StepStone Group (NASDAQ:STEP) reported record fee-related earnings and fundraising in its fiscal fourth quarter 2026, even as GAAP results were weighed down by accounting related to its StepStone Private Wealth profits interests.
The private markets investment firm reported a GAAP net loss attributable to StepStone Group Inc. of $7.8 million, or $0.10 per share. Seth Weiss, head of investor relations, said GAAP accounting required the company to factor the change in fair value of the buy-in of StepStone Private Wealth profits interests through the income statement, which drove the negative GAAP result.
On an adjusted basis, StepStone generated $69 million in adjusted net income, or $0.57 per share, down from $81 million, or $0.68 per share, in the prior-year quarter. Weiss attributed the decline primarily to lower performance-related earnings, partially offset by higher fee-related earnings.
Fee-Related Earnings Cross $100 Million
StepStone generated fee-related earnings of $105 million in the quarter, up 12% from the prior-year period, with an FRE margin of 40%. Excluding retroactive fees, core fee-related earnings were $101 million, up 28% year over year, with the core FRE margin also at 40%.
Chief Executive Officer Scott Hart said the quarter marked StepStone’s “best quarter ever of fee-related earnings,” supported by growth in fee-earning assets across the platform. Hart said the firm expects top-line growth and operating leverage to continue supporting FRE growth in fiscal 2027.
Chief Financial Officer David Park said fee revenues were $260 million, up 21% from the prior-year quarter. Excluding retroactive fees, fee revenues rose 29%, reflecting growth in fee-earning assets across commercial structures. Park said StepStone generated a full-year core FRE margin of 38%, up slightly from the prior year and more than 600 basis points higher than two years earlier.
Fundraising Reaches Record Levels
StepStone reported nearly $14 billion in capital formation during the quarter, capping a fiscal year in which gross AUM additions totaled more than $38 billion. Hart said the results highlighted a “stark difference between private market headlines and the reality” the firm is seeing with clients and partners.
Mike McCabe, head of strategy, said approximately $22 billion of annual inflows came from separately managed accounts, while more than $16 billion came from commingled funds, including private wealth. During the quarter, gross additions included $7 billion from managed accounts and more than $6.5 billion from commingled funds.
Notable commingled fund activity included:
- A $2.2 billion first close in StepStone’s private equity secondaries fund.
- A $200 million first close in its private equity GP-led secondaries fund.
- A $400 million final close in SCOF II, its corporate opportunistic lending fund.
- Nearly $300 million of closes in its infrastructure secondaries fund.
- $300 million of closes in its infrastructure co-investment fund, bringing that fund to more than $1 billion.
McCabe said fee-earning assets increased by nearly $5.5 billion in the quarter, while undeployed fee-earning capital rose by $7 billion to about $40 billion, the highest level in the firm’s history. Fee-earning assets plus undeployed fee-earning capital grew to more than $184 billion, up more than $12 billion sequentially and more than $38 billion from a year earlier.
Private Wealth and Credit Demand Remain Strong
Hart said demand for StepStone’s private wealth offerings remained strong, with $2.3 billion of new subscriptions in the quarter against total redemptions of approximately $300 million, or less than 2% of total net asset value. He said March and April were the firm’s two best months ever for private wealth subscriptions, with more than $800 million in subscriptions in each month, and May was on a similarly strong trajectory.
StepStone’s venture-focused SPRING fund generated $1.2 billion in subscriptions during the quarter. Hart said the fund delivered 11% year-to-date performance through April after 39% performance in 2025. He said individual investors continue to seek curated exposure to the innovation economy.
Hart also said StepStone saw steady subscriptions in SPRIM and STPEX, accelerating subscriptions in STRUCTURE, and improving interest in CRDEX, its credit interval fund. He said some distribution partners are rotating client assets into CRDEX, citing the diversification of the multi-manager credit portfolio.
Institutional demand for private debt also remained strong, with about $3 billion of new private debt capital raised in the quarter. Hart said fundraising was balanced between managed accounts and commingled funds, including activity in opportunistic lending, direct lending, StepStone’s evergreen BDC and its interval fund.
Management Addresses Secondaries Valuation Debate
During the question-and-answer session, analysts asked about scrutiny of valuation practices in secondary investments, particularly day-one markups in evergreen wealth vehicles.
McCabe said a secondary buyer’s initial mark for an acquired fund interest is typically the sponsor’s latest reported fair value. If the interest was bought at a discount, the buyer may report a value above cost in the first period. He said that reflects two different measures: the price paid for a fractional interest and the fair value of the underlying asset under GAAP.
“The point is not we created value on day one,” McCabe said. “It’s we bought a fractional interest at a discount to manager-reported fair value, and under GAAP, we carry it at fair value using the manager’s reported value as our starting point.”
McCabe said most of StepStone’s returns from secondary investments across evergreen and closed-end funds have come from asset appreciation after purchase, not simply buying at a discount. As examples, he said SPRIM delivered an 11% net return for the year ended March 31, with about 9 percentage points from asset appreciation after purchase, while SPRING delivered a 37% net return, with about 33 percentage points from post-purchase appreciation.
Jason Ment, president and co-chief operating officer, said clients and financial advisers have asked about the issue following media coverage, but he said StepStone’s explanation of the secondary market dynamics has been well received.
Capital Return, Data Initiatives and Defined Contribution Plans
StepStone’s board declared a $0.55 per share supplemental dividend tied to performance-related earnings, in addition to a $0.28 per share base quarterly dividend. McCabe said full-year dividends declared for Class A common stock totaled $1.67 per share, up 23% from the prior year.
McCabe also said StepStone repurchased about $9 million of Class A common stock in March under its $100 million authorization, buying roughly 200,000 shares at an average price of $44.77.
The company also discussed efforts to monetize its data and technology, including partnerships with FTSE Russell, Kroll and PitchBook. Hart said StepStone will work with PitchBook to provide deal-level performance and operating measures across private equity buyout, venture capital, growth equity and infrastructure.
Management also highlighted StepStone’s hiring of its first head of defined contribution solutions. Hart said the firm believes private markets can have a role in 401(k) and other defined contribution plans with appropriate allocation, diversification and liquidity structures. Ment said StepStone is speaking with plan sponsors, target-date managers, defined contribution aggregators and record keepers as it develops offerings for the channel.
Park said realized performance fees were $46 million gross and $18 million net of related compensation expense, lighter than recent quarters because of lower capital markets activity. He said StepStone remains optimistic realization activity may accelerate if M&A activity picks up and IPO markets reopen, while noting that the company generally does not control the timing of exits.
About StepStone Group (NASDAQ:STEP)
StepStone Group is a global private markets investment firm that provides specialized investment solutions across private equity, private credit and real assets. The firm offers customized portfolios, secondary interests, direct co-investments and tailored advisory services to institutional investors worldwide. StepStone's integrated research and data analytics platform supports its investment teams in sourcing opportunities and monitoring portfolio companies.
Founded in 2007 as an independent private markets specialist, the company has grown its presence through both organic expansion and strategic partnerships.
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