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StepStone Group Inc.

StepStone Group Inc.STEPEarnings & Financial Report

Nasdaq · Financials · Investment Advice

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What changed in StepStone Group Inc.'s 10-K — 2023 vs 2024

Top changes in StepStone Group Inc.'s 2024 10-K

573 paragraphs added · 520 removed · 445 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

111 edited+27 added−29 removed100 unchanged
We also have a number of additional proprietary tools that we use and license in service of our clients, including our Pacing tool that enables clients to forecast liquidity needs, our daily valuation engine that facilitates asset management solutions offering periodic subscription or liquidity (such as the mass affluent and defined contribution plan markets), ESG reporting dashboards that allow our clients to monitor their portfolio against these non-financial metrics, and a secondary pricing engine that drives operating leverage in our evaluation of larger and more complex transactions.
We also have a number of additional proprietary tools that we use and license in service of our clients, including our SPI Pacing tool that enables clients to forecast liquidity needs, our daily valuation engine that facilitates asset management solutions offering periodic subscription or liquidity (such as the mass affluent and defined contribution plan markets), ESG reporting dashboards that allow our clients to monitor their portfolio against these non-financial metrics, and a secondary pricing engine that drives operating leverage in our evaluation of larger and more complex transactions.
We believe we have scaled the personnel and infrastructure of our business to support significant growth in our client base across our existing investment offerings, positioning us well to continue to drive operating margin improvement. 14 Table of Contents Monetize Our Data and Analytics Capabilities Our proprietary database, SPI, provides access to valuable data that forms the cornerstone of our investing process.
We believe we have scaled the personnel and infrastructure of our business to support significant growth in our client base across our existing investment offerings, positioning us well to continue to drive operating margin improvement. 14 Table of Contents Monetize Our Data and Analytics Capabilities Our proprietary database, SPI Research, provides access to valuable data that forms the cornerstone of our investing process.
In a number of these countries and jurisdictions, which include the UK, European Union (“EU”), the European Economic Area (“EEA”) and certain of the individual member states of each of the EU and EEA (including Ireland and Luxembourg), Switzerland, Japan, Korea, Canada and Brazil, our operations, and in some cases our personnel, are subject to regulatory oversight and affirmative requirements.
In a number of these countries and jurisdictions, which include the UK, European Union (“EU”), the European Economic Area (“EEA”) and certain of the individual member states of each of the EU and EEA (including Ireland and Luxembourg), Switzerland, Japan, Korea, Singapore, Canada and Brazil, our operations, and in some cases our personnel, are subject to regulatory oversight and affirmative requirements.
StepStone’s retention strategy encompasses the entire life cycle of the employee, including our strategic hiring and co mprehensive onboarding processes, ongoing professional development, mentoring and sponsorship programs, our learning and inclusive culture and conduct of exit interviews to gain further insights on retention. Total Rewards We continuously strive to provide a competitive total rewards package.
StepStone’s retention strategy encompasses the entire life cycle of the employee, including our strategic hiring and co mprehensive onboarding processes, ongoing professional development, mentoring and sponsorship programs, our learning and inclusive culture and conduct of exit interviews to gain further insights on retention. Total Rewards We strive to provide a competitive total rewards package.
SPI initially augmented our own due diligence, investment and portfolio construction processes. In response to growing industry demand for private markets intelligence, we subsequently developed an interface for direct client access. Through SPI, our clients can access detailed, regularly updated information on managers through an intuitive, web-based user interface.
SPI Research initially augmented our own due diligence, investment and portfolio construction processes. In response to growing industry demand for private markets intelligence, we subsequently developed an interface for direct client access. Through SPI Research, our clients can access detailed, regularly updated information on managers through an intuitive, web-based user interface.
We license SPI to clients in the form of a traditional licensed offering as well as an “advisory-like” service where we offer the SPI license and limited advisory-type support from our team. This has allowed us to support the private markets activities of clients that are too small to participate in our full-service advisory offerings.
We license SPI Research to clients in the form of a traditional licensed offering as well as an “advisory-like” service where we offer the SPI Research license and limited advisory-type support from our team. This has allowed us to support the private markets activities of clients that are too small to participate in our full-service advisory offerings.
If for any reason these rules were to become inapplicable, we could become subject to regulatory action or third-party claims that could have a material adverse effect on our business. 27 Table of Contents Foreign Regulation We provide investment advisory and other services and raise funds in a number of countries and jurisdictions outside the United States.
If for any reason these rules were to become inapplicable, we could become subject to regulatory action or third-party claims that could have a material adverse effect on our business. 26 Table of Contents Foreign Regulation We provide investment advisory and other services and raise funds in a number of countries and jurisdictions outside the United States.
Item 1. Business. Our Company We are a global private markets investment firm focused on providing customized investment solutions and advisory, data and administrative services to our clients.
Item 1. Business. Our Company We are a global private markets investment firm focused on providing customized investment solutions and advisory and data services to our clients.
Our solutions include: • SMAs spanning multiple asset classes and strategies for defined contribution plans with long-term investment objectives; • private wealth solutions for registered investment advisors, independent broker dealers and wirehouses in the United States and wealth managers internationally; • registered funds available to accredited investors in the United States; and • global distribution of our institutional funds to family office investors and high-net-worth investors.
Our solutions include: • SMAs spanning multiple asset classes and strategies for defined contribution plans with long-term investment objectives; • private wealth solutions for registered investment advisors, independent broker dealers and wirehouses in the United States and wealth managers internationally; • registered funds available to mass affluent and accredited investors in the United States; and • global distribution of our institutional funds to family office investors and high-net-worth investors.
In many instances, existing clients have increased allocations to additional asset classes and commercial structures and deployed capital across our asset management and advisory services businesses. Our dedicated in-house business development, marketing and client relations teams, comprising approximately 130 professionals in offices across 12 countries, maintain an active and transparent dialogue with our diverse and global client base.
In many instances, existing clients have increased allocations to additional asset classes and commercial structures and deployed capital across our asset management and advisory services businesses. Our dedicated in-house business development, marketing and client relations teams, comprising approximately 130 professionals in offices across 13 countries, maintain an active and transparent dialogue with our diverse and global client base.
Fund managers’ information is entered into Omni, our proprietary, web-based application and database for private market portfolio analytics and reporting. Data are reconciled daily to ensure data integrity and that pertinent details are entered correctly. In order to be included in Omni, a fund manager must send us sufficient materials, including specific data fields required by us.
Fund managers’ information is entered into SPI Reporting, our proprietary, web-based application and database for private market portfolio analytics and reporting. Data are reconciled daily to ensure data integrity and that pertinent details are entered correctly. In order to be included in SPI Reporting, a fund manager must send us sufficient materials, including specific data fields required by us.
You can access our filings with the SEC by visiting www.sec.gov or our website https://shareholders.stepstonegroup.com/shareholder-relations. The information on our website is not, and shall not be deemed to be, a part of this Annual Report on Form 10-K or incorporated into any other filings we make with the SEC. 31 Table of Contents
You can access our filings with the SEC by visiting www.sec.gov or our website https://shareholders.stepstonegroup.com/shareholder-relations. The information on our website is not, and shall not be deemed to be, a part of this Annual Report on Form 10-K or incorporated into any other filings we make with the SEC. 30 Table of Contents
Historically, we have competed principally on the basis of the factors listed below: • global access to private markets investment opportunities through our size, scale, reputation and strong relationships with fund managers; • brand recognition and reputation within the investing community; • performance of investment strategies; • quality of service and duration of client relationships; • data and analytics capabilities; 25 Table of Contents • ability to customize product offerings to client specifications; • transparent organizational structure; • ability to provide cost effective and comprehensive range of services and products; and • clients’ perceptions of our independence and the alignment of our interests with theirs created through our investment in our own products.
Historically, we have competed principally on the basis of the factors listed below: • global access to private markets investment opportunities through our size, scale, reputation and strong relationships with fund managers; • brand recognition and reputation within the investing community; • performance of investment strategies; • quality of service and duration of client relationships; • data and analytics capabilities; • ability to customize product offerings to client specifications; • transparent organizational structure; • ability to provide cost effective and comprehensive range of services and products; and • clients’ perceptions of our independence and the alignment of our interests with theirs created through our investment in our own products.
Strong Investment Performance Track Record Our track record is a key point of differentiation to our clients. As shown below, we have outperformed the MSCI ACWI Index, the benchmark index used for comparison across all of our investment strategies on an inception-to-date basis as of December 31, 2022. See “Part II, Item 7.
Strong Investment Performance Track Record Our track record is a key point of differentiation to our clients. As shown below, we have outperformed the MSCI ACWI Index, the benchmark index used for comparison across all of our investment strategies on an inception-to-date basis as of December 31, 2023. See “Part II, Item 7.
Each of our offices follows a local staffing model, with local professionals who possess valuable insights, language proficiency and client relationships specific to that market. As of March 31, 2023, approximately 45% of our investment professionals were based outside the United States.
Each of our offices follows a local staffing model, with local professionals who possess valuable insights, language proficiency and client relationships specific to that market. As of March 31, 2024, approximately 45% of our investment professionals were based outside the United States.
Led by a Seasoned Team of Professionals Whose Interests Are Aligned with Clients and Our Stockholders We believe our biggest asset is our people, and therefore we focus on consistently recruiting the best people, all of whom are proven leaders in their areas of expertise.
Led by a Seasoned Team of Professionals Whose Interests Are Aligned with Clients and Our Stockholders 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.
Omni and SPI both allow users to leverage our research data, further enhancing our client experience and services. We also strategically use SPI and Omni as a competitive product bundle, for example, by providing both offerings to clients to secure more comprehensive mandates.
SPI Reporting and SPI Research both allow users to leverage our research data, further enhancing our client experience and services. We also strategically use SPI Research and SPI Reporting as a competitive product bundle, for example, by providing both offerings to clients to secure more comprehensive mandates.
We have extensive experience investing substantial capital in the private markets and have generated attractive risk-adjusted returns. • Proprietary database and insights . Our proprietary SPI system represents one of the industry’s most comprehensive and powerful databases. • Differentiated access .
We have extensive experience investing substantial capital in the private markets and have generated attractive risk-adjusted returns. • Proprietary database and insights . Our proprietary SPI by StepStone system represents one of the industry’s most comprehensive and powerful databases. • Differentiated access .
Data presented as of March 31, 2023. AUM/AUA reflects final data for the prior period (December 31, 2022), adjusted for net new client account activity through March 31, 2023. Does not include post-period investment valuation or cash activity.
Data presented as of March 31, 2024. AUM/AUA reflects final data for the prior period (December 31, 2023), adjusted for net new client account activity through March 31, 2024. Does not include post-period investment valuation or cash activity.
During the year ended March 31, 2023, nearly two-thirds of our management and advisory fees came from clients based outside of the United States, reflecting the strength and breadth of our relationships within the global investor community.
During the year ended March 31, 2024, nearly two-thirds of our management and advisory fees came from clients based outside of the United States, reflecting the strength and breadth of our relationships within the global investor community.
At the same time, we believe we have been successful in expanding relationships with our clients, often expanding from advisory relationships to discretionary asset management relationships. Approximately 36% of our clients engage us for both asset management and advisory services.
At the same time, we believe we have been successful in expanding relationships with our clients, often expanding from advisory relationships to discretionary asset management relationships. Approximately 35% of our clients engage us for both asset management and advisory services.
The combination of SPI, Omni, and our other tools offers an end-to-end software technology and data solution that delivers significantly more information than most private markets investors have available, providing us with a meaningful advantage in our investment, due diligence and client relations efforts.
The combination of SPI Research, SPI Reporting, and our other tools offers an end-to-end software technology and data solution that delivers significantly more information than most private markets investors have available, providing us with a meaningful advantage in our investment, due diligence and client relations efforts.
Our ESG due diligence process is tailored for each asset class and strategy, and incorporated into the broader business, financial, and operational diligence process, detailing a comprehensive set of ESG-related risk and return considerations. We perform a review of each fund manager and fund’s responsible investment policy, implementation and monitoring framework.
Our ESG due diligence process is tailored for each asset class and strategy and incorporated into the broader business, financial, and operational diligence process — detailing a comprehensive set of ESG-related risk and return considerations. Primary Investments For all primary investments, we perform a review of each fund manager and fund’s responsible investment policy, implementation and monitoring framework.
In the EU, we are subject to the EU Alternative Investment Fund Managers Directive (“AIFMD”) and the Undertakings for Collective Investment in Transferable Securities Directive (“UCITS”) under which we are subject to regulatory requirements regarding, among other things, registration for marketing activities, the structure of remuneration for certain of our personnel and reporting obligations.
In the EU, we are subject to the EU Alternative Investment Fund Managers Directive (“AIFMD”), the EU Alternative Investment Fund Managers Directive II (“AIFMD II”) and the Undertakings for Collective Investment in Transferable Securities Directive (“UCITS”) under which we are subject to regulatory requirements regarding, among other things, registration for marketing activities, the structure of remuneration for certain of our personnel and reporting obligations.
Secondaries Secondaries refer to investments in existing private markets funds through the acquisition of an existing interest in a private markets fund by one investor from another in a negotiated transaction. In so doing, the buyer will agree to take on future funding obligations in exchange for future returns and distributions.
Secondaries Secondaries refer to investments in existing private markets funds or companies through the acquisition of an existing interest by one investor from another in a negotiated transaction. In so doing, the buyer will agree to take on future funding obligations in exchange for future returns and distributions.
These services include one or more of the following for our clients: (i) recurring support of portfolio construction and design; (ii) discrete or project-based due diligence, advice and investment recommendations; (iii) detailed review of existing private markets investments, including portfolio-level repositioning recommendations where appropriate; (iv) consulting on investment pacing, policies, strategic plans, and asset allocation to investment boards and committees; (v) licensed access to our proprietary data and technology platforms, including SPI and our other proprietary tools; and (vi) administrative services to unaffiliated investment advisors.
These services include one or more of the following for our clients: (i) recurring support of portfolio construction and design; (ii) discrete or project-based due diligence, advice and investment recommendations; (iii) detailed review of existing private markets investments, including portfolio-level repositioning recommendations where appropriate; (iv) consulting on investment pacing, policies, strategic plans, and asset allocation to investment boards and committees; and (v) licensed access to our proprietary data and technology platforms, including SPI Research and our other proprietary tools.
We believe our value proposition as a full-service firm also helps us strengthen and grow our client relationships. As of March 31, 2023, 36% of our advisory clients also had an AUM relationship with us, and we advised or managed assets in more than one asset class for 34% of our clients, supporting our total capital responsibility growth.
We believe our value proposition as a full-service firm also helps us strengthen and grow our client relationships. As of March 31, 2024, 35% of our advisory clients also had an AUM relationship with us, and we advised or managed assets in more than one asset class for 34% of our clients, supporting our total capital responsibility growth.
As of March 31, 2023, over half of our employees have equity interests in us in the form of direct equity interests and/or restricted stock units under our 2020 Long-Term Incentive Plan (“LTIP”), and more than 200 employees are entitled to participate in our carried interest allocations in one or more of the asset classes. 13 Table of Contents Strategic Priorities 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 Expand existing client mandates .
As of March 31, 2024, nearly half of our employees have equity interests in us in the form of direct equity interests and/or restricted stock units under our 2020 Long-Term Incentive Plan (“LTIP”), and more than 200 employees are eligible to participate in our carried interest allocations in one or more of the asset classes. 13 Table of Contents Strategic Priorities 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 Expand existing client mandates .
Our focused commingled funds invest across a variety of private market strategies, which enables our clients to efficiently participate in these specialized strategies for which they otherwise may not be able to access due to the high minimum investment requirements. Focused commingled funds represented $43 billion of our AUM as of March 31, 2023.
Our focused commingled funds invest across a variety of private market strategies, which enables our clients to efficiently participate in these specialized strategies for which they otherwise may not be able to access due to the high minimum investment requirements. Focused commingled funds represented $49 billion of our AUM as of March 31, 2024.
Omni users can analyze investment-level and underlying asset-level performance by custom investment attributes, apply data filters, run grouped or granular reports while also having the ability to easily export these analyses.
SPI Reporting users can analyze investment-level and underlying asset-level performance by custom investment attributes, apply data filters, run grouped or granular reports while also having the ability to easily export these analyses.
Performance data monitored by Omni is available back to 1971. Omni supports investment monitoring and portfolio management and enhances transparency by providing users with a fast and intuitive user interface and web-based access to portfolio data.
Performance data monitored by SPI Reporting is available back to 1971. SPI Reporting supports investment monitoring and portfolio management and enhances transparency by providing users with a fast and intuitive user interface and web-based access to portfolio data.
We refer to these provisions as “clawbacks.” 24 Table of Contents Advisory, Data and Administrative Services Depending on the mandate, advisory, data and administrative services may include one or more of the following for our clients: (i) recurring support of portfolio construction and design; (ii) discrete or project-based due diligence, advice, and investment recommendations; (iii) detailed review of existing private markets investments, including portfolio-level repositioning recommendations where appropriate; (iv) consulting on investment pacing, policies, strategic plans, and asset allocation to investment boards and committees; (v) licensed access to our proprietary data and technology platforms, including SPI and our other proprietary tools; or (vi) administrative services to unaffiliated investment advisors.
We refer to these provisions as “clawbacks.” Advisory and Data Services Depending on the mandate, advisory and data services may include one or more of the following for our clients: (i) recurring support of portfolio construction and design; (ii) discrete or project-based due diligence, advice, and investment recommendations; (iii) detailed review of existing private markets investments, including portfolio-level repositioning recommendations where appropriate; (iv) consulting on investment pacing, policies, strategic plans, and asset allocation to investment boards and committees; and (v) licensed access to our proprietary data and technology platforms, including SPI Research and our other proprietary tools.
Today, we have investment and implementation professionals in 25 cities across 15 countries on five continents. Our offices are staffed by investment professionals who bring valuable regional insights and language proficiency to enhance existing client relationships and build new client relationships.
Today, we have investment and implementation professionals in 27 cities across 16 countries on five continents. Our offices are staffed by investment professionals who bring valuable regional insights and language proficiency to enhance existing client relationships and build new client relationships.
SMAs and directly-managed assets represented approximately $82 billion of our AUM as of March 31, 2023. Focused Commingled Funds We organize and manage commingled funds that invest in primary, secondary and co-investment funds managed by third-party managers focused in our areas of expertise.
SMAs and directly-managed assets represented approximately $94 billion of our AUM as of March 31, 2024. Focused Commingled Funds We organize and manage commingled funds that invest in primary, secondary and co-investment funds managed by third-party managers focused in our areas of expertise.
See “Risk Factors—Risks Related to Our Business— Our ability to retain our senior leadership team and attract additional qualified professionals is critical to our success .” Regulatory Environment Our business is subject to extensive federal and state regulation in the United States.
See “Risk Factors—Risks Related to Our Business— Our ability to retain our senior leadership team and attract additional qualified professionals is critical to our success .” 24 Table of Contents Regulatory Environment Our business is subject to extensive federal and state regulation in the United States.
With offices in 25 cities across 15 countries on five continents, we have built a global operating platform, organically and via acquisition, with strong local teams that possess valuable regional insights and deep-rooted relationships.
With offices in 27 cities across 16 countries on five continents, we have built a global operating platform, organically and via acquisition, with strong local teams that possess valuable regional insights and deep-rooted relationships.
As of March 31, 2023, we had $15.7 billion of capital not yet deployed across our various investment vehicles, which we expect to generate management fees when invested or activated. Add New Clients Globally Over the past decade, we have invested in and grown both our in-house and third-party distribution networks.
As of March 31, 2024, we had $22.6 billion of capital not yet deployed across our various investment vehicles, which we expect to generate management fees when invested or activated. Add New Clients Globally Over the past decade, we have invested in and grown both our in-house and third-party distribution networks.
Omni users can access all of the data tracked by SPAR, including daily cash flow activity, quarterly valuations, and underlying asset-level detail, and have fully integrated access to our SPI research platform.
SPI Reporting users can access all of the data tracked by SPAR, including daily cash flow activity, quarterly valuations, and underlying asset-level detail, and have fully integrated access to our SPI by StepStone platform.
The majority of this monitoring is conducted through regular engagement with the fund manager supplemented by Limited Partner Advisory Committees of which we are a member. In cases where we hold a board or observer seat at the fund, we seek to be active in ensuring these issues are standard agenda items.
The majority of this monitoring is conducted through regular engagement with the fund manager supplemented by Limited Partner Advisory Committees of which we are a member. In cases where we hold a board or observer seat at the fund, we seek to be active in advocating for material issues as standard agenda items.
These benefits accrue to our clients and to us. • Our large and experienced team . Since our inception, we have focused on recruiting and retaining the best talent. As of March 31, 2023, 95 partners led the firm, with an average of nearly 20 years of investment or industry experience.
These benefits accrue to our clients and to us. • Our large and experienced team . Since our inception, we have focused on recruiting and retaining the best talent. As of March 31, 2024, 100 partners led the firm, with an average of over 20 years of investment or industry experience.
These portfolios utilize several types of synergistic investment strategies with third-party fund managers, including commitments to funds (“primaries”), acquiring stakes in existing funds on the secondary market (“secondaries”) and investing directly into companies (“co-investments”). As of March 31, 2023, we were responsible for $621 billion of total capital, including $138 billion of AUM and $482 billion of AUA.
These portfolios utilize several types of synergistic investment strategies with third-party fund managers, including commitments to funds (“primaries”), acquiring stakes in existing funds on the secondary market (“secondaries”) and investing directly into companies (“co-investments”). As of March 31, 2024, we were responsible for $678 billion of total capital, including $157 billion of AUM and $521 billion of AUA.
Advisory relationships comprised $482 billion of our AUA and $13 billion of our AUM as of March 31, 2023. 9 Table of Contents • Portfolio analytics and reporting . We provide clients with tailored reporting packages, including customized performance benchmarks as well as associated compliance, administrative and tax capabilities.
Advisory relationships comprised $521 billion of our AUA and $14 billion of our AUM as of March 31, 2024. 9 Table of Contents • Portfolio analytics and reporting . We provide clients with tailored reporting packages, including customized performance benchmarks as well as associated compliance, administrative and tax capabilities.
For the year ended March 31, 2023, no single client contributed more than 6% of our total management and advisory fees, and our top 10 clients, which comprise over 50 separate mandates and commitments to commingled funds, contributed approximately 25% of our total management and advisory fees.
For the year ended March 31, 2024, no single client contributed more than 6% of our total management and advisory fees, and our top 10 clients, which comprise over 55 separate mandates and commitments to commingled funds, contributed approximately 23% of our total management and advisory fees.
Our proprietary data and technology platforms, including StepStone Private Markets Intelligence (“SPI”), our private markets intelligence database, Omni, our performance monitoring software, and Pacing, our portfolio cash flow, investment allocation and liquidity forecasting tool provide valuable information advantages, enhance our private markets insight, improve operational efficiency and facilitate portfolio monitoring and reporting functions.
Our proprietary data and technology platforms, including SPI by StepStone (“SPI”), a platform comprising SPI Research, our private markets intelligence database, SPI Reporting, our performance monitoring software, and SPI Pacing, our portfolio cash flow, investment allocation and liquidity forecasting tool provide valuable information advantages, enhance our private markets insight, improve operational efficiency and facilitate portfolio monitoring and reporting functions.
Omni is used extensively by our 105 person StepStone Portfolio Analytics & Reporting (“SPAR”) team to provide customized portfolio analytics and reporting on the performance of our clients’ investments.
SPI Reporting is used extensively by our StepStone Portfolio Analytics & Reporting (“SPAR”) team to provide customized portfolio analytics and reporting on the performance of our clients’ investments.
As of March 31, 2023, we had 956 total employees, including 322 investment professionals and 634 employees across our operating team and implementation teams dedicated to sourcing, executing, analyzing and monitoring private markets opportunities. We believe our scale and position in private markets provide us a distinct competitive advantage with our clients and fund managers.
As of March 31, 2024, we had 990 total employees, including 335 investment professionals and 655 employees across our operating team and implementation teams dedicated to sourcing, executing, analyzing and monitoring private markets opportunities. We believe our scale and position in private markets provide us a distinct competitive advantage with our clients and fund managers.
SMAs, including directly managed assets, comprised $82 billion of our AUM as of March 31, 2023. • Focused commingled funds . Owned by multiple clients, our focused commingled funds deploy capital in specific asset classes with defined investment strategies. Focused commingled funds comprised $43 billion of our AUM as of March 31, 2023. • Advisory, data and administrative services .
SMAs, including directly managed assets, comprised $94 billion of our AUM as of March 31, 2024. • Focused commingled funds . Owned by multiple clients, our focused commingled funds deploy capital in specific asset classes with defined investment strategies. Focused commingled funds comprised $49 billion of our AUM as of March 31, 2024. • Advisory and data services .
This further expands our investment opportunities and differentiates us from other co-investors, thereby leading to future opportunities with fund managers. Our co-investment program benefits from the access to fund managers we have through our scale and the approximately 4,900 meetings and calls that we conduct with fund managers on an annual basis.
This further expands our investment opportunities and differentiates us from other co-investors, thereby leading to future opportunities with fund managers. 16 Table of Contents Our co-investment program benefits from the access to fund managers we have through our scale and the approximately 5,300 meetings and calls that we conduct with fund managers on an annual basis.
Mandates for SPAR services typically include licensed access to Omni, our proprietary web-based performance monitoring and reporting solution. Omni allows our clients to customize performance measurement and benchmarking according to their unique specifications. Our advisory relationships comprised $482 billion of our AUA and $13 billion of our AUM as of March 31, 2023.
Mandates for SPAR services typically include licensed access to SPI Reporting, our proprietary web-based performance monitoring and reporting solution. SPI Reporting allows our clients to customize performance measurement and benchmarking according to their unique specifications. Our advisory relationships comprised $521 billion of our AUA and $14 billion of our AUM as of March 31, 2024.
During the year ended March 31, 2023, we reviewed over 3,600 investment opportunities and conducted approximately 4,900 meetings with fund managers across multiple geographies and all four asset classes.
During the year ended March 31, 2024, we reviewed over 3,900 investment opportunities and conducted approximately 5,300 meetings with fund managers across multiple geographies and all four asset classes.
Upside from performance fees As of March 31, 2023, we had approximately 180 investment programs with the potential to earn performance fees, consisting of over $63 billion in committed capital. As of March 31, 2023, our accrued carried interest allocations balance, which we view as a backlog of future carried interest allocation revenue, was $1,227 million.
Upside from performance fees As of March 31, 2024, we had over 200 investment programs with the potential to earn performance fees, consisting of over $75 billion in committed capital. As of March 31, 2024, our accrued carried interest allocations balance, which we view as a backlog of future carried interest allocation revenue, was $1,354 million.
Because secondary investments are generally made when a primary investment fund is three to seven years into its investment period and has deployed a significant portion of its capital into portfolio companies, these investments are viewed as more mature. Secondaries have historically generated a high risk-adjusted internal rate of return (“IRR”) relative to other strategies in the private equity market.
Because secondary investments are generally made when a primary investment fund is three to seven years into its life, these investments are viewed as more mature. Secondaries have historically generated a high risk-adjusted internal rate of return (“IRR”) relative to other strategies in the private equity market.
We believe that full integration of ESG factors in both our investment process and internal operations will improve long-term, risk-adjusted returns for our clients.
We believe that full integration of ESG factors in both our investment process and internal operations will improve long-term, risk-adjusted returns for our clients and stakeholders. We aim to continually improve and evolve our practices.
We have a dedicated Data Science and Engineering team with approximately 30 members, which manages and continues to develop our SPI and Omni platforms (and our additional proprietary tools built on these platforms) and supports our efforts to be a market leader in an area that is essential to evaluating private markets.
We have a dedicated Data and Software Engineering team, which manages and continues to develop our SPI Research and SPI Reporting platforms (and our additional proprietary tools built on these platforms) and supports our efforts to be a market leader in an area that is essential to evaluating private markets.
Our advisory, data and administrative services clients are generally charged annual fixed fees, which vary depending on the services we provide and the volume of capital deployed. We generally do not earn incentive fees on advisory contracts.
Our advisory and data services clients are generally charged annual fixed fees, which vary depending on the services we provide and the volume of capital deployed.
Our risk management process focuses on risk identification, measurement, treatment/mitigation, monitoring and management/reporting, with particular risk assessments tailored by asset class and individual client. Responsible Investment Philosophy Responsible investment, which encompasses ESG and impact investing considerations, is a core tenet of our operating and investment philosophies.
Our risk management process focuses on risk identification, measurement, treatment/mitigation, monitoring and management/reporting, with particular risk assessments tailored by asset class and individual client. 17 Table of Contents Responsible Investment Philosophy Responsible investment is a core tenet of our operating and investment philosophies.
Approximately 60% of current accrued carried interest allocations is from StepStone Fund vintages of 2017 or prior.
Approximately 74% of current accrued carried interest allocations is from StepStone Fund vintages of 2018 or prior.
During the 12 months ended December 31, 2022, we allocated approximately $80 billion in capital to private markets on behalf of our clients, excluding legacy funds, feeder funds and research-only, non-advisory services. We have a flexible business model whereby many of our clients engage us for solutions across multiple asset classes and investment strategies.
During the last three years ended December 31, 2023, we allocated an average of $70 billion annually in capital to private markets on behalf of our clients, excluding legacy funds, feeder funds and research-only, non-advisory services. We have a flexible business model whereby many of our clients engage us for solutions across multiple asset classes and investment strategies.
For the year ended March 31, 2023, approximately 46% of our management and advisory fees were generated from focused commingled funds, 42% from SMAs, 11% from advisory, data and administrative services and 1% from fund reimbursement revenues.
For the year ended March 31, 2024, approximately 51% of our management and advisory fees were generated from focused commingled funds, 38% from SMAs, 10% from advisory, data and administrative services and 1% from fund reimbursement revenues.
Mandates for portfolio analytics and reporting services typically include licensed access to our proprietary performance monitoring software, Omni. Omni tracked detailed information on over $905 billion of client commitments as of March 31, 2023, inclusive of our total capital responsibility, previously exited investments and investments of former clients.
Mandates for portfolio analytics and reporting services typically include licensed access to our proprietary performance monitoring software, SPI Reporting. We provided portfolio analytics and reporting on over $685 billion of client commitments as of March 31, 2024, inclusive of our total capital responsibility, previously exited investments and investments of former clients.
Our focus on offering full-service, customized solutions to our clients is reflected in our business composition. As of March 31, 2023, we had 279 bespoke SMAs and focused commingled funds (including high-net-worth programs).
Our focus on offering full-service, customized solutions to our clients is reflected in our business composition. As of March 31, 2024, we had 314 bespoke SMAs and focused commingled funds.
Users also have the ability to edit, run and export various portfolio analytics, including analyzing various return and preference metrics commonly used in the investment industry, such as return J-Curve, cash flow activity over time, multi-period internal rates of return and time-weighted rate of return. 17 Table of Contents Investment Risk Management We have an investment risk management function overseen by our Head of Research and Portfolio Management and our Head of Risk.
Users also have the ability to edit, run and export various portfolio analytics, including analyzing various return and preference metrics commonly used in the investment industry, such as return J-Curve, cash flow activity over time, multi-period internal rates of return and time-weighted rate of return.
As of March 31, 2023, 95 partners led the firm, with an average of nearly 20 years of investment or industry experience.
As of March 31, 2024, 100 partners led the firm, with an average of over 20 years of investment or industry experience.
Additionally, we have implemented a volunteer time off policy that gives employees 16 hours per calendar year of paid time to volunteer at the organization of their choice. We actively monitor participation in these programs. We have also established a formalized charitable giving program with an employee matching component.
Additionally, we have implemented a volunteer time-off policy that gives employees 16 hours per calendar year of paid time to volunteer at an organization of their choice. We actively monitor participation in these programs.
We believe our revenue model has the following important attributes: Sustainable and recurring management and advisory fees Our management and advisory fees grew from $141 million in fiscal 2018 to $497 million in fiscal 2023, representing a 29% compounded annual growth rate.
We believe our revenue model has the following important attributes: Sustainable and recurring management and advisory fees Our management and advisory fees grew from $191 million in fiscal 2019 to $585 million in fiscal 2024, representing a 25% compounded annual growth rate.
As of March 31, 2023, we had approximately 130 professionals worldwide dedicated to business development, marketing and client relations. Our local business development professionals lead conversations with potential local clients. We believe that geographically and economically diverse U.S. and non-U.S. investors will require a highly bespoke approach and will demand high levels of transparency, governance and reporting.
Our local business development professionals lead conversations with potential local clients. We believe that geographically and economically diverse U.S. and non-U.S. investors will require a highly bespoke approach and will demand high levels of transparency, governance and reporting.
We aim to build top-performing global private markets portfolios through a research-intensive investment approach and strive to identify fund managers with top-quartile performance through active sourcing and in-depth evaluation, complemented by excellent deal execution.
We aim to build top-performing global private markets portfolios through a research-intensive investment approach and strive to identify fund managers with top-quartile performance through active sourcing and in-depth evaluation, complemented by excellent deal execution. We leverage our SPI Research database to track a large cross section of fund managers and funds globally—irrespective of fundraising cycles.
(1) Allocation of AUM by asset class is presented by underlying investment asset classification. Well Positioned to Continue to Serve and Grow Our Diverse and Global Client Base We believe we are a leading provider of private markets solutions for a broad variety of clients.
Well Positioned to Continue to Serve and Grow Our Diverse and Global Client Base We believe we are a leading provider of private markets solutions for a broad variety of clients.
With respect to our co-investments, we complete an ESG assessment at both the manager and asset level. We use several tools when completing the latter, including information from the manager and company, along with SASB materiality standards, and for specific sectors information from GRESB. Post investment, we monitor the co-investment’s performance, including financial and ESG factors.
We use several tools to complete the latter, including information from the manager and company, along with SASB materiality standards, and for specific sectors information from GRESB. Post investment, we monitor the co-investment’s performance focusing on material financial and ESG factors.
(in billions except percentages and multiples) Strategy Committed Capital Cumulative Invested Capital Realized Distributions NAV Total Gross IRR Net IRR Net Multiple of Invested Capital Net IRR versus Benchmark Primaries $ 273.8 $ 192.0 $ 122.9 $ 153.7 $ 276.6 12.8 % 12.5 % 1.4x 4.7 % Secondaries 17.0 14.2 9.0 12.3 21.3 21.1 % 17.2 % 1.4x 9.3 % Co-investments 40.5 38.1 19.2 42.1 61.3 19.2 % 16.7 % 1.5x 9.1 % Total $ 331.3 $ 244.3 $ 151.1 $ 208.1 $ 359.2 13.8 % 13.2 % 1.4x 5.4 % We attribute our strong investment performance track record to numerous factors, including our scale and global reach, our selective investment process powered by our technology and data advantage and our experienced investment teams.
(in billions except percentages and multiples) Strategy Committed Capital Cumulative Invested Capital Realized Distributions NAV Total Gross IRR Net IRR Net Multiple of Invested Capital Net IRR versus Benchmark Primaries $ 296.6 $ 218.3 $ 136.1 $ 168.5 $ 304.6 11.5 % 11.1 % 1.4x 1.8 % Secondaries 19.6 16.8 10.1 14.8 24.9 19.4 % 16.0 % 1.4x 5.8 % Co-investments 44.8 42.4 23.2 44.3 67.5 16.7 % 13.6 % 1.5x 3.8 % Total $ 361.0 $ 277.5 $ 169.4 $ 227.6 $ 397.0 12.5 % 11.6 % 1.4x 2.2 % We attribute our strong investment performance track record to numerous factors, including our scale and global reach, our selective investment process powered by our technology and data advantage and our experienced investment teams.
Leverage Our Scale to Enhance Operating Margins Since inception we have made significant investments in our platform infrastructure through building out our investment and implementation teams across geographies and asset classes and developing technology-enabled solutions.
We have developed an investment platform, StepStone Private Wealth LLC (“SPW”), designed to expand access to the private markets for accredited investors. Leverage Our Scale to Enhance Operating Margins Since inception we have made significant investments in our platform infrastructure through building out our investment and implementation teams across geographies and asset classes and developing technology-enabled solutions.
The sponsorship program pairs promising mid-level employees, including female and diverse professionals, with one of the firm’s partners, who serves as a sponsor, as well as an executive coach, and is intended to support participants in advancing their professional development and leadership skills. 30 Table of Contents • Partnerships and Outreach – In addition to promoting diversity and inclusion through our own events, such as hosting events encouraging undergraduate female students to pursue careers in finance, we sponsor and partner with several organizations dedicated to making financial services more diverse and inclusive. • Parental Leave and Benefits – We provide benefits such as paid parental leave, parental leave coaching for managers and employees, paying for travel for newborns and caretakers when the employee has business required travel, paid shipping of breast milk, wellness rooms for new parents at our offices and paid volunteer time off.
The sponsorship program pairs promising mid-level employees, including female and diverse professionals, with one of the firm’s partners, who serves as a sponsor, as well as an executive coach, and is intended to support participants in advancing their professional development and leadership skills. • Partnerships and Outreach – In addition to promoting diversity and inclusion through our own events, such as hosting events encouraging undergraduate female students to pursue careers in finance, we sponsor and partner with several organizations dedicated to making financial services more diverse and inclusive.
We strive to maintain hiring practices that are handled with professionalism and responsiveness, in a fair and inclusive selection process. We aspire to have candidates progress within the hiring process with a positive impression of the firm.
Given our global business and client base, we seek to consider candidates from diverse backgrounds, cultures and educational institutions. We strive to maintain hiring practices that are handled with professionalism and responsiveness, in a fair and inclusive selection process. We aspire to have candidates progress within the hiring process with a positive impression of the firm.
Fees and Other Key Contractual Terms Separately Managed Accounts The scope of our separate account services and degree of client involvement varies by relationship and policy guidelines, but we typically direct or have substantial participation in the negotiation of account terms, investment policy and strategic planning, pacing and ongoing monitoring and reporting activities.
Given its scale, expertise, and relationships, we have preferred access to top-tier fund managers and proprietary opportunities, including co-investments and secondaries. 21 Table of Contents Fees and Other Key Contractual Terms Separately Managed Accounts The scope of our separate account services and degree of client involvement varies by relationship and policy guidelines, but we typically direct or have substantial participation in the negotiation of account terms, investment policy and strategic planning, pacing and ongoing monitoring and reporting activities.
Responsible Investment in the Investment Process Our Responsible Investment Committee comprises leadership from all four of our asset classes and other firm leaders. The Responsible Investment Committee provides oversight and direction for our responsible investment process, including reviewing ESG-focused due diligence within our investment memoranda before they are submitted to the relevant Investment Committee.
Responsible Investment in the Investment Process Composed of leaders from across our organization, the Responsible Investment Committee provides oversight and direction for our responsible investment process. Among other things, it reviews ESG-focused due diligence within our investment memoranda before they are submitted to the relevant Investment Committee.
Our research professionals utilize this technology to collect and develop qualitative and quantitative perspectives on investment opportunities. 11 Table of Contents • Omni monitors the performance of our clients’ investments and allows users, including our clients, to generate detailed analytics. As of March 31, 2023, Omni tracked detailed information on nearly 9,000 investments across more than 85,000 underlying portfolio companies.
Our research professionals utilize this technology to collect and develop qualitative and quantitative perspectives on investment opportunities. 11 Table of Contents • SPI Reporting monitors the performance of our clients’ investments and allows users, including our clients, to generate detailed analytics.
The committee also supports the firm’s various employee-led ERGs. • StepStone Diversity, Equity & Inclusion Network – The network provides opportunities for our employees to learn about various diversity, equity and inclusion matters and initiatives and to meet and talk to experts who are championing these causes. • Mentorship and Sponsorship Programs – The mentorship program provides interested employees with structured access to one of their more senior colleagues who provide guidance and career advice.
The committee also supports the firm’s various employee-led ERGs. • Mentorship and Sponsorship Programs – The mentorship program provides interested employees with structured access to one of their more senior colleagues who provide guidance and career advice.
We believe investors are reducing the number of fund managers they invest with, increasingly allocating capital to fund managers that have expertise across a wide range of asset classes within private markets. 10 Table of Contents PRIVATE EQUITY REAL ESTATE $72B (1) $46B $242B $13B (1) $6B $172B AUM FEAUM AUA AUM FEAUM AUA 161 54 Investment professionals Investment professionals INFRASTRUCTURE PRIVATE DEBT $27B (1) $19B $51B $27B (1) $14B $17B AUM FEAUM AUA AUM FEAUM AUA 61 46 Investment professionals Investment professionals _____________________________ Note: Amounts may not sum to total due to rounding.
We believe investors are reducing the number of fund managers they invest with, increasingly allocating capital to fund managers that have expertise across a wide range of asset classes within private markets. 10 Table of Contents PRIVATE EQUITY REAL ESTATE $82B (1) $50B $270B $16B (1) $8B $168B AUM FEAUM AUA AUM FEAUM AUA 155+ 60 Investment professionals Investment professionals INFRASTRUCTURE PRIVATE DEBT $30B (1) $20B $60B $28B (1) $15B $22B AUM FEAUM AUA AUM FEAUM AUA 65+ 45+ Investment professionals Investment professionals _____________________________ Note: Amounts may not sum to total due to rounding.
See “Risk Factors—Risks Related to Our Business—Third-party clients in many StepStone Funds have the right to remove us as the general partner of the relevant fund and to terminate the investment period under certain circumstances, leading to a decrease in our revenues, which could be substantial.
Our focused commingled funds may generally be terminated for specified reasons and for any reason upon the affirmative vote, depending on the fund, of 50% or more of the total limited partner interests entitled to vote. 22 Table of Contents See “Risk Factors—Risks Related to Our Business—Third-party clients in many StepStone Funds have the right to remove us as the general partner of the relevant fund and to terminate the investment period under certain circumstances, leading to a decrease in our revenues, which could be substantial.
Our ability to co-invest and participate on a pre-signing basis helps us expand the number of available opportunities and secure larger co-investment allocations. We have the ability to participate in non-traditional co-investments, such as helping to fund add-on acquisitions when a fund manager has already reached its concentration limits in its fund.
We have the ability to participate in non-traditional co-investments, such as helping to fund add-on acquisitions when a fund manager has already reached its concentration limits in its fund.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Our non-U.S. operations carry special financial and business risks, which include: fluctuations in foreign currency exchange rates that could adversely affect our results; unexpected changes in trading policies, regulatory requirements, tariffs and other barriers; local labor conditions, protections and regulations; adverse consequences or restrictions on the repatriation of earnings; potentially adverse tax consequences, such as trapped foreign losses or excise taxes (or other similar taxes); less stable political and economic environments; terrorism, political hostilities, war, outbreak of disease and other civil disturbances or other catastrophic events that reduce business activity; cultural and language barriers and the need to adopt different business practices in different geographic areas; and difficulty collecting fees and, if necessary, enforcing judgments. 44 Table of Contents As part of our day-to-day operations outside the United States, we are required to create compensation programs, employment policies, privacy policies, compliance policies and procedures and other administrative programs that comply with the laws of multiple countries.
Our non-U.S. operations carry special financial and business risks, which include: fluctuations in foreign currency exchange rates that could adversely affect our results; unexpected changes in trading policies, regulatory and licensing requirements, tariffs and other barriers; local labor conditions, protections and regulations; adverse consequences or restrictions on the repatriation of earnings; potentially adverse tax consequences, such as trapped foreign losses or excise taxes (or other similar taxes); less stable political and economic environments; terrorism, political hostilities, war, outbreak of disease and other civil disturbances or other catastrophic events that reduce business activity; cultural and language barriers and the need to adopt different business practices in different geographic areas; and difficulty collecting fees and, if necessary, enforcing judgments. 44 Table of Contents As part of our day-to-day operations outside the United States, we are required to create compensation programs, employment policies, privacy policies, compliance policies and procedures and other administrative programs that comply with the laws of multiple countries.
Our amended and restated certificate of incorporation and bylaws include provisions that: • provide that vacancies on our board of directors shall be filled only by a majority of directors then in office, even though less than a quorum, or by a sole remaining director; • establish that our board of directors is divided into three classes, with each class serving three-year staggered terms, subject to a specified Sunset; 68 Table of Contents • provide that our directors can be removed (i) for cause only as long as our board of directors is classified and (ii) following such time as our board of directors is no longer classified, with or without cause, but only upon the affirmative vote of holders of at least 66 2⁄3% of the voting power of the outstanding shares of our capital stock entitled to vote generally in the election of directors; • provide that any action required or permitted to be taken by the stockholders must be effected at a duly called annual or special meeting of stockholders and may not be effected by any consent in writing in lieu of a meeting of such stockholders; • specify that special meetings of our stockholders can be called only by our board of directors or the chairman of our board of directors; • establish an advance notice procedure for stockholder proposals to be brought before an annual meeting, including proposed nominations of persons for election to our board of directors; • authorize our board of directors to issue, without further action by the stockholders, shares of undesignated preferred stock; and • reflect two classes of common stock, with Class B common stock having five votes per share and Class A common stock having one vote per share, until a Sunset becomes effective, as discussed above.
Our amended and restated certificate of incorporation and bylaws include provisions that: • provide that vacancies on our board of directors shall be filled only by a majority of directors then in office, even though less than a quorum, or by a sole remaining director; 70 Table of Contents • establish that our board of directors is divided into three classes, with each class serving three-year staggered terms, subject to a specified Sunset; • provide that our directors can be removed (i) for cause only as long as our board of directors is classified and (ii) following such time as our board of directors is no longer classified, with or without cause, but only upon the affirmative vote of holders of at least 66 2⁄3% of the voting power of the outstanding shares of our capital stock entitled to vote generally in the election of directors; • provide that any action required or permitted to be taken by the stockholders must be effected at a duly called annual or special meeting of stockholders and may not be effected by any consent in writing in lieu of a meeting of such stockholders; • specify that special meetings of our stockholders can be called only by our board of directors or the chairman of our board of directors; • establish an advance notice procedure for stockholder proposals to be brought before an annual meeting, including proposed nominations of persons for election to our board of directors; • authorize our board of directors to issue, without further action by the stockholders, shares of undesignated preferred stock; and • reflect two classes of common stock, with Class B common stock having five votes per share and Class A common stock having one vote per share, until a Sunset becomes effective, as discussed above.
For example, the European Commission has adopted new regulations as part of a package of legislative measures arising from its Action Plan on Sustainable Finance, which include, without limitation: (a) The Disclosure Regulation EU 2019/2088 regarding the introduction of transparency and disclosure obligations for investors, funds and asset managers in relation to ESG factors, which took effect beginning on March 10, 2021 and (b) The Taxonomy Regulation EU 2020/852 regarding the introduction of EU-wide taxonomy of environmentally sustainable activities, which entered into force on July 12, 2020.
For example, the European Commission has adopted regulations as part of a package of legislative measures arising from its Action Plan on Sustainable Finance, which include, without limitation: (a) The Disclosure Regulation EU 2019/2088 regarding the introduction of transparency and disclosure obligations for investors, funds and asset managers in relation to ESG factors, which took effect beginning on March 10, 2021 and (b) The Taxonomy Regulation EU 2020/852 regarding the introduction of EU-wide taxonomy of environmentally sustainable activities, which entered into force on July 12, 2020.
The historical investment performance of our funds should not be considered indicative of the future investment performance of these funds or of any future funds we may invest, in part because: • market conditions and investment opportunities may be significantly less favorable than in the past; 32 Table of Contents • the performance of our funds is largely based on the NAV of the funds’ investments, including unrealized gains, which may never be realized; • our newly established funds may generate lower investment returns during the period that they initially deploy their capital; • changes in the global tax and regulatory environment may affect both the investment preferences of our clients and the financing strategies employed by businesses in which particular funds invest, which may reduce the overall capital available for investment and the availability of suitable investments, thereby reducing our investment returns in the future; • competition for investment opportunities, resulting from the increasing amount of capital invested in private markets alternatives, may increase the cost and reduce the availability of suitable investments, thereby reducing our investment returns in the future; and • the industries and businesses in which particular funds invest will vary.
The historical investment performance of our funds should not be considered indicative of the future investment performance of these funds or of any future funds we may invest, in part because: • market conditions and investment opportunities may be significantly less favorable than in the past; 31 Table of Contents • the performance of our funds is largely based on the NAV of the funds’ investments, including unrealized gains, which may never be realized; • our newly established funds may generate lower investment returns during the period that they initially deploy their capital; • changes in the global tax and regulatory environment may affect both the investment preferences of our clients and the financing strategies employed by businesses in which particular funds invest, which may reduce the overall capital available for investment and the availability of suitable investments, thereby reducing our investment returns in the future; • competition for investment opportunities, resulting from the increasing amount of capital invested in private markets alternatives, may increase the cost and reduce the availability of suitable investments, thereby reducing our investment returns in the future; and • the industries and businesses in which particular funds invest will vary.
However, our amended and restated certificate of incorporation contains provisions that have the same effect as Section 203, except that they provide that the Sunset Holders, their affiliates and their respective successors (other than the Company or any of our subsidiaries), as well as their direct and indirect transferees, will not be deemed to be “interested stockholders,” regardless of the percentage of our voting stock owned by them, and accordingly will not be subject to such restrictions. 69 Table of Contents Our amended and restated certificate of incorporation designates the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, and the federal district courts as the exclusive forum for Securities Act claims, which could limit our stockholders’ ability to obtain what such stockholders believe to be a favorable judicial forum for disputes with us or our directors, officers or other employees.
However, our amended and restated certificate of incorporation contains provisions that have the same effect as Section 203, except that they provide that the Sunset Holders, their affiliates and their respective successors (other than the Company or any of our subsidiaries), as well as their direct and indirect transferees, will not be deemed to be “interested stockholders,” regardless of the percentage of our voting stock owned by them, and accordingly will not be subject to such restrictions. 71 Table of Contents Our amended and restated certificate of incorporation designates the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, and the federal district courts as the exclusive forum for Securities Act claims, which could limit our stockholders’ ability to obtain what such stockholders believe to be a favorable judicial forum for disputes with us or our directors, officers or other employees.
In the United States, our advisory and investment management businesses are subject to regulation by the SEC, the Commodity Futures Trading Commission, the Internal Revenue Service (the “IRS”) and other regulatory agencies, pursuant to, among other laws, the Investment Advisers Act, the Securities Act, the Internal Revenue Code of 1986, as amended, (the “Code”), the Commodity Exchange Act, and the Exchange Act.
In the United States, our advisory and investment management businesses are subject to regulation by the SEC, the Commodity Futures Trading Commission, the Internal Revenue Service (the “IRS”) and other regulatory agencies, pursuant to, among other laws, the Investment Advisers Act, the Investment Company Act, the Securities Act, the Internal Revenue Code of 1986, as amended, (the “Code”), the Commodity Exchange Act, and the Exchange Act.
Accordingly, to the extent that SSG is disallowed a deduction for its distributive share of compensation expense under Section 162(m) of the Code, it may result in additional U.S. federal income tax liability for SSG and/or reduce cash available for distribution to SSG’s stockholders or for the payment of other expenses and obligations of SSG. 64 Table of Contents If StepStone Group Inc. were deemed an “investment company” under the Investment Company Act of 1940 as a result of its ownership of the Partnership or the General Partner, applicable restrictions could make it impractical for us to continue our business as contemplated and could have a material adverse effect on our business.
Accordingly, to the extent that SSG is disallowed a deduction for its distributive share of compensation expense under Section 162(m) of the Code, it may result in additional U.S. federal income tax liability for SSG and/or reduce cash available for distribution to SSG’s stockholders or for the payment of other expenses and obligations of SSG. 66 Table of Contents If StepStone Group Inc. were deemed an “investment company” under the Investment Company Act of 1940 as a result of its ownership of the Partnership or the General Partner, applicable restrictions could make it impractical for us to continue our business as contemplated and could have a material adverse effect on our business.
The SEC in particular has increased its regulation and scrutiny of the asset management and private equity industries in recent years, focusing on the private equity industry’s fees, allocation of expenses to funds, valuation practices, allocation of fund investment opportunities, disclosures to clients, the allocation of broken-deal expenses, the management of conflicts of interest disclosures and other fiduciary obligations.
The SEC has increased its regulation and scrutiny of the asset management and private equity industries in recent years, focusing on the private equity industry’s fees, allocation of expenses to funds, allocation of fund investment opportunities, disclosures to clients, the allocation of broken-deal expenses, the management of conflicts of interest disclosures, valuation practices and other fiduciary obligations.
In addition, our brand and reputation are also associated with our public commitments to various corporate ESG initiatives, including our goals for sustainability and inclusion and diversity. Any failure to achieve our disclosed commitments, could harm our reputation and adversely affect our client relationships or our recruitment and retention efforts.
In addition, our brand and reputation are also associated with our public commitments to various corporate ESG initiatives, including our goals for sustainability and inclusion and diversity. Any failure or perceived failure to achieve our disclosed commitments, could harm our reputation and adversely affect our client relationships or our recruitment and retention efforts.
As a result, we may take actions with respect to the allocation of investments among the StepStone Funds (including funds and accounts that have different fee structures), the purchase or sale of investments in the StepStone Funds, the structuring of investment transactions for those StepStone Funds, the advice we provide or other actions in order to comply with these fiduciary and contractual obligations. 34 Table of Contents In addition, because our senior management and other professionals generally hold their economic interests through pass-through entities like the Partnership or other affiliated entities, which are not subject to U.S. federal and state entity-level income taxes, and our Class A common stockholders will hold their interests through StepStone Group Inc., which is subject to entity-level taxation as a corporation in the United States, conflicts relating to the selection and structuring of investments or other matters may arise between the Class B unitholders (who are also Class B stockholders of StepStone Group Inc.) and Class C unitholders of the Partnership, on the one hand, and the Class A stockholders of StepStone Group Inc., on the other hand.
As a result, we may take actions with respect to the allocation of investments among the StepStone Funds (including funds and accounts that have different fee structures), the purchase or sale of investments in the StepStone Funds, the structuring of investment transactions for those StepStone Funds, the advice we provide or other actions in order to comply with these fiduciary and contractual obligations. 33 Table of Contents In addition, because our senior management and other professionals generally hold their economic interests through pass-through entities like the Partnership or other affiliated entities, which are not subject to U.S. federal and state entity-level income taxes, and our Class A common stockholders will hold their interests through StepStone Group Inc., which is subject to entity-level taxation as a corporation in the United States, conflicts relating to the selection and structuring of investments or other matters may arise between the Class B unitholders (who are also Class B stockholders of StepStone Group Inc.), Class C unitholders and Class D unitholders of the Partnership, on the one hand, and the Class A stockholders of StepStone Group Inc., on the other hand.
However, these measures, as well as our increased awareness of the nature and extent of a risk of a cyber-incident, do not guarantee that a cyber-incident will not occur or that our financial results or operations will not be adversely affected by such an incident.
However, these measures, as well as our increased awareness of the nature and extent of a risk of a cybersecurity incident, do not guarantee that a cyber-incident will not occur or that our financial results or operations will not be adversely affected by such an incident.
Any determination that we have violated the FCPA or other applicable anti-corruption, sanctions or export control laws could subject us to, among other things, civil and criminal penalties, material fines, profit disgorgement, injunctions on future conduct, securities litigation and a general loss of client confidence, any one of which could adversely affect our business prospects, financial condition and results of operations. 56 Table of Contents Regulation of investment advisers outside the United States could adversely affect our ability to operate our business.
Any determination that we have violated the FCPA or other applicable anti-corruption, sanctions or export control laws could subject us to, among other things, civil and criminal penalties, material fines, profit disgorgement, injunctions on future conduct, securities litigation and a general loss of client confidence, any one of which could adversely affect our business prospects, financial condition and results of operations. 58 Table of Contents Regulation of investment advisers outside the United States could adversely affect our ability to operate our business.
We will not be reimbursed if the actual benefits ultimately realized by us are less than were projected in the computation of the early termination payment. 62 Table of Contents Payments under each Tax Receivable Agreement will be based on the tax reporting positions that we will determine and the IRS or another tax authority may challenge all or part of the tax basis increases or the inheritance of tax attributes from the Blocker Companies, as well as other related tax positions we take, and a court could sustain such challenge.
We will not be reimbursed if the actual benefits ultimately realized by us are less than were projected in the computation of the early termination payment. 64 Table of Contents Payments under each Tax Receivable Agreement will be based on the tax reporting positions that we will determine and the IRS or another tax authority may challenge all or part of the tax basis increases or the inheritance of tax attributes from the Blocker Companies, as well as other related tax positions we take, and a court could sustain such challenge.
We believe that we are primarily engaged in the investment advisory service business, specifically that of providing customized investment solutions and advisory, data and administrative services to our clients and not in the business of investing, reinvesting or trading in securities.
We believe that we are primarily engaged in the investment advisory service business, specifically that of providing customized investment solutions and advisory, and data services to our clients and not in the business of investing, reinvesting or trading in securities.
If the investment returns achieved by the StepStone Funds are reduced, it could result in negative reputational effects and impair the value of carried interest allocations, which could materially and adversely affect our business, financial condition and results of operations. 35 Table of Contents Clients in the StepStone Funds with commitment-based structures may not satisfy their contractual obligation to fund capital calls when requested, which could adversely affect a fund’s operations and performance.
If the investment returns achieved by the StepStone Funds are reduced, it could result in negative reputational effects and impair the value of carried interest allocations, which could materially and adversely affect our business, financial condition and results of operations. 34 Table of Contents Clients in the StepStone Funds with commitment-based structures may not satisfy their contractual obligation to fund capital calls when requested, which could adversely affect a fund’s operations and performance.
In addition, the structuring of future transactions and investments may take into consideration the partners’ tax considerations even where no similar benefit would accrue to us. 66 Table of Contents We rely on our equity ownership, governance rights and other contractual arrangements to control certain of our consolidated subsidiaries that are not wholly-owned, which may provide us less effective operational control than wholly owning such subsidiaries.
In addition, the structuring of future transactions and investments may take into consideration the partners’ tax considerations even where no similar benefit would accrue to us. 68 Table of Contents We rely on our equity ownership, governance rights and other contractual arrangements to control certain of our consolidated subsidiaries that are not wholly-owned, which may provide us less effective operational control than wholly owning such subsidiaries.
If the Partnership or an entity in which the Partnership directly or indirectly invests does not make this election, the then-current partners of the Partnership (including SSG) could economically bear the burden of the understatement. 55 Table of Contents Audit adjustments for state or local tax purposes could similarly result in the Partnership (or any of its applicable subsidiaries or other entities in which the Partnership directly or indirectly invests) being required to pay or indirectly bear the economic burden of state or local taxes and associated interest, and penalties.
If the Partnership or an entity in which the Partnership directly or indirectly invests does not make this election, the then-current partners of the Partnership (including SSG) could economically bear the burden of the understatement. 57 Table of Contents Audit adjustments for state or local tax purposes could similarly result in the Partnership (or any of its applicable subsidiaries or other entities in which the Partnership directly or indirectly invests) being required to pay or indirectly bear the economic burden of state or local taxes and associated interest, and penalties.
Furthermore, a StepStone Fund could be unable to call capital from the investors until it sets up a new deposit account at a different institution, which could be a time-consuming process and could be prohibited under the fund’s then-existing credit facilities. 39 Table of Contents Ordinarily, assets held by a regulated financial institution are insured up to stated balance amounts—the U.S.
Furthermore, a StepStone Fund could be unable to call capital from the investors until it sets up a new deposit account at a different institution, which could be a time-consuming process and could be prohibited under the fund’s then-existing credit facilities. 38 Table of Contents Ordinarily, assets held by a regulated financial institution are insured up to stated balance amounts—the U.S.
The historical investment returns of the StepStone Funds and advisory accounts have benefited from investment opportunities and general market conditions, including favorable borrowing conditions in the debt markets during such historical periods, and we cannot assure you that the StepStone Funds, advisory accounts or the underlying funds in which we invest will be able to avail themselves of comparable opportunities and conditions, particularly in light of recent rising interest rates and other market conditions.
The historical investment returns of the StepStone Funds and advisory accounts have benefited from investment opportunities and general market conditions, including favorable borrowing conditions in the debt markets during such historical periods, and we cannot assure you that the StepStone Funds, advisory accounts or the underlying funds in which we invest will be able to avail themselves of comparable opportunities and conditions, particularly in light of recent higher interest rates and other market conditions.
Any of these events could cause a reduction to AUM and consequently cause our earnings to decline and materially and adversely affect our business, financial condition and results of operations. 36 Table of Contents Valuation methodologies for certain assets in the StepStone Funds are subjective, and the values of assets established pursuant to such methodologies may never be realized, which could result in significant losses for the StepStone Funds.
Any of these events could cause a reduction to AUM and consequently cause our earnings to decline and materially and adversely affect our business, financial condition and results of operations. 35 Table of Contents Valuation methodologies for certain assets in the StepStone Funds are subjective, and the values of assets established pursuant to such methodologies may never be realized, which could result in significant losses for the StepStone Funds.
The termination of such relationships by a critical mass of such fund managers and sponsors or the imposition of widespread restrictions on our ability to use the data we obtain for our reporting and monitoring services could adversely affect our business, financial condition and results of operations. 41 Table of Contents We and our clients depend on the reliability of our proprietary data and technology platforms and other data processing systems.
The termination of such relationships by a critical mass of such fund managers and sponsors or the imposition of widespread restrictions on our ability to use the data we obtain for our reporting and monitoring services could adversely affect our business, financial condition and results of operations. 40 Table of Contents We and our clients depend on the reliability of our proprietary data and technology platforms and other data processing systems.
If any of the foregoing were to occur, the values the investments we have made on behalf of clients or we recommend to our clients could decrease and our financial condition, results of operations and cash flow could suffer as a result. 40 Table of Contents Our risk management strategies and procedures may leave us exposed to unidentified or unanticipated risks.
If any of the foregoing were to occur, the values the investments we have made on behalf of clients or we recommend to our clients could decrease and our financial condition, results of operations and cash flow could suffer as a result. 39 Table of Contents Our risk management strategies and procedures may leave us exposed to unidentified or unanticipated risks.
In addition, if we fail to monitor and adapt to changes in policy and the regulations to which we are or may become subject, we could be subject to enforcement actions, which may materially and adversely affect our businesses, financial condition and results of operations. 54 Table of Contents Future changes to tax laws or our effective tax rate could materially adversely affect our company and reduce net returns to our stockholders.
In addition, if we fail to monitor and adapt to changes in policy and the regulations to which we are or may become subject, we could be subject to enforcement actions, which may materially and adversely affect our businesses, financial condition and results of operations. 56 Table of Contents Future changes to tax laws or our effective tax rate could materially adversely affect our company and reduce net returns to our stockholders.
In addition, we will depend on third parties to assist us in complying with regulatory obligations with respect to such registered funds and business development companies.
In addition, we depend on third parties to assist us in complying with regulatory obligations with respect to such registered funds and business development companies.
Many factors affect our ability to compete successfully, including: • some of our competitors have more relevant experience, greater financial and other resources and more personnel than we do; • if, as we expect, allocation of assets to private markets investment strategies increases, there may be increased competition for private markets investments and access to fund managers; • certain clients may prefer to invest with private partnerships rather than a public company; and 50 Table of Contents • other industry participants from time to time recruit our investment professionals and other employees away from us.
Many factors affect our ability to compete successfully, including: • some of our competitors have more relevant experience, greater financial and other resources and more personnel than we do; • if, as we expect, allocation of assets to private markets investment strategies increases, there may be increased competition for private markets investments and access to fund managers; • certain clients may prefer to invest with private partnerships rather than a public company; and • other industry participants from time to time recruit our investment professionals and other employees away from us.
Fee reductions on existing or future new business could have a material adverse effect on our profit margins and results of operations. 37 Table of Contents We may need to pay “clawback” or “contingent repayment” obligations if and when they are triggered under the governing agreements of our funds.
Fee reductions on existing or future new business could have a material adverse effect on our profit margins and results of operations. 36 Table of Contents We may need to pay “clawback” or “contingent repayment” obligations if and when they are triggered under the governing agreements of our funds.
This obligation is known as a “clawback” or contingent repayment obligation. Our carried interest is generally determined at the end of the period on a hypothetical liquidation basis. As of March 31, 2023, if the funds were liquidated at their fair values, no material amounts would have been subject to contingent repayment.
This obligation is known as a “clawback” or contingent repayment obligation. Our carried interest is generally determined at the end of the period on a hypothetical liquidation basis. As of March 31, 2024, if the funds were liquidated at their fair values, no material amounts would have been subject to contingent repayment.
In addition, we believe StepStone Group Inc. is not an investment company under section 3(b)(1) of the Investment Company Act because it is primarily engaged in a non-investment company business. 65 Table of Contents The Investment Company Act and the rules thereunder contain detailed parameters for the organization and operations of investment companies.
In addition, we believe StepStone Group Inc. is not an investment company under section 3(b)(1) of the Investment Company Act because it is primarily engaged in a non-investment company business. 67 Table of Contents The Investment Company Act and the rules thereunder contain detailed parameters for the organization and operations of investment companies.
If we experience a change of control (as defined under the Investment Advisers Act of 1940, as amended (the “Investment Advisers Act”) or as otherwise set forth in the partnership agreements of our funds), continuation of the investment management agreements of our 33 Table of Contents funds would be subject to client consent.
If we experience a change of control (as defined under the Investment Advisers Act of 1940, as amended (the “Investment Advisers Act”) or as otherwise set forth in the partnership agreements of our funds), continuation of the investment management agreements of our 32 Table of Contents funds would be subject to client consent.
We will need to continuously invest in our human resources and our infrastructure as a result of the increasingly complex investment management industry, increasing sophistication of clients and our expansion into new jurisdictions. In addition, our newer private wealth platform has and will require ongoing development of new infrastructure.
We will need to continue to invest in our human resources and our infrastructure as a result of the increasingly complex investment management industry, increasing sophistication of clients and our expansion into new jurisdictions. In addition, our newer private wealth platform has and will require ongoing development of new infrastructure.
Policy changes and regulatory reform by the U.S. federal government may create regulatory uncertainty for our funds’ portfolio companies and our investment strategies and adversely affect the profitability of the StepStone Funds’ portfolio companies. 53 Table of Contents Ongoing political developments could adversely impact our investment management and investment advisory businesses.
Policy changes and regulatory reform by the U.S. federal government may create regulatory uncertainty for our funds’ portfolio companies and our investment strategies and adversely affect the profitability of the StepStone Funds’ portfolio companies. 55 Table of Contents Ongoing political developments could adversely impact our investment management and investment advisory businesses.
The costs related to cyber or other security threats or disruptions may not be fully insured or indemnified by others, including by our service providers. We have implemented processes, procedures and internal controls designed to mitigate cybersecurity risks and cyber intrusions.
The costs related to cyber or other security threats or disruptions may not be fully insured or indemnified by others, including by our service providers. We have implemented processes, procedures and internal controls designed to mitigate cybersecurity risks and cybersecurity incidents.
We collect, process and store rapidly increasing volumes of highly sensitive data, including our proprietary business information and intellectual property, and personally identifiable information of our employees, our clients and others, in our data centers and on our networks, and with our vendors and service providers.
We collect, process and store rapidly increasing volumes of highly sensitive data, including our proprietary business information and intellectual property, and personally identifiable information of our employees, our clients and others, in our data centers and on our networks, and with our vendors, service providers and government agencies.
For instance, key requirements under Directive (EU) 2019/1160 and Regulation (EU) 2019/1156 on the cross-border distribution of collective investment undertakings came into effect in EU member states from August 2, 2021. Among other things, this legislation introduced rules regarding the pre-marketing of funds, including additional reporting requirements.
For instance, key 59 Table of Contents requirements under Directive (EU) 2019/1160 and Regulation (EU) 2019/1156 on the cross-border distribution of collective investment undertakings came into effect in EU member states from August 2, 2021. Among other things, this legislation introduced rules regarding the pre-marketing of funds, including additional reporting requirements.
Devoting additional resources to ESG matters could increase the amount of expenses we or our investments are required to bear. For example, collecting, measuring, and reporting ESG information and metrics can be costly, difficult and time consuming, is subject to evolving reporting standards, and can present numerous operational, reputational, financial, legal and other risks.
Devoting additional resources to ESG matters could increase the amount of expenses we or our investments are required to bear. For example, collecting, measuring, and reporting ESG 61 Table of Contents information and metrics can be costly, difficult and time consuming, is subject to evolving reporting standards, and can present numerous operational, reputational, financial, legal and other risks.
In addition, with respect to our funds that are subject to the Investment Company Act of 1940, as amended (the “Investment Company Act”), each fund’s investment management agreement must be approved annually by (a) such fund’s board of directors or by a vote of the majority of such fund’s equity holders and (b) the independent members of such fund’s board of directors and, in certain cases, its equity holders, as required by law.
In addition, with respect to our funds that are subject to the Investment Company Act of 1940, as amended (the “Investment Company Act”), each fund’s investment management agreement must be approved annually by (a) such fund’s board of directors and by a vote of the majority of such fund’s equity holders or (b) the independent members of such fund’s board of directors, as required by law.
We cannot assure you that we will be able to maintain leverage levels in compliance with such covenants. Any failure to comply with these financial and other covenants, if not waived, could cause a default or event of default under such indebtedness. 49 Table of Contents We are subject to risks in using custodians, counterparties, administrators and other agents.
We cannot assure you that we will be able to maintain leverage levels in compliance with such covenants. Any failure to comply with these financial and other covenants, if not waived, could cause a default or event of default under such indebtedness. We are subject to risks in using custodians, counterparties, administrators and other agents.
In addition, Class B and Class C limited partners in the Partnership would benefit from any value attributable to such accumulated cash balances as a result of their ownership of Class A common stock following an exchange of their units for Class A common stock. 67 Table of Contents The dual class structure of our common stock may adversely affect the trading market for our Class A common stock.
In addition, Class B, Class C and Class D limited partners in the Partnership would benefit from any value attributable to such accumulated cash balances as a result of their ownership of Class A common stock following an exchange of their units for Class A common stock. 69 Table of Contents The dual class structure of our common stock may adversely affect the trading market for our Class A common stock.
Any interruption or deterioration in the performance of these third parties, failures of their information systems and technology or cyber and security breaches could put our sensitive information at risk or result in the shutdown of a service provider, and indemnification by, or insurance coverage of, such service providers may not be sufficient to cover any damage or loss, which could impair the quality of the funds’ operations and harm our reputation, thereby adversely affecting our business, financial condition and results of operations.
Any interruption or deterioration in the performance of these government agencies or third-party service providers, failures of their information systems and technology or cyber and security breaches could put our sensitive information at risk or result in the shutdown of a service provider, and indemnification by, or insurance coverage of, such service providers may not be sufficient to cover any damage or loss, which could impair the quality of the funds’ operations and harm our reputation, thereby adversely affecting our business, financial condition and results of operations.
Cyber or security incidents may be an intentional attack, such as a hacker attack, ransomware, virus or worm, or an unintentional event and could involve bad actors gaining unauthorized access to our information systems for purposes of misappropriating assets, disclosing or modifying sensitive or confidential information, corrupting data or causing operational disruption.
Cybersecurity incidents may be an intentional attack, such as a hacker attack, ransomware, virus or worm, or an unintentional event and could involve bad actors gaining unauthorized access to our information systems for purposes of misappropriating assets, disclosing or modifying sensitive or confidential information, corrupting data or causing operational disruption.
Failures or interruptions of these services may disrupt our business, damage our reputation, limit our growth and adversely affect our business and results of operations. We and our clients rely heavily on our proprietary data and technology platforms, including SPI and Omni, and associated tools, which form a valuable part of the services we offer to our clients.
Failures or interruptions of these services may disrupt our business, damage our reputation, limit our growth and adversely affect our business and results of operations. We and our clients rely heavily on our proprietary data and technology platforms, including SPI Research and SPI Reporting, and associated tools, which form a valuable part of the services we offer to our clients.
As a result, in certain circumstances, payments could be made under the Tax Receivable Agreements in excess of our ultimate cash tax savings. In certain circumstances, payments under each Tax Receivable Agreement may be accelerated and/or significantly exceed the actual tax benefits, if any, that SSG actually realizes.
As a result, in certain circumstances, payments could be made under the Tax Receivable Agreements in excess of our ultimate cash tax savings. 63 Table of Contents In certain circumstances, payments under each Tax Receivable Agreement may be accelerated and/or significantly exceed the actual tax benefits, if any, that SSG actually realizes.
The global financial markets and business climate have recently deteriorated and may continue to deteriorate, including due to continued rising interest rates, ongoing high inflation, reduced availability of credit, recession risk, regional and international bank failures, changes in laws and regulation, terrorism or political uncertainty, war (including the ongoing Russia-Ukraine conflict), and potential recession.
The global financial markets and business climate have recently deteriorated and may continue to deteriorate, including due to continued rising interest rates, ongoing high inflation, reduced availability of credit, recession risk, regional and international bank failures, changes in laws and regulation, terrorism or political uncertainty, war (including the ongoing Russia-Ukraine and Middle East conflicts), and potential recession.
Recent and prospective increases in interest rates or decreases in the availability of credit may adversely affect the ability of the StepStone Funds to achieve attractive rates of return, particularly because certain funds and portfolio companies depend on leverage for a return on investment.
Recent and continuing higher interest rates or prospective decreases in the availability of credit may adversely affect the ability of the StepStone Funds to achieve attractive rates of return, particularly because certain funds and portfolio companies depend on leverage for a return on investment.
Because members of our senior leadership team hold their economic interest through other entities, conflicts of interest may arise between them and the holders of our Class A common stock or with us. The Sunset Holders, who are members of our senior leadership team, beneficially owned approximately 30.9% of the outstanding Partnership units as of March 31, 2023.
Because members of our senior leadership team hold their economic interest through other entities, conflicts of interest may arise between them and the holders of our Class A common stock or with us. The Sunset Holders, who are members of our senior leadership team, beneficially owned approximately 30.6% of the outstanding Partnership units as of March 31, 2024.
See “—Recent and prospective increases in interest rates or decreases in the availability of credit may adversely affect the ability of the StepStone Funds to achieve attractive rates of return, particularly because certain funds and portfolio companies depend on leverage for a return on investment.” 38 Table of Contents The portfolio companies in which private markets funds have invested or may invest will sometimes involve a high degree of business and financial risk.
See “—Recent and continuing higher interest rates or prospective decreases in the availability of credit may adversely affect the ability of the StepStone Funds to achieve attractive rates of return, particularly because certain funds and portfolio companies depend on leverage for a return on investment.” 37 Table of Contents The portfolio companies in which private markets funds have invested or may invest will sometimes involve a high degree of business and financial risk.
Our revenue from our investment management solutions is derived from fees earned for our management of the StepStone Funds and advisory accounts, performance fees, including incentive fees and carried interest with respect to certain of the StepStone Funds, administrative services, and monitoring and reporting fees.
Our revenue from our investment management solutions is derived from fees earned for our management of the StepStone Funds and advisory accounts, performance fees, including incentive fees and carried interest allocations with respect to certain of the StepStone Funds, and monitoring and reporting fees.
We may choose to manage these excess distributions through a number of different approaches, including through the payment of dividends to our Class A common stockholders or by applying them to other corporate purposes. 63 Table of Contents We may be required to fund withholding tax upon certain exchanges of Class B units into shares of Class A common stock by non-U.S. holders.
We may choose to manage these excess distributions through a number of different approaches, including through the payment of dividends to our Class A common stockholders or by applying them to other corporate purposes. 65 Table of Contents We may be required to fund withholding tax upon certain exchanges of Class B units or newly-created Class D units into shares of Class A common stock by non-U.S. holders.
Omni includes funds, direct investments and co-investments that we monitor and report on for the StepStone Funds and advisory accounts. The secure processing, maintenance and transmission of this information are critical to our operations.
SPI Reporting includes funds, direct investments and co-investments that we monitor and report on for the StepStone Funds and advisory accounts. The secure processing, maintenance and transmission of this information are critical to our operations.
In addition, a failure to successfully manage ESG-related expectations may adversely affect our reputation or erode stakeholder trust. ESG matters have also been the subject of increased focus by regulators, including in the EU and the U.S.
In addition, a failure to successfully manage ESG-related expectations may adversely affect our reputation or erode stakeholder trust. 60 Table of Contents ESG matters have also been the subject of increased focus by regulators, including in the EU, the UK and the U.S.
Such events could damage our business relationships and adversely affect our business, financial condition and results of operations. 42 Table of Contents Cybersecurity risks and cyber incidents could adversely affect our business by causing a disruption to our operations, which could adversely affect our financial condition and results of operations.
Such events could damage our business relationships and adversely affect our business, financial condition and results of operations. 41 Table of Contents Cybersecurity risks and cybersecurity incidents could adversely affect our business by causing a disruption to our operations, which could adversely affect our financial condition and results of operations.
Clients make capital commitments to the StepStone Funds, which we are entitled to call at any time during prescribed periods that can extend for several years into the future. We depend on clients fulfilling their commitments when we call capital from them in order for those funds to consummate investments and otherwise pay their obligations when due.
Clients make capital commitments to StepStone Funds with commitment-based structures, and we are entitled to call capital at any time during prescribed periods that can extend for several years into the future. We depend on clients fulfilling their commitments when we call capital from them in order for those funds to consummate investments and otherwise pay their obligations when due.
Holders of Class B units may include non-U.S. holders. The partners holding Class B units in the Partnership generally will be entitled to exchange such Class B units for shares of Class A common stock on a one-for-one basis or, at our election, for cash.
Holders of Class B units or newly-created Class D units include non-U.S. holders. The partners holding Class B units or newly-created Class D units in the Partnership generally will be entitled to exchange such Class B units or newly-created Class D units for shares of Class A common stock on a one-for-one basis or, at our election, for cash.
The extent and impact of any sanctions imposed in connection with the Russia-Ukraine conflict may also cause additional financial market volatility and impact the global economy. Volatility and disruption in the equity and credit markets can adversely affect the portfolio companies in which private markets funds invest and adversely affect the investment performance of the StepStone Funds and advisory accounts.
The extent and impact of any sanctions imposed in connection with geopolitical conflicts may also cause additional financial market volatility and impact the global economy. Volatility and disruption in the equity and credit markets can adversely affect the portfolio companies in which private markets funds invest and adversely affect the investment performance of the StepStone Funds and advisory accounts.
The frequency and sophistication of the cyber and security threats we face continue to increase. As a result, we face a heightened risk of a security breach or disruption with respect to sensitive information resulting from an attack by computer hackers, foreign governments or cyber terrorists.
The frequency and sophistication of the cybersecurity threats and incidents we face continue to increase. As a result, we face a heightened risk of a cybersecurity incident or disruption with respect to sensitive information resulting from an attack by computer hackers, foreign governments or cyber terrorists.
The European Union Markets in Financial Instruments Directive II (“MiFID II”), which became effective on January 3, 2018, requires, among other things, all MiFID II investment firms to comply with more prescriptive disclosure, transparency, reporting and recordkeeping obligations and enhanced obligations in relation to the receipt of investment research, best execution, product governance and marketing communications.
The European Union Markets in Financial Instruments Directive II (“MiFID II”) requires, among other things, all MiFID II investment firms to comply with more prescriptive disclosure, transparency, reporting and recordkeeping obligations and enhanced obligations in relation to the receipt of investment research, best execution, product governance and marketing communications.
We expect to be required to devote increasing levels of funding and resources to comply with evolving cybersecurity regulations, including those expected to be promulgated by the SEC with respect to public companies and investment advisers, and to continually monitor and enhance our information security procedures and controls.
We expect to be required to devote increasing levels of funding and resources to comply with evolving cybersecurity regulations, including the new SEC rules applicable to public companies as well as those expected to be promulgated by the SEC with respect to investment advisers, and to continue to monitor and enhance our information security procedures and controls.
See “—Evolving laws and government regulations could adversely affect us.” A major public health crisis, including a resurgence of the COVID-19 pandemic or a similar pandemic, could again severely disrupt the global financial markets and business climate and adversely affect our business, financial condition and results of operations.
See “—Evolving laws and government regulations could adversely affect us.” 52 Table of Contents A major public health crisis, such as COVID-19 pandemic or a similar pandemic, could again severely disrupt the global financial markets and business climate and adversely affect our business, financial condition and results of operations.
Different laws contain conflicting provisions, making compliance with all laws more difficult. If we fail to comply with these laws and regulations, we could face claims for damages, civil or criminal financial penalties, reputational harm, incarceration of our employees, restrictions on our operations and other liabilities, which could negatively affect our business, results of operations and financial condition.
If we fail to comply with these laws and regulations, we could face claims for damages, civil or criminal financial penalties, reputational harm, incarceration of our employees, restrictions on our operations and other liabilities, which could negatively affect our business, results of operations and financial condition.
For instance, in fiscal 2023, we recorded a $253.3 million loss on unrealized carried interest allocations with respect to our historic operations, as well as a $452.2 million loss on Legacy Greenspring carried interest allocations.
For instance, in fiscal 2023, we recorded a $122.3 million loss on unrealized carried interest allocations (net of the reversal of realized carried interest allocations) with respect to our historic operations, as well as a $452.2 million loss on Legacy Greenspring carried interest allocations.
The terms of the contracts with these third-party service providers are often customized and complex, and many of these arrangements occur in markets or relate to products that are not subject to regulatory oversight. We may be unsuccessful in seeking reimbursement or indemnification from these third-party service providers.
The terms of the contracts with these third-party service providers are often customized and complex, and many of these arrangements occur in markets or relate to products that are not subject to regulatory oversight.
The availability of investment opportunities will be subject to market conditions and other factors outside of our control and the control of the fund managers with which we invest. Markets in 2022 and 2023 have experienced meaningful headwinds, including falling equity values and increasing borrowing costs.
The availability of investment opportunities will be subject to market conditions and other factors outside of our control and the control of the fund managers with which we invest. Markets in the last two years experienced meaningful headwinds, including increasing borrowing costs.
Our profitability may also be adversely affected by our fixed costs and the possibility that we would be unable to reduce other costs within a time frame sufficient to match any decreases in revenue relating to changes in market and economic conditions.
Our profitability may also be adversely affected by our fixed costs and the possibility that we would be unable to reduce other costs within a time frame sufficient to match any decreases in revenue relating to changes in market and economic conditions. If our revenue declines without a commensurate reduction in our expenses, our net income will be lower.
We provide investment advisory and other services and raise funds in a number of countries and jurisdictions outside the United States.
As noted in “Business—Regulatory Environment—Foreign Regulation,” we provide investment advisory and other services and raise funds in a number of countries and jurisdictions outside the United States.
The Biden administration and the current leadership of the SEC have also signaled that they intend to seek to enact further changes to numerous areas of law and regulations currently in effect.
The Biden administration and the current leadership of the SEC have also signaled that they intend to seek to enact further changes to numerous areas of law and regulations currently in effect. In particular, the SEC has signaled an increased emphasis on investment adviser and private fund regulation.
We currently pay dividends to our stockholders, but our ability to do so is subject to the discretion of our board of directors and may be limited by our holding company structure and applicable provisions of Delaware law.
We currently pay dividends to our stockholders, but our ability to do so is subject to the discretion of our board of directors and may be limited by our holding company structure and applicable provisions of Delaware law. We have paid quarterly cash dividends consistently since the fourth quarter of fiscal 2021and have occasionally declared special dividends.
Our funds are subject to the risk that the counterparty to one or more of these contracts defaults, either voluntarily or involuntarily, on its performance under the contract. Any such default may occur suddenly and without notice to us.
We may be unsuccessful in seeking reimbursement or indemnification from these third-party service providers. 50 Table of Contents Our funds are subject to the risk that the counterparty to one or more of these contracts defaults, either voluntarily or involuntarily, on its performance under the contract. Any such default may occur suddenly and without notice to us.
Difficult or volatile market and political conditions can adversely affect our business by reducing the market value of the assets we manage, causing our clients to reduce their investments in private markets, reducing the number of high-quality investment managers with whom we may invest, and reducing the ability of our funds to raise or deploy capital.
This competitive pressure could adversely affect our ability to make successful investments and restrict our ability to raise future funds, either of which would materially and adversely affect our business, financial condition and results of operations. 51 Table of Contents Difficult or volatile market and political conditions can adversely affect our business by reducing the market value of the assets we manage, causing our clients to reduce their investments in private markets, reducing the number of high-quality investment managers with whom we may invest, and reducing the ability of our funds to raise or deploy capital.
The result of these adverse incidents can include the inability to provide services to our clients, other disruptions of our business, corruption or modifications to our data, fraudulent transfers or requests for transfers of money, liability for stolen assets or information, increased cybersecurity protection and insurance costs and litigation. 43 Table of Contents Employee misconduct could harm us by impairing our ability to attract and retain clients and subjecting us to significant legal liability and reputational harm.
The result of these adverse incidents can include the inability to provide services to our clients, other disruptions of our business, corruption or modifications to our data, fraudulent transfers or requests for transfers of money, liability for stolen assets or information, increased cybersecurity protection and insurance costs and litigation.
Any substantial decrease in net operating cash flows or any substantial increase in expenses could make it difficult for us to meet our debt service requirements or force us to modify our operations.
Any portion of our cash flow required for debt service will not be available for our operations, distributions, dividends or other purposes. Any substantial decrease in net operating cash flows or any substantial increase in expenses could make it difficult for us to meet our debt service requirements or force us to modify our operations.
Under these rules, a listed company of which more than 50% of the voting power with respect to the election of directors is held by an individual, group or another company is a “controlled company” and may elect not to comply with certain corporate governance requirements, including the requirement that (i) a majority of our board of directors consist of independent directors, (ii) director nominees be selected or recommended to the board entirely by independent directors and (iii) the compensation committee be composed entirely of independent directors. 60 Table of Contents A “Sunset” is triggered upon the earliest to occur of the following: (i) Monte Brem, Scott Hart, Jason Ment, Jose Fernandez, Johnny Randel, Michael McCabe, Mark Maruszewski, Thomas Keck, Thomas Bradley, David Jeffrey and Darren Friedman (including their respective family trusts and any other permitted transferees, the “Sunset Holders”) collectively cease to maintain direct or indirect beneficial ownership of at least 10% of the outstanding shares of Class A common stock (determined assuming all outstanding Class B units have been exchanged for Class A common stock); (ii) the Sunset Holders cease collectively to maintain direct or indirect beneficial ownership of an aggregate of at least 25% of the aggregate voting power of our outstanding Class A common stock and Class B common stock, before giving effect to a Sunset; and (iii) September 18, 2025.
A “Sunset” is triggered upon the earliest to occur of the following: (i) Monte Brem, Scott Hart, Jason Ment, Jose Fernandez, Johnny Randel, Michael McCabe, Mark Maruszewski, Thomas Keck, Thomas Bradley, David Jeffrey and Darren Friedman (including their respective family trusts and any other permitted transferees, the “Sunset Holders”) collectively cease to maintain direct or indirect beneficial ownership of at least 10% of the outstanding shares of Class A common stock (determined assuming all outstanding Class B units have been exchanged for Class A common stock); (ii) the Sunset Holders cease collectively to maintain direct or indirect beneficial ownership of an aggregate of at least 25% of the aggregate voting power of our outstanding Class A common stock and Class B common stock, before giving effect to a Sunset; and (iii) September 18, 2025.
Our businesses are subject to income taxation in the United States, as well as in many tax jurisdictions throughout the world. Tax rates in these jurisdictions may be subject to significant change. If our effective tax rate increases, our results of operations and cash flow could be adversely affected.
Our businesses are subject to income taxation in the United States, as well as in many tax jurisdictions throughout the world. Tax rates in these jurisdictions may be subject to significant change.
These legislative developments, which create a common classification system and disclosure obligations focusing on ESG issues, require additional disclosures to clients with respect to ESG factors, which may increase our compliance obligations and expenses, and could lead clients to reduce their investment with us.
These and other proposals have resulted in the Non-Financial Disclosure Regulation, EU Taxonomy Regulation and the EU Sustainable Finance Disclosure Regulation. These legislative developments, which create disclosure obligations focusing on ESG issues, require additional disclosures to clients with respect to ESG factors, which may increase our compliance obligations and expenses, and could lead clients to reduce their investment with us.
In addition, a court could find that one of our co-investment funds has formed a partnership-in-fact conducting a trade or business and would therefore be jointly and severally liable for the portfolio company’s unfunded pension liabilities. 52 Table of Contents In addition, the Partnership, along with certain of our consolidated subsidiaries, is registered as an investment adviser with the SEC and is subject to the requirements and regulations of the Investment Advisers Act.
In addition, a court could find that one of our co-investment funds has formed a partnership-in-fact conducting a trade or business and would therefore be jointly and severally liable for the portfolio company’s unfunded pension liabilities.
We declared and paid our first quarterly cash dividend in the fourth quarter of fiscal 2021 and have paid a quarterly cash dividend consistently thereafter. We may in the future continue to pay cash dividends to our stockholders, but our board of directors may, in its discretion, decrease the level of dividends or discontinue the payment of dividends entirely.
We may in the future continue to pay cash dividends to our stockholders, but our board of directors may, in its discretion, decrease the level of dividends or discontinue the payment of dividends entirely.
The SEC has also heightened its focus on the valuation processes employed by investment advisers. The lack of readily ascertainable market prices for many of the investments made by the StepStone Funds or the funds in which we invest could subject our valuation policies and processes to increased scrutiny by the SEC.
The lack of readily ascertainable market prices for many of the investments made by the StepStone Funds or the funds in which we invest could subject our valuation policies and processes to increased scrutiny by the SEC. 53 Table of Contents The SEC also adopted new Private Fund Adviser rules on August 23, 2023.
Non-compliance with GDPR, CCPA or similar regulation enacted elsewhere therefore represents a serious risk to our business. Our private wealth investment platform is subject to additional regulatory requirements that could adversely impact its profitability.
There are substantial financial penalties for breach of the GDPR, including up to the higher of 20 million Euros or 4% of group annual worldwide turnover. Non-compliance with GDPR, CCPA or similar regulation enacted elsewhere therefore represents a serious risk to our business. Our private wealth investment platform is subject to additional regulatory requirements that could adversely impact its profitability.
If our revenue declines without a commensurate reduction in our expenses, our net income will be lower. 51 Table of Contents In addition, regulatory oversight and enforcement may become more rigorous for public companies in general, and for the financial services industry in particular, as a result of the recent volatility in the financial markets.
In addition, regulatory oversight and enforcement may become more rigorous for public companies in general, and for the financial services industry in particular, as a result of the recent volatility in the financial markets.
During fiscal 2023, the closing price of our Class A common stock ranged from a low of $23.11, and to a high closing price of $33.76. The closing price of our Class A common stock has fallen to as low as $21.10 in fiscal 2024 to date.
During fiscal 2024, the closing price of our Class A common stock ranged from a low of $21.10, and to a high closing price of $36.41. The closing price of our Class A common stock ranged from a low of $34.55, and to a high of $38.36 in fiscal 2025 to date.
In our investment management business, we make investment decisions on behalf of our clients that could result in substantial losses. Any such losses may subject us to the risk of legal and regulatory liabilities or actions alleging negligent misconduct, breach of fiduciary duty or breach of contract.
Any such losses may subject us to the risk of legal and regulatory liabilities or actions alleging negligent misconduct, breach of fiduciary duty or breach of contract.

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Item 2. Properties

Properties — owned and leased real estate

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We also lease space for our offices located in Baltimore, Beijing, Charlotte, Cleveland, Dallas, Dublin, Frankfurt, La Jolla, London, Luxembourg, Mexico City, Miami, Orlando, Palo Alto, Perth, Rome, San Francisco, Santiago, São Paolo, Seoul, Sydney, Tokyo, Toronto and Zurich. We do not own any real property.
We also lease space for our offices located in Baltimore, Beijing, Charlotte, Chicago, Cleveland, Dallas, Dublin, Frankfurt, La Jolla, London, Luxembourg, Mexico City, Miami, Orlando, Palo Alto, Perth, Rome, San Francisco, Santiago, São Paulo, Seoul, Singapore, Sydney, Tokyo, Toronto and Zurich. We do not own any real property.
Item 2. Properties. We lease our corporate headquarters office space located at 450 Lexington Avenue, 31 st Floor, New York, NY 10017.
Item 2. Properties. We lease our corporate headquarters office space located at 277 Park Avenue, 45 th Floor, New York, NY 10172.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Item 3. Legal Proceedings. In the normal course of business, we may be subject to various legal, judicial and administrative proceedings. See note 16 to our consolidated financial statements included in Part II, Item 8 of this annual report on Form 10-K. Item 4. Mine Safety Disclosures. Not applicable. 70 Table of Contents PART II
Item 3. Legal Proceedings. In the normal course of business, we may be subject to various legal, judicial and administrative proceedings. See note 16 to our consolidated financial statements included in Part II, Item 8 of this annual report on Form 10-K. 74 Table of Contents Item 4. Mine Safety Disclosures. Not applicable. 75 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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To the extent that SSG does not distribute such excess cash as dividends on the Class A common stock or otherwise undertake such ameliorative actions and instead, for example, holds such cash balances, the limited partners of the Partnership (not including SSG) may benefit from any value attributable to such cash balances as a result of their ownership of Class A common stock following an exchange of their Class B units for shares of the Class A common stock, notwithstanding that such limited partners may previously have participated as holders of Class B units in distributions by the Partnership that resulted in such excess cash balances at SSG.
To the extent that SSG does not distribute such excess cash as dividends on the Class A common stock or otherwise undertake such ameliorative actions and instead, for example, holds such cash balances, the limited partners of the Partnership (not including SSG) may benefit from any value attributable to such cash balances as a result of their ownership of Class A common stock following an exchange of their Class B units or Class C units for shares of the Class A common stock, notwithstanding that such limited partners may previously have participated as holders of Class B units or Class C units in distributions by the Partnership that resulted in such excess cash balances at SSG.
In connection with deciding whether to pay any dividend to our Class A stockholders, the board of directors will take into account: • general economic and business conditions; • our financial condition and results of operations; • our available cash and current and anticipated cash needs; • our capital requirements; 72 Table of Contents • contractual, legal, tax and regulatory requirements, restrictions and implications on the payment of dividends by us to our stockholders or by our subsidiaries (including the Partnership) to us; and • such other factors as our board of directors may deem relevant.
In connection with deciding whether to pay any dividend to our Class A stockholders, the board of directors will take into account: • general economic and business conditions; • our financial condition and results of operations; • our available cash and current and anticipated cash needs; • our capital requirements; 77 Table of Contents • contractual, legal, tax and regulatory requirements, restrictions and implications on the payment of dividends by us to our stockholders or by our subsidiaries (including the Partnership) to us; and • such other factors as our board of directors may deem relevant.
Stock Performance Graph The following performance graph and related information shall not be deemed “soliciting material” or to be “filed” with the SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing, or otherwise subject to the liabilities under the Securities Act or Exchange Act, except to the extent that we specifically incorporate it by reference into such filing. 73 Table of Contents The following graph depicts the total cumulative stockholder return on our common stock from September 16, 2020, the first day of trading of our Class A common stock on Nasdaq, through March 31, 2023, relative to the performance of the S&P 500 Index and the Dow Jones US Asset Managers Index.
Stock Performance Graph The following performance graph and related information shall not be deemed “soliciting material” or to be “filed” with the SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing, or otherwise subject to the liabilities under the Securities Act or Exchange Act, except to the extent that we specifically incorporate it by reference into such filing. 78 Table of Contents The following graph depicts the total cumulative stockholder return on our common stock from September 16, 2020, the first day of trading of our Class A common stock on Nasdaq, through March 31, 2024, relative to the performance of the S&P 500 Index and the Dow Jones US Asset Managers Index.
Recent Sales of Unregistered Securities Except as previously disclosed in Current Reports on Form 8-K, no unregistered sales of the Company’s equity securities were made during the year ended March 31, 2023. Use of Proceeds Not applicable. Issuer Purchases of Equity Securities None.
Recent Sales of Unregistered Securities Except as previously disclosed in Current Reports on Form 8-K, no unregistered sales of the Company’s equity securities were made during the year ended March 31, 2024. Use of Proceeds Not applicable. Issuer Purchases of Equity Securities None.
The quarterly cash dividend and supplemental cash dividend relate to earnings in respect of our fourth fiscal quarter and full fiscal year 2023, respectively.
The quarterly cash dividend and supplemental cash dividend relate to earnings in respect of our fourth fiscal quarter and full fiscal year 2024, respectively.
Holders of our Class B common stock will not be entitled to dividends distributed by SSG, but will share in the distributions made by the Partnership on a pro rata basis.
Holders of our Class B common stock will not be entitled to dividends distributed by SSG, but will share in the distributions made by the Partnership on a pro rata basis through their concurrent ownership of Class B units of the Partnership.
September 16, 2020 March 31, 2021 March 31, 2022 March 31, 2023 StepStone Group Inc. $ 100.00 $ 141.36 $ 134.05 $ 101.29 S&P 500 Index $ 100.00 $ 118.33 $ 136.80 $ 126.20 Dow Jones US Asset Managers Index $ 100.00 $ 140.46 $ 153.12 $ 138.32 Item 6. [Reserved] 74 Table of Contents
September 16, 2020 March 31, 2021 March 31, 2022 March 31, 2023 March 31, 2024 StepStone Group Inc. $ 100.00 $ 141.36 $ 134.05 $ 101.29 $ 155.14 S&P 500 Index $ 100.00 $ 118.33 $ 136.80 $ 126.20 $ 163.89 Dow Jones US Asset Managers Index $ 100.00 $ 140.46 $ 153.12 $ 138.32 $ 182.85 Item 6. [Reserved] 79 Table of Contents
Holders of Record As of May 23, 2023, there was one stockholder of record of our Class A common stock and there were 61 stockholders of record of our Class B common stock.
Holders of Record As of May 22, 2024, there was one stockholder of record of our Class A common stock and there were 58 stockholders of record of our Class B common stock.
On May 24, 2023, we announced a quarterly cash dividend of $0.20 per share of Class A common stock and a supplemental cash dividend of $0.25 per share of Class A common stock, both payable on June 30, 2023 to holders of record at the close of business on June 15, 2023.
On May 23, 2024, we announced a quarterly cash dividend of $0.21 per share of Class A common stock and a supplemental cash dividend of $0.15 per share of Class A common stock, both payable on June 28, 2024 to holders of record at the close of business on June 14, 2024.
See “Risk Factors—Risks Related to Our Organizational Structure— We currently pay dividends to our stockholders, but our ability to do so is subject to the discretion of our board of directors and may be limited by our holding company structure and applicable provisions of Delaware law.” 71 Table of Contents The following table presents information regarding quarterly dividends on Class A common shares for the periods indicated: Quarterly Fiscal Period 1 Dividend Payment Date Dividend Per Share of Class A Common Stock First quarter N/A Second quarter N/A Third quarter N/A Fourth quarter March 12, 2021 $ 0.07 Total dividends paid in FY2021 $ 0.07 First quarter July 15, 2021 $ 0.07 Second quarter September 15, 2021 0.07 Third quarter December 15, 2021 0.15 Fourth quarter March 15, 2022 0.15 Total dividends paid in FY2022 $ 0.44 First quarter June 30, 2022 $ 0.20 Second quarter September 15, 2022 0.20 Third quarter December 15, 2022 0.20 Fourth quarter March 15, 2023 0.20 Total dividends paid in FY2023 $ 0.80 _______________________________ (1) Prior to the Company’s IPO on September 16, 2020, it was a wholly-owned subsidiary of the Partnership, had a single class of common stock and did not pay dividends.
See “Risk Factors—Risks Related to Our Organizational Structure— We currently pay dividends to our stockholders, but our ability to do so is subject to the discretion of our board of directors and may be limited by our holding company structure and applicable provisions of Delaware law.” 76 Table of Contents The following table presents information regarding quarterly dividends on Class A common shares for the periods indicated: Quarterly Fiscal Period 1 Dividend Payment Date Dividend Per Share of Class A Common Stock First quarter July 15, 2021 $ 0.07 Second quarter September 15, 2021 0.07 Third quarter December 15, 2021 0.15 Fourth quarter March 15, 2022 0.15 Total dividends paid in FY2022 $ 0.44 First quarter June 30, 2022 $ 0.20 Second quarter September 15, 2022 0.20 Third quarter December 15, 2022 0.20 Fourth quarter March 15, 2023 0.20 Total dividends paid in FY2023 $ 0.80 First quarter June 30, 2023 $ 0.20 Supplemental 2 June 30, 2023 0.25 Second quarter September 15, 2023 0.21 Third quarter December 15, 2023 0.21 Fourth quarter March 15, 2024 0.21 Total dividends paid in FY2024 $ 1.08 _______________________________ (1) Dividends paid, as reported in this table, relate to the preceding quarterly period in which they were earned.
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As such, there is no quarterly dividend information reported for the quarter ended September 30, 2020 or any periods prior. Dividends paid, as reported in this table, relate to the preceding quarterly period in which they were earned.
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(2) The supplemental cash dividend relates to earnings in respect of our full fiscal year 2023.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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However, we believe our disciplined investment philosophy across our diversified investment strategies has historically contributed to the stability of our investment performance throughout market cycles. Furthermore, we operate at scale across all four private markets asset classes and service clients across a broad range of geography, type, and size, which contributes to our operating resilience and mitigates against concentration risk.
However, we believe our disciplined investment philosophy across our diversified investment strategies has historically contributed to the stability of our performance throughout market cycles. Furthermore, we operate at scale across all four private markets asset classes and service clients across a broad range of geography, type, and size, which contributes to our operating resilience and mitigates against concentration risk.
A corresponding number of shares of Class B common stock were automatically redeemed at par value and canceled in connection with such exchange and a corresponding number of Class A units of the Partnership were issued to us.
A corresponding number of shares of Class B common stock were automatically redeemed at par value and canceled in connection with such exchange and a corresponding number of Class A units of the Partnership were issued to us.
A corresponding number of shares of Class B common stock were automatically redeemed at par value and canceled in connection with such exchange and a corresponding number of Class A units of the Partnership were issued to us.
A corresponding number of shares of Class B common stock were automatically redeemed at par value and canceled in connection with such exchange and a corresponding number of Class A units of the Partnership were issued to us.
Our AUM is calculated as the sum of (i) NAV of client portfolio assets, including the StepStone Funds and (ii) the unfunded commitments of clients to the underlying investments and the StepStone Funds.
Our AUM is calculated as the sum of (i) the NAV of client portfolio assets, including the StepStone Funds and (ii) the unfunded commitments of clients to the underlying investments and the StepStone Funds.
Fiscal 2023 reflects gross realized carried interest allocations of $74.7 million and unrealized carried interest allocations, net of the reversal of carried interest allocations, of $(526.8) million.
Fiscal 2023 reflects gross realized carried interest allocations of $74.7 million and unrealized carried interest allocations, net of the reversal of realized carried interest allocations, of $(526.8) million.
Expenses Year Ended March 31, 2023 Compared to Year Ended March 31, 2022 Total expenses decreased $980.2 million to $(67.1) million for fiscal 2023 as compared to fiscal 2022, due to decreases in legacy Greenspring performance fee-related compensation and performance fee-related compensation, partially offset by increases in cash-based compensation, general, administrative and other expenses, and equity-based compensation, in each case, as described below.
Year Ended March 31, 2023 Compared to Year Ended March 31, 2022 Total expenses decreased $980.2 million to $(67.1) million for fiscal 2023 as compared to fiscal 2022, due to decreases in legacy Greenspring performance fee-related compensation and performance fee-related compensation, partially offset by increases in cash-based compensation, general, administrative and other expenses, and equity-based compensation, in each case, as described below.
Net Income Attributable to Non-Controlling Interests in Subsidiaries Net income attributable to non-controlling interests in subsidiaries increased $8.6 million, or 32%, to $35.2 million for fiscal 2023 as compared to fiscal 2022. The increase was primarily attributable to an increase in income generated by our consolidated subsidiaries not wholly-owned by us.
The increase was primarily attributable to an increase in income generated by our consolidated subsidiaries not wholly-owned by us. Net income attributable to non-controlling interests in subsidiaries increased $8.6 million, or 32%, to $35.2 million for fiscal 2023 as compared to fiscal 2022.
A corresponding number of shares of Class B common stock were automatically redeemed at par value and canceled in connection with such exchange and a corresponding number of Class A units of the Partnership were issued to us.
A corresponding number of shares of Class B common stock were automatically redeemed at par value and canceled in connection with such exchange and a corresponding number of Class A units of the Partnership were issued to us.
Incentive fees are generally calculated as a percentage of the profits (up to 15%) earned in respect of certain accounts, including certain permanent capital vehicles, for which we are the investment adviser, subject to the achievement of minimum return levels or performance benchmarks.
Incentive fees are generally calculated as a percentage of the profits (up to 15%) earned in respect of certain accounts, including certain permanent capital vehicles, for which we are the investment adviser, subject to the achievement of minimum return levels or performance benchmarks.
Incentive fees are a form of variable consideration and represent contractual fee arrangements in our contracts with our customers. Incentive fees are typically subject to reversal until the end of a defined performance period, as these fees are affected by changes in the fair value of the assets under management or advisement over such performance period.
Incentive fees are a form of variable consideration and represent contractual fee arrangements in our contracts with our customers. Incentive fees are typically subject to reversal until the end of a defined performance period, as these fees are affected by changes in the fair value of the assets under management or advisement over such performance period.
Moreover, incentive fees that are received prior to the end of the defined performance period are typically subject to clawback, net of tax.
Moreover, incentive fees that are received prior to the end of the defined performance period are typically subject to clawback, net of tax.
We recognize incentive fee revenue only when these amounts are realized and no longer subject to significant risk of reversal, which is typically at the end of a defined performance period and/or upon expiration of the associated clawback period (i.e., crystallization).
We recognize incentive fee revenue only when these amounts are realized and no longer subject to significant risk of reversal, which is typically at the end of a defined performance period and/or upon expiration of the associated clawback period (i.e., crystallization).
However, clawback terms for incentive fees received prior to crystallization only require the return of amounts on a net of tax basis. Accordingly, the tax-related portion of incentive fees received in advance of crystallization is not subject to clawback and is therefore recognized as revenue immediately upon receipt.
However, clawback terms for incentive fees received prior to crystallization only require the return of amounts on a net of tax basis. Accordingly, the tax-related portion of incentive fees received in advance of crystallization is not subject to clawback and is therefore recognized as revenue immediately upon receipt.
Legacy Greenspring carried interest allocations include the allocation of carried interest to legacy Greenspring general partner entities from limited partners in certain legacy Greenspring funds in which the legacy Greenspring general partner entities hold an equity interest.
Legacy Greenspring carried interest allocations include the allocation of carried interest to legacy Greenspring general partner entities from limited partners in certain legacy Greenspring funds in which the legacy Greenspring general partner entities hold an equity interest.
The legacy Greenspring general partner entities are entitled to a carried interest allocation (typically 5% to 20%) based on cumulative fund or account performance to date, irrespective of whether such amounts have been realized.
The legacy Greenspring general partner entities are entitled to a carried interest allocation (typically 5% to 20%) based on cumulative fund or account performance to date, irrespective of whether such amounts have been realized.
Accordingly, the amount recognized as carried interest allocation revenue reflects our share of the gains and losses of the associated fund’s underlying investments measured at their then-fair values, relative to the fair values as of the end of the prior period.
Accordingly, the amount recognized as carried interest allocation revenue reflects our share of the gains and losses of the associated fund’s underlying investments measured at their then-fair values, relative to the fair values as of the end of the prior period.
These techniques may include a market approach, recent transaction price, net asset value approach, or discounted cash flows, and may use one or more significant unobservable inputs such as EBITDA, revenue multiples, discount rates, weighted-average cost of capital, exit multiples, or terminal growth rates.
These techniques may include a market approach, recent transaction price, net asset value approach, or discounted cash flows, and may use one or more significant unobservable inputs such as EBITDA, revenue multiples, discount rates, weighted-average cost of capital, exit multiples, or terminal growth rates.
Adjusted Revenues and Adjusted Net Income Year Ended March 31, 2023 Compared to Year Ended March 31, 2022 Adjusted revenues increased $48.0 million, or 8%, to $642.0 million for fiscal 2023 as compared to fiscal 2022, primarily reflecting increases in net management and advisory fees and incentive fees, including the deferred portion, partially offset by lower realized carried interest allocation revenues.
Year Ended March 31, 2023 Compared to Year Ended March 31, 2022 Adjusted revenues increased $48.0 million, or 8%, to $642.0 million for fiscal 2023 as compared to fiscal 2022, primarily reflecting increases in adjusted management and advisory fees, net, and adjusted incentive fees, including the deferred portion, partially offset by lower realized carried interest allocation revenues.
The transaction agreement provides for the payment of an earn-out of up to $75 million that is payable in 2025 subject to the achievement of certain management fee revenue targets for calendar year 2024. Future cash payments represent the fair values as of March 31, 2023.
The transaction agreement provides for the payment of an earn-out of up to $75 million that is payable in 2025 subject to the achievement of certain management fee revenue targets for calendar year 2024. Future cash payments represent the fair values as of March 31, 2024.
Multiple of Invested Capital is presented net of management fees, carried interest and expenses charged by underlying fund managers, as well as StepStone’s management fees, performance fees and expenses; • “IRR” refers to the annualized internal rate of return for all investments within the relevant investment strategy on an inception-to-date basis as of December 31, 2022 (except as noted otherwise below), based on contributions, distributions and unrealized value; • “Gross IRR” refers to IRR net of management fees, performance fees and expenses charged by the underlying fund managers, but gross of StepStone’s management fees, performance fees and expenses; • “Net IRR” refers to IRR net of fees and expenses charged by both the underlying fund managers and StepStone; • “MSCI ACWI Direct Alpha” refers to the MSCI All Country World Index, the benchmark index used for comparison below.
Multiple of Invested Capital is presented net of management fees, carried interest and expenses charged by underlying fund managers, as well as StepStone’s management fees, performance fees and expenses; • “IRR” refers to the annualized internal rate of return for all investments within the relevant investment strategy on an inception-to-date basis as of December 31, 2023 (except as noted otherwise below), based on contributions, distributions and unrealized value; • “Gross IRR” refers to IRR net of management fees, performance fees and expenses charged by the underlying fund managers, but gross of StepStone’s management fees, performance fees and expenses; • “Net IRR” refers to IRR net of fees and expenses charged by both the underlying fund managers and StepStone; • “MSCI ACWI Direct Alpha” refers to the MSCI All Country World Index, the benchmark index used for comparison below.
During fiscal 2022, we recorded a benefit of $25.3 million related to the full release of the valuation allowance as a result of the deferred tax liability recorded in connection with the Greenspring acquisition.
Additionally, during fiscal 2022, we recorded a benefit of $25.3 million related to the full release of the valuation allowance as a result of the deferred tax liability recorded in connection with the Greenspring acquisition.
Because our board of directors may determine to pay or not pay dividends to our Class A stockholders, our Class A stockholders may not necessarily receive dividend distributions relating to our excess distributions, even if the Partnership makes excess distributions to us. 111 Table of Contents Tax Receivable Agreements We have entered into an Exchanges Tax Receivable Agreement with the Class B limited partners and Class C limited partners, and a Reorganization Tax Receivable Agreement with certain pre-IPO institutional investors (collectively, the “Tax Receivable Agreements”).
Because our board of directors may determine to pay or not pay dividends to our Class A stockholders, our Class A stockholders may not necessarily receive dividend distributions relating to our excess distributions, even if the Partnership makes excess distributions to us. 117 Table of Contents Tax Receivable Agreements We have entered into an Exchanges Tax Receivable Agreement with the Class B limited partners and Class C limited partners, and a Reorganization Tax Receivable Agreement with certain pre-IPO institutional investors (collectively, the “Tax Receivable Agreements”).
Incentive fees received in advance of crystallization that remain subject to clawback are recorded as deferred incentive fee revenue and included in accounts payable, accrued expenses and other liabilities in the consolidated balance sheets. 115 Table of Contents Carried interest allocations include the allocation of performance-based fees, commonly referred to as carried interest, to us from unaffiliated limited partners in the StepStone Funds in which we hold an equity interest.
Incentive fees received in advance of crystallization that remain subject to clawback are recorded as deferred incentive fee revenue and included in accounts payable, accrued expenses and other liabilities in the consolidated balance sheets. 121 Table of Contents Carried interest allocations include the allocation of performance-based fees, commonly referred to as carried interest, to us from unaffiliated limited partners in the StepStone Funds in which we hold an equity interest.
The components of revenues used in the determination of ANI (“adjusted revenues”) comprise net management and advisory fees, incentive fees (including the deferred portion) and realized carried interest allocations.
The components of revenues used in the determination of ANI (“adjusted revenues”) comprise adjusted management and advisory fees, net, adjusted incentive fees (including the deferred portion) and realized carried interest allocations.
We are entitled to a carried interest allocation (typically 5% to 15%) based on cumulative fund or account performance to date, irrespective of whether such amounts have been realized. These carried interest allocations are subject to the achievement of minimum return levels (typically 5% to 10%), in accordance with the terms set forth in each respective fund’s governing documents.
We are entitled to a carried interest allocation (typically 5% to 20%) based on cumulative fund or account performance to date, irrespective of whether such amounts have been realized. These carried interest allocations are subject to the achievement of minimum return levels (typically 5% to 10%), in accordance with the terms set forth in each respective fund’s governing documents.
The principal items giving rise to temporary differences are certain basis differences resulting from exchanges of Partnership units. See Tax Receivable Agreements below. 118 Table of Contents Deferred tax assets are reduced by a valuation allowance when it is more-likely-than-not that some portion or all of the deferred tax assets will not be realized.
The principal items giving rise to temporary differences are certain basis differences resulting from exchanges of Partnership units. See Tax Receivable Agreements below. 124 Table of Contents Deferred tax assets are reduced by a valuation allowance when it is more-likely-than-not that some portion or all of the deferred tax assets will not be realized.
See note 4 to our consolidated financial statements included in Part II, Item 8 of this annual report for information on variable interest entities. 113 Table of Contents Under the VIE model, we are required to perform an analysis as to whether we have a variable interest in an entity and whether the entity is a VIE.
See note 4 to our consolidated financial statements included in Part II, Item 8 of this annual report for information on variable interest entities. 119 Table of Contents Under the VIE model, we are required to perform an analysis as to whether we have a variable interest in an entity and whether the entity is a VIE.
(4) Interest on debt obligations consists of projected future interest payments for amounts drawn on the Revolver using interest rates in effect as of March 31, 2023, which has been calculated assuming no additional principal payments will be made and the outstanding balance will be held until its final maturity date.
(4) Interest on debt obligations consists of projected future interest payments for amounts drawn on the Revolver using interest rates in effect as of March 31, 2024, which has been calculated assuming no additional principal payments will be made and the outstanding balance will be held until its final maturity date.
The aggregate returns are not indicative of the returns an individual investor would receive from these investments. No individual investor received the aggregate returns described herein as the investments were made across multiple mandates over multiple years. StepStone fees and expenses are based on the following assumptions (management fees and expenses represent an annual rate): i.
The aggregate returns are not indicative of the returns an individual investor would receive from these investments. No individual investor received the aggregate returns described herein as the investments were made across multiple mandates over multiple years. StepStone fees and expenses are based on the following assumptions (management fees and expenses represent an annual rate, charged quarterly): i.
The revenues earned by us as investment manager of the Consolidated Funds are eliminated in consolidation and generally have no direct effect on the net income attributable to SSG or to Stockholders' Equity. 114 Table of Contents Revenues We recognize revenue in accordance with ASC 606.
The revenues earned by us as investment manager of the Consolidated Funds are eliminated in consolidation and generally have no direct effect on the net income attributable to SSG or to Stockholders' Equity. 120 Table of Contents Revenues We recognize revenue in accordance with ASC 606.
Actual repayment obligations generally do not become realized until the end of a fund’s life. 116 Table of Contents Fair Value Measurements GAAP establishes a hierarchical disclosure framework, which prioritizes and ranks the level of market price observability used in measuring financial instruments at fair value.
Actual repayment obligations generally do not become realized until the end of a fund’s life. 122 Table of Contents Fair Value Measurements GAAP establishes a hierarchical disclosure framework, which prioritizes and ranks the level of market price observability used in measuring financial instruments at fair value.
Overall performance excludes (i) all client-direct investments, (ii) investments for which StepStone does not provide monitoring and reporting services to the client that made the investment, (iii) syndicated loan portfolio totaling $0.4 billion, and (iv) investments made by legacy private equity acquired businesses.
Overall performance excludes (i) all client-direct investments, (ii) investments for which StepStone does not provide monitoring and reporting services to the client that made the investment, (iii) syndicated loan portfolio totaling $0.5 billion, and (iv) investments made by legacy private equity acquired businesses.
The MSCI All Country World Index is a free float-adjusted market capitalization-weighted index of nearly 2,900 world stocks that is designed to measure the equity market performance of developed and emerging markets. We believe the MSCI All Country World Index is commonly used by private markets investors to evaluate performance.
The MSCI All Country World Index is a free float-adjusted market capitalization-weighted index of nearly 2,840 world stocks that is designed to measure the equity market performance of developed and emerging markets. We believe the MSCI All Country World Index is commonly used by private markets investors to evaluate performance.
Ownership of Our Businesses Certain of our consolidated subsidiaries are not wholly-owned by us. To the extent these subsidiaries are not wholly-owned, substantially all of the other owners are current StepStone professionals working for the related businesses. We believe this ownership structure has benefited us by aligning our interests with the interests of our employees.
To the extent these subsidiaries are not wholly-owned, substantially all of the other owners are current StepStone professionals working for the related businesses. We believe this ownership structure has benefited us by aligning our interests with the interests of our employees.
The Credit Agreement also contains financial covenants requiring us to maintain a total net leverage ratio, and a minimum total of fee-earning assets under management. As of March 31, 2023, we were in compliance with the total net leverage ratio and minimum fee-earning assets under management covenants.
The Credit Agreement also contains financial covenants requiring us to maintain a total net leverage ratio, and a minimum total of fee-earning assets under management. As of March 31, 2024, we were in compliance with the total net leverage ratio and minimum fee-earning assets under management covenants.
As part of the new arrangements, certain members of the SPW team received a profits interest in SPW and concurrently entered into an option agreement which provides that (i) we have the right to acquire the profits interest at the end of any fiscal quarter after June 30, 2027 in exchange for payment of a call price and (ii) the SPW management team, through an entity named CH Equity Partners, LLC (formerly known as Conversus Holdings LLC), has the right to put the profits interest to us on June 30, 2026 or at the end of any fiscal quarter thereafter, in exchange for payment of a put price.
As part of the new arrangements, certain members of the SPW team received a profits interest in SPW and concurrently entered into an option agreement which provides that (i) we have the right to acquire the profits interest at the end of any fiscal quarter after June 30, 2027 in exchange for payment of a call price and (ii) the SPW management team, through an entity named CH Equity Partners, LLC, has the right to put the profits interest to us on June 30, 2026 or at the end of any fiscal quarter thereafter, in exchange for payment of a put price.
In addition, market dislocations, contractions or volatility could put pressure on our returns in the future which could in turn affect our fundraising abilities. 76 Table of Contents • Our ability to maintain our data advantage relative to competitors.
In addition, market dislocations, contractions or volatility could put pressure on our returns in the future which could in turn affect our fundraising abilities. 81 Table of Contents • Our ability to maintain our data advantage relative to competitors.
We did not acquire any direct economic interests in the legacy Greenspring general partner entities. As a result, all of the net income related to the legacy Greenspring general partner entities is allocated to non-controlling interests in legacy Greenspring entities.
We did not acquire any direct economic interests in the legacy Greenspring general partner entities. As a result, all of the net income or loss related to the legacy Greenspring general partner entities is allocated to non-controlling interests in legacy Greenspring entities.
We may designate each borrowing as (i) in the case of any borrowing in U.S. dollars, a base rate loan or a LIBOR rate loan, (ii) in the case of any borrowing denominated in Euros, a EURIBOR rate loan, (iii) in the case of any borrowing denominated in British Pounds Sterling, a Sterling Overnight Index Average (“SONIA”) loan, (iv) in the case of any borrowing denominated in Swiss Francs, a Swiss Average Rate Overnight (“SARON”) loan, and (v) in the case of any borrowing denominated in Australian dollars, an AUD rate loan.
We may designate each borrowing as (i) in the case of any borrowing in U.S. dollars, a base rate loan or a Term SOFR rate loan, (ii) in the case of any borrowing denominated in Euros, a EURIBOR rate loan, (iii) in the case of any borrowing denominated in British Pounds Sterling, a Sterling Overnight Index Average (“SONIA”) loan, (iv) in the case of any borrowing denominated in Swiss Francs, a Swiss Average Rate Overnight (“SARON”) loan, and (v) in the case of any borrowing denominated in Australian dollars, an AUD rate loan.
We believe ANI and adjusted revenues are useful to investors because they enable investors to evaluate the performance of our business across reporting periods. Adjusted Revenues Adjusted revenues represents the components of revenues used in the determination of ANI and comprise net management and advisory fees, incentive fees (including the deferred portion) and realized carried interest allocations.
We believe ANI and adjusted revenues are useful to investors because they enable investors to evaluate the performance of our business across reporting periods. 103 Table of Contents Adjusted Revenues Adjusted revenues represents the components of revenues used in the determination of ANI and comprise adjusted management and advisory fees, net, adjusted incentive fees (including the deferred portion) and realized carried interest allocations.
Fee-Related Earnings Year Ended March 31, 2023 Compared to Year Ended March 31, 2022 FRE increased $33.9 million, or 28%, to $156.2 million for fiscal 2023 as compared to fiscal 2022, primarily reflecting higher net management and advisory fees, partially offset by higher adjusted cash-based compensation, adjusted general, administrative and other expenses and adjusted equity-based compensation.
Year Ended March 31, 2023 Compared to Year Ended March 31, 2022 FRE increased $33.9 million, or 28%, to $156.2 million for fiscal 2023 as compared to fiscal 2022, primarily reflecting higher net management and advisory fees, partially offset by higher adjusted cash-based compensation, adjusted general, administrative and other expenses and adjusted equity-based compensation.
(5) Includes carried interest-related compensation expense related to the portion of net carried interest allocation revenue attributable to equity holders of the Company’s consolidated subsidiaries that are not 100% owned ($11.3 million in fiscal 2023, $1.8 million in fiscal 2022, and $1.3 million in fiscal 2021). (6) Excludes the impact of consolidating the Consolidated Funds.
(5) Includes carried interest-related compensation expense related to the portion of net carried interest allocation revenue attributable to equity holders of the Company’s consolidated subsidiaries that are not 100% owned ($3.8 million in fiscal 2024, $11.4 million in fiscal 2023, and $1.8 million in fiscal 2022). (6) Excludes the impact of consolidating the Consolidated Funds.
These services include one or more of the following for our clients: (i) recurring support of portfolio construction and design; (ii) discrete or project-based due diligence, advice and investment recommendations; (iii) detailed review of existing private markets investments, including portfolio-level repositioning recommendations where appropriate; (iv) consulting on investment pacing, policies, strategic plans, and asset allocation to investment boards and committees; (v) licensed access to our proprietary data and technology platforms, including SPI and our other proprietary tools; and (vi) administrative services to unaffiliated investment advisors.
These services include one or more of the following for our clients: (i) recurring support of portfolio construction and design; (ii) discrete or project-based due diligence, advice and investment recommendations; (iii) detailed review of existing private markets investments, including portfolio-level repositioning recommendations where appropriate; (iv) consulting on investment pacing, policies, strategic plans, and asset allocation to investment boards and committees; and (v) licensed access to our proprietary data and technology platforms, including SPI Research and our other proprietary tools.
Non-controlling interests in subsidiaries are allocated a share of income or loss in the respective consolidated subsidiary in proportion to their relative ownership interests, after consideration of contractual arrangements that govern allocations of income or loss. 86 Table of Contents Non-controlling interests in legacy Greenspring entities represent the economic interests in the legacy Greenspring general partner entities.
Non-controlling interests in subsidiaries are allocated a share of income or loss in the respective consolidated subsidiary in proportion to their relative ownership interests, after consideration of contractual arrangements that govern allocations of income or loss. Non-controlling interests in legacy Greenspring entities represent the economic interests in the legacy Greenspring general partner entities.
At that point, StepStone will then ‘liquidate’ the fund’s contribution to the track record by entering a distribution amount equal to the last reported NAV. Historical performance contribution is maintained up until the ‘liquidation’ date. (3) Inception date reflects date of the first investment: September 1994 for primaries, January 2005 for secondaries and June 2001 for co-investments.
At that point, StepStone will then ‘liquidate’ the fund’s contribution to the track record by entering a distribution amount equal to the last reported NAV. Historical performance contribution is maintained up until the ‘liquidation’ date. (3) Inception date reflects date of the first investment: September 1994 for primaries, December 2004 for secondaries and June 2001 for co-investments.
The historical results of our investments are not indicative of future results to be expected of existing or new investment funds, and are not a proxy for the performance of our Class A common stock, including because: • market conditions and investment opportunities may differ from those in the past; • the performance of our funds is largely based on the NAV (as defined below) of the funds’ investments, including unrealized gains, which may never be realized; • newly-established funds may generate lower investment returns during the period that they initially deploy their capital; • changes in the global tax and regulatory environment may impact both the investment preferences of our clients and the financing strategies employed by businesses in which particular funds invest, which may reduce the overall capital available for investment and the availability of suitable investments, thereby reducing investment returns in the future; • competition for investment opportunities, resulting from the increasing amount of capital invested in private markets alternatives, may increase the cost and reduce the availability of suitable investments, thereby reducing investment returns in the future; and • the industries and businesses in which particular funds invest will vary.
The historical results of our investments are not indicative of future results to be expected of existing or new investment funds, and are not a proxy for the performance of our Class A common stock, including because: • market conditions and investment opportunities may differ from those in the past; • the performance of our funds is largely based on the NAV (as defined below) of the funds’ investments, including unrealized gains, which may never be realized; • newly-established funds may generate lower investment returns during the period that they initially deploy their capital; • changes in the global tax and regulatory environment may impact both the investment preferences of our clients and the financing strategies employed by businesses in which particular funds invest, which may reduce the overall capital available for investment and the availability of suitable investments, thereby reducing investment returns in the future; • competition for investment opportunities, resulting from the increasing amount of capital invested in private markets alternatives, may increase the cost and reduce the availability of suitable investments, thereby reducing investment returns in the future; and • the industries and businesses in which particular funds invest will vary. 108 Table of Contents Historical and future returns of investments included in our track record are not directly correlated to potential returns on our Class A common stock.
For the purposes of the following tables: • “Invested capital” refers to the total amount of all investments made by a fund, including commitment-reducing and non-commitment-reducing capital calls; 102 Table of Contents • “NAV” refers to the estimated fair value of unrealized investments plus any net assets or liabilities associated with the investment as of December 31, 2022; • “Net Multiple of Invested Capital” refers to (a) the sum of Realized Distributions from underlying investments to the fund plus the fund’s NAV, divided by (b) Cumulative Invested Capital.
For the purposes of the following tables: • “Invested capital” refers to the total amount of all investments made by a fund, including commitment-reducing and non-commitment-reducing capital calls; • “NAV” refers to the estimated fair value of unrealized investments plus any net assets or liabilities associated with the investment as of December 31, 2023; • “Net Multiple of Invested Capital” refers to (a) the sum of Realized Distributions from underlying investments to the fund plus the fund’s NAV, divided by (b) Cumulative Invested Capital.
Our overall effective tax rate in each of the periods described above is less than the statutory rate primarily because a portion of income is allocated to non-controlling interests, as the tax liability on such income is borne by the holders of such non-controlling interests.
Our overall effective tax rate in each of the periods described above is less than the statutory rate primarily because a portion of income was allocated to non-controlling interests and the tax liability on such income is borne by the holders of such non-controlling interests.
We are a global firm and believe that our multi-asset class expertise, local knowledge, business relationships, proprietary data and technology, and presence are all critical to securing a competitive edge in the private markets. We deploy a local staffing model, operating from 25 cities across 15 countries on five continents.
We are a global firm and believe that our multi-asset class expertise, local knowledge, business relationships, proprietary data and technology, and presence are all critical to securing a competitive edge in the private markets. We deploy a local staffing model, operating from 27 cities across 16 countries on five continents.
The performance of our Consolidated Funds is not necessarily consistent with, or representative of, the combined performance trends of all of our funds. 88 Table of Contents Consolidated Results of Operations We consolidate funds and entities where we are deemed to hold a controlling financial interest.
The performance of our Consolidated Funds is not necessarily consistent with, or representative of, the combined performance trends of all of our funds. Consolidated Results of Operations We consolidate funds and entities where we are deemed to hold a controlling financial interest.
Year Ended March 31, 2023 Compared to Year Ended March 31, 2022 Income tax expense decreased $24.5 million, or 86%, to $3.8 million for fiscal 2023 as compared to fiscal 2022. The decrease in tax expense was primarily driven by pre-tax net loss for fiscal 2023 compared to pre-tax net income for fiscal 2022.
The increase in tax expense was primarily driven by pre-tax net income for fiscal 2024 compared to pre-tax net loss for fiscal 2023. Year Ended March 31, 2023 Compared to Year Ended March 31, 2022 Income tax expense decreased $24.5 million, or 86%, to $3.8 million for fiscal 2023 as compared to fiscal 2022.
The quarterly cash dividend and supplemental cash dividend relate to earnings in respect of our fourth fiscal quarter and full fiscal year 2023, respectively.
The quarterly cash dividend and supplemental cash dividend relate to earnings in respect of our fourth fiscal quarter and full fiscal year 2024, respectively.
As a result, the Partnership does not record U.S. federal and state income taxes on income in the Partnership or its subsidiaries, except for certain local and foreign income taxes discussed above.
As a result, the Partnership does not record U.S. federal and state income taxes on income generated by the Partnership or its subsidiaries, except for certain local and foreign income taxes discussed above.
The increase was driven by new client activity and 28% growth in average FEAUM (or 21% excluding the impact of Greenspring) across the platform, as well as retroactive fees of $2.8 million from the final closing of StepStone Capital Partners V (“SCP V”) and additional closings on StepStone’s multi-strategy global venture capital fund.
The increase was driven by new client activity and 28% growth in average FEAUM (or 21% excluding the impact of Greenspring) across the platform, as well as retroactive fees of $2.8 million from the final closing of SCP V and additional closings on StepStone’s multi-strategy global venture capital fund.
Incentive fee-related compensation is accrued as compensation expense when it is probable and estimable that payment will be made. Legacy Greenspring performance fee-related compensation represents the legacy Greenspring carried interest allocations which are entirely payable to certain employees.
Incentive fee-related compensation is accrued as compensation expense when it is probable and estimable that payment will be made. 90 Table of Contents Legacy Greenspring performance fee-related compensation represents the legacy Greenspring carried interest allocations which are entirely payable to certain employees.
The increase was primarily attributable to the inclusion of expense related to liability classified awards in the current year period and no comparable expense in the prior year period, as well as the full year impact of restricted stock units (“RSUs”) awarded to certain employees and directors in the prior year period and additional grants of RSUs granted in the current year period.
The increase was primarily attributable to the inclusion of expense related to liability classified awards in the current year period and no comparable expense in the prior year period, as well as the full year impact of RSUs awarded to certain employees and directors in the prior year period and additional grants of RSUs granted in the current year period.
The variability and availability of the observable inputs affected by the factors described above may result in transfers between Levels I, II, and III. We consider our cash, cash equivalents, restricted cash, fees and accounts receivable, accounts payable, investments, revolving credit facility, contingent consideration and liability classified award balances to be financial instruments.
The variability and availability of the observable inputs affected by the factors described above may result in transfers between Levels I, II, and III. We consider our cash, cash equivalents, restricted cash, fees and accounts receivable, accounts payable, investments, revolving credit facility, and contingent consideration balance to be financial instruments.
As of March 31, 2023 and 2022, no material amounts for potential clawback obligations had been accrued. Expenses Cash-based compensation primarily includes salaries, bonuses, employee benefits and employer-related payroll taxes. 84 Table of Contents Equity-based compensation represents grants of equity related awards or arrangements to certain employees and directors.
As of March 31, 2024 and 2023, no material amounts for potential clawback obligations had been accrued. Expenses Cash-based compensation primarily includes salaries, bonuses, employee benefits and employer-related payroll taxes. Equity-based compensation represents grants of equity related awards or arrangements to certain employees and directors.
SMAs, including directly managed assets, comprised $82 billion of our AUM as of March 31, 2023. • Focused commingled funds. Owned by multiple clients, our focused commingled funds deploy capital in specific asset classes with defined investment strategies.
SMAs, including directly managed assets, comprised $94 billion of our AUM as of March 31, 2024. • Focused commingled funds. Owned by multiple clients, our focused commingled funds deploy capital in specific asset classes with defined investment strategies.
Legacy Greenspring performance fee-related compensation expense of $187.1 million for fiscal 2022 reflects gross realized performance fee-related compensation expense of $92.2 million and unrealized performance fee-related compensation expense, net of the reversal of realized performance fee-related compensation expense, of $94.9 million for the period from September 20, 2021 to March 31, 2022.
Fiscal 2022 reflects gross realized performance fee-related compensation expense of $92.2 million and unrealized performance fee-related compensation expense, net of the reversal of realized performance fee-related compensation expense, of $94.9 million for the period from September 20, 2021 to March 31, 2022.
Interest income attributable to Consolidated Funds was $0.2 million in the current year period as compared to zero in the prior year period. Interest expense increased $3.1 million, or 276%, to $4.2 million for fiscal 2023 as compared to fiscal 2022.
Interest income attributable to Consolidated Funds was $0.2 million in the current year period as compared to zero in the prior year period. 99 Table of Contents Interest expense increased $3.1 million, or 276%, to $4.2 million for fiscal 2023 as compared to fiscal 2022.
The data for these investments is generally presented from the inception date of each strategy and asset class through December 31, 2022 and have not been adjusted to reflect acquisitions or disposals of investments subsequent to that date.
The data for these investments are generally presented from the inception date of each strategy and asset class through December 31, 2023 and have not been adjusted to reflect acquisitions or disposals of investments subsequent to that date.
(2) The change in weighted-average fee rates primarily reflected the timing of new funds and shifts in mix between SMAs and focused commingled funds.
(2) The change in weighted-average fee rates primarily reflected the timing of new funds and shifts in mix between SMAs and focused commingled funds. (3) The change in weighted-average fee rates primarily reflected the timing of new funds and shifts in asset class mix.
See note 6 to our consolidated financial statements for additional details regarding the fair value of our contingent consideration and liability classified award balances and note 9 for additional details regarding the fair value of our revolving credit facility balance. 117 Table of Contents Equity-Based Compensation We account for grants of equity-based awards, including RSUs, to certain employees and directors at fair value as of the grant date.
See note 6 to our consolidated financial statements for additional details regarding the fair value of our contingent consideration balance and note 9 for additional details regarding the fair value of our revolving credit facility balance. 123 Table of Contents Equity-Based Compensation We account for grants of equity-based awards, including RSUs, to certain employees and directors at fair value as of the grant date.
The weighted-average management fee rate from SMAs was approximately 0.40% and 0.40% of average FEAUM in fiscal 2022 and 2023, respectively. 82 Table of Contents • Management fees from focused commingled funds are generally based on a specified fee rate applied against client capital commitments during a defined investment or commitment period.
The weighted-average management fee rate from SMAs was approximately 0.40% and 0.39% of average FEAUM in fiscal 2023 and 2024, respectively. • Management fees from focused commingled funds are generally based on a specified fee rate applied against client capital commitments during a defined investment or commitment period.
(9) Other includes mezzanine debt, collateralized loan obligations, leasing, regulatory capital, trade finance, intellectual property/royalty, real estate debt and infrastructure debt. Liquidity and Capital Resources Sources and Uses of Liquidity We generate cash primarily from management and advisory fees and realized carried interest allocations.
(9) Other includes mezzanine debt, collateralized loan obligations, leasing, regulatory capital, trade finance, intellectual property/royalty, real estate debt and infrastructure debt. Liquidity and Capital Resources Sources and Uses of Liquidity We generate cash primarily from management and advisory fees and performance fees.
Ongoing sources of cash include (a) management and advisory fees, which are collected monthly or quarterly, (b) carried interest allocations and incentive fees, which are volatile and largely unpredictable as to amount and timing; and (c) distributions from our investments in the StepStone Funds.
Ongoing sources of cash include (a) management and advisory fees, which are collected monthly or quarterly, (b) performance fees, which are volatile and largely unpredictable as to amount and timing; and (c) distributions from our investments in the StepStone Funds.
As of March 31, 2023, we were required to maintain approximately $15.8 million in net capital at these subsidiaries and were in compliance with all regulatory minimum net capital requirements. Contractual Obligations and Commitments In the ordinary course of business, we enter into contractual arrangements that require future cash payments.
As of March 31, 2024, we were required to maintain approximately $17.7 million in net capital at these subsidiaries and were in compliance with all regulatory minimum net capital requirements. Contractual Obligations and Commitments In the ordinary course of business, we enter into contractual arrangements that require future cash payments.
Adjusted Net Income Adjusted net income (“ANI”) is a non-GAAP performance measure that we present on a pre-tax and after-tax basis used to evaluate profitability and is presented excluding the consolidation of our funds. ANI represents the after-tax net realized income attributable to us.
Adjusted Net Income Adjusted net income (“ANI”) is a non-GAAP performance measure that we present before the consolidation of StepStone Funds on a pre-tax and after-tax basis used to evaluate profitability. ANI represents the after-tax net realized income attributable to us.
Mandates for portfolio analytics and reporting services typically include licensed access to our proprietary performance monitoring software, Omni. Omni tracked detailed information on over $905 billion of client commitments as of March 31, 2023, inclusive of our total capital responsibility, previously exited investments and investments of former clients.
Mandates for portfolio analytics and reporting services typically include licensed access to our proprietary performance monitoring software, SPI Reporting. SPI Reporting tracked detailed information on over $685 billion of client commitments as of March 31, 2024, inclusive of our total capital responsibility, previously exited investments and investments of former clients.
Borrowings bear interest equal to (i) in the case of base rate loans, 1.00% plus the greatest of (a) the Prime Rate, (b) the New York Federal Reserve Bank Rate plus 0.50% and (c) the 1 month LIBOR, multiplied by the Statutory Reserve Rate (as defined in the Credit Agreement), plus 1.00%, (ii) in the case of a LIBOR rate loan, the LIBOR rate multiplied by the Statutory Reserve Rate plus 2.00%, (iii) in the case of a EURIBOR rate loan, the EURIBOR rate multiplied by the Statutory Reserve Rate plus 2.00%, (iv) in the case of a SONIA loan, the Sterling Overnight Index Average plus 2.03%, (v) in the case of a SARON loan, the Swiss Average Rate Overnight plus 2.00%, and (vi) in the case of an AUD rate loan, the AUD Screen Rate (as defined in the Credit Agreement) multiplied by the Statutory Reserve Rate plus 2.20%.
Borrowings bear interest equal to (i) in the case of base rate loans, 1.00% plus the greatest of (a) the Prime Rate, (b) the New York Federal Reserve Bank Rate plus 0.50% and (c) the 1 month Term SOFR, plus 1.10%, (ii) in the case of a Term SOFR rate loan, the Term SOFR rate plus 2.10%, (iii) in the case of a EURIBOR rate loan, the EURIBOR rate multiplied by the Statutory Reserve Rate (as defined in the Credit Agreement) plus 2.00%, (iv) in the case of a SONIA loan, the Sterling Overnight Index Average plus 2.03%, (v) in the case of a SARON loan, the Swiss Average Rate Overnight plus 2.00%, and (vi) in the case of an AUD rate loan, the AUD Screen Rate (as defined in the Credit Agreement) multiplied by the Statutory Reserve Rate plus 2.20%, in certain cases subject to applicable interest rate floors.
The weighted-average interest rate in effect for the Revolver as of March 31, 2023 was 6.86%. Borrowings under the Revolver may be repaid at any time during the term of the Credit Agreement and, subject to certain terms and conditions, may be reborrowed prior to the maturity date.
The weighted-average interest rate in effect for the Revolver as of March 31, 2024 was 7.42%. Borrowings under the Revolver may be repaid at any time during the term of the Credit Agreement and, subject to certain terms and conditions, may be reborrowed prior to the maturity date.
The balance outstanding under the Revolver as of March 31, 2023 has been presented as an obligation payable in the years 112 Table of Contents 3-5 column as there are no scheduled or required principal payments on the Revolver until the maturity date on September 20, 2026.
The balance outstanding under the Revolver as of March 31, 2024 has been presented as an obligation payable in the years 118 Table of Contents 1-3 column as there are no scheduled or required principal payments on the Revolver until the maturity date on September 20, 2026.
FRE is a component of ANI and comprises net management and advisory fees, less adjusted expenses which are operating expenses other than (a) performance fee-related compensation, (b) equity-based compensation for awards granted prior to and in connection with our IPO, profits interests issued by our non-wholly owned subsidiaries, and unrealized mark-to-market changes in the fair value of the profits interests issued in connection with the Private Wealth Transaction, (c) amortization of intangibles, and (d) certain other items that we believe are not indicative of our core operating performance, including charges associated with acquisitions and corporate transactions, contract terminations and employee severance.
FRE is a component of ANI and comprises adjusted management and advisory fees, net, less adjusted expenses which are operating expenses other than (a) performance fee-related compensation, (b) equity-based compensation for awards granted prior to and in connection with our IPO, profits interests issued by our non-wholly owned subsidiaries, and unrealized mark-to-market changes in the fair value of the profits interests issued in the private wealth subsidiary, (c) amortization of intangibles, (d) charges associated with acquisitions and corporate transactions, and (e) certain other items that we believe are not indicative of our core operating performance (as listed in the below table).
In the first calendar quarter of 2023, signs of slowing inflation coupled with a strong labor market contributed to a rebound in financial markets despite the banking system volatility as recession fears receded in anticipation that interest rates may not rise as much as previously expected.
Current Events In 2023, signs of slowing inflation coupled with a strong labor market contributed to a rebound in financial markets despite banking system volatility as recession fears receded in anticipation that interest rates may not rise as much as previously expected.
As of March 31, 2023, we had 956 total employees, including 322 investment professionals and 634 employees across our operating team and implementation teams dedicated to sourcing, executing, analyzing and monitoring private markets opportunities. We have a flexible business model whereby many of our clients engage us for solutions across multiple asset classes and investment strategies.
As of March 31, 2024, we had 990 total employees, including 335 investment professionals and 655 employees across our operating team and implementation teams dedicated to sourcing, executing, analyzing and monitoring private markets opportunities. We have a flexible business model whereby many of our clients engage us for solutions across multiple asset classes and investment strategies.
Advisory relationships comprised $482 billion of our AUA and $13 billion of our AUM as of March 31, 2023. • Portfolio analytics and reporting. We provide clients with tailored reporting packages, including customized performance benchmarks as well as associated compliance, administrative and tax capabilities.
Advisory relationships comprised $521 billion of our AUA and $14 billion of our AUM as of March 31, 2024. • Portfolio analytics and reporting. We provide clients with tailored reporting packages, including customized performance benchmarks as well as associated compliance, administrative and tax capabilities.
(2) Reflects the removal of interest income earned by the Consolidated Funds.
(3) Reflects the removal of interest income earned by the Consolidated Funds.
Income Tax Expense Income tax expense primarily reflects U.S. federal and state income taxes on our share of taxable income generated by the Partnership, as well as local and foreign income taxes of certain of the Partnership’s subsidiaries. 93 Table of Contents Our effective income tax rate was (9.2)%, 5.5%, and 6.9% for fiscal 2023, 2022 and 2021, respectively.
Income Tax Expense Income tax expense primarily reflects U.S. federal and state income taxes on our share of taxable income generated by the Partnership, as well as local and foreign income taxes of certain of the Partnership’s subsidiaries. Our effective income tax rate was 14.1%, (9.2)%, and 5.5% for fiscal 2024, 2023 and 2022, respectively.
Assets Under Advisement Assets related to our advisory accounts were $340 billion as of March 31, 2021, $436 billion as of March 31, 2022 and $482 billion as of March 31, 2023.
Assets Under Advisement Assets related to our advisory accounts were $436 billion as of March 31, 2022, $482 billion as of March 31, 2023 and $521 billion as of March 31, 2024.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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We generally endeavor to minimize our risk of exposure by limiting the counterparties with which we enter into financial transactions to reputable financial institutions. In other circumstances, availability of financing from financial institutions may be uncertain due to market events, and we may not be able to access these financing markets. 121 Table of Contents
We generally endeavor to minimize our risk of exposure by limiting the counterparties with which we enter into financial transactions to reputable financial institutions. In other circumstances, availability of financing from financial institutions may be uncertain due to market events, and we may not be able to access these financing markets. 127 Table of Contents
Our management fee and advisory fee revenue is only marginally affected by changes in investment values because our management fees are generally based on commitments or net invested capital and our advisory fees are fixed. As of March 31, 2023 and 2022 , NAV-based management fees represented approximately 7% and 3%, respectively, of total net management and advisory fees.
Our management fee and advisory fee revenue is only marginally affected by changes in investment values because our management fees are generally based on commitments or net invested capital and our advisory fees are fixed. As of March 31, 2024 and 2023, NAV-based management fees represented approximately 9% and 7%, respectively, of total net management and advisory fees.
The primary driver for the change in the contingent repayment between periods is due to additional carried interest allocation realizations in fiscal 2023 that are potentially subject to clawback. • Investment income changes in relation to realized and unrealized gains and losses of the underlying investments in our funds in which we have a general partner commitment.
The primary driver for the change in the contingent repayment between periods is due to additional carried interest allocation realizations in fiscal 2024 that are potentially subject to clawback. 126 Table of Contents • Investment income changes in relation to realized and unrealized gains and losses of the underlying investments in our funds in which we have a general partner commitment.
We estimate that a 10% decline in market values of the investments held in our funds as of March 31, 2023 and 2022 would result in an approximate decrease to annual management fees of $3.4 million and $1.5 million, respectively.
We estimate that a 10% decline in market values of the investments held in our funds as of March 31, 2024 and 2023 would result in an approximate decrease to annual management fees of $5.8 million and $3.4 million, respectively.
Based on the $103.5 million and $117.4 million of cash, cash equivalents and restricted cash (excluding Consolidated Funds) as of March 31, 2023 and 2022, respectively, we estimate that interest income would increase by $1.0 million and $1.2 million, respectively, on an annualized basis as a result of a 100 basis point increase in interest rates.
Based on the $144.1 million and $103.5 million of cash, cash equivalents and restricted cash (excluding Consolidated Funds) as of March 31, 2024 and 2023, respectively, we estimate that interest income would increase by $1.4 million and $1.0 million, respectively, on an annualized basis as a result of a 100 basis point increase in interest rates.
As of March 31, 2023 and 2022, we had $18.1 million and $14.2 million, respectively, of deferred incentive fee revenue recorded in accounts payable, accrued expenses and other liabilities in the consolidated balance sheets. • We earn carried interest allocation revenue from certain of the StepStone Funds based on cumulative fund performance to date, subject to specified performance criteria.
As of March 31, 2024 and 2023, we had $20.5 million and $18.1 million, respectively, of deferred incentive fee revenue recorded in accounts payable, accrued expenses and other liabilities in the consolidated balance sheets. • We earn carried interest allocation revenue from certain of the StepStone Funds based on cumulative fund performance to date, subject to specified performance criteria.
As of March 31, 2023 and 2022, we estimate that interest expense would increase by $1.0 million and $0.7 million, respectively, on an annualized basis as a result of a 100 basis point increase in interest rates.
As of March 31, 2024 and 2023, we estimate that interest expense would increase by $1.5 million and $1.0 million, respectively, on an annualized basis as a result of a 100 basis point increase in interest rates.
As of March 31, 2023 and 2022, the maximum amount of carried interest allocations (excluding legacy Greenspring carried interest allocations) subject to contingent repayment, net of tax, was an estimated $264.1 million and $204.8 million, respectively, assuming the fair value of all investments was zero, a possibility that we view as remote.
As of March 31, 2024 and 2023, the maximum amount of carried interest allocations (excluding legacy Greenspring carried interest allocations) subject to contingent repayment, net of tax, was an estimated $287.5 million and $264.1 million, respectively, assuming the fair value of all investments was zero, a possibility that we view as remote.
Interest Rate Risk As of March 31, 2023 and 2022, we had $100.0 million and $65.0 million, respectively, in borrowings outstanding under our Revolver. The Revolver accrues interest at a variable rate.
Interest Rate Risk As of March 31, 2024 and 2023, we had $150.0 million and $100.0 million, respectively, in borrowings outstanding under our Revolver. The Revolver accrues interest at a variable rate.
Potentially negative effects of these risks may be mitigated to a certain extent by those aspects of our investment approach, investment strategies, fundraising practices or other business activities that are designed to benefit, either in relative or absolute terms, from periods of economic weakness, tighter credit markets or financial market dislocations. 119 Table of Contents Market Risk Our predominant exposure to market risk is related to our role as general partner or investment manager for our focused commingled funds and SMAs and the sensitivities to movements in the fair value of their investments, which may adversely affect our performance fee revenues and investment income.
Potentially negative effects of these risks may be mitigated to a certain extent by those aspects of our investment approach, investment strategies, fundraising practices or other business activities that are designed to benefit, either in relative or absolute terms, from periods of economic weakness, tighter credit markets or financial market dislocations.
Based on investments (excluding legacy Greenspring investments in funds and investments of Consolidated Funds) held as of March 31, 2023 and 2022, we estimate that a 10% decline in fair value of the investments in funds and investments, at fair value, of Consolidated Funds would result in a decrease in investment income of $11.5 million and $10.7 million, respectively. 120 Table of Contents Exchange Rate Risk Our business is affected by movements in the exchange rate between the U.S. dollar and non-U.S. dollar currencies in respect of revenues and expenses of our foreign offices that are denominated in non-U.S. dollar currencies and cash and other balances we hold in non-functional currencies.
Based on investments (excluding legacy Greenspring investments in funds and investments of Consolidated Funds) held as of March 31, 2024 and 2023, we estimate that a 10% decline in fair value of the investments in funds would result in a decrease in investment income of $13.5 million and $11.5 million, respectively.
Added
Market Risk Our predominant exposure to market risk is related to our role as general partner or investment manager for our focused commingled funds and SMAs and the sensitivities to movements in the fair value of their investments, which may adversely affect our performance fee revenues and investment income.
Added
Exchange Rate Risk Our business is affected by movements in the exchange rate between the U.S. dollar and non-U.S. dollar currencies in respect of revenues and expenses of our foreign offices that are denominated in non-U.S. dollar currencies and cash and other balances we hold in non-functional currencies.

Other STEP 10-K year-over-year comparisons