How should investors track performance given the public position in SpaceX, and how is that position being managed?

SpaceX concentration has muted to a mid-teens position. SPRING is diversified with over 2,000 positions, and its strong performance is broad-based. As a private market investor, StepStone will look to exit public positions in an orderly way as lockups expire, which may introduce volatility. “With the recent trading down in that position as well as continued fundraising and markups across the portfolio, that position is now more of a mid-teens-ish position down from sort of its peak there.”

What is the company's comfort zone for leverage, and how does it define 'conservative'?

The company aims to maintain its investment-grade rating (currently A+) from Kroll as the bellwether for its leverage decisions, indicating a commitment to conservative financial management. “I think the bellwether that we're looking to inform that decision really revolves around the rating that we receive. We're currently, as I mentioned, enjoying an investment-grade rating A+. And I think we're going to start that as our opening position and see how far we can go in the debt capital markets while maintaining that strong investment-grade rating.”

STEP

StepStone Group (STEP) Q1 FY27 earnings call: guidance and Q&A

Q: Why did base fees not translate as expected given AUM growth, and what is the impact of UFEC conversion on fee rates?

UFEC remains a pipeline for future FEAUM growth with an average fee rate in line with the overall fee rate. The commingled fund fee rate is expected to remain flat for the next few quarters due to a fee structure change in PE secondaries funds, offsetting Private Wealth growth. “you should expect to see the commingled fund fee rate stay relatively flattish over the next few quarters to a year as the secondaries funds continue to fundraise.”

Q: How will the company manage potential stock overhang from lockup expirations post-buyout, and what are the plans for funding the cash portion of the buy-in?

The equity portion will have lockups similar to prior acquisitions (30% immediately tradable, rest over 3 years), managed in an orderly fashion. The cash portion will be funded by cash on hand, operating cash flows, and accessing capital markets (revolver/debt) while maintaining an investment-grade rating and conservative leverage. “The incremental earnings associated with the Private Wealth buy-in should provide meaningful capacity for us to fund a decent portion of the cash consideration with debt while maintaining conservative leverage ratios.”

Earnings call· Jun 2026 (Q1 FY27)· Financials· Aug 6, 2026

Source: earnings call transcript

Executive summary

StepStone Group Q1 FY27 — Strong FRE Growth and Record Private Wealth Inflows

StepStone Group delivered robust Q1 FY27 results, driven by strong fee-related earnings and record inflows into its Private Wealth platform, which now exceeds $21 billion in assets. The company continues to execute its growth playbook through client expansion, strategic long-term investments, and opportunistic M&A, including the planned buy-in of Private Wealth profits interest for future EPS accretion. Management expressed confidence in sustained earnings growth and capital returns, despite a GAAP loss tied to accounting for the Private Wealth buy-in.

Highlights

Fee-related earnings (FRE) grew 30% year-over-year to $106 million, with a 39% FRE margin.
Adjusted net income increased to $60 million, or $0.48 per share, up from $49 million or $0.40 per share in the prior year.
Private Wealth platform achieved record subscriptions of $2.8 billion, with total assets surpassing $21 billion, more than doubling year-over-year.
Gross AUM additions reached $40 billion over the last 12 months, the best 12-month period ever for the company.
Quarterly dividend raised by 18% from $0.28 to $0.33 per share, reflecting sustainable earnings growth.

Concerns

GAAP net loss attributable to StepStone Group, Inc. was $116 million or $1.41 per share, primarily due to the change in fair value of the Private Wealth profits interest buy-in.
A managed account expiration of roughly $1.5 billion is anticipated next quarter, which will impact fee-earning AUM.
The blended management fee rate of 65 basis points over the last 12 months remained consistent with FY25, as favorable mix shift was offset by moderation in retroactive fees and fee pressure from lower-fee secondaries funds.

Guidance & targets

Category	Target	Timeline	Confidence
Earnings per share accretion from Private Wealth buy-in	Material accretion, compounding into the future high materiality	Future	High
Private Wealth platform annual inflows	Strong level, consistent with pace highlighted at beginning of year high materiality	Annual	High
Cash compensation ratio	43% medium materiality	Remainder of FY27	High
Adjusted equity-based compensation	$7 million medium materiality	Remainder of FY27	High
Private Wealth platform distribution fees	Grow in line with Private Wealth assets low materiality	Future	High
Managed account expiration	$1.5 billion medium materiality	Q2 · FY27	High
Commingled fund fee rate	Relatively flattish medium materiality	Next few quarters to a year	Medium
Revenue from tech/index partnerships (FTSE Russell, Kroll, PitchBook)	Start seeing line item in P&L low materiality	End of FY27	Medium

STEP operating KPIs by quarter

STEP operating KPIs stated on its earnings calls, by fiscal quarter
KPI	Mar 2026 Q4 FY26	This call Jun 2026 Q1 FY27	Change vs prior quarter
Gross AUM additions	$13.5B+ During the quarter, we generated over $13.5 billion in gross additions including $7 billion of managed account additions and over $6.5 billion of commingled fund inflows. Source: earnings call transcript	$10B+ During the quarter, we generated over $10 billion in gross additions, including approximately $4.5 billion of managed account additions and $5.5 billion of commingled fund inflows. Source: earnings call transcript	—
Gross AUM additions Managed accounts	$7B During the quarter, we generated over $13.5 billion in gross additions including $7 billion of managed account additions and over $6.5 billion of commingled fund inflows. Source: earnings call transcript	~$4.5B During the quarter, we generated over $10 billion in gross additions, including approximately $4.5 billion of managed account additions and $5.5 billion of commingled fund inflows. Source: earnings call transcript	—
Gross AUM additions Commingled funds	$6.5B+ During the quarter, we generated over $13.5 billion in gross additions including $7 billion of managed account additions and over $6.5 billion of commingled fund inflows. Source: earnings call transcript	$5.5B During the quarter, we generated over $10 billion in gross additions, including approximately $4.5 billion of managed account additions and $5.5 billion of commingled fund inflows. Source: earnings call transcript	—
Assets under management (AUM) Private wealth suite	<$18B We generated over $2.3 billion of subscriptions in our private wealth suite of offerings, growing the platform of nearly $18 billion as of the end of the quarter. Source: earnings call transcript	$21B+ We generated $2.8 billion of subscriptions in our Private Wealth suite of offerings, growing the platform to over $21 billion as of the end of the quarter. Source: earnings call transcript	—
Fee-earning AUM plus undeployed fee-earning capital	$184B+ The combination of feeding assets plus UF grew to over $184 billion, which is up more than $12 billion sequentially and is up over $38 billion from a year ago, our strongest year of growth in our history. Source: earnings call transcript	~$193B The combination of fee-earning assets plus UFEC grew to approximately $193 billion, which is up $9 billion sequentially and is up $37 billion from a year ago. Source: earnings call transcript	—
Undeployed fee-earning capital	~$40B For the quarter, we increased fee earning assets by nearly $5.5 billion, and we increased our undeployed fee-earning capital, or UFC, by $7 billion to roughly $40 billion, our highest level ever. Source: earnings call transcript	$39B+ Even with these large activations and steady managed account deployment, we maintained a healthy balance in our undeployed fee-earning capital, or UFEC, of over $39 billion as strong fundraising in managed accounts and the first close of our venture capital secondaries fund helped to replenish the UFEC balance. Source: earnings call transcript	—

Operating figures the company stated on at least two of the calls shown, checked against each call's transcript. Click a figure to read the sentence. A dash means it was not stated that quarter.

Product announcements

Product	Type	Timeline	Details
Special Situations Real Estate Secondaries Fund	launch	coming quarters
Multi-Strategy Growth Equity Fund	launch	coming quarters

Deals & partnerships

Private Wealth team members Buy-in of Private Wealth profits interest. up to 75% of the consideration in StepStone equity 3-year period

StepStone has a put-call option agreement. The Private Wealth team entered the put period in the June quarter, and StepStone will enter the call period in Q3 CY27. The equity portion will have lockups, with 30% tradable immediately and the remainder locked up over 3 years. The cash portion will be funded by cash on hand, operating cash flows, and debt capital markets access.

FTSE Russell Collaboration on benchmarking tools and analytical tools for private markets.

Focus on creating indices for defined contribution and retirement markets.

PitchBook Collaboration to enable deal-level performance analysis for GPs and service providers.

Provides data points like GICS code, sector, geography, enterprise value, entry multiple for benchmarking.

Kroll Collaboration to provide tools for measuring risk at the loan level in private credit.

Addresses the need for better risk understanding in private credit.

Risks & headwinds

GAAP net loss due to fair value change of Private Wealth profits interest Q1 FY27

$116 million or $1.41 per share

Mitigation:This is an GAAP accounting requirement; the underlying business is strong, and the buy-in is expected to be accretive to adjusted net income.

Managed account expiration Next quarter (Q2 FY27)

$1.5 billion

Mitigation:Partial offset to adjusted net income from noncontrolling interest.

Fee rate pressure from new secondaries funds Next few quarters to a year

Commingled fund fee rate expected to be 'relatively flattish'

Mitigation:Expected to resume progress once secondaries funds are fully raised; offset by Private Wealth asset growth.

Volatility from public positions in SPRING fund As lockups expire

SpaceX position is now 'mid-teens-ish'

Mitigation:Will look to exit in an orderly way as a private market investor; fund is diversified with over 2,000 positions.

Episodic nature of performance fees Ongoing

Gross realized performance fees were '$30 million' for the quarter, net '$16 million'

Mitigation:Strong investment performance supports a growing backlog of future carry; more consistent flow expected in a couple of years as European waterfall vehicles mature.

What to watch in Q2 FY27

Managed account expiration

Next quarter (Q2 FY27)

Current Anticipated $1.5 billion

Target Confirmation of expiration and impact

Why it matters

This represents a reduction in fee-earning AUM and will impact fee revenue.

Consistent with our commitment to communicate forthcoming distributions out of fee-earning AUM, we anticipate an expiration of a managed account of roughly $1.5 billion next quarter.

Find out whether STEP delivers this. Inve re-checks your case every morning.

Q&A highlights

Why did base fees not translate as expected given AUM growth, and what is the impact of UFEC conversion on fee rates?

UFEC remains a pipeline for future FEAUM growth with an average fee rate in line with the overall fee rate. The commingled fund fee rate is expected to remain flat for the next few quarters due to a fee structure change in PE secondaries funds, offsetting Private Wealth growth.

“you should expect to see the commingled fund fee rate stay relatively flattish over the next few quarters to a year as the secondaries funds continue to fundraise.”

asked by Brennan Hawken · answered by David Park

2 min read 6 chapters

Detailed narrative

Strategic Growth Initiatives

StepStone is pursuing a three-pronged growth strategy: consistent growth from existing business through client retention and expansion, investment in long-term initiatives like data/technology and the U.S. defined contribution market, and opportunistic M&A focused on acquiring noncontrolling interests. The company aims to replicate its Private Wealth success in the defined contribution space, leveraging its commitment to investing for the long term in client solutions.

Private Wealth Platform Momentum

The Private Wealth platform continues to be a significant growth driver, achieving record subscriptions of $2.8 billion in the quarter and growing total assets to over $21 billion, more than doubling year-over-year. The SPRING venture and growth equity fund contributed $1.7 billion of these inflows, demonstrating strong performance with 23% net returns in the first half of the calendar year, supported by significant value creation events.

Capital Management and Buy-in Strategy

The company is prioritizing the buy-in of Private Wealth profits interest, which is expected to materially increase adjusted net income and provide EPS accretion. This transaction allows for up to 75% equity funding (with 30% immediately tradable and the rest locked up over 3 years) and the balance in cash.

The cash portion will be funded through cash on hand, operating cash flows, and accessing capital markets (revolver/debt) while maintaining an investment-grade rating and conservative leverage ratios.

Fundraising and AUM Growth

StepStone generated over $10 billion in gross AUM additions this quarter, contributing to a total of $40 billion over the last 12 months, marking its best 12-month period ever. Fee-earning assets increased by nearly $10 billion, and the combination of fee-earning assets and undeployed fee-earning capital (UFEC) reached approximately $193 billion, representing a 19% annual organic growth rate since fiscal 2022.

Fee Rate Dynamics

The blended management fee rate remained consistent at 65 basis points over the last 12 months, as a favorable mix shift towards evergreen funds offset a moderation in retroactive fees. The fee structure change for PE secondaries and GP-led secondaries funds is expected to keep the commingled fund fee rate relatively flat for the next few quarters to a year, with growth resuming once these funds are fully raised and Private Wealth assets continue to grow.

Data and Technology Partnerships

StepStone is leveraging its extensive private markets data through partnerships with FTSE Russell, PitchBook, and Kroll. These initiatives aim to provide benchmarking tools, deal-level performance analysis, and risk measurement at the loan level, positioning StepStone as a leading source of truth in private markets data. Management expects to see revenue from these partnerships reflected in the P&L by the end of the fiscal year.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.