun. So before I get started on sharing with any financials, there's the obligatory disclosures just in case I say something that the compliance people may fear I've given you a forecast or a belief, take it with a grain of salt, I guess, is what they want me to tell you. But let's start with this slide, which you've seen before, and it's kind of like highlights the key metrics of the company. And I'll reference back to some of these metrics as we go through the presentation. But on the left side, it's more about the size of our organization. Some of the key metrics we use is assets that we advise or manage for clients. So we just reported yesterday our first quarter results, and our Q1 assets under management and administration is just over $60 billion, at $61.3 billion. Our market capitalization as of yesterday, I believe or just last week, it was $1.1 billion. And of course, you look at that and you think, well, there's some distortion there given that our market cap is actually lower than what our book value and our fair market value of securities, which is a fairly liquid balance sheet. So we'll share a little bit of that story as we go through today's presentation. But that's kind of description of our size of company that we are. On the right-hand side -- this is an annual shareholders meeting, and I think what's important for shareholders is how we allocate capital. And over the last -- on the right-hand side, the last 12 years, which really covers the tenure of my leadership as Chief Executive Officer and the executive team we have at hand. But we see our purpose of allocating capital largely in 3 buckets. There is the reinvestment in the business, either organically or as we've put in the top left corner of -- on the right-hand side, acquisitions. We have -- at the end of 2013 in the last 12 years, spent close to $170 million in acquisitions. This does not include the pending transaction we have with Sterling to close imminently in the next few months. And we've complemented that with also giving back to our shareholders through a growing dividend, which you'll hear a bit more about. But cumulative dividends over the last decade have been over $170 million paid to shareholders. And during that period of time, we've also bought back close to $200 million of shares, which I'll give you a bit more details of how many shares outstanding that has reduced the shareholder count. And for our shareholders, the total return experienced over the last decade has been an annualized return of 13.9%. We're quite pleased with that return, not only in its absolute form, but also relative to our peers and main benchmark indices that you might want to compare us against. By the way, some of the financial highlights I'm going to share. I mean, I hate being pedantic about it, but maybe because I'm originally an accountant, I do value an annual report, and there's a lot of details in here. if you take the time and read the time spent to kind of describe what the company has done and where it's going, you'll get a lot more color by reading the annual report. But here are some of the key highlights for 2023 in comparison to the prior year. And recall, we did restate our 2022 figures so that it was reflective of the business that we operated in 2023, which was an asset management business, having sold our Worldsource businesses. And you can see pretty much on every metric, we've done better. Now -- what is key to understanding and all this is that we were able to do better because we traded an operating business and took on a pool of capital that we were able to invest and make a return to add to our operating earnings from our operating businesses. So the relative hurdle was a bit easier to overcome. I think it will be quite telling next year how we perform relative to 2023. This was our first quarter, same metrics just reported -- and you'll see this is far more relevant in terms of comparables because it was pretty much comparable of the same quarter last year without the wealth businesses. In the first 2 months, we had the wealth businesses and thereafter we disposed of it. But you'll see here -- I mean, one highlight I want to bring to your attention is our securities per share and our securities and cash, net of operating borrowings dipped slightly quarter-over-quarter. And the main reason for that was we sold the business, but didn't have to pay the taxes owed on that business until Q1 of 2024. So most of that dip in our securities per share relates to about $75 million in taxes that we paid in February to the CRA. In a visual, the key highlights for 2023. Net revenues in total were $240 million. The majority of those revenues were from our operating businesses, $195 million. But of course, we have a healthy investment income from our portfolio that generated $46 million. Our operating earnings was close to $60 million and that was represented by about $40 million from our investment management businesses and about $21.5 million from our investment portfolio. And then on the far right, we demonstrated our EBITDA again similar signs of that. What we're really focused on, and you'll hear in the next few slides is this blue-shaded figures that we're showing for operating earnings and EBITDA, this is where we're focused on trying to use our balance sheet to grow our operating earnings. And I'll state a few objectives we have over the next 5 years. And that's something that we're going to be watching. I think the next few years will be a little bit more of a challenge to kind of grow this because we're making heavy investments to set ourselves up for more success down the road. Again, as shareholders, what's important is what your return is in terms of either dividends or the appreciation of the stock. So this is a graph that shows our growth of dividends over the last 10 years. We increased our dividend at the beginning of this year from $0.34 to $0.37 a quarter. We reaffirmed that dividend in our quarterly Board meeting yesterday. And if you look at the compounded annual growth rate of our dividend over the last 10 years, it's been 20%. And if we continue to have success growing our business, our intention is to continue to give back more to our shareholders. And for those who remain longstanding shareholders, your yield on your original cost becomes quite an attractive return to shareholders. I mentioned buybacks was another way of us giving back to shareholders. What do I mean by that? Well, over the last decade, we've bought back 7.4 million shares, representing roughly 23% of the outstanding shares. And during that time, we did not issue 1 option. If we remunerate employees with shares, we tend to go in the market and buy those shares on their behalf, so what ends up happening is that 23% drop in shares outstanding means that for those who have remained longstanding shareholders and benefited from a compounded annual growth rate of 20% on their dividend, also own 23% more of the company by doing basically nothing and staying invested as a long-term shareholder at Guardian. And on the right, this is just a graphic that many in the industry like to see, some of them call it the X factor. But when you see dividends rising and share count going down, it's kind of nirvana in our industry. So we're really proud of what we've accomplished there. And I think given where we are today in terms of what we think the relative value of the stock is to what it's trading at, I'd be confident that we'd be buying back shares at this level still. The other big item with respect to our organization is the size of our balance sheet. It became bigger with the sale of Worldsource. So at the end of December, it was $1.3 billion. We just reported Q1, I think it's $1.25 billion. Again, the drop is largely because we paid some taxes in the first quarter. The big question is, what are you doing with this big balance sheet? And I'll talk to you a little bit more about strategy. But as of the end of December, the makeup of that $1.3 billion is on the left side. The gold bronze is kind of more short-term cash equivalent that we were holding largely from the proceeds of the sale of Worldsource that we had not yet allocated to other strategic initiatives. The small sliver is just the $34 million is largely some additional other equities that we're not necessarily managing as a firm. There's close to $300 million that is in 1 concentrated holding, the Bank of Montreal, which we've been a longstanding shareholder. We've been reducing that over time. But despite selling the shares from 5 million that we held down to 2.27 million, the depreciation of BMO shares has still kept the overall value of BMO quite high for us. So it's just under $300 million. But the biggest bucket that we have our investment portfolio invested in is in our proprietary strategies, just over $500 million at the end of the year. And on the right-hand side of this slide, we kind of break out where is that $500 million. Well, there's a couple of hundred million dollars that is spread across our proprietary owned global and U.S. equity strategies. In some cases, it's funds that we needed to seed new investment ideas. But quite often, it's actually existing strategies that we're established in, but we're now launching new vehicles and new jurisdictions to capture new clients. And often when we launch a new vehicle, in order to give it some level of scale, we're not afraid to put some of our own capital to help launch those vehicles. So about $200 million in global and U.S. equity public markets, large cap, so fairly liquid portfolio. To the left there, the light blue shade, $79 million is, again, more fixed income short-term securities. Much of it is under a year term because we've invested in a lot of our own short-term vehicles that we launched to the market. The next bucket, $157 million is a growing private asset allocation. Now this is largely 2 areas that we're trying to grow. About 1/3 of that is real estate. As you know, we stood up a real estate asset management business, and it has had successful performance, and we continue to remain an investor in that real estate. The other larger portion is a more recent initiative where we're trying to establish our presence in smart infrastructure. And at the end of 2023, we decided as an organization to invest in the first direct investment of that strategy and Guardian stood up basically underwriting the entire investment that we've made in a traffic management company in the expectations that over time, showing investors the kind of investments we intend to do will make it easier for us to hopefully raise other third-party assets to join us in this cause. And then just finally, the last 2 buckets, the $76 million is a fairly large, but steady allocation we've had in the emerging markets. As you know, we've got a team in the U.K. that we've been trying to build on, and we've left much of our seed capital there to help build that track record. Unfortunately, it hasn't grown as much as we would have liked to. But again, it's also a large cap, fairly liquid portfolio. So now that I've kind of given you the review of the overall 2023 and the historical record of our key financial metrics, I think the biggest subject matter I've been facing since we sold Worldsource when I go out to visit with analysts, when I visit with existing clients and do some investor relations activity is, "what are you going to do with all this money? Like it's a lot of capital on your balance sheet." And so over the last 6 to 12 months, we've taken a lot of time, spoke to a number of stakeholders and given a lot of consideration of -- what do we think we want to do now that we have this size of a balance sheet going forward. And we presented to our Board a number of discussions over time and agreed at the end of last year on a strategic plan over the next 5 years. And here is a summary of that strategic plan. As I said, pretty simple, but the execution of this extremely hard. First and foremost, the size of balance sheet. While there's been a lot of considerations of whether we should just return all that capital back to shareholders. And you can do that in various forms, all the way to the other spectrum, which is use that capital to make a transformational acquisition and bet on being a much bigger organization by buying up competitors or peers. And where we've landed is really not much different than how we've operated the business for the last number of decades. And that is we believe that as an independent firm in order to have the ability to truthfully stay the course over the long term, because we always talk about being patient and investing over 10-, 15-, 20-year horizons. It's really not possible if you don't have the financial wherewithal to live through troughs and longer periods of time to kind of unlock successes in the company. And so we think that the balance sheet being fairly liquid is what gives us a fighting chance to launch new ideas, to launch new teams, attract new teams and occasionally acquire new businesses as we go along. But I do want to stress the liquid capital because what that really implies is that it's highly unlikely that we would take the entire balance sheet and turn it into goodwill. I'm getting into accounting terms here. But what does that mean when I say goodwill? Well, it means that it's unlikely that we're going to go take that balance sheet and spend $1 billion to buy a business. Because once we do that, we no longer have that liquidity available to do some of these other things that we've talked about to build things organically. So we want to protect this balance sheet, and we want to use it to help us grow our businesses going forward. And I would hope that in the 5 years that we move forward, we continue to maintain a very healthy balance sheet. The second thing is, I showed you earlier some of the key metrics of what the contribution to operating earnings and EBITDA is from our operating businesses. We think that it's quite reasonable and possible for us to double those metrics over the next 5 years. We want to look at being able to generate just from operating our businesses somewhere between $80 million of operating earnings or $100 million of EBITDA from our businesses. And we still have income that we can generate from our investment portfolio, but we want the operating businesses to be able to do this. And we have a vision on how we're going to accomplish this. And that is there's a number of organic initiatives currently on the go and hopefully, others that were going to attempt that will help us increase our earnings in the future. It's important that we accomplish this because we already are fighting a battle to get recognition for value in our businesses. If we cannot increase the operating earnings or the EBITDA power of our businesses, it's going to be harder to get that value unlocked by the market and appreciate what we've built as an organization. We think that that's not going to be an immediate doubling. In fact, we're willing to perhaps even depress earnings for a while by investing heavily in the near term if we have strong conviction that in the next 3, 4, 5 years, that will help us unlock towards the measure of doubling our earnings and EBITDA. The third item I've alluded to it earlier, we will continue buying back our shares. Certainly, at these valuations is accretive to all of us who remain shareholders. There's -- if the market has a dislocation with what we think is intrinsic value of the business, then we will continue using our normal course issuer bid and be active in our buybacks. And I would expect that we will be doing it continuously at an accretive basis. In other words, we're not issuing options on the back end so that you're diluting that value of buying back shares and canceling them. And then actually, the first 3, if you just kind of draw up the potential of what we can accomplish based on a historical track record, doubling our earnings, anywhere between the $80 million to $100 million of free cash flow and share count, if we continue with the buybacks we've been doing over the last number of years, decreasing them from 25 million shares outstanding to something close to 20 million shares outstanding. That alone would give us about $4 million to $5 million per share of free cash flow. And that's why the last item is -- important is that we're determined with that increase in cash flow to give it back to our shareholders through increase in dividends. Today, the annualized dividend is $1.48. So you can see how much potential there is if we could accomplish some of these other objectives that we set out. Where are we today in our businesses. This is a map that we've been drawing up of late. I think what I really wanted to depict with this is that Guardian has come a long way, circa -- from its circa 1990s. This is a business that's taken a long time to branch out of our domestic routes. On the right side, a global map where you see colors in different jurisdictions. Those colors represent the fact that we have clients in those jurisdictions. So we have clients all across Europe and the U.K. We have some clients in Asia, and particularly Japan and South Korea. We have a growing client base in Australia as well as in Latin America, we've picked up our first initial institutional accounts. Then of course, in North America, we have a very wide breadth of clients in Canada and the U.S. And if you look at what's the depth of that client base because -- put to the side the earnings because that is one measure that we're working on. But to build the business of this kind, where you have this size of client segmentation, over 400 institutional relationships, over 10,000 retail investors that have somehow bought our strategies and over 3,000 private wealth relationships. These types of organizations are not built overnight. There is tremendous value. If someone wanted to pursue to try build this, it would take the millions of dollars and years in order to kind of get close to that, which is another way of saying why our business should have more value than is reflected in the share price, right? And the little Guardian logos just depicts where we have offices in different countries. We're in Canada, we're in the U.S., we're in the Caribbean and we're in the U.K. And potentially, that's something that we can look at growing as our business grows with our clients. These are the current brands that represent Guardian today. It's grown to roughly 10 names. Sterling is here in a dotted box because it has yet to close, but we expect that either by the end of Q2 or early Q3. But you can see it's a mosaic of different names. And I think each of them have their own strengths. Each of them represent a different segment they might be operating in. And our job over the next 5 years is to work on trying to integrate them better so that we're all leveraging the collective good of the organization. It's happening as we speak. And I hope that we can accelerate some of that integration and leveraging of different businesses we have and the skill set so that we can make ourselves that much more successful in the regions we operate. That's just a quick mosaic. One of the things that strikes me is that over time, we'd like to see how maybe keeping the strength of each of our respective brands in their regions, but kind of create a more umbrella brand that everyone can tie themselves associated to. So that's something that we're giving a lot of thought to and maybe in the coming years, we'll figure out a better way to present the Guardian group to the marketplace. Our current AUM that we actually manage for clients. You've seen this slide before. It's just a depiction of like a cross-section of the various big asset classes that we manage. I think the big takeaway here is how significant our international equities, global U.S. equities represent 60% of our revenues today. So it's grown significantly from where it was just 10 years ago. But we're also very proud of the growth in the other buckets that we have, whether it be fixed income, private client and remain still very committed to finding ways to being the key provider of Canadian equity solutions to the marketplace despite what has been a shrinking asset class for a lot of allocators in Canada. The previous slide talked about our manufacturing and the diversification of our manufacturing. This slide talks about kind of the diversification of our client segmentation. We think of it as 3 big pillars: institutional, retail, private wealth. The percentages -- I would say to you, I don't have necessarily an exact science as to what I want the percentage to look like, but they should each be meaningful. Today, 53% of our assets still come from institutional relationships, 31% come from some type of retail relationships, and 16% from private wealth. The revenues are slightly different in each of those, like in respect of private wealth, even though 16% of assets, it's close to 20% of the revenue contribution. And this -- when we look at our business strategically and look at how to invest resources, we're always thinking of these distribution segments, institutional, retail, private and increasingly, we're also looking at, where geographically do we need to do more of? Is it in Canada, the U.S., Europe, Asia? These are the multivariable factors, which make the execution of our strategy complex, but also very exciting that if you can succeed in it, the rewards are quite great. And I love this slide because it does tell a story that a lot of people, I think, when I speak to them for the first time or haven't -- they haven't heard about Guardian for years. They're kind of fall off their chair when they hear that actually the majority of our assets either come from clients outside of Canada. The light blue and the gold there add up to like 60%. If you look at it by revenue still, 60% is clients that come outside of Canada. And I think not many investors know that story about Guardian still. They're like quite surprised. They think of us like I said, circa 1990s. And this will likely continue to be a trend with the acquisition of Sterling. Because obviously, it's a very large business with a large client base in the U.S., and I'll give you a bit of a better analysis in the next couple of slides. So the other big subject of late is the acquisition of Sterling. What is Sterling, who is Sterling? And for any of our colleagues that are dialed in from Sterling, welcome to our first AGM together or at least pending the acquisition closing. But Sterling represents an incredible opportunity for our group to expand our operations in the U.S. The Sterling business has been in operations for over 50 years. For many of the last number of years, they've been embedded inside of a large bank that has gone through mergers itself and today is known as Truist Bank, and Sterling asset management through that period has done exceptional good work in investing client money, largely in fixed income and across 4 different equity engines that they operate. The head office of that business is in North Carolina -- Charlotte, North Carolina. They have roughly 180 employees. So this is a fairly large established infrastructure. We bought into 2 businesses in the U.S. with Alta and Agincourt over the last decade, but they were smaller businesses. And as we tried to do a bit more, it was going to require us to invest significantly new amounts of infrastructure and personnel to really try and capture more of the opportunity in the U.S. With this acquisition, we essentially get that with a stroke of a pen. The purchase price was for USD 70 million on closing, and there's a contingency payment of roughly $45 million based on certain thresholds of revenues reached over the next 5 years. It caused a lot of people to scratch their head when they heard the original purchase price of $70 million because we bought a business that on signing of the agreement, they had USD 76 billion under management. And so maybe people thought this seems relatively cheap to what industry standards are. And we think it is a good value. But there are many good reasons for it. I think the main reason is that the team at Sterling, the management team had a big say in how they want to see the future of Sterling. Once Truist decided they wanted to sell Sterling, the management team had a big say in who they thought they wanted to partner with, and Guardian kind of represented a lot of values and the opportunities they believed in, and that offered us a tremendous opportunity to buy at a fair value. So we didn't compromise that liquid balance sheet just to acquire assets. It was very important for us that we protect that balance sheet, and this transaction allows us to do that. I think I've covered most of the stuff that I wanted to cover. Between the time we announced the deal, which I think was early February to now, there's been a heavy engagement between the teams in Charlotte and across the U.S., wherever they represented and Guardian. And I think we're in a really good position when we come to close to do it rather seamlessly at that point in time. And the observations I have is that the cultures between 2 organizations were as we thought they were, we had a very good fit. And we're really excited on the pending closing and where we can do with this business. At the end of Q1, we just reported at Guardian, we have $61 billion of assets. If we had closed the business with Sterling at the end of March 31, their AUM is roughly USD 78 billion. So the combined business of Guardian on closing today would have looked like at $167 billion under management. And you can see a fairly balanced book of business between fixed income and equities, half the book is fixed income at $87 billion, and the other half is largely represented by equities. It's public markets, by and large, for both groups. So that's one of our descriptive as a company. We're battling in the asset classes that are most fiercely competitively challenged in terms of fee pricing and demand. But we think with this scale, we can continue to build on the successes that we were planning on when we were a much smaller organization. And just only a couple of more slides, and I'll take questions. You'll see this is kind of the history of the last 13, 14 years of what we've done with acquisitions. We've been pretty active. Obviously, both acquiring and, in some cases, selling and monetizing. But for the most part, it's been acquisitions of growing our asset management business. And we hope to then close the Sterling deal later this year. And we will continue to look at these opportunistic situations where an acquisition might make sense, but we're not out there to buy assets for the sake of buying assets. It really has to have a strategic fit for why we would like to buy this business. The other thing I'd like to point out is that this time line in these various acquisitions has taught our management team a lot of things that we've learned along the way that we can do better in the next acquisition. These are acquisitions of large groups of people and meshing cultures and integrating is obviously an art, not a science. And we're learning how to be better at deploying our integration skills and hopefully, that will improve our ability if we consider any further acquisitions. And I just want to wrap up with this slide, which is, again, I want to drive home the simplicity of our strategy, but how important and potentially financially rewarding if we deliver on this strategic plan. Preservation of that balance sheet, absolutely critical. And by the way, just to give you a little bit more color, if we're not doing acquisitions, we believe we need significant capital because we're not attached to a large financial institution. We're not part of a bank. We're not part of a large insurance company. The benefit of being part of those organizations is that if your distribution abilities are a bit challenged, or if you're -- you really rely on your parent company's ability to distribute your product and they're very large and able to direct their clients to certain solutions. If we want to create new ideas, and we were owned by a large institution, internal money can be easily allocated to help give launch of those strategies. But being independent, the only way we feel we can be remotely competitive is having that balance sheet available so that we can with our own capital eat our own cooking to launch new ideas and then be able to then hopefully build good track records and sell it at arm's length to third parties. It's absolutely critical. We could not launch our real estate fund. We could not try even to accomplish launching our infrastructure fund. Frankly, we couldn't have even launched our global equity team in the U.K. or a quantitative team in Toronto without having this balance sheet. Because each of those initiatives took multi-years to actually get to an inflection point where they were actually contributing and profitable. And it was that ability with that capital to remain patient and help them build the track record until we won out at arm's length. So preservation to liquid capital. We are very focused on wanting to increase our operating earnings and EBITDA. It needs to happen if you want to unlock value. Now we're not so impatient that we want to drive just this metric immediately. And what I mean by that, we are making heavy investments in a lot of areas for a better future. And we're okay trading off today's earnings for better future earnings, but we've got to deliver on those investments and make sure they provide good future earnings. We'll continue with our share buybacks at these current levels. It's kind of the easiest no-brainer in our mind in terms of a return to shareholders. When you're buying back $1 for cents on the dollar all the time, and you still have the operating business that you get the benefit of. And then finally, if we're successful with all these 3, the intention is to continue to increase the dividend payout over the course of the next number of years. So on that front, I will stop, pause and take any questions that anyone may have. And I know people tend to be shy on these things. So?

Well, George, it's exciting to hear about the Sterling acquisition. What one point that stood out to me is skill, right? You're talking you're set to triple assets under management with this deal. So 2 questions for you. The first is what's giving you the confidence to take on this acquisition given the sizable [indiscernible] adding? And given the 2 other platforms, the 2 other teams you have in the U.S. what's the plan to integrate those different franchises, especially as it relates to distribution?

So look, I'll take your first question, and that is that time line where we've been doing all these acquisitions over the last decade plus, has been really a precursor to our ability to feel confident with every acquisition we were making. And I think our organization as a whole has a better understanding on how to integrate businesses than we did a decade ago. I think the other thing that gives us confidence, though, is that actually the Sterling management team is exceptionally good at what they do. So we are going to rely on their skill set to continue to run the business they've been running for a number of years. And hopefully, with us coming along enhance that business together to grow it to the next level. As far as integration of the other businesses, look, we're very -- I think one of our successes over the years is that we've respected what every organization we've acquired represented to its clients and to its employees. As an owner, we didn't come in to any one of those businesses and demand and disruption to how things were done because we recognize those clients that were with them when we acquired them, came to them because they wanted to have their process and their people the same as before. However, as time passes, we're finding opportunities collectively to leverage now a bigger scaled platform. And I think you're going to see now with a much bigger platform than we have in Sterling, more opportunities, more optionality to integrate in areas where actually it doesn't impact the clients. It doesn't impact the process. If anything, it enhances the overall delivery of service that we could offer. And I think that could be done through distribution. It could be done through operational efficiencies. But we're pretty clear that when it comes to the investment engines, we want the purity of those investment engines to remain in their independent kind of offering that they have clients that have mandated them for that. So I think the bigger the business we bought as well and Sterling makes it a bit more easier to find that optionality than it did when we had much smaller enterprises in the U.S.

Okay. Great. And another question on GSIM. You recently deployed capital for Q3. What's been the reception from perspective LPs to invest in the new strategy?

Murphy's law though, when you start things -- no one could have predicted the environment of fundraising, how challenging it has been over the last couple of years to go out there and try and convince LP investors to invest in a first fund. Even though we have a team of people that have a long history of success in investing in infrastructure. But historical track record show that people are hesitant on being the first fund, which actually creates a bit of a chicken and egg. I mean, we need somebody to give us money to make -- create that first fund. But I will say to you, even before the acquisition of Q-Free that the thesis we had for smart infrastructure investing captured people's interest. We have had dozens and hundreds of meetings with investors who are extremely intrigued by the strategy we're laying out. The acquisition of Q-Free, making a direct investment has increased the level of interest by some LP investors who are now can see rather a blind pool, they can envision what a real investment in smart infrastructure will look like. And so we have some ongoing conversations. It remains challenging to raise capital. And when we have some LP investors that have committed, I don't think it's sufficient yet to endorse like a successful fundraising, so that remains outstanding of whether we can kind of triangulate whatever LP investors are still out there to buy into the strategy. But I would tell you that there are no regrets to what we've done because this investment we bought in Q-Free has really brought forward a lot of interesting parties who like this investment. Right from the acquisition, we've had strategic parties calling us and saying, actually, "if we knew this asset was for sale, we would have been interested in it. So -- can we talk to you about this asset?" We've also had a lot of co-investment interest, so very large pension plans from around the world saying, "we don't really like investing in funds these days, but we'd love to co-invest with you on this strategy." So we know there is interest in what we've bought. The question is, will we be able to actually successfully launch a fund. If we don't launch a fund successfully, I'm not -- it's not all lost. We have a great asset that we will work and figure out another mechanism to raise capital. Any other questions? Okay. Well, maybe it was so simple, it was easy to understand. I want to thank everyone for taking the time to join us today. It won't be long before we're sitting here a year from now, and hopefully, we'll give you an update on our progress along the lines. But again, thank you, everyone, for coming, and have yourselves a good weekend.