StepStone Group’s first quarter results were met with a positive market reaction, as the company surpassed Wall Street revenue and profit expectations. Management credited this performance to strong fee-related earnings and expanding fundraising across its platform. CEO Scott Hart emphasized, “We surpassed $100 million of quarterly fee-related earnings for the first time ever, driven by growth in earning assets across the platform.” The quarter also saw the company’s private wealth offerings generate record organic subscriptions, especially in its venture capital fund, reflecting robust demand from individual investors seeking exposure to private markets. Meanwhile, solid institutional interest in private debt contributed to the overall fundraising strength.

Is now the time to buy STEP? Find out in our full research report (it’s free for active Edge members).

While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.

Our Top 5 Analyst Questions From StepStone Group’s Q1 Earnings Call

• Benjamin Budish (Barclays) asked about valuation practices in secondary private market funds. Head of Strategy Michael McCabe explained that StepStone uses rigorous, independent processes to corroborate manager-reported fair values and emphasized that long-term returns are driven by asset appreciation after purchase.
• Kenneth Worthington (JPMorgan) inquired whether concerns about secondary market valuation practices are shared by clients. President Jason Ment responded that while clients ask about it due to media coverage, StepStone’s approach and track record have reassured them.
• Michael Cyprys (Morgan Stanley) questioned how StepStone can support adoption of private markets in defined contribution plans given varying degrees of legal protection. Ment highlighted education efforts and noted that the Department of Labor’s process-based proposal is seen as favorable by industry participants.
• Anthony (Goldman Sachs) asked about the durability of private wealth inflows and performance, especially in venture funds. CEO Scott Hart attributed sustained demand to broad interest in the innovation economy and StepStone’s market-leading position in venture capital.
• Mark (BMO) sought clarity on the ramp potential for new private wealth vehicles. Ment suggested using the early ramp of S Prime as a baseline for expectations, noting that newer funds are following a similar growth trajectory.

Catalysts in Upcoming Quarters

In future quarters, our analysts will be watching (1) the conversion rate of undeployed fee-earning capital into actively managed assets, (2) the pace of adoption and monetization of data and technology partnerships, and (3) regulatory developments and early client traction in defined contribution retirement channels. Progress on private wealth fundraising and realization activity in secondary markets will also be important markers for StepStone’s execution.

StepStone Group currently trades at $52.78, up from $52 just before the earnings. In the wake of this quarter, is it a buy or sell? The answer lies in our full research report (it’s free).

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