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 fair value changes related to the StepStone Private Wealth profit.
• Fee-Related Earnings (FRE): $89 million, up 20% year-over-year, with a FRE margin of 37%.
• Core FRE: $88 million, up 35% year-over-year, excluding retroactive fees.
• Adjusted Net Income: $80 million, or $0.65 per share, compared to $53 million, or $0.44 per share in Q3 2025.
• Fee Revenues: $241 million, a 26% increase year-over-year; excluding retroactive fees, revenue grew by 32%.
• Net Accrued Carry: $875 million, up 4% from the previous quarter.
• Total NAV for Spring Fund: $5.5 billion, with a performance increase of 39% over the year.

2. Strategic Updates and Business Highlights

• Fundraising Success: Generated over $34 billion in gross AUM additions over the last twelve months, marking a record period for the firm.
• Private Wealth Growth: Expanded the platform to $15 billion with over $2.2 billion in new subscriptions for the quarter.
• Diversified Fundraising: Strong inflows from managed accounts and commingled funds, with a balanced mix across geographies and strategies.
• AI Investment Focus: Emphasized commitment to investing in AI-related companies and infrastructure, positioning the firm to capitalize on growth in the AI sector.

3. Forward Guidance and Outlook

• Positive Earnings Trajectory: Anticipation of continued growth in core FRE and performance fees due to an improving capital market environment.
• Fundraising Plans: In-market with several funds, including private equity co-investment and secondaries funds, with expectations for strong fundraising in the upcoming year.
• Cautious Optimism: While the firm is positioned for growth, management tempered expectations for fund sizes, indicating a focus on matching fundraising with market opportunities.

4. Bad News, Challenges, or Points of Concern

• GAAP Loss: The significant GAAP net loss due to fair value adjustments raises concerns about underlying profitability.
• Market Competition: Acknowledgment of a competitive fundraising environment, which may impact future fundraising efforts.
• AI Disruption Risks: While AI presents opportunities, it also poses risks, particularly for software investments, which could affect portfolio performance.
• Moderation in Performance Fees: Anticipated slight moderation in next year's incentive fees based on expected normalized investment returns.

5. Notable Q&A Insights

• Software Exposure: Management highlighted a diversified approach to software investments, with approximately 11% of total AUM in software, primarily within venture capital.
• Spring Fund Management: The firm is actively managing inflows to the Spring fund, ensuring existing investors are protected while capitalizing on new opportunities.
• Geographic Demand: Strong fundraising in Asia and Europe, particularly in private credit and infrastructure, with ongoing interest from institutions.
• Future Product Development: No immediate new product launches planned, but continued expansion of existing fund families and geographies is expected.

Overall, StepStone Group reported strong financial performance and growth in AUM, with a strategic focus on AI investments and diversified fundraising efforts, while also acknowledging challenges related to market competition and potential risks from AI disruption.