10-K: StepStone Group Inc. Reports Strong FY26 Growth

StepStone Group Inc. filed its annual report for the fiscal year ended March 31, 2026, detailing significant growth in assets under management and robust financial performance.

Summary

• StepStone Group Inc. (SSG) reported total revenues of $1.99 billion for fiscal year 2026, a 70% increase from the previous year, driven by strong growth in carried interest allocations, incentive fees, and management and advisory fees.
• Assets Under Management (AUM) grew to $233 billion as of March 31, 2026, up from $189 billion in the prior year, while Assets Under Advisement (AUA) increased to $652 billion.
• Fee-Earning AUM (FEAUM) also saw substantial growth, reaching $144 billion as of March 31, 2026, a 19% increase from the prior year.
• The company reported a net loss attributable to StepStone Group Inc. of $535.8 million for FY2026, primarily due to a significant increase in equity-based compensation expenses related to liability-classified awards.
• Despite the net loss, Fee-Related Earnings (FRE), a measure of baseline earnings from recurring fees, increased by 14% to $354.4 million.
• The company announced a quarterly cash dividend of $0.28 per share and a supplemental cash dividend of $0.55 per share, both payable on June 30, 2026.

Sentiment

Score: 6

Explanation: StockSavvy.ai views this filing as mixed; while revenue and AUM growth are strong positives, the significant net loss driven by increased compensation expenses presents a notable concern.

Positives

• Total revenues increased by 70% to $1.99 billion in FY2026.
• Management and advisory fees, net, increased by 21% to $926.5 million.
• Incentive fees saw a substantial increase of 582% to $220.1 million.
• Carried interest allocations (realized and unrealized) increased significantly, with unrealized allocations growing by 135% to $708.3 million.
• Assets Under Management (AUM) grew by 23% to $233 billion.
• Assets Under Advisement (AUA) increased to $652 billion.
• Fee-Earning AUM (FEAUM) grew by 19% to $144 billion.
• Fee-Related Earnings (FRE) increased by 14% to $354.4 million.
• The company announced a quarterly cash dividend of $0.28 per share and a supplemental cash dividend of $0.55 per share, indicating confidence in future performance.
• The company's credit facility was amended and extended, increasing its capacity to $300 million and extending the maturity date to May 2029.

Negatives

• The company reported a net loss attributable to StepStone Group Inc. of $535.8 million for FY2026.
• Equity-based compensation expenses increased significantly by 160% to $1.74 billion, primarily due to liability-classified awards related to SPW profits interest.
• Total expenses increased by 109% to $3.02 billion, largely driven by the increase in equity-based and performance fee-related compensation.
• The company's deferred tax assets increased significantly, partly due to non-deductible equity-based compensation expenses.
• The company's organizational structure includes complex Tax Receivable Agreements, which could lead to substantial future payments.

Risks

• The success of the business depends on the identification and availability of suitable investment opportunities for clients.
• Poor investment performance of StepStone Funds could lead to a decline in revenues and earnings.
• Competition for access to investment funds and other investments is intense.
• Third-party clients in many StepStone Funds have the right to remove the company as general partner, which could decrease revenues.
• The company's ability to retain its senior leadership team and attract qualified professionals is critical to its success.
• Failure to appropriately manage conflicts of interest could damage the company's reputation.
• Recent and continuing higher interest rates or decreases in credit availability may adversely affect the ability of StepStone Funds to achieve attractive rates of return.
• Clients in StepStone Funds with commitment-based structures may not satisfy their contractual obligation to fund capital calls when requested.
• The company's risk management strategies and procedures may leave it exposed to unidentified or unanticipated risks.
• Cybersecurity risks and incidents could adversely affect the business by causing a disruption to operations.
• Emerging and changing technology, including AI, and corresponding regulations could impact results of operations or financial condition.
• Employee misconduct could harm the company by impairing its ability to attract and retain clients and subjecting it to legal liability and reputational harm.
• The company may face damage to its professional reputation if its services are not regarded as satisfactory or for other reasons.
• The company's non-U.S. operations are subject to certain risks, which may adversely affect its business, financial condition and results of operations.
• The substantial growth of the business in recent years may be difficult to sustain, as it may place significant demands on resources and employees and may increase expenses.
• Current or future indebtedness may expose the company to substantial risks.
• The market price of Class A common stock has been, and may continue to be, volatile.
• Anti-takeover provisions in charter documents and under Delaware law could make an acquisition more difficult and may adversely affect the market price of Class A common stock.
• The company's forum selection provisions may limit a stockholder's ability to bring a claim in a judicial forum that they believe to be favorable.

Future Outlook

The company expects to continue to grow its business by expanding existing client mandates, deploying already raised committed capital, adding new clients globally, expanding its distribution channel for private wealth clients, leveraging its scale to enhance operating margins, and monetizing its data and analytics capabilities. The company may also pursue accretive transactions to complement its platform. The company believes it will be able to meet its liquidity and capital requirements through operating cash flows, existing cash, and the ability to obtain future financing.

Management Comments

• "We believe our scale and position in private markets provide us a distinct competitive advantage with our clients and fund managers."
• "Our proprietary data and technology platforms, including SPI by StepStone (SPI), provide valuable information advantages, enhance our private markets insight, improve operational efficiency and facilitate portfolio monitoring and reporting functions."
• "We believe our people are our biggest asset, and therefore we focus on consistently recruiting the best people, many of whom are proven leaders in their areas of expertise."
• "We aim to leverage our core principles and values that have guided us since inception to continue to grow our business, using the following key strategies: Continue to Grow with Existing Clients, Add New Clients Globally, Continue to Expand Our Distribution Channel for Private Wealth Clients, Leverage Our Scale to Enhance Operating Margins, Monetize Our Data and Analytics Capabilities, Pursue Accretive Transactions to Complement Our Platform."
• "We believe our disciplined investment philosophy across our diversified investment strategies has historically contributed to the stability of our performance throughout market cycles."

Industry Context

StockSavvy.ai notes that StepStone's strong growth in AUM and FEAUM, coupled with a significant increase in carried interest, aligns with the broader trend of increasing investor allocation to private markets. The company's focus on a global-and-local approach, multi-asset class expertise, and proprietary data platforms are key differentiators in a competitive landscape.

Comparison to Industry Standards

• The company's Net IRR for Private Equity Buyout Primaries is 14.1%, which is competitive within the industry.
• The Net IRR for Private Equity Secondaries is 17.6%, indicating strong performance in this segment.
• The Net IRR for Private Equity Co-investments is 16.2%, demonstrating successful direct investment strategies.
• The company's management fees for focused commingled funds (1.01% in FY2026) are in line with industry averages for private equity and private debt funds.
• The company's overall weighted-average management fee rate across SMAs and focused commingled funds (0.64% in FY2026) is competitive, reflecting its scale and diversified offerings.

Corporate Governance

Legal Proceedings

• In the normal course of business, the company may be subject to various legal, judicial and administrative proceedings. No material impact is expected on the consolidated financial statements as of March 31, 2026.

Related Party Transactions

• The company earns management, advisory, and performance fees from various StepStone Funds.
• Amounts due from affiliates primarily relate to fees and accounts receivable from StepStone Funds, advances made on behalf of StepStone Funds, and amounts due from employees and affiliated entities.
• Amounts due to affiliates primarily relate to payments to non-controlling interest holders in connection with Tax Receivable Agreements and amounts payable to StepStone Funds and employee equity holders of consolidated subsidiaries.
• The company made payments under the Tax Receivable Agreements totaling $12.6 million, $9.8 million, and $10.3 million for the years ended March 31, 2026, 2025, and 2024, respectively.

Stakeholder Impact

• Shareholders: The net loss and significant increase in equity-based compensation may impact investor sentiment. The announced dividends provide a positive return to shareholders.
• Employees: The company's focus on talent acquisition, development, and retention, along with equity-based compensation and employee stock purchase plans, aims to align employee interests with the company's success.
• Clients: The company's global scale, customized solutions, and proprietary data and analytics are designed to meet client objectives and strengthen relationships.
• Creditors: The company's debt obligations and covenants are detailed, and it was in compliance with all covenants as of March 31, 2026.

Next Steps

• Continue to grow with existing clients by expanding mandates and deploying raised capital.
• Add new clients globally by leveraging established distribution networks and local presence.
• Expand distribution channels for private wealth clients.
• Pursue accretive transactions to complement the platform.
• Continue to monitor and adapt to evolving regulatory environments, including those related to AI and sustainability.
• Manage and integrate the increasing employee base and platform infrastructure to support growth and drive operating margin improvement.
• The company's board of directors will determine future dividend payments at its discretion.

Key Dates

Recommendation

While StepStone Group Inc. demonstrates strong revenue growth and AUM expansion, the significant net loss for the fiscal year, primarily driven by a substantial increase in equity-based compensation, introduces considerable uncertainty. The company's ability to manage these compensation-related expenses and translate its strong revenue growth into profitability will be key factors for future performance. The announced dividends are a positive, but the overall financial picture warrants a cautious 'hold' stance until profitability improves and compensation-related impacts are better understood.

Keywords

StepStone Group, SEC Filing, 10-K, Annual Report, Assets Under Management, Assets Under Advisement, Fee-Earning AUM, Carried Interest, Incentive Fees, Management Fees, Private Markets, Investment Management, Financial Performance, Equity Compensation, Stock Dividends