STEP — StepStone Group Inc.

StepStone Group Inc. Q3 2026 Earnings Call Summary

1. Key Financial Results and Metrics

• GAAP Net Loss: $123 million or $1.55 per share, primarily due to the change in fair value of the StepStone Private Wealth profit.
• Fee-Related Earnings (FRE): $89 million, up 20% year-over-year, with a FRE margin of 37%.
• Adjusted Net Income: $80 million or $0.65 per share, an increase from $53 million or $0.44 per share in Q3 2025.
• Total Fee Revenues: $241 million, a 26% increase from the prior year, with a 32% growth excluding retroactive fees.
• Gross Realized Performance Fees: $253 million, driven by strong performance in the Spring fund, which had a 39% return.

2. Strategic Updates and Business Highlights

• Fundraising Success: Generated over $34 billion in gross AUM additions over the past twelve months, marking the best fundraising year in the company's history.
• Private Wealth Growth: The private wealth platform grew to $15 billion, with $2.2 billion in new subscriptions for the quarter.
• Diversified Fundraising: Strong inflows from separately managed accounts (over $21 billion) and commingled funds (over $13 billion), with a balanced mix across geographies and strategies.
• AI Investment Strategy: StepStone is positioning itself to capitalize on AI opportunities across various sectors, including venture capital and private equity.

3. Forward Guidance and Outlook

• Earnings Trajectory: Management expressed confidence in continued growth in core FRE and performance fees, anticipating stronger realizations in the upcoming year.
• Fundraising Pipeline: Several funds are in the market, including private equity co-investment and secondaries funds, with expectations for strong fundraising activity in the coming quarters.
• Performance Expectations: While the Spring fund's performance is expected to moderate slightly next year, the overall outlook for earnings remains positive due to robust fee-related and performance-related earnings.

4. Bad News, Challenges, or Points of Concern

• GAAP Loss: The significant GAAP net loss reflects accounting adjustments rather than operational performance, which could raise concerns among investors.
• Market Risks: The company acknowledged potential risks associated with AI disruption in the software sector, emphasizing the need for careful portfolio construction.
• Competitive Fundraising Environment: Despite strong fundraising results, the competitive landscape remains challenging, which could impact future growth rates.
• Moderation in Performance Fees: Future incentive fees may be lower due to expected normalization in investment returns, particularly for the Spring fund.

5. Notable Q&A Insights

• Software Exposure: Management discussed their diversified approach to software investments, noting that only 11% of total AUM is in software, with a focus on AI-driven opportunities.
• Managing Inflows: The Spring fund's strong performance has not necessitated limiting inflows, as the venture team continues to find ample opportunities in the innovation economy.
• Geographic Demand: Strong fundraising demand is noted in Asia and Europe, particularly for infrastructure and private credit strategies.
• Future Product Development: While no new products are planned in the immediate term, the company is focused on expanding existing offerings and geographic reach.

Overall, StepStone Group reported strong operational performance and growth in key areas, while also navigating challenges related to market conditions and competitive pressures.