STEP

Day, and thank you for standing by. Welcome to the fiscal fourth quarter 2026 StepStone Group Earnings Conference Call. At this time, all participants are on a listen-only mode. After the speaker's presentation, there'll be a question and answer session. To ask a question during the session, you'll need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to turn the conference over to your speaker for today, Seth Weiss. Please go ahead.

Thank you. 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 which is 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 factor section of StepStone's periodic filings.

These forward-looking statements are made only as of today, and except as required, we 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 the fourth quarter of fiscal 2026. Beginning with slide three, we reported a GAAP net loss attributable to StepStone Group Inc. of $7.8 million, or $0.10 per share. As a reminder, GAAP accounting requires us to factor the change in fair value of the buy-in of the StepStone Private Wealth profits interests through our income statement, which drove the negative GAAP earnings result this quarter.

Moving to slide five, we generated fee-related earnings of $105 million, up 12% from the prior year quarter, and we generated an FRE margin of 40%. The quarter reflected retroactive fees from our infrastructure secondaries fund and our multi-strategy global venture capital fund. Retroactive fees contributed $4.4 million to revenue, which compares to retroactive fees of $15.7 million in the fourth quarter of the prior fiscal year. When excluding the impact of retroactive fees, core fee-related earnings were $101 million, up 28% relative to the prior year quarter, and core FRE margin remains at 40%. We earned $69 million in adjusted net income for the quarter, or $0.57 per share. This is down from $81 million, or $0.68 per share in the fourth quarter of the last fiscal year, primarily due to lower performance-related earnings, partially offset by higher fee-related earnings.

I'll now hand the call over to Scott.

Thank you, Seth, and good evening. In a quarter that was characterized at the macro level by geopolitical shocks, AI disruption, and media scrutiny on private credit, StepStone delivered our best quarter ever of fee-related earnings, our best quarter ever of fundraising across the platform, and our highest quarter ever of organic private wealth subscriptions on both a gross and net basis. This quarter's success stems from groundwork laid years ago to build a client-focused, diverse private markets platform. We are thrilled with the excellent results we continue to post, and we are just as excited about new investments we are making in our platform to drive sustainable growth. Beginning with results, we surpassed $100 million of quarterly fee-related earnings for the first time ever, driven by growth in fee-earning assets across the platform. The robust top-line growth was coupled with strong profitability as our FRE margin achieved 40%.

We expect top-line growth and operating leverage will continue to spur FRE growth in fiscal 2027. Moving to fundraising, we generated a record quarter of nearly $14 billion in capital formation, which caps our best fiscal year ever of $38 billion of gross AUM additions. This is a remarkable result and highlights the stark difference between private market headlines and the reality of what we are seeing with our clients and partners. I'd like to focus on a couple of themes. First, demand for our client-centric private wealth offerings remains strong across funds. We generated $2.3 billion of new subscriptions this past quarter against total redemptions of approximately $300 million, or under 2% of the total net asset value. As I mentioned in my opening, this is our best quarter for organic private wealth subscriptions, excluding the impact of new fund launches on a gross and net basis.

In fact, March and April were our two best months ever, with over $800 million in subscriptions in each month, and May is on a similarly strong trajectory. Our venture fund SPRING continues to be a highlight of our StepStone Private Wealth, with subscriptions of $1.2 billion in the quarter. We see significant interest in this fund as individual investors seek a means to gain well-curated exposure to the innovation economy. We continue to generate strong returns, with 11% year-to-date performance through April, following 39% performance in 2025. Shifting to our other funds, we are generating steady subscriptions in the combination of SPRIM and STPEX, and accelerating subscriptions in STRUCTURE, which just delivered its first $100 million month in April.

CRDEX, our credit interval fund, is starting to see an uptick in subscriptions as some of our distribution partners rotate their clients' assets into our multi-manager credit fund, finding value in the diversification of the CRDEX portfolio. Second, staying on the theme of credit, institutional demand for private debt is strong, with approximately $3 billion of new private debt capital raised in the quarter. We are seeing success across commercial structures as fundraising was balanced between managed accounts and commingled funds, where we held a final close in our opportunistic lending fund, a first close in our direct lending fund, and strong flows in our evergreen BDC and interval fund, which serve both institutional and private wealth capital. Private credit remains well-positioned in the current environment.

While we expect an underwrite for default rates to increase from current low levels, underlying credit trends remain strong, spreads are attractive, and our portfolios are well-diversified. Shifting gears, I would like to discuss some of the investments we are making in growth opportunities. First, data and technology have always been integral parts of our business model, providing key insights for our investing activity and an invaluable resource for many of our large LPs. Last fall, we began to more directly monetize our data and tech by launching a suite of private market indices with FTSE Russell, and by launching a private credit benchmarking and analytics tool with Kroll. We are thrilled to expand on this with a solution to provide deal level performance and operating measures, which we will deliver in partnership with PitchBook, a leading private markets intelligence provider.

The arrangement with PitchBook leverages our SPI research and reporting platform, along with PitchBook's market data and research to provide greater transparency and benchmarking capabilities across private equity buyout, venture capital, growth equity, and infrastructure. The data can be utilized by LPs to benchmark their portfolios, by GPs to benchmark and market their own funds, and by other service providers to the private markets industry. We will leverage PitchBook's significant reach to distribute the product. Second, we hired our first head of defined contribution solutions. We are staunch believers that private markets have a role in 401Ks and other defined contribution retirement plans, provided there is appropriate allocation, diversification, and liquidity structures. We were encouraged to see the Department of Labor issue a thoughtful, process-based safe harbor proposal in late March that would help enable inclusion of private markets investments in 401K plans.

We believe this will give rise to a dramatic step forward in financial security for retirees, and we believe StepStone is incredibly well-positioned to be a leading and innovative solutions provider. With that, I'll turn it over to Mike to speak about fundraising, asset growth, and capital distribution.

Thanks, Scott. Turning to slide eight, we generated over $38 billion of gross AUM additions over this last year, our best 12-month period ever. Approximately $22 billion of these inflows came from separately managed accounts, and over $16 billion came from our commingled funds, including private wealth. Of the managed account additions, $8 billion, or 35%, came from a combination of new accounts or the expansion of existing accounts into new asset classes or strategies. During the quarter, we generated over $13.5 billion in gross additions, including $7 billion of managed account additions and over $6.5 billion of commingled fund inflows.

Notable commingled fund additions included a $2.2 billion first close in our private equity secondaries fund, a $200 million first close in our private equity GP-led secondaries fund, a $400 million final close in SCOF II, our corporate opportunistic lending fund, nearly $300 million of closes in our infrastructure secondaries fund, and $300 million of closes in our infrastructure co-investment fund, which was activated during the quarter, bringing that fund to over $1 billion. This is already equivalent in size to the last vintage of this strategy, with additional fundraising still to come. Turning to our evergreen funds, we generated over $2.3 billion of subscriptions in our private wealth suite of offerings, growing the platform to nearly $18 billion as of the end of the quarter. Additionally, we have grown our evergreen non-traded BDC SCRED to over $2 billion in net assets.

Slide nine shows our fee-earning AUM by structure and asset class. For the quarter, we increased fee-earning assets by nearly $5.5 billion, and we increased our undeployed fee-earning capital, or UFEC, by $7 billion to roughly $40 billion, our highest level ever. A healthy amount of this undeployed capital should convert to fee-earning in the coming periods as management fees turn on for several notable funds. In April, we activated our PE co-invest fund, which stood at slightly more than $1 billion as of the end of the quarter. Within the next two quarters, we plan to activate our flagship PE secondaries fund and our GP-led private equity secondaries fund, which collectively accounted for $2.5 billion of our UFEC balance as of March 31st.

The combination of fee-earning assets plus UFEC grew to over $184 billion, which is up more than $12 billion sequentially, and is up over $38 billion from a year ago, our strongest year of growth in our history. This translates to a 21% annual organic growth rate since fiscal 2021. Slide 10 shows our evolution in fee revenues. We generated a blended management fee rate of 64 basis points over the last 12 months, down slightly from the 65 basis points in fiscal 2025, driven by moderation in retroactive fees, but partially offset by a favorable mix shift driven by growth in our evergreen funds. One note for your modeling on fee rate.

We are making a prospective change to the fee structure for our flagship PE secondaries fund that will lower the fee rate during the investment period, but will be offset by a higher fee rate following the investment period. This will align our fee structure with recent market practices and will help mitigate the J-curve for our LPs, but is structured to ensure parity and present value between the old and new fee streams. In isolation, when our flagship PE secondaries funds are fully raised and activated, the new pricing structure will have an approximate three to four basis points initial impact on the firm-wide blended commingled fund fee rate. However, we do not anticipate observable pressure as continued growth in our private wealth funds should more than offset this impact.

As I mentioned earlier, the secondaries PE fee rate will balance out over the life of the fund as the rate increases post the investment period. As we bring the fiscal year to a close, I would like to provide an update on capital distribution. First, we expect to conduct the third tranche of our buy-in of the non-controlling interest of the infrastructure, private debt, and real estate asset classes in the first quarter of fiscal 2027, utilizing $11 million of cash and $166 million of equity. This translates to 3.4 million issued shares effective as of April first. As a reminder, the cost of each buy-in is hardwired based on StepStone's market multiple and the asset class' results. This year's buy-in will be executed on average at a 14% discount to the STEP public PE multiple.

We view this as a very efficient use of capital as it provides positive earnings accretion with no integration or execution risk. Second, we are thrilled to announce that the board has declared a $0.55 per share supplemental dividend, which is tied to our performance-related earnings. This is on top of the $0.28 per share base quarterly dividend. For the full year, we have declared $1.67 per share of dividends for our Class A common stock, up 23% over last year's dividends. We believe this level of dividends represents a compelling value when contextualized with the over 30% annual growth rate we've achieved in fee-related earnings over the last three years, while also considering cash usage for accretive NCI buy-in. Third, in March, we announced an authorization to repurchase up to $100 million in StepStone Class A common stock.

The share repurchase program serves as an opportunistic means of capital distribution on top of our standing priorities of funding organic growth, paying for our quarterly dividend, and paying for our annual supplemental dividend. Over the last few months, we've experienced higher than normal volatility in our stock price due to exogenous events. Yet, we have demonstrated fundraising and operating strength and stability and have visibility for sustained growth. We executed roughly $9 million of the share repurchase authorization in March, buying back roughly 200,000 shares at an average price of $44.77. With that, I'll hand the call over to David for our financial results.

Thanks, Mike. Turning to slide 12, we earned fee revenues of $260 million, up 21% from the prior year quarter. Excluding retroactive fees, fee revenues grew by 29% year-over-year, reflecting growth in fee-earning AUM across commercial structures. Private Wealth, which carries a higher average fee rate, continued to see strong inflows for the quarter. Fee-related earnings were $105 million, up 12% from a year ago. Core FRE was up 28%, driven by growth in fee revenues. FRE margin was 40% for the quarter, both on a reported and core basis. This is up 280 basis points from last quarter on a core basis. We believe a rolling 12-month figure is the best gauge of our profitability, as our quarterly margins may fluctuate due to normal variability in timing of revenues and expenses. For the full year, we generated a core FRE margin of 38%.

This is up slightly from a year ago and up more than 600 basis points from two years ago. This margin expansion is a result of the investments we made in our business and executing on our strategic priorities. We expect to continue to invest in our business for growth while balancing profitability. We see plenty of room for margin expansion over the long term, but the path may not be linear. Shifting to expenses, adjusted cash-based compensation was $111 million, representing a cash compensation ratio of 43%, lower than the roughly 45% ratio of the last three quarters. We expect a seasonal step-up in compensation next quarter as merit increases take effect at the start of our new fiscal year. We believe this 43% cash compensation ratio is a fair level for the next fiscal year, understanding there may be quarter-to-quarter variability.

Equity-based compensation was $6 million for the quarter, which is $1 million higher than last quarter. The increase was primarily due to the acceleration of expense for awards tied to certain retirees. With the issuance of our normal annual RSU grants in March, we anticipate equity-based compensation to approximate $6 million-$7 million per quarter for fiscal 2027. General and administrative expenses were $38 million, down $2 million from last quarter and up $6 million from last year's fiscal 4Q. The sequential decline was primarily due to timing of client events, marketing, and travel-related expenses. With the growth of our business, we have taken on additional space in several existing locations, which will add incremental expense going forward. Gross realized performance fees were $46 million for the quarter and $18 million net of related compensation expense.

This is lighter than the pace we have generated in recent quarters due to lower levels of capital market activity. Partially offsetting lower PRE was $14 million of realized investment income from our own portfolio. This includes $11 million of realized gains from one of our seed capital investments in our funds. We remain optimistic that realization activity may accelerate should M&A activity pick up and IPOs reopen. LPs are increasingly focused on distribution. Secondaries should continue to play a role in providing liquidity to both GPs and LPs. Interest rate volatility and geopolitical events add an element of uncertainty. As a reminder, we generally do not control the timing of exits.

Our ANI tax rate for the quarter was slightly elevated at 23.5% due to a true-up to reflect the full year tax rate of 22.6%, which is roughly 30 basis points higher than our blended statutory tax rate last year. The increase was driven by a shift in the mix of income to states with relatively higher tax rates. Based on our current estimate, we would anticipate a similar blended statutory tax rate of 22.6% for fiscal 2027. Adjusted net income per share of $0.57 was down from $0.68 a year ago and $0.65 last quarter, reflecting lower performance-related earnings offset by growth in fee-related earnings. Moving to key items on the balance sheet on slide 13, net accrued carry finished the quarter at $936 million, up 7% from last quarter. Our net accrued carry is relatively mature.

Approximately 60% 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 $347 million, up from $338 million last quarter. This concludes our prepared remarks. I'll now turn it back over to the operator to open the line for any questions.

We also ask that you please limit yourself to one question, one follow-up. If you would like to ask additional questions thereafter, please come back into the queue. Also, wait for your name and company to be announced before proceeding with your questions. One moment while we compile the Q&A roster. Our first question for the day will be coming from Benjamin Budish of Barclays. Your line is open.

Hi. Good evening, and thanks for taking the question. I wanted to ask about some comments a competitor of yours made a few weeks ago about secondaries. The comments suggested that the practice of day one markups can lead to short-term mispricing, which makes the strategies maybe less appropriate for semi-liquid wealth evergreen funds in particular. I'm curious what your response would be here. Why do you think secondaries are appropriate for the wealth channel in that style of vehicle? Maybe if you could give us some color on the valuation methodologies and how much of the performance over time has come from day one markups versus underlying asset performance.

Thanks, Ben. This is Mike here. I think you're right. I think this is a good opportunity to address some of the concerns around accounting practices in the secondary market, which have come into focus, as you point out, as evergreen vehicles have been making secondary investments to build their portfolios. To begin, a secondary buyer's initial mark for an acquired fund interest is typically the sponsor's latest reported fair value. Now, if that interest was bought at a discount, the buyer may report a value above cost in the first period. This reflects two different but valid measures, the price paid for a fractional interest in an asset, and the fair value of the underlying asset under a long-established GAAP framework. Both numbers are real. They just answer different questions.

The purchase price tells you what someone was willing to pay for a fractional interest in a fund or a company at a given moment, and that can be influenced by the seller's situation, whether it's liquidity, timing, negotiating power, market dynamics, transaction friction. Reported fair value answers a different question. What does the best-informed party, typically the sponsor, believe the investment is worth under GAAP? The point is not we created value on day one. 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. Now, an immediate gain might be unrealized, but that does not make it unreal. Said differently, a discount does not prove an asset is overvalued.

It simply shows that liquidity has a price, just as paying a premium to NAV does not by itself prove the asset is undervalued. The real question here is not whether purchase price and fair value can differ. Of course they can. The question is whether the fair value is backed by rigorous, independent, and transparent valuation processes, which is why StepStone applies its own valuation discipline to assess and corroborate manager-reported fair values for primary, secondary, and co-investments. More importantly, most of StepStone's returns from secondary investments across both evergreen and closed-end funds have come from asset appreciation after purchase, not simply from buying at a discount to manager-reported fair value. Our approach is to buy great assets at a fair price, not fair assets at a great price.

For example, for the year ending March 31st, SPRIM delivered an 11% net return, with about nine points coming from asset appreciation after purchase. SPRING delivered a 37% net return over the last year, with about 33 points coming from post-purchase asset appreciation. I know that was a lot, Ben, but I hope it helps clear up some of these questions out there.

That was great. Thank you for all the color. Maybe just one follow-up. You guys talked in your prepared remarks about the relationship with PitchBook and what you're doing in partnership with FTSE Russell and with Kroll. I think you mentioned that you started to monetize some of the data last fall. Just curious, based on sales cycles, based on the pipeline, how should we be thinking about maybe near to medium term expectations for the revenue contribution from this new opportunity?

Yeah, we're really excited about these partnerships with FTSE Russell, Kroll, PitchBook. These are all ways and avenues for us to monetize our data advantage in the marketplace and our technologies as well. It's been 12 months since we've began initiating these partnerships, I would say we're in the early stages of product development across all of these partnerships, anticipate the near term revenue to be modest at first. The important point here is that there are no material incremental expenses associated with any of these efforts. As revenues do start to roll in, they should be accretive to FRE margin.

All right, great. Thank you so much.

Thank you. One moment for the next question. Our next question is coming from the line of Kenneth Worthington of JPMorgan. Please go ahead.

Hi, good afternoon, and thanks for taking the question. I wanted to first follow up on the secondary markup issue. To what extent is the concern that equity investors have with regard to the secondary markup exposure, something you hear as a question from either your fund investors or your distribution intermediaries? In other words, is this just an issue or a concern that public market investors have, or is it a concern that your clients have as well?

Thanks, Ken. Jason here. Look, there's been a lot of press around that, and whenever there's press, there are questions from clients. What I can say is that our posture around all this, as Mike articulated earlier, has carried the day to a person when we've been talking to the channel and FAs. In other words, yes, they've asked because the press has told them to ask about it, but they understand the dynamic in the secondary market, and they appreciate that, as Mike said, the returns, while unrealized, are real. The performance in each of the funds over the life to date has supported that.

Okay, fair enough. Thank you. As a follow-up, you mentioned the hiring of a lead U.S. defined contribution hire in the quarter. Can you talk about what the customer build-out might look like and where you think StepStone is more likely to see early traction here? Are you starting with plan sponsors, fund managers, or record keepers? How does the plan look in terms of the build-out of this opportunity?

Yeah, thanks. First, we're very excited to have Taylor join us. She started just this week, and we're going at this market in a multifaceted way, as you might imagine from a group like us, and we talk about customization all the time and really responding to the channel in the ways that they need us to respond. As a result, yes, we're talking to plan sponsors. Yes, we're talking to the target date managers. Yes, we're talking to the DC aggregators, right? Yes, we're talking to record keepers. It's yes to all. In terms of where we expect to see traction, one, we do think that some of the target date managers will move, meaning move early, whether that be in customized TDF or new series off the shelf or existing series off the shelf will vary certainly by manager.

We've had positive conversations with groups across all three of those potential avenues. We are in conversations with a number of industry participants around new ways to think about attacking all of this, and so more to come there in the near term. Rest assured that the offerings that we bring, we will be taking advantage of, one, our asset class coverage, and two, our focus on being able to customize our solutions for this channel.

Great. Thank you.

Thank you. One moment for the next question. Our next question will be coming from the line of Michael Cyprys of Morgan Stanley. Please go ahead.

Hey, good afternoon. Maybe just continuing on the DC channel question. While target date managers may move to incorporate alts, I guess there remains a question to what extent will plan sponsors embrace this? Curious your viewpoints there. What are some of the steps you guys are taking to help support adoption from plan sponsors? How are you thinking about the level of safe harbor protection that is being proposed in the rule from the DOL, as opposed to a more broader protection from a congressional safe harbor that that might offer? Just curious what you're hearing around the degree of legal protection.

Yeah. Taking those in reverse order, we were very pleased with the DOL proposed rulemaking. It was very much in line with the position we were indirectly advocating for through our contacts in industry and the lobbyists representing industry. We liked the idea that it was process-based rather than asset class specific. We don't want Washington picking winners and losers. We just wanted a fair playing field, as we've had outside the DC, not Washington, D.C., but defined contribution space. Sorry to conflate there.

We believe that the six basic criteria that DOL laid out in the proposal line up very well for the types of offerings we're going to be able to bring, both in terms of the asset management solutions, but also things like benchmarking and the partnership that we've got with FTSE Russell, with daily priced indices available as potential benchmarks for these kinds of products. Right? We think we've got interesting angles there. In terms of plan sponsor adoption, it's going to vary a bit, Mike, based on which of the different channels we were kind of talking about, right? If it's private markets get adopted into off-the-shelf target date, not a new series, the adoption cycle for the plan sponsor, i.e., the employer, is negligible.

It's one of education and comforting them on the inclusion if they've got questions, but the target date they've already got will now have privates included. If it's a new series, obviously, there's a whole go-to-market that the target date managers will have to go through. In terms of our role, irrespective of all of that, we view it as one of education. Based on the experience that we've had, not only over the last six years with the private wealth team here, but going back for a number of us over decades of dealing in the wealth channel, it's really the same playbook in terms of education. Finally, to circle back to the DOL proposal versus congressional.

While congressional action and legislative response would clearly be stronger in that it would withstand the test of time more thoroughly, we think that the route that DOL went here by it being process-based, as opposed to, again, specifically picking a winner or loser, has better legs, longer legs, than if they had tried to pick winners and losers. We feel good about where they ended up. In talking to the channel, people are happy with where the DOL ended up, and we're prepared to proceed on this basis, and we're hearing those in the channel being willing to proceed on this basis as well.

Great. Thanks for that. Just as a follow-up question, maybe also just on the secondary day 1 markup topic, I guess, curious your views around the scope for the industry practice potentially changing, what the implications might be. Then more broadly, in a hypothetical scenario, if redemptions were to pick up in secondary vehicles, just given everything happening in the direct lending space in the private wealth channel today, can you just speak to remind us how you manage liquidity in these secondary private wealth vehicles, how you might navigate a hypothetical scenario to the extent redemptions were to be larger than, say, 5% requests for an extended period, 12 months or longer. I mean, arguably, the credit vehicles in the private wealth space are benefiting from principal payments. Secondary is also generally closer to realization cycle in terms of older-aged funds oftentimes.

I guess how much of the cash flows are dependent upon a monetization cycle versus otherwise and such? Thank you.

Hey, Michael. I'll take the first part of that question. I think it's pretty hard to see why GAAP would make a change here in how the accounting practices are managed in the industry. The last time there was a change was when FAS 157 was unrolled in the early 2000s. Since then, the valuation practices have been pretty consistent, and they work. It's hard to see how or why they would make a change. To place a finer point on any change that might happen based on this notion of a markup, which we would describe as a fair value being purchased at a discount. Take, for example, a fund that has 500 limited partners, and you have 10-20 or 30 different secondary transactions, each happening at a different price for the same portfolio across these different LPs.

It would be hard to see why the accounting rules would change to recognize all these different seller situation transactions now being the fair value or the reported value. I think the way GAAP made their changes decades ago has proven the test of time and works well. Hard to see how or why that would change.

This is Jason, pivoting to how we manage for liquidity inside the equity-driven strategies for the evergreen funds. What we do is we take advantage of the fact that we've got extreme diversification across lots and lots of different underlying portfolio companies, directly or indirectly. We take advantage of the fact that with portfolios of that level of diversification, we can be much more predictive in what the cash flows are going to look like coming off realizations. Even over the last number of years, where the liquidity story has been very depressed, these funds still, in buyout portfolios, you're still seeing double-digit percentage cash coming off the portfolio each year. Right? That alone can satisfy quite a bit of the liquidity demands without having to sell assets or the like.

Second, we maintain a credit facility that can be used to help satisfy liquidity. That is all designed to have us be able to go through depressed liquidity periods with depressed fundraising, and still not have to sell an asset for something like 18 months, and still be able to satisfy the max 5% liquidity requirements, the redemptions.

The only thing I would add to that is, there was a part of Ben's question earlier about why secondaries are appropriate for these types of evergreen funds. I think it's exactly what Jason just described. To achieve that extreme level of diversification and to have a portfolio of assets that are of varying vintage years and ages across the portfolio, and thus are generating liquidity over time, we really think the secondary strategy serves that purpose incredibly well.

Great. Thanks so much.

Thank you. One moment for the next question. Our next question is coming from the line of Alex Blostein of Goldman Sachs. Your line is open.

Hey, good afternoon, guys. This is Anthony on for Alex. I had a couple questions on the wealth channel. I guess first on the credit side. Flows here continue to be pretty strong despite the rest of the industry seeing headwinds. Maybe what are you hearing on the ground there? Maybe with regards to your SPRING product, flows and performance have been very strong, partially driven by a few high-profile companies which are about IPO. How are you thinking about the durability of flows and performance in this product once these companies go public?

Hi, Anthony. Starting with the credit flows. Look, I think one thing that's really accrued to our benefit from all of the attention on the redemption stories in the BDCs has been the power of the multi-manager approach that we take in credit, driving extreme diversification, right? Targeting under 1% positions. 2, being able to deploy at scale as capital flows come in, and not have to sit on cash, not have to rely heavily on the broadly syndicated loan market or other public credit markets. That's been very powerful, and it's driven really high performance relative to the BDC market. What we've seen in conversations with the channel has really been a recognition of the story we've been telling all along, and the relative attractiveness of that model to the direct manager BDCs. That's what we've really seen is rotation.

Particularly, post the quarter end, it's picked up quite a bit, and I'm sure you've seen the flows on the screen. After a $50 million quarter, we've seen $125+ million in a month. It's certainly picking up. I'm not saying that that level is sustainable long-term right now, right? We're still adding to the syndicate. The flows have certainly been strong on recognition of the power of the model.

On your second question about SPRING. Look, I think would suggest that the interest and demand that we are seeing for that product is driven by more than just a few high-profile companies. I think there is clearly incredible demand for high-quality exposure to the venture capital asset class and the innovation economy coming from the individual investor. Two, I think there's recognition that the SPRING vehicle is perhaps a better way for the individual investor to get access to that part of the market and to gain that curated exposure than the previously existing opportunities that one might have to invest in these pre-IPO companies. I think there's also a recognition that SPRING is really a one-of-a-kind type of fund, given our market-leading position in the venture asset class.

On top of that, our venture team has clearly come to the view that there is this power law that exists in venture. Something like the top 100 companies have driven close to 50% of the value creation over the last decade. As a result, we are looking to build reasonably concentrated portfolios in what we believe to be the best ideas and the biggest value drivers within the venture ecosystem. We had done a deep dive into the 50 largest positions. Last quarter, those 50 positions represented something like 75% of the total value of that fund, and about 75% of those companies were exposed to AI tailwinds or AI native across a variety of different parts of the market, whether space, AI, defense tech, cybersecurity, fintech, et cetera. Again, I think it's more than just a few high-profile companies.

Again, this demand for venture and innovation economy exposure by the individual investor and recognition that SPRING is a better way to access that than SPVs.

Thanks. That's helpful. I guess for my follow-up, maybe just on the Undeployed Fee-Earning Capital. It's stepped up quite a bit quarter-over-quarter, even excluding the kind of closes and the secondaries funds. Could you kind of talk through the drivers of the sequential growth?

Sure. Yeah, no, there were a number of drivers of the UFEC balance in this quarter to this record level of $40 billion. In the past, we've often tried to highlight roughly how much of that needs to be deployed over time as opposed to how much of it needs to be activated once those funds move into the activation period. Today, rough numbers, something like $6 billion is subject to activation. The biggest drivers of that have been some of the current commingled funds. We mentioned that our private equity co-investment fund activated post-quarter end. We also mentioned the sizable initial closings of the private equity secondaries fund and the private equity GP-led secondaries fund. Those are both subject to activation, as are a handful of different separate accounts that are currently in that balance.

If we look at the net sort of $33 billion, $34 billion that's subject to deployment. Again, if you look at the last 12 months, they've been deploying at a roughly $8 billion pace. Kind of continues to keep us right in the middle of that three to five-year time period that we've always talked about in terms of deploying that capital over time. The other drivers of that balance would have been some sizable separate accounts that we had, particularly across our infrastructure and private credit business, where we had some important re-ups in our separate account business that would have been the other major drivers of the balance this quarter.

Thank you.

Thank you. One moment for the next question. Our next question is coming from the line of Brennan Hawken of BMO. Please go ahead.

Hey, it's Mark on for Brennan. I wanted to ask on private wealth, it continues to be impressive, generating $2 billion in subscriptions each quarter. Given some of the vehicles are newer, e.g., STPEX, CRDEX, and as the syndicate matures, what's a reasonable way to think about where this could ultimately ramp to and maybe on what timeline?

I look at the ramp that we saw in SPRIM U.S. of how the monthly flows have picked up over time as a good baseline for how to think about CRDEX and STPEX in terms of the ramp. STPEX had the initial launch month where we saw a ton of inflows, but in terms of the syndicate buildup and ramp, I use the SPRIM ramp line as my kind of base case. Similar with CRDEX, we had the in-kind secondary we did two years back leading to an influx of assets. If I look at kind of the slope of the line now, it's generally in line with the SPRIM ramp.

I would look back at the SPRIM ramp up inflows and use that as your base case of how those newer funds we believe are likely to ramp rather than looking at the SPRING curve.

Helpful. Then with a sizable amount of accrued carry, 59% tied to funds over five years old, understanding it's difficult in terms of the environment and timing, but what needs to change in the exit environment to drive realizations back towards more normalized levels? Kind of how should we think about the timing and cadence of monetizations from here? Thanks.

Yeah. I'll start. David, jump in if you have anything to add here. Always a little bit difficult to predict the timing, particularly given that we don't control it. What I would say overall is both for StepStone but also for the industry, we have seen that realizations have been picking up over the last couple of years in absolute dollar terms, if you will. What remains well below historic levels is the yield or those distributions as expressed as a percentage of overall net asset value, given how that net asset value grew in the 2021-2022 time period. We've seen things move in the right direction. I think certainly many of us in the industry came into calendar 2026 cautiously optimistic. I stress the word cautiously because in a lot of ways it felt very similar to the start of 2025 when that momentum was disrupted by tariffs.

This year was not tariffs, but the combination of AI disruption, private credit concerns, a war in the Middle East that has at least temporarily slowed down some of the exit activity. There are still exits happening. We in recent weeks have had a combination of full exits. We've continued to have a number of partial realizations, which continues to be a trend that we see, either through continuation vehicles or just managers deciding to sell a partial stake as opposed to a complete exit. I think that's one of the things that we need to see come back is the return of the full exit to really drive some of those realization numbers and carry distributions back to historic norms.

Thanks.

Thank you. One moment for the next question. Our next question will be coming from the line of Michael Brown of UBS. Please go ahead.

Great. Okay, thanks for taking my question. Guys, I wanted to start on the SPW buy-in. Can you just maybe walk us through the range of potential outcomes here when you think about maybe how you plan to fund the potential buy-in obligation, maybe talk through the mix of cash and equity, maybe the expected range of share issuance, and then key levers you have to manage for the liquidity and cost of capital for that transaction, and then any color you can add on the updated views on the accretion potential for shareholders. Thank you.

Yeah. Thanks for the question. This is David. Look, the ultimate purchase price is going to depend on a number of factors, it's hard to really put a range on what that ultimate price is going to be. It's going to depend on the actual performance of the private wealth business, the actual Step trading multiple. Once you figure out the purchase price, the number of shares is a function of the Step trading multiple. Currently, the purchase price is payable in cash and up to 75% in equity. We don't have a predetermined formula on how we're going to settle this today. We'll figure that out as we get closer. How we're going to fund it, again, it can be in a combination of cash, debt, equity, financing. Again, we'll figure that out as we get closer.

Again, the accretion tends to be bigger as the Step multiple grows by function of the fact that the purchase price is capped at 20. Whenever Step is trading above 28.5 on an LTM multiple basis, it goes above 28.5, it actually becomes more accretive as the transaction executes.

Great. Yep.

Makes sense. Sorry, go ahead.

The other thing I might add is I think you should expect it to be a largely equity-based consideration to maintain an important alignment of interest among the groups. That's something that we've had as a firm culturally as I think one of our key drivers of success, is having that shared ownership in our future outcomes.

Right. Of course, that makes sense. Can you just remind us, is there a lockup on that portion of the equity that would be issued?

30% is not subject to lockup. The rest is locked up for over three years. It gets released a third a year.

Great. Okay. Just maybe one quick follow-up. A lot's already been asked and answered, but I wanted to just ask a little bit more about the FTSE opportunity. As we think about the longer-term opportunity here, and if we dream the dream, is there a chance that there's more indexed AUM that could ultimately follow that opportunity? Or do you think there's maybe broader licensing opportunities for Step as you think about that index?

Yeah, thanks, Mike. It's Mike here. I think the answer is yes and yes. I would say the longer-term vision, like you said, the dream of dreams is an AUM play around some sort of investable index or indices across the private markets. In many ways, the tickerized evergreen vehicles that StepStone manages, you could almost look at that as SPRIM being a version one. It's that the liquidity is available on the ticker on the buy, but on the way out there is, of course, a monthly redemption. How to create a daily tradable index is really the solve here that we're going to try to work on. The key is first the adoption rate of the daily price indices that FTSE StepStone are out in the marketplace with, and that will take some time.

Once those adoption rates are at a critical mass, we do think that there is a really good and compelling opportunity here to create some sort of investable products around those daily indices. Yes, by all means, we do think the licensing opportunity will only grow from here. We started out with a couple of large, broad-based daily price indices, and as those indices get adopted, we expect to get more granular over time and issue more indices. In fact, it's reasonable to expect customized indices to be developed over time as well that are very client-specific. We think it's a broad opportunity, and yes to both questions.

Great color. Thanks for taking my questions.

Thank you. One moment for the next question. Our next question is coming from the line of John Dunn of Evercore. Please go ahead.

Thank you. Another on SPRING. You mentioned the several late-stage venture investments. With VC secondaries becoming a bigger driver for you guys and the industry, maybe could you give us a little more color kind of behind the curtain as to why you think you'll be able to maintain your lead in this area, like how you source these investments and kind of what makes your team differentiated in terms of process?

Sure. No, happy to. I think in addition to SPRING, also manage the really industry-leading venture capital secondaries fund. Last time around, raised a bit over $3 billion, and that's a fund that's returning to market here shortly as well. It's a story that very much rhymes with the story across the StepStone platform in terms of our presence and our advantages as a secondaries investor. A lot of it driven by the market-leading amount of primary capital that we are deploying in the market, and as a result, the relationships that we have with GPs, the insights that that drives across their funds and their portfolios, the sourcing advantages that it drives across the business as well.

One of the things that I've often commented on during these calls that I think our venture team has done a particularly good job of is to be very proactive about identifying those top 50, those top 100 venture-backed assets that they want to own, and then finding and using a variety of different ways to go and acquire exposure to those companies in the most attractive way possible. That can take the form of seasoned primary investments. It can take the form of LP secondaries, of GP-led secondaries.

One of the things that you heard us talk about last quarter on this call was also a significant amount of, for example, the SPRING portfolio and our VC secondaries portfolio is driven by direct secondaries and have really spent the time and effort to build direct relationships with many of the companies that we're investing in, their management teams, the key GPs that are backing those companies, recognizing that that is sort of required and necessary in order to get access to and exposure to some of the highest quality venture-backed assets. It's all those things that are really driving our market-leading position in the venture secondary space.

Got it. Could you tell us when the last valuation on SpaceX was done in SPRING?

The valuation in our fund?

Yeah.

Last valuation at which SPRING invested?

The first.

We value the portfolio monthly.

Got it. Great. Thank you.

Thank you. That does conclude today's Q&A session. I would like to turn the call over to Scott Hart for closing remarks. Please go ahead, Scott.

Great. Thank you very much, everyone, for joining today's call and for your continued interest in the StepStone story. We look forward to connecting with many of you in the days and weeks to come. Thank you.

Thank you for joining today's conference call. This concludes today's program. You may all disconnect.