StepStone Group Inc. Q3 FY2025 earnings call

• Strong fee-related earnings and asset growth: Generated highest fee-related earnings ever, with fee-earning AUM up 28% yoy. Deployed over $2 billion of capital and activated over $6.5 billion of capital this quarter.
• Key fund closures: Inaugural infrastructure co-investment fund closed at $1.2 billion; real estate secondaries fund raised $2.4 billion since December.
• Private wealth growth: Private wealth platform grew to over $6 billion, with over $1 billion in new subscriptions in evergreen funds.
• Managed accounts: Record quarter for managed account fee-earning AUM growth, up $8 billion, with $2 billion deployed from SMAs.
• Venture capital: Venture capital team exceeded earn-out targets from the GreenSpring acquisition, doubling venture capital fee-earning AUM since the acquisition.

In the third quarter of fiscal 2025, StepStone generated fee-related earnings of $74.1 million, up 46% from the prior year quarter, with an FRE margin of 39%. Fee-earning assets under management (AUM) reached over $114 billion, up 28% from a year ago. The private wealth platform grew to over $6 billion, with over $1 billion in new subscriptions. The inaugural infrastructure co-investment fund closed with a total size of approximately $1.2 billion. Fee-related earnings were $74 million, up 46% year over year, and management and advisory fees were $192 million, up 26% year over year.

• Anticipate deploying the remaining undeployed fee-earning capital (UFEC) over a normal 3-5 year cycle.
• Expect FRE margin to continue growing over time as seen in trailing twelve-month trends.
• Optimistic about broader pickup in M&A and capital market activity supporting realizations, though timing is difficult to predict.

Q: Ken Worthington asked about building out the wealth footprint and the secondaries market.

A: Jason Ment mentioned strong cross-selling with 450 platforms globally, 40% selling two or more funds, progress with ticker-eligible funds, and the CredX secondary transaction adding over $600 million of NAV. On the secondaries market, Jason Ment noted 2024 was a record year, with average market pricing ticking up, and the secondary space being exciting with growth in dry powder and unrealized NAV.

Q: Ben Budish asked about NCI and infrastructure.

A: David Park said the largest driver of non-private wealth NCI was retroactive fees from the real estate secondaries fund; Scott Hart mentioned infrastructure investments are diversified across power and renewables, transportation, and communications including data centers.

Q: Alex Blostein asked about deployment activity and the GreenSpring earn-out.

A: Scott Hart said deployment was broad-based across asset classes; David Park stated the GreenSpring earn-out target of $75 million was hit, fully accrued as of December 31st, and will be payable 100% in cash.

Q: Michael Cyprys asked about public-private blending and the retirement market.

A: Jason Ment said there are many conversations about public-private convergence, with no near-term reports; on the retirement market, they believe no regulatory/legislative action is needed but action would be welcome, with active conversations on including private markets in portfolios.

Q: Chris Kotowski asked about the CredX transaction.

A: Jason Ment said the CredX secondary transaction was opportunistic, aimed at growing scale to decrease expense ratio, increase diversification, and make the fund more relevant to platforms, evaluated on a case-by-case basis