StepStone Group (NASDAQ:STEP) reported mixed GAAP results but strong underlying profitability and fundraising momentum in its fiscal third-quarter 2026 earnings call, highlighted by record core fee-related earnings and sizable incentive fees from its Spring Evergreen Fund.
Quarterly results: GAAP loss driven by accounting item, but higher FRE and adjusted net income
The company reported a GAAP net loss attributable to StepStone Group Inc. of $123 million, or $1.55 per share. Management emphasized that GAAP results were negatively impacted by required accounting for changes in the fair value of the “buy-in” of StepStone Private Wealth profits interests, which flows through the income statement.
StepStone posted adjusted net income (ANI) of $80 million, or $0.65 per share, up from $53 million, or $0.44 per share, in the prior-year quarter. The increase was attributed to higher fee-related earnings and higher performance-related earnings.
Spring incentive fees and performance: strong year, but management expects moderation if returns normalize
Performance-related revenue was a key focus of the quarter. Management said total performance fees (inclusive of incentive fees) were “very strong,” driven by over $200 million of gross incentive fees tied to the Spring Evergreen Fund. StepStone attributed these incentive fees to the fund’s asset growth and investment performance, which was described as 39% over the year.
David Park, CFO, said gross realized performance fees were $253 million, including $47 million of realized carried interest and $207 million of incentive fees. He noted that incentive fees are typically seasonally strong in fiscal third quarter due to Spring’s annual crystallization. Park said Spring’s total NAV reached $5.5 billion, more than tripling over the course of the year, and that performance was more than double the prior year.
Management also addressed the composition of Spring’s performance. CEO Scott Hart said less than 3 percentage points of Spring’s annual performance came from the markup of secondary discounts, with the remaining performance attributed to returns after the initial markup. In Q&A, executives discussed how Spring sources investments, noting the importance of direct secondaries. Jason Ment, President and Co-COO, said 34% of Spring consists of “primary directs” (not secondary), while 64% of the portfolio comes through secondaries, “the vast majority” being direct secondaries.
Looking ahead, Park said that if Spring’s investment performance is in the “mid-teens,” management would expect next year’s incentive fees to moderate slightly compared with this year, though results will depend on actual performance. He also reminded investors that much of the gross incentive fee revenue is shared with the investment team through compensation and with the private wealth team through profits interest, but said shareholders still saw a benefit, with about $25 million of the quarter’s Spring incentive fees flowing to pre-tax ANI.
Fundraising and AUM: record 12-month inflows, private wealth subscriptions above $2 billion in the quarter
StepStone highlighted a record fundraising period. Hart said the firm generated gross AUM additions of over $8 billion in the quarter and over $34 billion for the calendar year, the “best 12-month period of fundraising” in the company’s history. Mike McCabe, Head of Strategy, added that more than $21 billion of last-12-month inflows came from separately managed accounts and more than $13 billion came from commingled funds, including private wealth.
Geographically, McCabe said roughly two-thirds of inflows came from outside North America. In response to a question about regional drivers, management cited Asia and Europe as key contributors in the most recent quarter (including Singapore, Japan, Korea, Germany, and the Nordics), and also referenced the Middle East over a 12-month view. Management noted infrastructure success in Europe and described private credit demand as strong in Asia and the Middle East, with recent wins in the U.S.
Private wealth was another major growth driver. Hart said StepStone’s private wealth platform grew to $15 billion, with more than $2.2 billion in new subscriptions in the quarter. He said the firm is “comfortably generating more than $2 billion” of private wealth subscriptions per quarter and pointed to momentum across multiple fund families. McCabe added that StepStone’s evergreen non-traded BDC, S Cred, grew to nearly $2 billion in net assets.
StepStone also reported continued growth in fee-earning assets and undeployed fee-earning capital. McCabe said fee-earning AUM rose by nearly $6 billion in the quarter, while UFEC increased by about $3 billion to nearly $33 billion. Combined, fee-earning assets plus UFEC grew to over $171 billion, up more than $8 billion sequentially and over $35 billion year-over-year, which management called the strongest one-year growth in its history.
Pipeline, activations, and expense items
Management outlined a broad pipeline of funds in market or expected to return to market. Hart said StepStone is currently fundraising for private equity co-investment and private equity secondaries, and noted an initial close on the second vintage of the infrastructure co-investment fund. He said the firm is now in market with a Venture Capital Secondaries Fund and expects to return to market with a Special Situation Real Estate Secondaries Fund and a Multi-Strategy Growth Equity Fund in coming quarters.
McCabe added that notable quarterly commingled fund closes included:
- $300 million for the Private Equity Co-Investment Fund
- $100 million for the Infrastructure Secondaries Fund
- More than $600 million for the Infrastructure Co-Investment Fund (now raising its second vintage)
McCabe said the Infrastructure Co-Investment Fund and the Private Equity Co-Investment Fund (which he said has raised about $900 million to date) are expected to activate by the end of StepStone’s first fiscal quarter of 2027. He also said the firm expects first closes in the coming two quarters for its flagship private equity secondaries fund and the first vintage of its GP-led private equity secondaries fund, with activation shortly thereafter.
On expenses, Park said adjusted cash-based compensation was $107 million, reflecting a 44% cash compensation ratio. General and administrative expenses were $40 million, up $6 million sequentially, primarily due to the StepStone 360 conference held in October. He said G&A will remain seasonally high in the fiscal fourth quarter due to a venture capital conference in February.
Portfolio positioning: software exposure and AI themes discussed in Q&A
During Q&A, management addressed software exposure and AI-driven disruption risk. Hart said StepStone estimates about 11% of total AUM is in software investments, and about 7% excluding venture. He added that real estate and infrastructure have no software exposure, and said the firm’s private credit strategies have “very modest exposure” to software, noting that StepStone tends to focus on small and mid-market loans and “shy away” from ARR loans.
Hart also framed diversification and portfolio construction as “the first line of defense” in periods of disruption. In a separate exchange, he referenced StepStone’s dataset indicating that, from 2020 to 2025, roughly 27% of private equity investments were in IT broadly and just over 20% in software, with lower software exposure in the small and mid-market segment compared with the large and global market.
On the balance sheet, Park said net accrued carry ended the quarter at $875 million, up 4% from the prior quarter, and described the accrued carry as “relatively mature,” with about 65% tied to programs older than five years. The firm’s own investment portfolio ended the quarter at $338 million.
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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