StepStone Group Inc. (NASDAQ:STEP) Q4 2025 Earnings Call Transcript

StepStone Group Inc. (NASDAQ:STEP) Q4 2025 Earnings Call Transcript May 22, 2025

StepStone Group Inc. beats earnings expectations. Reported EPS is $0.68, expectations were $0.46.

Operator: Thank you for standing by, and welcome to StepStone Group Inc.’s fiscal fourth quarter 2025 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. To ask a question during the session, you will need to press star one one on your telephone. If your question has been answered and you would like to remove yourself from the queue, simply press star one one again. As a reminder, today’s program is being recorded. And now I would like to introduce your host for today’s program, Seth Weiss, Head of Investor Relations. Please go ahead.

Seth Weiss: Thank you, and good evening. Joining me on today’s call are Scott Hart, Chief Executive Officer; Jason Ment, 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 would 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, which are currently uncertain and are subject to various risks, uncertainties, and assumptions.

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 factor section of StepStone Group Inc.’s 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 2025. Beginning with slide three, we reported a GAAP net loss attributable to StepStone Group Inc.

of $18.5 million or $0.24 per share. Moving to slide five, we generated fee-related earnings of $94.1 million, 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. Our draft fees contributed $15.7 million to fee revenues, which compares to retroactive fees of $5.4 million in the fourth quarter of fiscal 2024. We earned $80.6 million in adjusted net income for the quarter or $0.68 per share. This is up from $37.7 million 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 have 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 30th.

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: 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 billion of assets under management and generated $27.5 billion of growth in our fee-earning AUM. Both are record year results for StepStone Group Inc. This translates to fee-earning asset growth of over 29%, which is our best organic growth rate for any twelve-month period since we became a public company. Our increasing scale continues to be a tailwind for growth. Our managed account re-up rate remains above 90%, and on average, those re-up accounts have grown at approximately 30%.

Fiscal 2025 was also an excellent year for managed account expansion, with over $8.5 billion of SME inflows or over 40% of total SME 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. Prior to this year, our largest commingled fund was $2.6 billion. Over the last twelve months, we’ve closed on three commingled funds of over $3 billion, 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 billion, 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. We had outstanding growth in our private wealth platform, which increased from $3.4 billion of assets at the end of fiscal 2024 to over $8 billion as of the end of this past fiscal year. The success in private wealth is driven by new products, expansion of distribution, and 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, 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. The ability to purchase S Prime, CreditX, and Instruqt 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 $9.9 billion, 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 $1.2 billion of evergreen subscriptions, our best private wealth quarter ever.

Strong fundraising combined with the deployment of our undeployed fee-earning capital drove our fee-earning assets under management to over $121 billion, up $7.2 billion over last quarter. We generated fee-related earnings of $94 million 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. We’ve mentioned on recent calls that 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 2024, resulting in very strong realizations and distributions in the first calendar quarter of 2025.

The backdrop obviously shifted in April, but it 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. We are cautiously optimistic, based on recent progress made on trade policy, and 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.

Private markets have a consistent track record of outperforming their public equivalents. We capture a meaningful portion of the industry’s investment outperformance 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 market investor to capitalize, they 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. StepStone Group Inc.’s experience, expertise, and scale enable us to consistently enact this strategy. 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 that we’ve 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 2023.

Mike McCabe: Thanks, Scott. Turning to slide eight, we generated over $31 billion of gross AUM inflows during the fiscal year. Approximately $21 billion of these inflows came from separately managed accounts, and over $10 billion 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 billion of managed account AUM inflows and over $3 billion of commingled fund gross additions. Notable commingled fund additions included a $300 million final close on our growth equity fund and a $1.2 billion close on our real estate secondaries fund. We conducted a final close of approximately $200 million in our real estate secondaries fund after the quarter end.

Our growth equity fund just finished over $700 million, 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&A. Our real estate fund finished at over $3.75 billion, which is the largest real estate secondary 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 $1.7 billion of investments already committed from the fund and related separately managed accounts. StepStone Group Inc.’s Real Estate Partners Fund is a classic example of how we deliver for our clients and shareholders across market cycles. Turning to private wealth, we generated over $1.2 billion of subscriptions at our evergreen funds, growing the platform to $8.2 billion as of the end of the fiscal year. We achieved our highest inflows ever on the platform as well as at the individual fund level for S Prime, Spring, and Instruqt. 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 in our infrastructure co-investment fund and continued momentum in private wealth. Together, we achieved our first $1 billion quarter in our company’s history. And we expect to remain very active in fiscal 2026. We are currently in the market with our private equity co-investment fund, our multi-strategy global venture capital fund, a 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, which closed at $4.75 billion 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 billion. Our undeployed fee-earning capital, or UFEC, grew from about $22 billion last quarter to approximately $25 billion this quarter, driven by additions in managed accounts that pay on deployed capital. 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 billion and is up nearly $30 billion or 25% from a year ago. This translates to a very healthy 19% organic growth rate since fiscal 2020. Slide ten 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.

Now turning to Slide eleven, I would like to highlight our progress relative to our 2023 Investor Day goals. You’ll notice that this is essentially the same scorecard we presented at our fiscal year-end 2024 last call last May. In June of 2023, 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 2025 results, fee-related earnings have 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%. 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 retro 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 has over 1,100 professionals today, nearly 20% higher than at the end of fiscal 2023, including investments in private wealth, business development, and data software and engineering, three of our most important growth areas. 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 pay rate. 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 Group Inc.’s brand. Recently, insights from Spy were featured in two prominent annual industry reports, and we anticipate more opportunities to showcase our benchmarking and data sets 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 interest and on our capital distribution to shareholders. We expect to conduct the second tranche of our buy-in in the first quarter of fiscal 2026, utilizing $10 million of cash and $161 million of equity.

This translates to 3.2 million issued shares effective as of April 1st. As a reminder, the cost of each buy-in is hardwired based on StepStone Group Inc.’s market multiple and the asset class’s results. 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.

We believe this level of distribution represents a compelling value when contextualized with the 30% annual organic growth we’ve 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: Thanks, Mike. Turning to slide thirteen, we earned fee revenues of $215 million, 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 million, up 85% from a year ago. The 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, our 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 million last quarter. 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 2026 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 1st. Adjusted equity-based compensation was $2.9 million, up $1.2 million from last year’s fiscal fourth quarter.

We anticipate equity-based compensation to increase by about $1 million next quarter. A long-term incentive plan generally vests over a full year cycle. The first fiscal quarter of 2026 will reflect a full four years’ worth of equity-based compensation expense. General and administrative expenses were $32 million, up $2 million sequentially and up about $5 million from a year ago. Gross realized performance fees were $81 million for the quarter and $42 million net of related compensation expense. Our best gross and net quarter ever. The quarter largely reflects the realization from the closings of previously announced deals. The pipeline for realization for the next quarter 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 million, up $21 million from a year ago, driven by key revenue growth in our infrastructure, real estate, and private debt asset classes. We 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 fourteen. Net accrued carry finished the quarter at $738 million, down 1% from last quarter, given the strong level of realization this period, but up 16% over the last twelve months. 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 million.

This concludes our prepared remarks. I’ll now turn it back over to the operator to open the line for any questions.

Q&A Session

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

Ken Worthington: 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. But there were some one-time fees in the quarter. What were those one-time fees? How big were they? And I think you indicated excluding the retro fees and the one-time fees, margins would have been 37%. Again, assuming I heard all this correct, is that right? Is it fair to expect that margins sort of increase from that level as we look forward in fiscal year 2026, or is that sort of the right level we should expect for next year at least as of this point in time?

David Park: Yeah. Thanks, Ken, for the question. So the one-time fees were in our advisory fees. Our advisory fees typically include both recurring and nonrecurring fees. But this quarter included a somewhat larger one-time fee, so we thought it’d be helpful to call out. It’s about $4 million. On the cash comp, we did benefit from a favorable bonus scroll adjustment downward. Had we normalized the cash comp, it’d be rough. So if you factor in both those, you know, the operating margin for the quarter would have been 37% versus the 40% just purely excluding retroactive fees. And if you look at our fiscal full year fiscal 2025 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 1st, so you should see a slight bump up in compensation, as well as incremental hirings.

Ken Worthington: Okay. Excellent. That was super helpful. Okay. Maybe just secondly, UFEC had a nice jump this quarter, $24.6 billion, despite the $2 billion of deployment. It suggests sort of continued strong execution. I guess the question here is, how does the pipeline of new business look? So fundraising has been really on a tear this year, so you’ve 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 pipeline and how does it look?

Scott Hart: And I’m sorry. Ken, just to clarify, we did not want just to clarify what you said there. Yeah.

Ken Worthington: So you so UFEC is sort of won but it just hasn’t converted to fee-paying AUM. So we know what that pipeline is. But what is sort of the business that, you know, you’re bidding for, but you haven’t necessarily won yet. Just your pipeline, you know, look better? Are you, you know, have you won so much? Is it sort of depressed? You know, 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: 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. You know, I’ve 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. 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, look, 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 during the prepared remarks. 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. The last thing I would say just to loop in some of the commingled funds as well, it’s part of the reason we wanted to highlight that certain of those funds may be coming back to market sooner than you expected. And the reminder there was really around private equity secondaries where we had started to 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.

Ken Worthington: Okay. Excellent. Thank you so much.

Operator: Thank you. And as a reminder, ladies and gentlemen, if you do have a question at this time, please press star one one on your telephone. Our next question comes from the line of Ben Budish from Barclays. Your question, please.

Ben Budish: Hi. Good evening and thank you for taking the question. 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 of longer duration and a bigger final close. Curious if that sort of resonates with what you’re expecting and again, kind of on the same topic, I was wondering if you could share any details for the major flagships. Has anything been raised so far? Is anything sort of yet in fee-earning AUM? And how should we think about sort of the near-term cadence of potential closes?

Scott Hart: 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, 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 sort of enabled to act there.

So I would agree with and tell you that we have experienced a similar phenomenon in some of our recent fundraisers. 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 31st quarter 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 so no. Nothing that would have immediately hit the earning AUM based on recent closes there.

Ben Budish: Okay. Got it. Very helpful. And then maybe just on the same topic with the commingled funds, just curious on the fee rate. You know, we’ll 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 to sort of like a core fee rate. It looks like that was quite a bit higher this quarter than some of the prior quarters. 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, you know, new funds kind of turning on over the course of the next several quarters we should be keeping in mind?

David Park: Hey, Ben. This is David. So you’re right. Commingled 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. But again, that 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 commingled fund ex-retro fee rate would be in the low nineties.

Ben Budish: 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: Hi. Good afternoon. Thanks for taking the question. Maybe just start off on the secondaries marketplace. We’ve seen some headlines, with some investors and endowments maybe looking to sell private portfolio stakes while there are other LPs struggling with liquidity constraints in their private portfolio. So just curious how you see this all playing out across the marketplace. What role can StepStone Group Inc. play? And then just more broadly on the secondaries marketplace, I think you mentioned you raised the largest secondary fund ever in the marketplace at just under $4 billion, but that’s while successful, much smaller than what we’re seeing in the private equity space with funds over $20 billion in size. Just curious how you see the path for real estate and infrastructure secondary products to meaningfully scale to double-digit billions. What’s that path look like? How do you see that playing out? Thank you.

Scott Hart: Yeah. Thanks, Mike. I mean, certainly a topic that we’ve been talking about really over the last couple of years, but agree that given the likely delay in some realizations as well as some either LP-specific or, you know, the whole category-specific challenges like you mentioned with the endowments, do expect to see increased selling in the secondaries market. And, I mean, 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, but even on the private credit side as well. And so you can imagine we are actively evaluating opportunities in this market.

And look, I don’t think that the likely selling will be limited to, you know, obviously, the endowments. 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 2024 and calendar Q1 of 2025 that led us to have really a record carry quarter this quarter. But now clearly expect that to slow down a bit just given, you know, bid-ask spread and likely delay in deals given the uncertainty in the market. Look. On the real estate side, you know, as a reminder, that fund is a really almost entirely GP-led secondary fund. And, you know, 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, you know, we today are active through separately managed accounts, but don’t have a commingled fund. And there, we’ve seen much less activity. And so I think until that picks up, you know, unlikely to see the real estate secondary funds scale dramatically or anywhere in line with what you mentioned on the private equity side.

Michael Cyprys: Great. And then just a follow-up question on the private wealth side. You guys have had a lot of success over $8 billion 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 billion 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? How do you see sort of that cadence of that expanding from here?

Jason Ment: Thanks, Mike. Jason here. Well, at $1.2 billion a quarter, hopefully, $10 billion 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 twelve boxes that we have in the toolkit across primary, secondaries, and co-investments across private equity, real estate, infrastructure, and private credit. 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 become 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. Right? As the allocation goes up, the individual investor will look for more opportunities to specialize their exposures, and then we can create products to address that. And I think you see that, you know, 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 opportunities in the private markets have greatly developed as it became a larger part of the institutional wallet share. So yes, there will be opportunities to infill, but probably really only as the individual investor expands their wallet share in private markets.

Michael Cyprys: Great. Thank you.

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

Chris Kotowski: Yeah. Good afternoon. Thank you. Michael stole my question, so I’m kind of down to just a narrow marbling question. And that’s on the NCI buyout. You said it was $10 million of cash, and then I missed the amount of stock. And I’m just kind of curious about how to model that. Is it in how many shares were issued and is it in for the full quarter? And is there a percentage 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?

Mike McCabe: Well, Chris, it’s Mike. This is what I mentioned that I repeat that there was $10 million of cash, but we also issued $161 million of equity. So that was 3.2 million issued shares.

David Park: Yeah, Chris, so if you think about the buy-in, it’s hardwired. It’s payable. The consideration is payable in cash up to 20%. The election of how much cash we pay depends on the selling shareholders, what they elect. So from, you know, from year to year, 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, you know, with each buy-in, you know, the shares are effective as of April 1st for the entire fiscal quarter or fiscal year. And as each buy-in occurs, right, you’re going to see a more tapering off or plateauing of the NCI trajectory. Ultimately, you know, flattening out and then starting to decline over the last, maybe, four or five years.

Chris Kotowski: Yeah. I was just kind of trying to think about the incremental kind of step of fiscal 2025 to fiscal 2026. And I mean, it should be a couple of percentage points. Right?

David Park: Yeah. You can assume it’s low single digits.

Chris Kotowski: 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.

Michael Cyprys: Hey, guys. This is Michael on for Alex. So you guys spoke to 500 unique distribution platforms for your retail products today versus 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: Thanks, Michael. Jason here. I think our allocation amongst the different channels is actually fairly consistent. Period over period. And, 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. 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.

Michael Cyprys: Yep. 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. 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 change going forward?

Jason Ment: 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 the model portfolio for private markets. With a ticker. Spring, you know, in the venture growth space is really an end of one in terms of what it offers to the individual investor. Instruqt in the multi-manager infrastructure is really a novel offering and the CredX Fund combining multi-manager exposure to both direct lending and specialty credit together. So, you know, 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.

Michael Cyprys: 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: Great. Well, thanks, everyone, for your time and interest in the StepStone Group Inc. 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, for your participation in today’s conference. This does conclude the program. You may now disconnect. Good day.