STEP — StepStone Group Inc.

StepStone Group Q2 2026 Earnings Call Summary

1. Key Financial Results and Metrics:

• GAAP Net Loss: $366 million, or $4.66 per share, significantly larger than prior periods due to the fair value change related to the Private Wealth platform.
• Fee-Related Earnings (FRE): $79 million, up 9% year-over-year, with a core FRE margin of 36%. Excluding retroactive fees, core FRE grew 34% year-over-year.
• Adjusted Net Income: $66.7 million, or $0.54 per share, compared to $53.6 million, or $0.45 per share in Q2 2025.
• Fee Revenues: $217 million, a 17% increase year-over-year, with a 27% growth when excluding retroactive fees.
• Fee-Earning AUM: Increased by over $5.5 billion to nearly $133 billion.

2. Strategic Updates and Business Highlights:

• Private Wealth Platform: Achieved record subscriptions of $2.4 billion, nearly double previous highs, driven by strong performance of the SPRING fund and the launch of STPEX, which garnered over $700 million in gross subscriptions within 30 days.
• Institutional Fundraising: Generated $3.8 billion in managed account gross additions, totaling over $10 billion for the first half of the fiscal year. Commingled funds added $3.4 billion.
• Geographic Expansion: Opened new offices in the Netherlands, Spain, South Korea, and Saudi Arabia, enhancing international presence.
• Data and Technology Initiatives: Launched Kroll StepStone Private Credit benchmarks and FTSE StepStone Global Private Market Indices, with plans for further index products.

3. Forward Guidance and Outlook:

• Anticipates continued growth in Private Wealth inflows, particularly from STPEX, although a moderation in subscription rates is expected following the initial surge.
• Expects strong gross performance fees next quarter, particularly from the SPRING Evergreen fund.
• The company remains optimistic about private market distributions improving, citing indicators such as increased IPO activity and narrowing bid-ask spreads.

4. Challenges and Points of Concern:

• GAAP Loss Impact: The significant GAAP net loss reflects the ongoing investment in the Private Wealth platform, which may raise concerns about short-term profitability.
• Advisory Fees: Advisory fees decreased to $16 million, down from elevated levels in previous quarters, indicating potential volatility in this revenue stream.
• Market Trends: The private market environment shows low distributions for three consecutive years, leading to a shift in client focus from IRR to DPI, which could impact future fundraising efforts.

5. Notable Q&A Insights:

• STPEX Demand: Initial strong demand for STPEX was driven by channel partner requests for exclusive private equity exposure and the need for a ticker accessible across custodians. Some cannibalization of existing products was anticipated.
• Distribution Strategy: There is significant room for growth in cross-selling existing products among distribution partners, with many large partners currently focused on only 2-3 funds.
• Geographical Strengths: The U.S. market is gaining a larger share of business, while interest in private credit is notably rising in Asia and the Middle East.
• Operational Challenges: The integration of private market products into existing model portfolios is seen as an operational hurdle that the company is working to overcome.

Overall, StepStone Group reported strong growth in fee-related earnings and AUM while navigating challenges related to GAAP losses and market conditions. The company remains focused on strategic expansion and leveraging technology to enhance its offerings.