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Date

Thursday, November 6, 2025 at 5 p.m. ET

Call participants

  • Chief Executive Officer — Scott Hart
  • President and Co-Chief Operating Officer — Jason Ment
  • Chief Financial Officer — David Park
  • Head of Strategy — Mike McCabe
  • Managing Director — Seth Weiss

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Risks

  • GAAP Net Loss — The company reported a GAAP net loss attributable to StepStone Group of $366 million, or $4.66 per share, which was described as "significantly larger than prior periods" according to Seth Weiss and is tied to the accounting treatment of the StepStone Private Wealth profits interests.
  • Retroactive Fees Impact — Retroactive fees contributed only $300,000 to revenue versus $14.9 million in the prior year quarter. Management noted this moderation reduced reported fee-related earnings and advisory fees sequentially.
  • Advisory Fee Normalization — Advisory fees of $16 million were below the $20 million seen in the previous two quarters, attributable to elevated prior project-based fee levels not recurring in the current period.
  • Expectation of G&A Expense Increases — General and administrative expenses of $34 million rose $2 million sequentially. Management stated that G&A is expected to remain "seasonally elevated" over the next two quarters due to major conferences and ongoing investments.

Takeaways

  • Fee-Related Earnings (FRE) -- $79 million, up 9%, with a FRE margin of 36% driven by core operations; excluding retroactive fees, core FRE was $78 million, up 34%.
  • Adjusted Net Income -- $66.7 million, or $0.54 per share, up from $53.6 million and $0.45 per share, reflecting higher performance and fee-related earnings.
  • Fee Revenues -- $217 million, up 17%; excluding retroactive fees, fee revenues grew by 27%.
  • Net Accrued Carry -- $842 million, up 8% sequentially, with approximately 70% tied to programs older than five years, indicating maturity for harvesting.
  • Gross AUM Additions -- $29 billion in the past twelve months, comprised of $18 billion from separately managed accounts and $11 billion from commingled funds, including private wealth.
  • Fee-Earning AUM -- Grew by over $5.5 billion in the quarter and reached nearly $133 billion; fee-earning capital plus undeployed capital totaled approximately $163 billion, an annual organic growth rate of 20% since fiscal 2021.
  • Private Wealth Platform Subscriptions -- Record $2.4 billion in new subscriptions, nearly doubling the previous high; Spring fund contributed more than $800 million.
  • STEPEX Launch -- Over $700 million in gross subscriptions in the first thirty days. Management stated the "initial surge" will not be the ongoing run rate.
  • Distribution Partner Penetration -- Approximately 150 private wealth distribution partners; among those onboarded more than one year, 50% now distribute more than one evergreen product.
  • New Institutional Mandates -- $3.8 billion in managed account gross additions and $3.4 billion in commingled fund gross additions this quarter, supporting both new and expanded client relationships.
  • Re-Up Rate -- Managed account client "re-up rate remains above 90%" and average account growth of "nearly 30%" per vintage.
  • Evergreen Non-Traded BDC S-Cred -- Platform reached net assets over $1.5 billion.
  • Launches and Strategic Indices -- New Kroll StepStone private credit benchmarks and FTSE StepStone global private indices (US buyouts, US infrastructure, and all-private market indices) were announced, providing new data products and laying groundwork for future index-tracking investment tools.
  • GAAP Accounting Impact -- The current quarter's loss reflects GAAP treatment of the StepStone Private Wealth profits interests, with a planned call option exercise in September 2027.
  • Geographic Expansion -- Opened new offices in The Netherlands, Spain, South Korea, and Saudi Arabia, extending presence in Europe, Asia, and The Middle East.

Summary

StepStone Group (STEP 2.38%) reported a GAAP net loss of $366 million due to the repricing of private wealth profits interests, while core business performance reflected growth across fee revenues, adjusted net income, asset inflows, and platform expansion. Management highlighted robust private wealth inflows, major product launches such as STEPEX with over $700 million initial subscriptions, and the onboarding of new and expanded institutional mandates. Strategic initiatives included launching proprietary indices in partnership with Kroll and FTSE, expanding distribution partners, and establishing international offices supporting global client acquisition.

  • Management stated that STEPEX's large first-month inflow was "initial surge," according to Scott Hart and does not represent expected ongoing subscription levels.
  • Fee-earning AUM rose nearly $6 billion in the quarter, with the combined total of fee-earning and undeployed capital reaching $163 billion, up $7 billion sequentially and $28 billion annually.
  • Advisory fees normalized to $16 million, reflecting reduced project-based revenue relative to earlier quarters.
  • Upcoming G&A expense increases are expected due to major company conferences and continued infrastructure investment for business growth.
  • Net accrued carry's maturity—with 70% related to programs beyond five years—positions the company for potential harvesting and realizations.
  • Strategic recognition was achieved through a new Aviva partnership for the UK defined contribution market, expected to develop gradually with future flows.
  • Private wealth platform distribution remains in expansion mode, with 50% of legacy partners cross-selling multiple evergreen products and significant remaining room to expand product penetration among major distribution groups.
  • Interest and new mandates in private credit have grown, especially from Asia and the Middle East, as asset owners establish new allocation strategies.

Industry glossary

  • FRE (Fee-Related Earnings): Operating profit from recurring management and advisory fees, excluding performance fees and principal investment income.
  • Accrued Carry: Performance-based fee earned but not yet realized, typically associated with private equity fund structures.
  • Evergreen Fund: An investment fund without a fixed end date, continuously raising and investing capital.
  • BDC (Business Development Company): A closed-end investment fund that invests in small- and mid-sized businesses, often providing private credit solutions.
  • LP/GP Secondaries: Purchases of existing commitments in private funds from Limited Partners (LP) or GP-led transactions reorganizing fund assets and investor stakes.
  • UFEC (Undeployed Fee-Earning Capital): Capital commitments earning management fees but not yet invested.

Full Conference Call Transcript

Seth Weiss: Joining me on today's call are Scott Hart, Chief Executive Officer, Jason Ment, President and Co-Chief Operating Officer, Mike McCabe, Head of Strategy, and David Park, Chief Financial Officer. During our prepared remarks, we will be referring to a presentation available on our Investor Relations website at shareholders.stepstonegroup.com. Before we begin, I'd like to remind everyone that this conference call, as well as the presentation, contains certain forward-looking statements regarding the company's expected operating and financial performance for future periods. Forward-looking statements reflect management's current plans, estimates, and expectations and are inherently uncertain and are subject to various risks, uncertainties, and assumptions.

Actual results for future periods may differ materially from those expressed or implied by these forward-looking statements due to changes in circumstances or a number of risks or other factors that are described in the Risk Factors section of StepStone's periodic filings. These forward-looking statements are made only as of today and, except as required, undertake no obligation to update or revise any of them. Today's presentation contains references to non-GAAP financial measures. Reconciliations to the most directly comparable GAAP financial measures are included in our earnings release, our presentation, and our filings with the SEC. Turning to our financial results for 2026.

Beginning with Slide three, we reported a GAAP net loss attributable to StepStone Group Incorporated of $366 million or $4.66 per share. As a reminder, GAAP accounting requires us to factor the change in fair value of the buy-in the StepStone Private Wealth profits interests through our income statement. This option is expected to be accretive to EPS, and we plan to exercise the call option as soon as it's available in September 2027. This quarter's GAAP loss was significantly larger than prior periods and is a direct function of the progress of our private wealth platform, which Scott will speak to in more detail.

Moving to slide five, we generated fee-related earnings of $79 million, up 9% from the prior year quarter, and we generated an FRE margin of 36%. The quarter reflected retroactive fees from our infrastructure secondary fund. Retroactive fees contributed $300,000 to revenue, which compares to retroactive fees of $14.9 million in the second quarter of the prior fiscal year. When excluding the impact of retro fees, core fee-related earnings were $78 million, up 34% to the prior year quarter, and core FRE margin remains at 36%. We earned $66.7 million in adjusted net income for the quarter or $0.54 per share.

This is up from $53.6 million or $0.45 per share in the second quarter of the last fiscal year, driven by higher performance-related earnings and higher core fee-related earnings. I'll now hand the call over to Scott.

Scott Hart: Thank you, Seth. Our second quarter was strong on all fronts. We continue to deliver for our clients both in the form of strong investment performance and value-added services. We produced a record quarter of subscriptions within our private wealth platform, generated robust institutional fundraising within both managed accounts and focused commingled funds, generated strong financial results, and continued to enhance our data and technology offerings and partnerships. Starting with private wealth, where our momentum is nothing short of spectacular, we generated $2.4 billion of new subscriptions, a record result for StepStone and nearly doubled our previous highest quarter. There are several drivers of the strength this quarter. First, we continue to generate growth in our existing suite of products.

Spring, our venture and growth fund, was a standout this quarter with over $800 million in new subscriptions. It's a true one-of-a-kind product whose popularity is continuing to grow. Second, we launched STEPEX, a pure-play private equity interval fund that enables daily subscription through a ticker. We constructed STEPEX to address the request of several channel partners, leading to over $700 million in gross subscriptions in the first thirty days. This is an incredible result that frankly exceeded our own expectations. While subscriptions will moderate after this initial surge, we expect STEPEX to become a significant source of private wealth inflows.

Third, we are accelerating internationally as we continue to build on our syndicate, establish a track record of our international funds, and grow the StepStone brand. Last month, we were thrilled to announce a partnership with Aviva to be one of five specialist managers in its UK trust-based pension scheme. We believe this solidifies the StepStone name as a trusted partner in private markets for retirement savings, a trend we expect to develop globally. Moving to institutional, it was another solid quarter for fundraising within both managed accounts and commingled funds.

We generated $3.8 billion in managed account gross additions in the quarter and over $10 billion for the first half of our fiscal year, continuing the momentum from our record-setting fundraising last year. Our strength in managed accounts has been a differentiator for StepStone, as a result of nearly two decades of investment and relationship building across the globe. We are generating a healthy mix of new mandates as well as retention and growth in existing mandates.

Over the last twelve months, more than a third of our managed account inflows have come from new and expanded relationships, which not only contribute to gross inflows today but plant the seeds for growth as those LPs re-up with us in the future. As we have consistently said since our IPO over five years ago, we are very proud of our success with existing clients. Our re-up rate remains above 90%, and on average, those re-up accounts have grown in each successive vintage at nearly 30%. These are incredibly strong numbers and are even more powerful when you consider the compounding growth that results when we get to the second, third, and fourth re-up cycles.

StepStone's success with both new and existing clients is the result of strong investment performance and the high level of service we provide. A key means of achieving this is by placing senior and experienced professionals in the asset classes and geographies where our limited partners reside. Over the last six months, we have opened new offices in The Netherlands, Spain, South Korea, and Saudi Arabia, representing increasing footholds for StepStone in Europe, Asia, and The Middle East, and highlighting the importance of our partnership with key clients in those regions. Pivoting to commingled funds, we generated $3.4 billion of gross additions. In addition to record private wealth subscriptions, we executed the first close of our PE co-investment fund.

We're also now in the market with our PE secondaries fund, investing in both LP and GP-led secondaries, and with a first-time dedicated GP-led private equity secondaries fund. Mike will speak about these funds in more detail. The fundraising momentum has led to continued growth in our fee-earning AUM, which is up more than $5.5 billion in the quarter to nearly $133 billion. The strong progression of fee-earning AUM translates to growing earnings power. We generated $78 million of core fee-related earnings representing 34% year-over-year growth. On the strategic front, we are continuing to make strides in leveraging our data and technology. In September, we announced the launch of the Kroll StepStone private credit benchmarks.

These benchmarks and analytic tools provide up-to-date data and analysis on a wide pool of loans with insights down to the loan level. Last week, we were pleased to announce the launch of the FTSE StepStone global private indices. We're beginning with three indices: a US buyouts index, a US infrastructure index, and an all-private market index, offering daily index performance based on comprehensive institutional-grade inputs. We believe this lays the groundwork for additional indices across other sectors and asset classes, ultimately, for establishing index-tracking investment products. I'll now turn the call over to Mike.

Mike McCabe: Thanks, Scott. Turning to slide eight, we generated $29 billion of gross AUM additions over the last twelve months. $18 billion of these inflows came from separately managed accounts, and $11 billion came from our commingled funds, including private wealth. During the quarter, we generated over $7 billion in gross additions, including approximately $4 billion of managed account inflows and approximately $3 billion of commingled fund inflows. Notable funding additions included a $150 million final close for our corporate direct lending fund SCL3 and a $550 million close at our PE co-investment fund.

As Scott mentioned, we are now back in the market with our PE secondaries fund, and we are also in the market with the debut GP-led PE secondaries fund. The flagship secondaries fund will continue to invest across a diversified array of both LP-led and GP-led investments, while the dedicated GP-led fund will provide access to a more concentrated set of high-quality GP-led investments. We expect first closes in these funds by the end of our fiscal year. The GP-led dedicated fund will be smaller than the flagship secondaries fund, but we anticipate the combination of both funds will increase over the prior vintage size of $4.8 billion.

Turning to our evergreen fund platform, we generated $2.4 billion of subscriptions in our private wealth suite of offerings, growing the platform to $12 billion as of the end of the quarter. Additionally, we have grown our evergreen non-traded BDC S-Cred to over $1.5 billion in net assets. We've expanded our private wealth platform to approximately 150 individual distribution partners. Among our partners that have been with us on the platform for at least a year, 50% are selling more than one evergreen product. Slide nine shows our fee-earning AUM by structure and asset class. The quarter, we increased fee-earning assets by nearly $6 billion or an annualized growth rate of 18%.

Our undeployed fee-earning capital, or UFEC, grew by over $1 billion to nearly $30 billion. The combination of fee-earning assets plus UFEC grew to approximately $163 billion, which is up $7 billion sequentially and is up over $28 billion from a year ago. This translates to a healthy 20% annual organic growth rate since fiscal 2021. Slide 10 shows our evolution of fee revenues. We generated a blended management fee rate of 63 basis points over the last twelve months, down slightly from the 65 basis points in fiscal year 2025, driven by the moderation in retroactive fees. Before turning the call over to David, I would like to briefly address recent capital market trends and client sentiment.

While private market returns have stayed strong, distributions have been low for three consecutive years, shifting client focus from IRR to DPI. Slower exits have led to fundraising declines industry-wide, and 2025 could see another down year unless fundraising picks up in Q4. StepStone's results, however, stand out. Raising nearly $30 billion annually over the last two years is a significant jump from previous years. We credit this growth to our client-focused customized approach and our data-driven insights as a major market participant. Clients worldwide, including those who attended our largest-ever StepStone 360 conference, have echoed this feedback. We believe current low distributions in private markets are temporary.

Indicators like increased IPOs, rising investment banking activity, and a major recent buyout point toward better realizations ahead. Our analysis finds bid-ask spreads narrowing, improving sentiment, and a growing pipeline of future transactions. Despite geopolitical and market challenges, we're committed to monitoring conditions and providing solutions for clients in all environments. With that, I'll hand it over to David for our financial results.

David Park: Thanks, Mike. Turning to slide 12, we earned fee revenues of $217 million, up 17% from the prior year quarter. Excluding retroactive fees, which were very small this quarter, fee revenues grew by 27% year over year. The increase was driven by growth in fee-earning AUM across commercial structures. Fee-related earnings were $79 million, up 9% from a year ago, while core FRE was up 34%. Sequentially, FRE declined slightly, driven primarily by lower retroactive fees and lower advisory fees. Advisory fees of $16 million were below the elevated $20 million level of the prior two quarters, which benefited from a higher-than-normal level of project-based fees.

We view this quarter as a more normalized level of advisory fees in the near term. FRE margin was 36% for the quarter, both on a reported and core basis. Core FRE margin moderated slightly as compared to last quarter, due to lower project-based advisory fees. Shifting to expenses, adjusted cash base compensation was $100 million, representing a cash ratio of 46%, in line with the expectation we set out at the beginning of the fiscal year. General and administrative expenses were $34 million, up $2 million from last quarter. The sequential increase was driven by higher travel, IT, and other general operating expenses.

As a reminder, the G&A of our next two quarters tends to be seasonally elevated, driven by our StepStone 360 conference in October and our Venture Capital Conference in February. Gross realized performance fees were $65 million and $34 million net of related compensation expense. We expect strong gross performance fees next quarter, driven by the annual crystallization of incentive fees in our spring evergreen fund. As a reminder, a relatively small portion of spring incentive fees drops to the bottom line. After accounting for performance fee compensation and the private wealth profits interest. Adjusted net income per share of 54¢ was up from 45¢ a year ago and $0.40 last quarter, driven by growth across fee-related and performance-related earnings.

Moving to key items on the balance sheet on slide 13, net accrued carry finished the quarter at $842 million, up 8% from last quarter. Our net accrued carry is relatively mature. Approximately 70% are tied to programs that are older than five years, which means that these programs are ready to harvest. Our own investment portfolio ended the quarter at $314 million. This concludes our prepared remarks. I'll now turn it back over to the operator to open the line for any questions.

Operator: Thank you. At this time, we will conduct a question and answer session. As a reminder, to ask a question, you will need to press 11 on your telephone and wait for your name to be announced. To withdraw your question, please press 11 again.

Seth Weiss: Our first question comes from the line of Alexander Blostein from Goldman Sachs.

Alex Blostein: Hey. Good afternoon, guys. This is Anthony on for Alex. I wanted to click into the recently launched fee product, StepX, which saw, you know, a very strong first thirty days of fundraising. I was curious what drove such strong demand here? And how do you think about any cannibalization risk with your existing product suite?

Jason Ment: Thanks, Anthony. Jason here. So, yeah, we were ecstatic with the traction that StepX received out of the gate. As was mentioned in the prepared remarks, the product was designed specifically in response to demand from several channel partners who highlighted a couple of things. One, they were looking for PE exclusive exposure as opposed to the model portfolio that's in S prime. And two, we talked about it previously, but SCLIMB's ticker was not available on all custodians. And certain of our channel partners over-indexed to the custodians that were not allowing the ticker for S' prime, and the ticker was very important to them.

So that was, we think, the main drivers of the initial uptake, i.e., it was developed in response to demand we knew was there. In terms of cannibalization, we did see some rotation out of prime and into STEP X, and that was planned for in advance, and we knew that was coming. But we think we've seen the majority of that rotation occur already in the initial month here. That's helpful. Thanks.

Seth Weiss: Thank you. Our next question comes from the line of Kenneth Worthington from JPMorgan. Your line is now open.

Ken Worthington: Hi. Good evening. Thanks for taking the question. I'll continue on wealth. You've got five flagship products now. Can you talk about next steps to broaden and deepen distribution? So maybe number one, you've got 650 distribution partners. How far along are you through selling through either the biggest or, you know, your target distribution partners? Like, how much room do you have to run for the big ones? And then two, I think, Mike, to your comment, 50% or 50% of your distribution partners are selling more than one evergreen product. I assume that the dream would be to get 650 distribution partners to sell all five.

So maybe bridge where you are today and the maybe unrealistic dream scenario of getting everybody to sell everything. How do you bridge that gap? Thanks.

Jason Ment: Don't kill our dreams, Ken. This is Jason. In terms of that, the 50% statistic that Mike cited during the prepared remarks, that 50% is those that have been that have had a product on platform for more than one year. And so we're always adding new partners. And so that presents additional cross-sell that'll happen over time with those groups. To your point, the 50% cited is, you know, an aggregate of those selling two, three, four, or five of the funds. As you would imagine, the number selling all five funds is less than that selling two funds, etcetera. So we've got plenty of room to run in that regard.

We are also always focused on ensuring that we're meeting each channel partner exactly where they are. So we don't expect that all channel partners would want or need all five funds given their they have different client bases, of course. As we look at the largest of our distribution partners, most of those really large groups are not selling all five funds for sure and are really focused on two or three funds at present. So there's still room there as well.

Ken Worthington: Okay. Okay. Great. I'll leave it there.

David Park: Thank you.

Seth Weiss: Our next question comes from the line of Brennan Hawken of BMO. Your line is now open.

Brennan Hawken: Hi, good afternoon. Thanks for taking my question. I believe you've made a comment about STEP X, this new product that you launched and that maybe the strong subscription rate above expectations. And it seemed like you were suggesting it's above the your expectations for what the run rate is. Did those subscriptions sort of, like, flatter this overall SPW subscriptions in the quarter, and should we expect a pullback on the back of that? I'm just trying to get an understanding of fully contextualizing this call. Thanks.

Jason Ment: Sure. So STEPEX in, you know, in the initial month was around $750 million of subscriptions. We would not expect that to be the run rate for the fund in the near term going forward. And so yes, we would expect a quarterly pullback from this past quarter due to that one-time initial subscription surge from the launch.

Brennan Hawken: Great. Thanks for that. And then G&A expenses were a little higher than we were looking for. Can you talk about maybe what drove some of that quarter-over-quarter increase and how much of that would be expected to be durable going forward? Thanks.

David Park: Yeah, thanks for the questions, David. I think in the prepared remarks we had mentioned that the quarter-over-quarter increase was largely driven by travel, IT, and just general operating costs. And, you know, you've heard us talk about data and tech benchmarks, the new office openings we've had. So you know, we continue to invest in our business for growth. So I think as you see top line continue to grow, we're to continue to invest in infrastructure and other costs there. For the next couple of quarters, like we said in the prepared remarks, you should expect a step up in the G&A costs for our StepStone 360 conference. For the next quarter.

In the fiscal fourth quarter, you see some costs for the DC conference there. If you look at last year, the StepStone 360 conference was actually held in September. So not really a good proxy. But if you look back a couple years to fiscal 2024, and you can see the step up from fiscal 2Q to March, that should be a better proxy of what you should expect to see in the next couple of quarters.

Brennan Hawken: Great. Thanks for taking my questions.

Operator: Thank you. Our next question comes from the line of Ben Budish from Barclays. Your line is now open.

Ben Budish: Maybe first Scott, I think in your prepared remarks, you mentioned the partnership with Aviva that was announced maybe a month or so ago. Can you talk a little bit about what you're doing there? How big is the potential opportunity? And how do you see maybe other opportunities to participate in the retirement channel perhaps unfolding outside The U.S?

Jason Ment: Hey, Ben. Jason here. With respect to The UK opportunity, it's obviously a very big market in terms of the defined contribution market there. Aviva is one of the top five players, so we're ecstatic to be one of their partners. The initiation of that channel we don't expect to see material flows this calendar year, so think of that as a calendar '26 event. And it's going to build over time. This is a new area for Aviva, and we're gonna have to see how it develops as they roll it across their book. Outside of The UK market, we are having conversations in those geographies where it's potentially conducive to include private markets in the defined contribution space.

And obviously, spending a lot of time focused on The US opportunity as well. But this is all very early days, obviously.

Ben Budish: Got it. Thanks for that, Jason. Maybe a separate follow-up. On the indexes. So it's nice to see a number of products now launched. Can you maybe talk about from here, what does the path look like to more commercial relationships? How do these get monetized? I imagine that is still far off as well. But with the products out there, curious what next steps look like on that path? Thank you.

Mike McCabe: Thanks, Ben. Mike here. Just as a reminder, the data and technology platform really revolves around our proprietary technology that we call SPY, which has four use cases. Primarily being one, driving our investment decisions and track record, two, enabling our existing clients to make better decisions around asset allocation and portfolio construction as well as monitoring returns. The third use case is to develop new client and LP relationships by offering SPY as a value-added service. But last but not least, relating to your question, you know, we're using data in technology to power our benchmarking indices and analytical tools. For data partnerships like the one we announced with FTSE Russell and Kroll.

To be clear, our posture toward indices is quite a bit different than others in the marketplace. The first is, you know, we're using our data to develop and power these benchmarks from a very comprehensive database that includes venture capital, private equity, infrastructure, real estate, and credit. And the second is the indices that we announced with FTSE Russell are priced daily, meaning cash adjusted and market adjusted on a daily basis. And as a reminder, you know, we've quite a bit of experience with a daily priced product by virtue of our tickerized evergreen product called S Prime.

The commercialization of all of this comes in lots of different forms, but as it relates to the indices, the initial revenue case is a licensing opportunity in partnership with FTSE Russell that will be shared between the two organizations. Longer term, the potential use case for building asset management products around our reference benchmarks is on the come. But to be clear, not a replication strategy. Rather, you know, we see asset management products around these indices being a much longer-term opportunity, which is why on previous calls, I've described this as more of a walk before you run approach.

But we believe there is plenty of opportunity out there to develop some asset management products around these indices in the longer term.

Ben Budish: Okay. Great. Thank you for that, Mike.

Mike McCabe: Thanks, Ben.

Operator: Our next question comes from the line of Michael Cyprys from Morgan Stanley. Your line is now open.

Michael Cyprys: Just given all the success in the private wealth channel, hoping you could speak to how you're expanding your source deal sourcing capabilities to put all this capital to work so it does not compromise returns for the retail customers as well as for the institutional accounts and customers that you're already managing store? How are you thinking about that?

Scott Hart: Hey, Mike. Scott here. Looks great question and something that look. Whether driven by the growth of the wealth business or the growth of the separate account business, or the commingled fund business that we have always been very, very focused on. And it really comes down to, you know, the flywheel and the amount of capital that we are committing across the private market ecosystem really starting with primary fund commitments that are a big driver of ultimately, the deal flow and our position in the market, also a big driver of the data and the information that we have to inform our decision making.

So one of the things that we have always had to do is to make sure that the various different elements of our deal flow remain balanced. And one of the ways that I've often thought about that is whereas you may have some investors in the market that are looking for, you know, for example, a dollar of free co-invest for every dollar of primary capital they commit. I think we operate very differently and a more appealing, you know, ratio to our GP partners, which is that across the board, we have been allocating about $70 billion per year into the private markets.

If I take just private equity, for example, it represents about $35 billion, with a few billion going into co-investments each year, probably $5-6 billion going into secondaries, but the rest into primary funds. So that, in my mind, is a very balanced approach. But I think maintaining the activity on the primary side, in particular, is one way we balance that. I would say the other thing that we keep a very close eye on is just the conversion or the approval rates across our deal flow. And so one of the ways that we have been able to invest successfully over time here is that the pipeline has been growing significantly. About different parts of our business.

You know, for example, private equity secondary, we had a record year at $160 billion of volume last year. Expected to grow to $200 billion this year. Our approval rates, particularly on, you know, LP secondaries, is very low single-digit percentage and has kind of remained there for a period of time. So across each of our strategies, each of our asset classes, those are the types of stats that we are constantly monitoring to make sure that we have sufficient deal flow to maintain that selective ratio.

Michael Cyprys: Great. Thanks. And just a follow-up question on the private wealth channel. Curious how you're seeing and expect your product set to evolve over the next twelve to twenty-four months from the five products that you have today. What other solutions, product vehicle strategies could make sense? Maybe you could update us on some of your thoughts and progress around models in the private wealth channel. You've had a lot of success with Ticker. Curious what might be next as you think about innovation.

Jason Ment: So in terms of the core portfolios or products that we're putting together, we think that the ones that we have available today are the ones we'll have available for, you know, the next twelve, twenty-four months, and it'll be a doubling down on distribution. But as you alluded to, call it the wrapping paper around that and models being a good example of it, but not the only one. We continue to have very engaging dialogue on inclusion in existing model programs, most of which are in the common parlance paper models, although some are dynamically reallocating as well.

And continue to have conversations with some technology innovators that are really looking to bring private markets into the model world in a really robust way, and we're one of the thought partners around how to do that operationally. Because it really, at this point, is more an operational challenge as opposed to a CIO challenge in the models world.

Michael Cyprys: If you could just want to follow-up to that point, just curious what the time frame might be for inclusion in models and how you see some of those hurdles being overcome.

Jason Ment: Yeah. Well, we're already included, we've seen very modest, but, you know, double-digit millions of flows. Inception to date within the models already. Using our existing products. So that's not a separate portfolio. It's the existing wealth product. It was one of the drivers for the creation of StepX as well, to have pure-play private equity exposure for CIOs to be able to fine-tune within a model structure. In terms of the technology developments, you know, the systems that many of these models rely on didn't contemplate the idea of, let's call it, delayed gratification on redemption. And putting the orders in and having that settled later.

And so that's one example of where the technology solutions need to work out the pipes, so to speak, to make that all work properly. So that everything flows through.

Michael Cyprys: Great. Thank you.

Operator: Our next question comes from the line of John Dunn of Evercore. Your line is now open.

John Dunn: Thank you. I wonder if you could talk to any different, you know, areas of geographical strength. And any differences between, you know, strategy preferences among the region?

Scott Hart: Hey, John. Sure. Happy to touch on the geographical areas of strength. And you heard us make a couple of comments about the new office openings, specifically in The Middle East and parts of Europe, and we've had some recent ones in Asia as well. Those would probably be the geographies I would call out. I mean, if you look at in our earnings presentation, how the geographic mix has evolved over time, you will actually see that The US is starting to represent a slightly larger percentage than historically. Part of that is driven by the growth in wealth.

But if I break it down and just focus, for example, on separately managed accounts, really over the last quarter or if I look at it over the last twelve-month period, in order of size, it would have been Middle East, Asia, and then pretty balanced across Europe, Australia, and The US. So, look, I think it's broad-based. It's not any one geography that is driving the success, but continued development across various different regions here. In terms of the specific asset classes or strategies, again, it's been fairly balanced. I think the main thing I would call out though, and you maybe having had the chance to travel with our private credit leadership team over the last several months.

I'd say the, you know, the interest that we are seeing particularly out of Asia and some of the Asian insurance companies and in The Middle East where, you know, certain asset owners, you may just be setting up a private credit allocation for the first time as opposed to managing out of other asset classes. Be it fixed income, be it private equity, etcetera. And so that's maybe the one thing I would call out is just the interest we are seeing in private credit in a couple of those markets.

John Dunn: Great. Thank you.

Operator: Thank you. At this time, I'm showing no further questions in the queue. I would now like to hand it back to Scott for closing remarks.

Scott Hart: Great. We just wanted to thank everyone for joining today and appreciate your continued interest in the StepStone story. We'll look forward to connecting again next quarter. Thank you.

Operator: Thank you for your participation in today's conference. This does conclude the meeting. You may now disconnect.