10-K: StepStone Group Reports Robust Revenue Growth and AUM Expansion in Fiscal 2025, Despite Net Loss Attributable to Shareholders

StepStone Group Inc. announced a significant 65% surge in total revenues to $1.17 billion for fiscal year 2025, driven by strong management and advisory fees and a rebound in carried interest, though the company recorded a net loss attributable to StepStone Group Inc. of $179.56 million.

Summary

• Total revenues for fiscal year 2025 increased by 65% to $1,174.8 million, up from $711.6 million in fiscal year 2024.
• Management and advisory fees, net, grew 31% to $767.0 million in fiscal year 2025, fueled by new client activity and a 23% increase in average Fee-Earning Assets Under Management (FEAUM).
• Realized carried interest allocation revenues surged by 223% to $159.7 million in fiscal year 2025, while unrealized carried interest allocation revenues increased 71% to $301.2 million.
• Legacy Greenspring carried interest allocation revenues saw a positive swing of $149.5 million, reaching $74.3 million in fiscal year 2025 compared to a $(75.2) million reversal in the prior year.
• The company reported a net loss attributable to StepStone Group Inc. of $(179.56) million for fiscal year 2025, a notable shift from a net income of $58.09 million in fiscal year 2024, primarily due to a significant increase in equity-based compensation.
• Adjusted Net Income (ANI), a non-GAAP measure, increased 75% to $244.1 million in fiscal year 2025 from $139.4 million in fiscal year 2024.
• Fee-Related Earnings (FRE), another non-GAAP measure, rose 64% to $312.2 million in fiscal year 2025 from $189.8 million in fiscal year 2024.
• Assets Under Management (AUM) expanded by 20% to $189 billion as of March 31, 2025, from $157 billion as of March 31, 2024.
• Fee-Earning AUM (FEAUM) increased 29% to $121.4 billion as of March 31, 2025.
• The company had $24.6 billion of undeployed fee-earning capital as of March 31, 2025.
• Total debt obligations, net of debt issuance costs, stood at $269.3 million as of March 31, 2025, following the issuance of $175.0 million in Series A senior notes and an increased revolving credit facility of $300.0 million.
• The first annual exchange to acquire approximately 5% of the equity interests of SRA, SRE, and SPD was completed on May 31, 2024, involving $13 million in cash, 513,394 Class A common shares, and 2,239,185 Class D units.

Sentiment

Score: 6

Explanation: Strong underlying business growth in revenues, AUM, FEAUM, and non-GAAP earnings (ANI, FRE) indicates operational strength and market position. However, the significant net loss attributable to shareholders due to a large non-cash equity-based compensation expense, coupled with substantial potential future liabilities from SPW and TRA, introduces a notable negative financial impact for the current period and future obligations. The positive operational momentum is somewhat overshadowed by these accounting and future payment considerations.

Positives

• Total revenues increased by a substantial 65% to $1,174.8 million in fiscal year 2025, indicating strong top-line growth.
• Management and advisory fees, net, grew 31% to $767.0 million, driven by new client activity and a 23% growth in average FEAUM, highlighting consistent core business expansion.
• Realized carried interest allocation revenues increased significantly by 223% to $159.7 million, and unrealized carried interest allocations rose 71% to $301.2 million, reflecting positive investment performance.
• Non-GAAP financial measures, Adjusted Net Income (ANI) and Fee-Related Earnings (FRE), showed robust growth of 75% and 64% respectively, indicating strong underlying operational profitability.
• Assets Under Management (AUM) grew 20% to $189 billion, and Fee-Earning AUM (FEAUM) increased 29% to $121.4 billion, demonstrating successful capital attraction and deployment.
• The company maintains a high client retention rate of approximately 95% for its advisory clients since inception, underscoring strong client relationships and service quality.
• StepStone's investment performance track record consistently outperforms the MSCI ACWI Index across all strategies (Primaries +0.6%, Secondaries +3.2%, Co-investments +1.7%), validating its investment philosophy and execution.
• The business model is diversified, with no single client contributing more than 5% of total management and advisory fees, mitigating concentration risk.
• A significant $24.6 billion in undeployed fee-earning capital provides a strong pipeline for future management fee revenue generation.
• Strategic initiatives, including the expansion of the private wealth channel and the ongoing acquisition of asset class entities (SRA, SRE, SPD), are progressing to enhance future growth and capabilities.
• The company emphasizes responsible investment, being a UNPRI signatory since 2013 and implementing climate and stewardship policies, which aligns with growing investor demand for ESG considerations.

Negatives

• The company reported a net loss attributable to StepStone Group Inc. of $(179.56) million in fiscal year 2025, a significant reversal from net income in the prior year.
• Total expenses increased by a substantial 167% to $1,441.6 million in fiscal year 2025, largely driven by a $629.0 million increase in equity-based compensation for liability classified awards related to the SPW profits interest.
• A non-operating loss of $32.5 million was incurred in fiscal year 2025 due to a payment associated with a secondary transaction in one of its private wealth funds.
• The estimated future cash payments for the SPW profits interest liability range from $165.3 million to $661.1 million, representing a significant potential future cash outflow.
• The company has a substantial Tax Receivable Agreements liability of $313.7 million as of March 31, 2025, which will require future cash payments and could exceed actual tax savings in certain circumstances.

Risks

• The success of the business depends on the identification and availability of suitable investment opportunities for clients, which are subject to market conditions outside of the company's control.
• Poor investment performance of StepStone Funds or recommended investments could lead to a decline in revenues and earnings, and adversely affect the ability to raise future capital.
• Historical investment performance is not indicative of future results and may not correlate with the performance of Class A common stock.
• Competition for access to investment funds and other investment opportunities is intense, potentially limiting the company's ability to secure desired investments.
• Third-party clients in many StepStone Funds have the right to remove the company as general partner or terminate investment periods, which could substantially decrease revenues.
• The ability to retain senior leadership and attract additional qualified professionals is critical, and failure to do so could adversely affect client relationships and investment strategies.
• Failure to appropriately manage conflicts of interest could damage the company's reputation and lead to client dissatisfaction, litigation, or regulatory actions.
• Obligations to clients and other third parties may conflict with stockholders' interests, particularly due to the differing tax positions of management's economic interests.
• Higher interest rates or decreased credit availability may adversely affect the ability of StepStone Funds and portfolio companies to achieve attractive rates of return due to dependence on leverage.
• Clients in commitment-based structures may not satisfy their contractual obligation to fund capital calls, impacting fund operations and performance.
• Failure to comply with investment guidelines set by clients could result in damage awards or a reduction in AUM.
• Valuation methodologies for certain illiquid assets are subjective, and actual values may differ significantly from reported fair values, potentially leading to losses.
• The company may not be able to maintain its desired fee structure due to industry pressure from private markets clients to reduce fees, impacting profit margins.
• The company may need to pay clawback or contingent repayment obligations if funds do not achieve preferred returns, potentially requiring the use or reservation of cash.
• Investment management activities involve relatively high-risk, illiquid assets, and there is a risk of losing some or all amounts invested.
• StepStone Funds may face risks relating to undiversified investments, leading to significant adverse effects if a concentrated category experiences difficult market conditions.
• Banking system volatility may adversely affect the results and financial condition of StepStone Funds or StepStone generally, including access to funds and ability to call capital.
• Investments in funds and companies that StepStone does not control mean performance depends significantly on third-party decisions.
• Risk management strategies and procedures may leave the company exposed to unidentified or unanticipated risks, particularly in new lines of business.
• The due diligence process undertaken for investments may not reveal all relevant facts or guarantee investment success.
• Restrictions on the ability to collect and analyze data regarding client investments could adversely affect the business.
• Dependence on the reliability of proprietary data and technology platforms; failures or interruptions could disrupt business and damage reputation.
• A compromise or corruption of systems or those of vendors containing confidential information could damage business relationships and financial results.
• Cybersecurity risks and incidents, including sophisticated attacks and the impact of artificial intelligence, could disrupt operations and affect financial condition.
• Risks related to emerging and changing technology, including artificial intelligence, could impact results of operations or financial condition if not anticipated or responded to effectively.
• Employee misconduct could harm the company's ability to attract and retain clients and subject it to significant legal liability and reputational harm.
• Damage to professional reputation or legal liability to clients and third parties under securities or other laws and regulations.
• Non-U.S. operations are subject to special financial and business risks, including foreign currency fluctuations, regulatory changes, and political instability.
• Investments in certain jurisdictions may be subject to heightened risks, including currency exchange matters, different capital markets, and economic/political instability.
• Revenues from the real estate asset class are subject to inherent risks in real estate ownership, operation, construction, and development, including market conditions and regulatory changes.
• The real estate asset class is exposed to commercial real estate values and loans, which are expected to be adversely affected by decreased occupancy rates, higher interest rates, and decreased credit availability.
• Investments in infrastructure assets may expose the company to increased risks and liabilities, including construction risks, operational interruptions, and regulatory control.
• The substantial growth of the business in recent years may be difficult to sustain, placing significant demands on resources and increasing expenses.
• Entering into new lines of business may result in additional risks and uncertainties, including insufficient expertise or loss of clients.
• Long-term agreements to acquire all equity interests of asset class entities may not be accretive to existing shareholders and are subject to closing conditions and regulatory approvals.
• The option agreement with respect to SPW may result in substantial purchase prices, potentially requiring equity or debt financing.
• Current or future indebtedness may expose the company to substantial risks, including difficulty withstanding adverse economic conditions or meeting debt service requirements.
• Risks in using custodians, counterparties, administrators, and other agents, including errors, defaults, and inability to recover assets.
• Intense competition in the investment management and investment advisory business could adversely affect the ability to make successful investments and raise future funds.
• Difficult or volatile market and political conditions (e.g., rising interest rates, inflation, trade policies, geopolitical conflicts) can adversely affect the business.
• Operating in a heavily regulated industry; any failure to comply with government regulations could adversely affect the company.
• Evolving laws and government regulations, including increased SEC scrutiny and new rules (e.g., anti-money laundering, DORA, MiFID II, anti-ESG policies), could increase compliance burdens and regulatory risk.
• Future changes to tax laws or the effective tax rate could materially adversely affect the company and reduce net returns to stockholders.
• Potential requirement to pay additional taxes under the Centralized Partnership Audit Regime.
• Federal, state, and foreign anti-corruption and sanctions laws create potential for significant liabilities and reputational harm.
• Regulation of investment advisers outside the United States could adversely affect the ability to operate the business.
• Divergent views of investors and differing approaches by governmental authorities regarding sustainability-related factors and human capital management may affect capital commitments or subject the company to increased scrutiny.
• As a controlled company, the company relies on exemptions from certain Nasdaq corporate governance requirements, which may not afford the same protections to stockholders as non-controlled companies.
• SSG depends on distributions from the Partnership to pay dividends, taxes, and other expenses, including payments under Tax Receivable Agreements, and restrictions on such distributions could affect liquidity.
• The IRS might challenge tax basis step-ups and other tax benefits received in connection with the IPO and subsequent acquisitions of Partnership units.
• Payments under Tax Receivable Agreements may be accelerated and/or significantly exceed actual tax benefits, potentially having a substantial negative effect on financial condition and liquidity.
• The Partnership may be required to make substantial distributions to SSG and existing partners, potentially exceeding the overall effective tax rate applicable to a corporate taxpayer.
• The company may be required to fund withholding tax upon certain exchanges of Class B or Class D units into Class A common stock by non-U.S. holders.
• Tax and other liabilities attributable to pre-IPO investors as a result of certain reorganization transactions.
• SSG may not be permitted to deduct its distributive share of compensation expense under Section 162(m) of the Code, potentially increasing U.S. federal income tax liability.
• Risk of being deemed an investment company under the Investment Company Act of 1940, which could make it impractical to continue business as contemplated.
• A change of control, including the effect of a Sunset on the voting structure, could result in an assignment of investment advisory agreements requiring client consent.
• Conflicts of interest may arise between senior leadership (holding economic interests through other entities) and Class A common stockholders or the company.
• Reliance on equity ownership, governance rights, and contractual arrangements to control non-wholly owned consolidated subsidiaries may provide less effective operational control.
• The disparity in voting rights among the classes of common stock and the inability of Class A common stockholders to influence decisions may adversely affect the price of Class A common stock.
• The ability to use cash received in distributions from the Partnership may be limited, potentially leading to accumulated cash at SSG not invested in the business.
• The dual class structure of common stock may adversely affect the trading market for Class A common stock.
• The ability to pay dividends is subject to the discretion of the board of directors and may be limited by the holding company structure and Delaware law.
• 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 limit stockholders' ability to replace management.
• Exclusive forum provisions in the amended and restated certificate of incorporation could limit stockholders' ability to obtain a favorable judicial forum for disputes.

Future Outlook

StepStone Group anticipates continued growth by expanding existing client mandates and attracting new clients globally, particularly within the private wealth sector. The company plans to enhance operating margins by leveraging its scaled platform infrastructure and to monetize its proprietary data and analytics capabilities. Strategic and tactical acquisitions are also a priority to complement organic growth. A significant future event is the anticipated 'Sunset' of Class B common stock voting rights on September 18, 2025, which will equalize voting power per share. The second annual exchange under the Asset Class Entities Transaction Agreements is expected around May 31, 2025.

Management Comments

• "We believe our success and growth since our founding has been driven by our continued focus on providing a high level of service, tailored to our clients evolving needs, through: Our focus on customization, Our global-and-local approach, Our multi-asset class expertise, Our proprietary data and technology, Our large and experienced team."
• "We believe our biggest asset is our people, 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."
• "Our management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures... and have concluded that... our disclosure controls and procedures... are effective to provide reasonable assurance that information that we are required to disclose... is recorded, processed, summarized and reported within the time periods specified... and that such information is accumulated and communicated to our management... to allow timely decisions regarding required disclosure."

Industry Context

The private markets industry is experiencing increasing investor demand for exposure and allocations, driven by a focus on lower-correlated and absolute levels of return. This trend is accompanied by rising complexity due to a proliferation of fund managers and specialized strategies, necessitating customized solutions. Investors are increasingly consolidating capital with fewer, multi-asset class managers, favoring firms with global reach and deep expertise. The high-net-worth and mass affluent segments represent a growing but underserved market due to regulatory and structural barriers. The industry faces intense competition and is subject to evolving and intense governmental regulation, including increased scrutiny on fees, conflicts of interest, and new rules related to data privacy, anti-money laundering, digital operational resilience (DORA), and sustainability (ESG). Geopolitical tensions and trade policies also contribute to market volatility and economic uncertainty, impacting fundraising and capital deployment.

Comparison to Industry Standards

• StepStone has consistently outperformed the MSCI ACWI Index, a widely used benchmark for global equity market performance, across all its investment strategies on an inception-to-date basis as of December 31, 2024.
• Specifically, the company's Primaries strategy outperformed the benchmark by 0.6%, Secondaries by 3.2%, and Co-investments by 1.7%, with a total outperformance of 0.9% against the MSCI ACWI Total Return using the Direct Alpha public market equivalent method.
• The company highlights its proprietary data and technology platforms (SPI Research, SPI Reporting, SPI Pacing, secondary pricing engine) as a preeminent advantage, providing significantly more information and analytical capabilities than most private markets investors typically have access to.
• StepStone's global operating platform, with offices in 28 cities across 16 countries and a local staffing model, is presented as a distinct competitive advantage for sourcing deals and building client relationships compared to regionally focused competitors.

Corporate Governance

Legal Proceedings

• In the normal course of business, the company may be subject to various legal, judicial, and administrative proceedings. As of March 31, 2025, management does not expect any potential liability related to current legal proceedings or claims that would individually or in the aggregate materially affect its consolidated financial statements.

Related Party Transactions

• A substantial portion of the company's management and advisory fees ($570.9 million in fiscal 2025) and carried interest allocations ($301.2 million in fiscal 2025) are earned from various StepStone Funds.
• Due from affiliates totaled $92.7 million as of March 31, 2025, primarily consisting of receivables from StepStone Funds, advances for fund costs, amounts due from employees, and loans from affiliated entities.
• Due to affiliates totaled $331.8 million as of March 31, 2025, mainly comprising amounts payable to non-controlling interest holders under Tax Receivable Agreements ($313.7 million), amounts payable to StepStone Funds, and distributions payable to certain employee equity holders of consolidated subsidiaries.
• Payments of $9.8 million were made under the Tax Receivable Agreements to related parties during fiscal year 2025.
• Legacy Greenspring carried interest allocations are entirely payable to certain employees who are considered affiliates of the company.
• The SPW profits interest liability is related to certain members of the SPW management team, who are employees and affiliates.
• The Transaction Agreements for SRA, SRE, and SPD involve exchanges with seller parties, including employee owners, for Class D units and Class A common stock.

Stakeholder Impact

• Shareholders: Experienced a net loss attributable to StepStone Group Inc. in fiscal 2025, but benefited from strong underlying revenue and non-GAAP earnings growth. Dividends were declared. The dual-class voting structure and controlled company status limit the influence of Class A shareholders. Potential future dilution from equity issuance for acquisitions or unit exchanges exists. Tax Receivable Agreements reduce cash available for dividends.
• Employees: Received significant equity-based compensation, cash-based compensation, and performance fee-related compensation. Nearly two-thirds of employees hold equity interests, and over 200 are eligible for carried interest allocations. The company invests in employee development and offers competitive benefits, aiming for high retention.
• Clients: Benefit from customized investment solutions, advisory and data services, and access to diverse investment strategies and proprietary technology. The company's high client retention rate indicates satisfaction, but poor investment performance could negatively impact client relationships.
• Creditors: The company has debt obligations and is subject to covenants under its credit agreements. Its ability to meet these obligations depends on cash flows from operations and distributions from investments.
• Suppliers/Vendors: The company relies on third-party service providers for critical functions, exposing them to cybersecurity risks and potential disruptions if vendors fail to perform.

Next Steps

• The second annual exchange under the Asset Class Entities Transaction Agreements is expected to occur on or about May 31, 2025.
• A quarterly cash dividend of $0.24 per share of Class A common stock and a supplemental cash dividend of $0.40 per share of Class A common stock were announced on May 22, 2025, payable on June 30, 2025.
• The 'Sunset' of Class B common stock voting rights, which will equalize voting power per share, is anticipated on September 18, 2025.
• The SPW management team has the right to put their profits interest to StepStone on June 30, 2026, or at the end of any fiscal quarter thereafter.
• StepStone has the right to acquire the SPW profits interest at the end of any fiscal quarter after June 30, 2027.
• The company will continue to invest in human resources and infrastructure to support its growth and expand its private wealth platform.
• Ongoing monitoring of global economic conditions, regulatory changes, and geopolitical tensions will continue to assess their impact on financial markets and the business.
• Compliance policies and procedures will be reviewed and updated to align with new regulations, including the UK Economic Crime and Corporate Transparency Act 2023 (ECCTA) and the new corporate offense of failure to prevent fraud (effective September 1, 2025).
• The company will continue to evaluate U.S. and global legislative developments concerning Pillar Two for future tax reporting periods.
• The company is preparing for compliance with the EU Alternative Investment Fund Managers Directive II (AIFMD II) and the new EU anti-money laundering and counter-terrorist financing regime.
• The company will adapt its cybersecurity program to the evolving security landscape and comply with new regulations like DORA (effective January 17, 2025).

Key Dates

Recommendation

Keywords

Private markets, Investment firm, Asset management, Advisory services, Private equity, Infrastructure, Private debt, Real estate, AUM, AUA, FEAUM, Carried interest, Incentive fees, SEC filing, 10-K, Financial performance, Corporate governance, Risk management, Strategic growth, Capital markets, Institutional investors, Private wealth, Alternative investments, Fund-of-funds, Secondaries, Co-investments, SPI by StepStone, Nasdaq, STEP