StepStone Group Q4 2025 Earnings Call Transcript

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Provided by Quartr
May 22, 2025
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Operator

Thank you for standing by and welcome to StepStone Group's Fiscal Fourth Quarter twenty twenty five Earnings Conference Call. At this time, all participants are in listen only mode. After the speakers' presentation, there will be a question and answer session. As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Seth Weiss, Head of Investor Relations.

Operator

Please go ahead.

Seth Weiss
Seth Weiss
Managing Director of Corporate Investor Relations at StepStone

Thank you, and good evening. Joining me on today's call are Scott Hart, Chief Executive Officer Jason Mint, President and Co Chief Operating Officer Mike McCabe, Head of Strategy and David Park, Chief Financial Officer. During our prepared remarks, we will be referring to a presentation, which is available on our Investor Relations website at shareholders.stepstonegroup.com. Before we begin, I'd like to remind everyone that this conference call as well as the presentation contains certain forward looking statements regarding the company's expected operating and financial performance for future periods. Forward looking statements reflect management's current plans, estimates and expectations and are inherently uncertain and are subject to various risks, uncertainties and assumptions.

Seth Weiss
Seth Weiss
Managing Director of Corporate Investor Relations at StepStone

Actual results for future periods may differ materially from those expressed or implied by these forward looking statements due to changes in circumstances or a number of risks or other factors that are described in the Risk Factors section of StepZone periodic filings. These forward looking statements are made only as of today and except as required, we undertake no obligation to update or revise any of them. Today's presentation contains references to non GAAP financial measures. Reconciliations to the most directly comparable GAAP financial measures are included in our earnings release, our presentation and our filings with the SEC. Turning to our financial results for the fourth quarter of fiscal twenty twenty five.

Seth Weiss
Seth Weiss
Managing Director of Corporate Investor Relations at StepStone

Beginning with slide three, we reported a GAAP net loss attributable to StepStone Group Incorporated of $18,500,000 or $0.24 per share. Moving to slide five, we generated fee related earnings of $94,100,000 up 85% from the prior year quarter, and we generated an FRE margin of 44%. The quarter reflected retroactive fees primarily from our special situations real estate secondaries fund and our multi strategy growth equity fund. Retroactive fees contributed $15,700,000 to fee revenues, which compares to retroactive fees of $5,400,000 in the fourth quarter of fiscal twenty twenty four. We earned $80,600,000 in adjusted net income for the quarter or $0.68 per share.

Seth Weiss
Seth Weiss
Managing Director of Corporate Investor Relations at StepStone

This is up from $37,700,000 or $0.33 per share in the fourth quarter of last fiscal year, driven by higher fee related earnings and higher performance related earnings. Finally, we declared a base quarterly dividend of $0.24 as well as a supplemental dividend of $0.40 both of which will be payable on June 30. The full dividend payout related to this fiscal year is $1.36 up from last year's total of $0.99 I'll now hand the call over to Scott.

Scott Hart
Scott Hart
CEO at StepStone

Thanks, Seth. We generated record earnings this quarter, a capstone for a record fiscal year. Our fee related earnings, FRE margin, and adjusted net income per share were all at our highest levels ever for both our quarterly and annual results. For the full year, we raised over $31,000,000,000 of assets under management and generated $27,500,000,000 of growth in our fee earning AUM, both record year results for StepStone. This translates to fee earning asset growth of over 29% in fiscal twenty twenty five, which is our best organic growth rate for any twelve month period since we became a public company.

Scott Hart
Scott Hart
CEO at StepStone

Our increasing scale continues to be a tailwind for growth. Our managed account re up rate remains above 90%, and on average, those re upped accounts have grown at approximately 30%. Fiscal twenty twenty five was also an excellent year for managed account expansion, with over $8,500,000,000 of SMA inflows, or over 40% of total SMA inflows, sourced from new accounts or expanded relationships. This plants the seeds for continued growth from re ups and upsizing. Our commingled funds are also growing.

Scott Hart
Scott Hart
CEO at StepStone

Prior to this year, our largest commingled fund was $2,600,000,000 Over the last twelve months, we've closed on three commingled funds of over $3,000,000,000 which contributed to our remarkable year. Our growing scale and scope have afforded us new opportunities. Earlier this fiscal year, we closed on our debut infrastructure co investment fund of over $1,000,000,000 a great result for a first time fund. With the raising of this fund, we now have commingled funds across all four asset classes. Our second infrastructure commingled fund, focused on secondaries, has been well received and we are seeing strong demand.

Scott Hart
Scott Hart
CEO at StepStone

We had outstanding growth in our private wealth platform, which increased from $3,400,000,000 of assets at the end of fiscal twenty twenty four to over $8,000,000,000 as of the end of this past fiscal year. The success in private wealth is driven by new products, expansion of distribution, growing momentum of existing products with existing distribution partners, cross selling of funds, and continued utilization of the tickers. Over the past fiscal year, we added CredX to our private wealth suite. We now offer evergreen funds across credit, infrastructure, venture and growth equity, and of course, our all private markets S Prime fund. We expanded our distribution partners from roughly 300 unique platforms a year ago to almost 500 platforms today, and we continue to expand our offerings outside The US.

Scott Hart
Scott Hart
CEO at StepStone

And the ability to purchase S Prime, CredX, and Struct via the ticker continues to be a point of value for our partners, with nearly 80% of all eligible sales being executed with those tickers. This has led to consistent growth each quarter since the inception of StepStone Private Wealth in 2019. Moving to our highlights in the quarter, total gross inflows were $9,900,000,000 our second highest quarter on record, trailing only the first fiscal quarter of this past year. We generated a healthy balance across managed accounts, commingled drawdown funds, and private wealth evergreen funds. Included in this number is $1,200,000,000 of evergreen subscriptions, our best private wealth quarter ever.

Scott Hart
Scott Hart
CEO at StepStone

Strong fundraising combined with deployment of our undeployed fee earning capital drove our fee earning assets under management to over $121,000,000,000 up $7,200,000,000 over last quarter. We generated fee related earnings of $94,000,000 and an FRE margin of 44%, both of which are our best measures ever. If you were to exclude the impact of retroactive fees, our FRE margin was 40% for the quarter and was 37% for the trailing twelve months, our highest quarterly and twelve month core margin levels on record. We generated our strongest ever adjusted net income per share of $0.68 driven by records in fee related earnings and in performance related earnings. As we have mentioned on recent calls, we have seen an improving capital market backdrop over the last twelve months, which led to increases in announced deal activity toward the end of twenty twenty four, resulting in very strong realizations and distributions in the first calendar quarter of twenty twenty five.

Scott Hart
Scott Hart
CEO at StepStone

The backdrop obviously shifted in April and has seemingly shifted back in May, with rapidly evolving global trade policy driving volatility in the public markets and creating widening bid ask spreads in the private markets. While we are cautiously optimistic, based on recent progress made on trade policy, we expect that we will continue to operate in an environment characterized by uncertainty. As a result, much of our focus will continue to be on scenario planning to quickly and dynamically assess the impact by asset class, strategy, region, and sector. Our scale across global private markets allows us to balance opportunity versus risk in deploying capital in the best and most appropriate investments for our clients. We believe our information advantage and insight into private markets allow us to capitalize on market dislocations.

Scott Hart
Scott Hart
CEO at StepStone

Private markets have a consistent track record of outperforming their public equivalents. A meaningful portion of the industry's investment outperformance comes from limiting the downside during drawdowns while capturing all of the upside in the subsequent recoveries. That is what we saw play out in the dot com bubble burst, the global financial crisis, and the market sell off after the outbreak of COVID. However, for a private markets investor to capitalize, it must take a long term disciplined approach by remaining invested through cycles and avoiding poor investments whether directly in deals or in funds. This is much easier said than done.

Scott Hart
Scott Hart
CEO at StepStone

StepStone's experience, expertise, and scale enables us to consistently and tactically invest in the private markets through cycles for our clients. We have proven to be among the fastest growing private market asset managers by being able to guide LPs across market cycles. While we are not immune to macroeconomic downturns, it is during periods of uncertainty when we have consistently proven our mettle and widened the gap from our peers. With that, I'll turn the call over to Mike to speak to our fundraising and asset growth in more detail. As we did at the end of last fiscal year, Mike will provide an update on our performance relative to our Investor Day goals from June of twenty twenty three.

Michael McCabe
Michael McCabe
Head of Strategy at StepStone

Thanks, Scott. Turning to slide eight, we generated over $31,000,000,000 of gross AUM inflows during the fiscal year. Approximately $21,000,000,000 of these inflows came from separately managed accounts and over $10,000,000,000 came from our commingled funds. This is our best fiscal year since our founding for both managed account and commingled fund gross inflows. During the quarter, we generated nearly $7,000,000,000 of managed account AUM inflows and over $3,000,000,000 of commingled fund gross additions.

Michael McCabe
Michael McCabe
Head of Strategy at StepStone

Notable commingled fund additions included a $300,000,000 final close on our growth equity fund and a $1,200,000,000 close on our real estate secondaries fund. We conducted a final close of approximately $200,000,000 in our real estate secondaries fund after the quarter end. Our growth equity fund just finished over $700,000,000 similar in size to the prior fund, which is a great result in this challenging environment. This fund pursues founder led businesses outside of the traditional venture capital ecosystem that exhibit rapid top line growth, strong margins, capital efficiency, and minimal leverage. These growth oriented businesses have the potential to provide complementary exposure to both buyout and venture investments while generating liquidity that is not dependent on the IPO market or large scale strategic M and A.

Michael McCabe
Michael McCabe
Head of Strategy at StepStone

Our real estate fund finished at over $3,750,000,000 which is the largest real estate secondaries fund ever raised in the industry. This fund provides liquidity to asset owners during periods of market dislocation through GP led secondaries and recapitalizations, a strategy pioneered by our team. Demand was very high with the fund significantly oversubscribed. We are well on our way to deploying this capital with $1,700,000,000 of investments already committed from the fund and related separately managed account. Stepstones Real Estate Partners Fund is a classic example of how we deliver for our clients and shareholders across market cycles.

Michael McCabe
Michael McCabe
Head of Strategy at StepStone

Turning to private wealth, we generated over $1,200,000,000 of subscriptions at our evergreen funds, growing the platform to $8,200,000,000 as of the end of fiscal year. We achieved our highest inflows ever on the platform, as well as at the individual fund level from S Prime, Spring, and Structs. The return and diversification benefits of layering on private market exposure across asset classes are resonating strongly within the private wealth market. Reflecting on this fiscal year, our secondaries platform enjoyed record sizes for our venture capital, private equity and real estate funds, as well as a successful debut offering at our infrastructure co investment fund and continued momentum in private wealth. Together, our co mingled fund gross inflows exceeded 10,000,000,000 for the first time in our company's history.

Michael McCabe
Michael McCabe
Head of Strategy at StepStone

And we expect to remain very active in fiscal twenty twenty six. We are currently in market with our private equity co investment fund, our multi strategy global venture capital fund, our corporate direct lending fund, our opportunistic lending fund, and our debut infrastructure secondaries fund. It is also worth noting that our private equity secondaries fund, closed at $4,750,000,000 last September, is preparing to come back to market in the coming quarters. Slide nine shows our fee earning AUM by structure and asset class. For the quarter, we grew fee earning assets by over $7,000,000,000 Our undeployed fee earning capital, or UFEC, grew from about $22,000,000,000 last quarter to approximately $25,000,000,000 this quarter, driven by additions in managed accounts that pay on deployed capital.

Michael McCabe
Michael McCabe
Head of Strategy at StepStone

We feel great about this level of dry powder, given the potential opportunity to capitalize on market dislocations. The combination of fee earning assets plus UFEC grew to $146,000,000,000 which is up $10,000,000,000 sequentially, and is up nearly $30,000,000,000 or 25 percent from a year ago. This translates to a very healthy 19% organic growth rate since fiscal twenty twenty. Slide 10 shows our evolution of fee revenues. We generated a blended management fee rate of 65 basis points for the last fiscal year, higher than the 59 basis points from the prior fiscal year, as we benefited from retroactive fees and a positive mix shift from a higher fee rate associated with our private wealth offerings.

Michael McCabe
Michael McCabe
Head of Strategy at StepStone

Now turning to slide 11, I would like to highlight our progress relative to our twenty twenty three Investor Day goals. You'll notice that this is essentially the same scorecard we presented at our fiscal year end twenty twenty four last call last May. In June of twenty twenty three, we set a goal to at least double our fee related earnings over five years and to expand our FRE margin to the mid-30s. Looking at our fiscal twenty twenty five results, fee related earnings has exactly doubled in only two years. We accomplished this by growing our fee earning AUM by over 40%, and by expanding our FRE margin to over 40%.

Michael McCabe
Michael McCabe
Head of Strategy at StepStone

While we clearly benefited from favorable retroactive fees, our core margin excluding retro fees was comfortably in the mid-30s. We still have some work to do to achieve our fee related earnings goal excluding retroactive fees, but at only two years into our five year cycle, we are well ahead of schedule. Importantly, we are achieving our targets while continuing to invest for growth and providing strong cash returns to our shareholders. As an investment and technology enabled business, most of our investment is in human capital. Our organization is over 1,100 professionals today, nearly 20% higher than at the end of fiscal twenty twenty three, including investments in private wealth, business development, and data software and engineering, three of our most important growth areas.

Michael McCabe
Michael McCabe
Head of Strategy at StepStone

Growth on our private wealth platform this past year has been nothing short of spectacular, with assets more than doubling, distribution growing by nearly 200 unique partners, and improved profitability contributing meaningfully to the firm's blended fee rate and FRE margin. Data and technology are deeply entrenched in all that we do. It is embedded in our research and underwriting across primaries, co investments and secondary investments. It is the engine behind cash flow pacing and valuation, which enables our private wealth platform. It is a critical value proposition in acquiring and retaining clients, and increasingly, we are leveraging our data and tech to highlight StepStone's brand.

Michael McCabe
Michael McCabe
Head of Strategy at StepStone

Recently, insights from SPI were featured in two prominent annual industry reports, and we anticipate more opportunities to showcase our benchmarking and datasets in the years to come. Before passing the call to David, I would like to provide an update on our buy in of the non controlling interests and on our capital distribution to shareholders. We expect to conduct the second tranche of our buy in of the non controlling interest of the asset classes in the first quarter of fiscal twenty twenty six, utilizing $10,000,000 of cash and $161,000,000 of equity. This translates to 3,200,000.0 issued shares effective as of April 1. As a reminder, the cost of each buy in is hardwired based on Stepstones market multiple and the asset classes results.

Michael McCabe
Michael McCabe
Head of Strategy at StepStone

This year's buy in will be executed on average at a greater than 15% discount to the STEP public PE multiple. We view this as a very efficient use of capital as it provides positive earnings accretion with no integration or execution risk. Next, we are thrilled to announce that the Board has declared a $0.40 per share supplemental dividend, which is tied to our performance related earnings. This is on top of the $0.24 base quarterly dividend. For the full year, we have declared $1.36 per share of dividends for our Class A common stock, up 37% over last year's distribution.

Michael McCabe
Michael McCabe
Head of Strategy at StepStone

We believe this level of distribution represents a compelling value when contextualized with a 30% annual organic growth we have achieved in fee related earnings over the last three years, while also considering cash usage for accretive NCI buy in. I'll now turn the call over to David to speak to our financial highlights.

David Park
David Park
CFO at StepStone

Thanks, Mike. Turning to slide 13, we earned fee revenues of $215,000,000 up 40% from the prior year quarter. The increase was driven by growth in fee earning AUM across commercial structures and a higher blended average fee rate. We also generated strong growth in advisory fees, some of which are project based fees that won't necessarily recur. Fee related earnings were $94,000,000 up 85% from a year ago.

David Park
David Park
CFO at StepStone

FRE margin was 44% for the quarter, up more than 1,000 basis points versus the prior year quarter. Normalizing for retroactive fees, previously mentioned one time advisor fees and the bonus accrual adjustment, core FRE margins were 37%, expanding nearly 600 basis points over the last year quarter. Our core operating margin has consistently risen since our IPO in 2020. The path forward for our margin may not be linear, but we believe that the long term trajectory will move higher as we continue to generate operating leverage. Looking at expenses, adjusted cash based compensation was $86,000,000 flat the last quarter.

David Park
David Park
CFO at StepStone

The current quarter included a favorable adjustment to the bonus accrual, which offset the growth in headcount. For the full year, our cash compensation represented 46% of fee related revenues after adjusting for retroactive fees. We expect our fiscal twenty twenty six cash compensation ratio to be around this level, understanding there may be variability in any given quarter. As a reminder, our annual compensation cycle resets with our new fiscal year with increases having taken effect on April 1. Adjusted equity based compensation was $2,900,000 up $1,200,000 from last year's fiscal fourth quarter.

David Park
David Park
CFO at StepStone

We anticipate equity based compensation to increase by about $1,000,000 next quarter. A long term incentive plan generally best over a four year cycle. The first fiscal quarter of twenty twenty six will reflect a full four years' worth of equity based compensation expense. General and administrative expenses were $32,000,000 up $2,000,000 sequentially and up about $5,000,000 from a year ago. Gross realized performance fees were $81,000,000 for the quarter and $42,000,000 net of related compensation expense, our best gross and net quarter ever.

David Park
David Park
CFO at StepStone

The quarter largely reflect the realization from the closings of previously announced deals. The pipeline for realization for the next quarter or two remains driven by deals announced in the last six months. Adjusted net income per share was $0.68 our highest quarterly result ever, up 106% from a year ago driven by growth in fee revenues, FRE margin expansion and higher performance related earnings. Income attributable to non controlling interest and profits interest was $33,000,000 up $21,000,000 from a year ago, driven by fee revenue growth in our infrastructure, real estate and private debt asset classes, realized performance fees, retroactive fees in real estate and growth in our private wealth management fees. Moving to key items on the balance sheet on slide 14, net accrued carry finished the quarter at $738,000,000 down 1% from last quarter given the strong level of realizations this period, but up 16% over the last twelve months.

David Park
David Park
CFO at StepStone

Our net accrued carry is relatively mature with 75% tied to programs that are older than five years, which means that these programs are ready to harvest. Our own investment portfolio ended the quarter at $276,000,000 This concludes our prepared remarks. I'll now turn it back over to the operator to open the line for any questions.

Operator

Certainly. And our first question for today comes from the line of Ken Worthington from JPMorgan. Your question please.

Kenneth Worthington
Kenneth Worthington
Financial Analyst at JP Morgan

Hi, great. Good afternoon. Thanks for taking the question. Maybe first David, I think you mentioned this went fast, I apologize if I'm messing this up, that there were some onetime fees in the quarter. What were those onetime fees?

Kenneth Worthington
Kenneth Worthington
Financial Analyst at JP Morgan

How big were they? And I think you indicated excluding the retro fees and the onetime fees, margins would have been 37%. Again, assuming I heard all this correct, is that right? And is it fair to expect that margins sort of increase from that level as we look forward in fiscal year 'twenty six? Or is that sort of the right level we should expect for next year, at least as of this point in time?

David Park
David Park
CFO at StepStone

Yeah, thanks again for the question. So, the one time fees were in our advisory fees. Our advisory fees typically include both recurring and non recurring fees, but this quarter included a somewhat larger one time fee. So, we thought it'd be helpful to call out is about $4,000,000 On the cash comp, we did benefit from a favorable bonus accrual adjustment downward. Had we normalized the cash comp, it'd be roughly $89,000,000 So if you factor in both those, the FRE margin for the quarter would have been 37% versus the 40% just purely excluding retroactive fees.

David Park
David Park
CFO at StepStone

And if you look at our fiscal full year fiscal twenty twenty five margin excluding retroactive fees, that was also about 37%. So, I think that 37% margin is a fair expectation as a starting point. But as you know, from quarter to quarter, the margins are going to vary, particularly the next quarter, our merit increases took effect April 1. So, you should see a slight bump up in compensation as well as incremental hirings.

Kenneth Worthington
Kenneth Worthington
Financial Analyst at JP Morgan

Okay, excellent. That was super helpful. Okay, maybe just secondly, UFEK had a nice jump this quarter, twenty four point six despite the 2,000,000,000 of deployment. It suggests sort of continued strong execution. I guess the question here is how does the pipeline of new business, not one, look?

Kenneth Worthington
Kenneth Worthington
Financial Analyst at JP Morgan

So fundraising has been really on a tear this year. So you've, you know, won a lot of new business. More recently, the environment has seen some increasing volatility. I think there's some seasonality as well. You know, maybe how far out do you feel comfortable with visibility on the not one pipeline, and how does it look?

Scott Hart
Scott Hart
CEO at StepStone

And sorry. Ken, just to clarify, the not one, just to clarify what you said there

Kenneth Worthington
Kenneth Worthington
Financial Analyst at JP Morgan

Yeah. So so UFEC is sort of

Kenneth Worthington
Kenneth Worthington
Financial Analyst at JP Morgan

one, but it just hasn't converted to fee paying AUM. So we know what that that pipeline is. But what is sort of the business that, you know, you're bidding for, but you you haven't necessarily won yet? Does your pipeline, you know, look better? Are you you know, have you won so much?

Kenneth Worthington
Kenneth Worthington
Financial Analyst at JP Morgan

Is it sort of depressed? How does the outlook look given what you've already done and then combine that with sort of seasonality and market conditions, etcetera?

Scott Hart
Scott Hart
CEO at StepStone

Sure. Got it. No, understood. Look, I will say that we are actually feeling fairly positive in terms of the pipeline of new opportunities whether through RFPs that we are in the process of responding to, whether it is some newer pools of capital that are coming online and just allocating to the private markets for the first time. As a reminder, we've talked about that in the past tends to be groups that we're speaking to outside of The US for the most part, have just come back from some recent trips where you're seeing even long time investors in the private markets just start to set aside an allocation for things like private credit opportunities.

Scott Hart
Scott Hart
CEO at StepStone

And so, I would say that we continue to be pleased with the amount of opportunity that lies ahead of us. On the separate account side, we are obviously coming off a very strong fundraising year from a separate account standpoint, good mix of re ups as well as new and expansion business as we highlighted in the prepared remarks. We probably don't have the same size of re up opportunities coming, but still a very healthy re up pipeline and expect to continue to execute on that at a very high re up rate. And so overall feel fairly good about the pipeline. And lastly, I would say just to loop in some of the commingled funds as well as part of the reason we wanted to highlight that certain of those funds may be coming back to market sooner than you expected.

Scott Hart
Scott Hart
CEO at StepStone

And the reminder there was really around private equity secondaries where we had started to actually invest that fund back in October 2022 when we activated it. Clearly, given the fundraising environment, it took a bit longer to ultimately get to our final close, although that exceeded our target expectation. And here we are almost right on plan three years later planning for the next iteration. So again, good pipeline of opportunities that lie ahead.

Kenneth Worthington
Kenneth Worthington
Financial Analyst at JP Morgan

Okay, excellent. Thank you so much.

Operator

Thank you. Our next question comes from the line of Ben Budish from Barclays. Your question please.

Ben Budish
Ben Budish
Director at Barclays

Hi, good evening and thank you for taking the question. Just following up on the fundraising side, we've been hearing from some of your peers that especially for larger flagship funds, there's likely to be more of a barbell shape with a big first close, longer duration than a bigger final close. Curious if that sort of resonates with what you're expecting for your funds in the market. Kind of on the same topic, I was wondering if you could share any details just for the major flagships. Has anything been raised so far?

Ben Budish
Ben Budish
Director at Barclays

Is anything sort of yet in fearing AUM? And how should we think about sort of the near term cadence of potential closes?

Scott Hart
Scott Hart
CEO at StepStone

I think that description of the barbell with the strong first and strong final close is exactly what we have described as well and exactly what you've seen in our two most recent flagship fundraisers being private equity secondaries and real estate secondaries, where we did indeed have a sizable first close. There was then an extended period that we were fundraising before then having a very strong final close. And I think part of that is just trying to create a sense of urgency and some momentum around clients who have a number of other opportunities on their plate, given the crowded fundraising environment. But once you can confidently speak of wrapping up and having a final close, they are more willing and able So, I would agree with and tell you that we have experienced a similar phenomenon in some of our recent fundraisers.

Scott Hart
Scott Hart
CEO at StepStone

In terms of the flagship funds that are currently in market today, we've mentioned in the past that our private equity co investment fund is back in market, have not had a first closing there yet. And we also have our multi strategy global venture capital fund in market as of the quarter end that had not had a close, has had its initial closing subsequent to the March end. And then have some of our other funds including our first time infrastructure secondaries effort, as well as our corporate direct lending and corporate opportunities funds in market. But nothing that would have immediately hit fee earning AUM based on recent closes there.

Ben Budish
Ben Budish
Director at Barclays

Okay, got it. Very helpful. And then maybe just on the same topic with the commingled funds, just curious on the fee rate. I think a lot of us try to do is sort of strip out what we think your management fees are on the wealth vehicles, strip out the retroactive fees, and we're left with sort of like a core fee rate. It looks like that was quite a bit higher this quarter than some of the prior quarters.

Ben Budish
Ben Budish
Director at Barclays

Curious, any details you can share there as well, like how should that trend over the year? Are we kind of at a good run rate or any other dynamics with new funds kind of turning on over the course of the next several quarters we should be keeping in mind?

David Park
David Park
CFO at StepStone

Hey, Ben, this is David. So you're right, commingle fund fee rates have trended up over time. This quarter was particularly strong. It was really driven by the retroactive fees from our real estate secondaries fund with the relatively large close this quarter. If you strip out the retroactive fees, it was about 94 basis points for the quarter.

David Park
David Park
CFO at StepStone

But again, is a little bit elevated, I think, because you have to factor in timing of the closes. So if you look at our last twelve months and strip out the retroactive fees, which helps mute some of the timing elements, our commingle fund ex retro fee rate would be in the low 90s.

Ben Budish
Ben Budish
Director at Barclays

Okay, very helpful. Thanks so much.

Operator

Thank you. And our next question comes from the line of Michael Cyprys from Morgan Stanley. Your question please.

Michael Cyprys
Michael Cyprys
Managing Director at Morgan Stanley

Hi, good afternoon. Thanks for taking the question. Maybe just start off on the secondaries marketplace. We've seen some headlines with some investors, endowments may be looking to sell private portfolio stakes while there are other LPs struggling with liquidity constraints in their private portfolios. So just curious how you see this all playing out across the marketplace.

Michael Cyprys
Michael Cyprys
Managing Director at Morgan Stanley

What role can Stepstone play? And then just more broadly on the secondaries marketplace, I think you mentioned you raised the largest secondaries fund ever in the marketplace at just under $4,000,000,000 but that's, while successful, much smaller than what we're seeing in the private equity space with funds over $20,000,000,000 in size. Just curious how you see the path for real estate and infrastructure secondaries products to meaningfully scale to double digit billions. What's that path look like? How do you see that playing out?

Michael Cyprys
Michael Cyprys
Managing Director at Morgan Stanley

Thank you.

Scott Hart
Scott Hart
CEO at StepStone

Yeah, thanks Mike. I mean, certainly a topic that we've been talking about really over the last couple of years, agree that given the likely delay and some realizations, as well as some either LP specific or the whole category specific challenges like you mentioned with the endowments, do expect to see increased selling in the secondaries market. I mean, like the role for us to play there is that we are an active buyer and participant really across the entirety of the private markets, not only including the funds that we talked about on this call in real estate, private equity secondaries, venture secondaries, infrastructure, but even on private credit side as well. And so you can imagine we are actively evaluating opportunities in this market. And look, don't think that the likely selling will be limited to obviously the endowments.

Scott Hart
Scott Hart
CEO at StepStone

I think there are a number of groups that have been expecting this year to be an important one in terms of distributions and realizations. You certainly saw from our numbers that that started to pick up with a number of announced transactions in the calendar Q4 of 'twenty four and calendar Q1 of 'twenty five that led us to have really a record carry quarter this quarter, but now clearly expect that to slow down a bit just given bid ask spread and likely delay in deals given the uncertainty in the market. Look, the real estate side, as a reminder that fund is a really almost entirely GP led secondaries fund and part of what drove the growth in the fund size there is that we think it is particularly well suited for the current environment. What we've seen much less of in the real estate market is a real pickup on the LP secondary side of things where we today are active through separately managed accounts, but don't have a commingled fund. And there we've seen much less activity.

Scott Hart
Scott Hart
CEO at StepStone

And so, I think until that picks up, unlikely to see the real estate secondary fund scale dramatically or anywhere in line with what you mentioned on the private equity side.

Michael Cyprys
Michael Cyprys
Managing Director at Morgan Stanley

Great. And then just a follow-up question on the private wealth side, You guys have had a lot of success, over $8,000,000,000 in private wealth assets. I was just hoping you could maybe speak to how you see your product platform evolving as you look out over the next five years, when you look at the offering today, you have a number of different strategies and a bunch of different asset classes. Where do you see opportunities to sort of fill in? And if you were to think about, say, the next $10,000,000,000 that you might raise in the coming years from the private wealth space, broadly speaking, how much of that might you anticipate from overseas versus domestic versus from newer products versus scaling existing?

Michael Cyprys
Michael Cyprys
Managing Director at Morgan Stanley

How do you see sort of that cadence of that expanding from here?

Jason Ment
Jason Ment
President & Co-COO at StepStone

Thanks Mike. Jason here. Well, at $1,000,000,000 a quarter, hopefully $10,000,000,000 won't take us too long as we continue to scale. The US market continues to be a strong one for us, and the European market continues to be a lot of white space as we continue to build out a sales force as well as syndicate partners there, and spending a lot of time and attention there to help grow that as a percentage of the overall fund landscape. In terms of the strategies that we bring to bear, we've talked often about the 12 boxes that we have in the toolkit across primary, secondaries, and co investments, across private equity, real estate, infrastructure, and private credit.

Jason Ment
Jason Ment
President & Co-COO at StepStone

There are obviously different flavors within each of these asset classes in terms of asset type and strategies. And so, we could see as the private markets becomes a bigger allocation within the individual investor's wallet that you see some degree of specialization. But we're going to have to do this on an iterative basis. As the allocation goes up, the individual investor will look for more opportunities to specialize their exposures, and then we can create product to address that. And I think you see that if you look back ten, twenty, thirty, forty years of history in the institutional market, that the number of strategies and the types of strategies and the tapestry of available opportunity in the private markets has greatly developed as it became a larger part of the institutional wallet share.

Jason Ment
Jason Ment
President & Co-COO at StepStone

So, yes, there will be opportunities to infill, probably really only as the individual investor expands their wallet share in private markets.

Michael Cyprys
Michael Cyprys
Managing Director at Morgan Stanley

Great. Thank you.

Operator

Thank you. And our next question comes from the line of Chris Kotowski from Oppenheimer. Your question please.

Chris Kotowski
Managing Director at Oppenheimer & Co. Inc.

Yeah. Good afternoon. Thank you. Michael stole my question. So I'm kind of down to just a narrow modeling question.

Chris Kotowski
Managing Director at Oppenheimer & Co. Inc.

And that's on the NCI buyout. You said it was $10,000,000 of cash and then I missed the amount of stock. And I'm just kind of curious about how to model that. Is it how many shares were issued and is it in for the full quarter?

Chris Kotowski
Managing Director at Oppenheimer & Co. Inc.

And

Chris Kotowski
Managing Director at Oppenheimer & Co. Inc.

is there a percentage we should be thinking about kind of on an ongoing basis of what percentage of the kind of core FRE still accrues to the non controlling interests?

Michael McCabe
Michael McCabe
Head of Strategy at StepStone

Chris, it's Mike.

Michael McCabe
Michael McCabe
Head of Strategy at StepStone

I just want

Michael McCabe
Michael McCabe
Head of Strategy at StepStone

to mention that I repeat that there was $10,000,000 of cash, but we also issued $161,000,000 of equity. That was $3,200,000 issued shares. David, if you want to expand a little bit on that.

David Park
David Park
CFO at StepStone

Yes, Chris. So if you think about the buying, it's hardwired. It's payable. The consideration is payable in cash up to 20%. The election of how much cash we pay is it depends on the selling shareholders, what they elect.

David Park
David Park
CFO at StepStone

So, from year to year, then the amount of cash can vary. The number of shares, right, will be a function of whatever our trading multiple is. So you can make your assumptions there, but in no case will the amount of cash exceed 20% of the consideration. And as you think about the NCI, with each buy the shares are effective for as of April 1 for the entire fiscal quarter or fiscal year. And as each buy in occurs, you're going to see a more tapering off or plateauing of the NCI trajectory and ultimately flattening out and then starting to decline over the last maybe four or five years.

Chris Kotowski
Managing Director at Oppenheimer & Co. Inc.

Yeah, I was just kind of trying to think about the incremental kind of step of fiscal to fiscal twenty six and I mean it should be a couple of percentage points, right?

David Park
David Park
CFO at StepStone

Yeah, you can assume it's low single digits.

Chris Kotowski
Managing Director at Oppenheimer & Co. Inc.

Yeah, okay. Alrighty, thank you. That's it for me.

Operator

Thank you. And our next question comes from the line of Alex Blostein from Goldman Sachs. Your question please.

Analyst

Hey guys, this is Michael on for Alex. So you guys spoke to 500 unique distribution platforms for your retail products today versus I think 300 a year ago. Can you maybe walk through which channels are generating the most onboarding demand today versus how that's been historically? And maybe how competition in those specific channels has evolved given a bunch of new entrants in the space?

Jason Ment
Jason Ment
President & Co-COO at StepStone

Thanks, Michael. Jason here. I think our allocation amongst the different channels is actually fairly consistent period over period. See just over a third of The US distribution through the wires, just over a third through the RIAs, and the balance through the broker dealer and kind of direct relationship distribution. So I think that's been broadly consistent.

Jason Ment
Jason Ment
President & Co-COO at StepStone

In terms of the competitive landscape, there are obviously many more funds in the evergreen semi liquid space today than there were a year ago. And they come in a variety of flavors, both direct GPs as well as other solutions providers and in different asset classes. And while that landscape has become more crowded, the individual investor is becoming more interested in private markets. And so, it is a growing pie. And despite that competition, we've posted a couple of quarters in a row of best quarters ever.

Analyst

Yes. Maybe a follow-up on the ticker feature. You guys were relatively early with that, but again, kind of on the same theme, a bunch of the new product launches have been interval funds, which come with similar ticker feature for new investors and subscribers. Has that kind of played in? I know you guys mentioned 80% of flows coming via ticker.

Analyst

But as new product launches do have a similar dynamic, is that impacting any of the fundraising that you're seeing? And do you expect that to kind of change going forward?

Jason Ment
Jason Ment
President & Co-COO at StepStone

We have not seen any negative impact from other products coming on and don't see that we should anticipate that on a go forward basis. Our products, each of the four fund families are differentiated from what is out there today. S Prime is an all private markets fund, so really a one ticket solution with a model portfolio for private markets with a ticker. Spring in the venture growth space is really an N of one in terms of what it offers to the individual investor. Structs in the multi manager infrastructure is really a novel offering and the Credex Fund combining multi manager exposure to both direct lending and specialty credit together.

Jason Ment
Jason Ment
President & Co-COO at StepStone

We've tried to structure these products with the end user in mind based on feedback from the channel and trying to offer something that actually is differentiated. So, yes, while it's a competitive landscape, these are just more folks that are out there educating the individual investor on the benefits of private markets, and so far it's accrued to our benefit. Thank you.

Operator

Thank you. This does conclude the question and answer session of today's program. I'd like to hand the program back to Scott for any further remarks.

Scott Hart
Scott Hart
CEO at StepStone

Great. Well, thanks everyone for your time and interest in the StepStone story today. Obviously, hopefully you sensed how excited we are about the most recent quarter here and what lies ahead. So with that, thank you and we look forward to updating you again next quarter.

Operator

Thank you, ladies and gentlemen, your participation in today's conference. This does conclude the program. You may now disconnect. Good day.

Executives
Analysts
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Key Takeaways

  • GAAP net loss of $18.5 million (–$0.24/share): The company reported a GAAP net loss attributable to StepStone Group in the quarter.
  • Record Fee Related Earnings: FRE surged 85% year-over-year to $94.1 million with a 44% margin (40% ex-retro fees) and adjusted net income of $0.68/share, all-time highs.
  • Strong Fundraising & AUM Growth: Fiscal 2025 saw $31 billion of gross inflows, 29% organic growth in fee-earning AUM to $121 billion, and $25 billion of undeployed fee-earning capital.
  • Private Wealth Platform Expansion: Assets under management grew from $3.4 billion to $8 billion, distribution partners increased to about 500, and ~80% of eligible sales used ticker-based vehicles.
  • Cautious Market Outlook: Management expects continued uncertainty from global trade volatility and is focusing on scenario planning to capture private-market dislocations.
AI Generated. May Contain Errors.
Earnings Conference Call
StepStone Group Q4 2025
00:00 / 00:00

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