Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis should be read in conjunction with the consolidated financial statements and the related notes included in Part II, Item 8 of this annual report on Form 10-K. In this annual report references to “we,” “us,” “our,” “StepStone” and similar terms refer to SSG and its consolidated subsidiaries, including the Partnership. Unless otherwise indicated, references in this annual report to fiscal 2026, fiscal 2025 and fiscal 2024 are to our fiscal years ended March 31, 2026, 2025 and 2024, respectively.
Business Overview
We are a global private markets investment firm focused on providing customized investment solutions and advisory and data services to our clients. Our clients include some of the world’s largest public and private defined benefit and defined contribution pension funds, sovereign wealth funds and insurance companies, as well as prominent endowments, foundations, family offices and private wealth clients, which include high-net-worth and mass affluent individuals. We partner with our clients to develop and build private markets portfolios designed to meet their specific objectives across the private equity, infrastructure, private debt and real estate asset classes. 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, 2026, we were responsible for approximately $885 billion of total capital, including $233 billion of AUM and $652 billion of AUA.
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 31 cities across 19 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. Since our inception in 2007, we have invested and continue to invest heavily in our platforms to drive growth and expand our investment solutions capabilities and service offerings, including through opportunistic transactions that have helped accelerate the growth of our team and capabilities. As of March 31, 2026, we had over 1,310 total employees, including approximately 420 investment professionals and approximately 890 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. Our solutions are typically offered in the following commercial structures:
• Separately managed accounts (“SMAs”). Owned by one client and managed according to their specific preferences, SMAs integrate a combination of primaries, secondaries and co-investments across one or more asset classes. SMAs are meant to address clients’ specific portfolio objectives with respect to return, risk tolerance, diversification and liquidity. SMAs, including directly managed assets, comprised $136 billion of our AUM as of March 31, 2026.
• 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 $81 billion of our AUM as of March 31, 2026.
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• Advisory and data services. 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. Advisory relationships comprised $652 billion of our AUA and $16 billion of our AUM as of March 31, 2026.
• Portfolio analytics and reporting. We provide clients with tailored reporting packages, including customized performance benchmarks as well as associated compliance, administrative and tax capabilities. 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 $900 billion of client commitments through SPI Reporting as of March 31, 2026.
We generate revenues from management and advisory fees and performance fees earned pursuant to contractual arrangements with the StepStone Funds and our clients. We also invest our own capital in the StepStone Funds we manage to align our interests with those of our clients. Through these investments, we earn a pro-rata share of the results of such funds and may also be entitled to an allocation of performance-based fees from the limited partners in the StepStone Funds, commonly referred to as carried interest.
Trends Affecting Our Business
Our business is affected by a variety of factors, including conditions in the financial markets, regulatory environment, and economic and political conditions. Changes in global economic conditions and regulatory or other governmental policies or actions can materially affect the values of the StepStone Funds’ holdings, our ability to source attractive investments and completely utilize the capital that we have raised, and result in increased compliance costs and administrative burdens. 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.
In addition to these macroeconomic trends and market factors, we believe our future performance will be influenced by the following factors:
• The extent to which clients favor private markets investments. Our ability to attract new capital is partially dependent on clients’ views of private markets relative to traditional asset classes. We believe our fundraising efforts will continue to be subject to certain fundamental asset management trends, including (1) the increasing importance and market share of private markets investment strategies to clients of all types as clients focus on lower-correlated and absolute levels of return, (2) the increasing demand for private markets investments from private wealth clients, (3) shifting asset allocation policies of institutional clients and (4) increasing barriers to entry and growth for potential competitors.
• Our ability to generate strong, stable returns. Our ability to raise and retain capital is partially dependent on the investment returns we are able to generate for our clients and drives growth in our fee-earning AUM (“FEAUM”) and management fees. Although our FEAUM and management fees have grown significantly since our inception, adverse market conditions or an outflow of capital in the private markets management industry in general could affect our future growth rate. In addition, market dislocations, contractions or volatility could put pressure on our returns in the future which could in turn affect our fundraising abilities.
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• Our ability to maintain our data advantage relative to competitors. Our proprietary data and technology platforms, analytical tools and deep industry knowledge allow us to provide our clients with customized investment solutions, including asset management services and tailored reporting packages, such as customized performance benchmarks as well as compliance, administration and tax capabilities. Our ability to maintain our data advantage is dependent on a number of factors, including our continued access to a broad set of private market information and our ability to grow our relationships with fund managers and clients of all types.
• Our ability to source investments with attractive risk-adjusted returns. The continued growth in our revenues is dependent on our ability to identify attractive investments and deploy the capital that we have raised. However, the capital deployed in any one quarter may vary significantly from period to period due to the availability of attractive opportunities and the long-term nature of our investment strategies. Our ability to identify attractive investments is dependent on a number of factors, including the general macroeconomic environment, valuation, transaction size, and the liquidity of an investment opportunity. A significant decrease in the quality or quantity of potential opportunities could significantly and adversely affect our ability to source investments with attractive risk-adjusted returns.
• Increased competition and clients’ desire to work with fewer managers. There has been an increasing desire on the part of larger institutional investors to build deeper relationships with fewer private markets managers. At times, this has led to certain funds being oversubscribed due to the increasing flow of capital. Our ability to invest and maintain our relationships with high-performing fund managers across private markets asset classes is critical to our clients’ success and our ability to maintain our competitive position and grow our revenue.
Current Events
In 2025 and in early 2026, financial markets experienced significant volatility in response to the uncertainty of the economic impact from U.S. trade policy developments including the announcement and implementation of increases on tariffs charged by the U.S. on certain imports, the weakening of the U.S. dollar against several major foreign currencies and economic uncertainty driven by developments in the Middle East. Despite elevated levels of inflation, slowing global growth and elevated long-term rates, unemployment remained low, and the U.S. economy continued to grow throughout 2025 and into 2026.
On July 4, 2025, the One Big Beautiful Bill Act was enacted in the U.S., which includes extensive amendments to existing tax laws applicable to businesses. The relevant provisions were included in our income tax provision for fiscal 2026 and did not have a significant impact on our consolidated financial statements. We will continue to evaluate the effect of the new legislation but do not expect the legislation to have a significant effect on the consolidated financial statements.
We are continuing to closely monitor developments related to inflation, decreasing but still elevated interest rates, trade, regulatory and other governmental policy , fluctuations in foreign currency exchange rates, banking system volatility, geopolitical tension, unrest or conflicts, including in or with China, Russia, Ukraine, Europe and the Middle East , and assess the impact on financial markets and on our business. Our results and the overall industry results have been, and may continue to be, adversely affected by slowdowns in fundraising activity and the pace of capital deployment, which have resulted in, and may continue to result in, delayed or decreased management fees. Further, fund managers have been unable or less able to exit existing investments profitably. Such conditions have resulted in, and may continue to result in, delayed or decreased performance fee revenues. It is currently not possible to predict the ultimate effects of these events on the financial markets, the overall economy and our consolidated financial statements. See “Risk Factors—Risks Related to Our Industry— or market and political conditions can 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
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managers with whom we may invest, and reducing the ability of our funds to raise or deploy capital” and “Risk Factors—Banking system volatility may adversely affect the results and financial condition of the StepStone Funds or StepStone generally.”
Corporate Transactions
Purchase of Asset Class Non-Controlling Interests
On February 7, 2024, we entered into agreements (the “Transaction Agreements”) with each of SRA, SRE and SPD (the “Asset Class Entities”), their respective asset class heads as seller representatives, the seller parties signatory thereto, and certain other parties. The Transaction Agreements provide a path to the Partnership owning all of the outstanding equity interests of the Asset Class Entities over a defined period of time.
The Transaction Agreements provide for, among other things and subject to the terms and conditions therein, the exchange of the sellers’ equity interests in the Asset Class Entities, as applicable, for a combination of (i) Class D units of the Partnership, in the case of SRA and SRE, or shares of Class A common stock of SSG, in the case of SPD, and (ii) cash (at our discretion for all exchanges except the initial exchange), in up to ten annual exchanges (or up to fifteen annual exchanges in certain circumstances in the case of the sellers of SRA equity interests). Each Transaction Agreement also provides that beginning after the fifth annual exchange, future exchanges may be accelerated into one final exchange in certain circumstances.
The portion of the equity interests expected to be acquired in each annual exchange is set forth in an exchange schedule attached to each Transaction Agreement and is approximately 5% of each Asset Class Entity on each contemplated annual exchange date. The amount of consideration to be delivered is calculated using exchange ratios annually derived from a formula that establishes an assumed value of each Asset Class Entity based on its estimated adjusted net income, relative to an adjusted trading multiple for our Class A common stock with respect to our estimated adjusted net income. The Transaction Agreement specifies a minimum adjusted trading multiple for the exchange to take place. If this threshold is not met for a particular year, the exchange for that year will be skipped and combined with a future exchange in a subsequent year, provided the minimum adjusted trading multiple is met at that time.
On May 31, 2024, we completed the first annual exchange (the “2024 Exchange”) to acquire approximately 5% of the equity interests of each of SRA, SRE and SPD pursuant to the Transaction Agreements dated as of February 7, 2024. As a result of the 2024 Exchange, the Partnership owned approximately 54% of the outstanding equity interests of SRA, 56% of the outstanding equity interests of SRE and 54% of the outstanding equity interests of SPD. The aggregate consideration paid by us in the 2024 Exchange was approximately (i) $13 million in cash, (ii) 513,394 shares of Class A common stock and (iii) 2,239,185 Class D units of the Partnership.
In connection with the transactions contemplated by the SRA Transaction Agreement and SRE Transaction Agreement, we entered into a Class D Exchange Agreement (the “Class D Exchange Agreement”) at the closing of the 2024 Exchange on May 31, 2024. The Class D Exchange Agreement provides, among other things, sellers under the SRA Transaction Agreement and SRE Transaction Agreement with the ability, in certain circumstances and subject to certain conditions, to exchange the Class D units issued to them in connection with the SRA Transaction Agreement and SRE Transaction Agreement on a one-for-one basis with shares of Class A common stock, par value $0.001. In addition, the Class D Exchange Agreement restricts the exchange of the Class D units issued to such sellers, which restriction applies for a maximum of one year (or two years if a Transaction Agreement Exchange (as defined in the Class D Exchange Agreement) constitutes an Acceleration Exchange (as defined in the Class D Exchange Agreement)), subject to certain exceptions.
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On May 30, 2025, we completed the second annual exchange (the “2025 Exchange”) to acquire approximately 5% of the equity interests of each of SRA, SRE and SPD pursuant to the Transaction Agreements dated as of February 7, 2024. As a result of the 2025 Exchange, the Partnership now owns approximately 60% of the outstanding equity interests of SRA, 60% of the outstanding equity interests of SRE and 59% of the outstanding equity interests of SPD. The aggregate consideration paid by us in the 2025 Exchange was approximately (i) $10 million in cash, (ii) 756,105 shares of Class A common stock and (iii) 2,438,403 Class D units of the Partnership.
We expect the third annual exchange under the Transaction Agreements to occur on or about May 29, 2026. In connection with such exchange, we expect to acquire approximately 5% of the equity interests of each of SRA, SRE and SPD, in exchange for cash and either Class A common stock or Class D units of the Partnership.
Private Wealth Transaction
In November 2022, we entered into arrangements with the SPW management team (the “Private Wealth Transaction”) under which 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. The applicable call or put price is, in certain circumstances, subject to an earn-out or earn-down. The call or put price will be payable in cash unless we elect to pay a portion of the consideration in units of the Partnership, each to be exchangeable into shares of our Class A common stock, and, in either case, rights under one or more tax receivable agreements.
Equity Transactions
In June 2025, we issued 152,768 shares of Class A common stock to certain limited partners of the Partnership in exchange for 152,768 Class B units of the Partnership in accordance with the elective exchange notices submitted pursuant to an agreement with the Class B limited partners (the “Class B Exchange Agreement”) to allow for exchange of Class B units of the Partnership to shares of our Class A common stock on a one-for-one basis, subject to certain restrictions. 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. We also issued 18,000 shares of Class A common stock to certain limited partners of the Partnership in exchange for 18,000 Class C units of the Partnership in accordance with the elective exchange notices submitted pursuant to an agreement with the Class C limited partners (the “Class C Exchange Agreement”) to allow for exchange of Class C units of the Partnership to shares of our Class A common stock on a one-for-one basis, subject to certain restrictions. A corresponding number of Class A units of the Partnership were issued to us. We also issued 864,640 shares of Class A common stock to certain limited partners of the Partnership in exchange for 864,640 Class D units of the Partnership in accordance with the elective exchange notices submitted pursuant to the Class D Exchange Agreement, and a corresponding number of Class A units of the Partnership were issued to us.
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In September 2025, we issued 370,470 shares of Class A common stock to certain limited partners of the Partnership in exchange for 370,470 Class B units of the Partnership in accordance with the elective exchange notices submitted pursuant to the Class B Exchange Agreement. 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. We also issued 16,658 shares of Class A common stock to certain limited partners of the Partnership in exchange for 16,658 Class C units of the Partnership in accordance with the elective exchange notices submitted pursuant to the Class C Exchange Agreement, and a corresponding number of Class A units of the Partnership were issued to us. We also issued 135,697 shares of Class A common stock to certain limited partners of the Partnership in exchange for 135,697 Class D units of the Partnership in accordance with the elective exchange notices submitted pursuant to the Class D Exchange Agreement, and a corresponding number of Class A units of the Partnership were issued to us.
In December 2025, we issued 116,000 shares of Class A common stock to certain limited partners of the Partnership in exchange for 116,000 Class B units of the Partnership in accordance with the elective exchange notices submitted pursuant to the Class B Exchange Agreement. 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. We also issued 892,169 shares of Class A common stock to certain limited partners of the Partnership in exchange for 892,169 Class D units of the Partnership in accordance with the elective exchange notices submitted pursuant to the Class D Exchange Agreement, and a corresponding number of Class A units of the Partnership were issued to us.
In March 2026, we issued 379,955 shares of Class A common stock to certain limited partners of the Partnership in exchange for 379,955 Class B units of the Partnership in accordance with the elective exchange notices submitted pursuant to the Class B Exchange Agreement. 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.
Organizational Structure
SSG is a holding company and its only business is to act as the managing member of the General Partner, and its only material assets are Class A units in the Partnership and 100% of the interests in the General Partner. In its capacity as the sole managing member of the General Partner, SSG indirectly operates and controls all of the Partnership’s business and affairs. Therefore, we consolidate the financial results of the Partnership and report non-controlling interests (“NCI”) related to the Class B units, Class C units and Class D units held by partners of the Partnership in our consolidated financial statements.
Pursuant to the StepStone Limited Partnership Agreement, the Class B Exchange Agreement, the Class C Exchange Agreement and the Class D Exchange Agreement that SSG and the Partnership entered into with partners holding Class B units, Class C units and Class D units of the Partnership, respectively, each Class B unit, Class C unit or Class D unit is exchangeable for one share of SSG’s Class A common stock or, at SSG’s election, for cash, subject to certain restrictions specified in the relevant exchange agreement. When a Class B unit, Class C unit or Class D unit is surrendered for exchange, it will not be available for reissuance. When a Class B unit is exchanged for a share of SSG’s Class A common stock, a corresponding share of SSG’s Class B common stock will automatically be redeemed by SSG at par value and canceled. There are no corresponding shares of common stock for the Class C and Class D units.
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The diagram below illustrates our organizational structure as of March 31, 2026.
Amounts may not sum to 100% due to rounding.
(1) The partners of the Partnership other than StepStone Group Inc. are:
• the General Partner, which holds a 100% general partner interest and no economic interests;
• certain members of management, employee and former employee owners and outside investors, all of whom own Class B units and an equivalent number of shares of Class B common stock;
• certain employee and former employee owners who own Class C units; and
• certain employee owners who own Class D units.
(2) Each share of Class A common stock is entitled to one vote and vote together with the Class B common stock as a single class, except as set forth in SSG’s amended and restated certificate of incorporation or as required by law.
(3) Each share of Class B common stock is entitled to one vote and votes together with the Class A common stock as a single class, except as set forth in SSG’s amended and restated certificate of incorporation or as required by law. The economic rights of our Class B common stock are limited to the right to be redeemed at par value.
Prior to September 18, 2025, holders of our Class B common stock controlled a majority of the voting power of our outstanding common stock because (i) each share of our Class B common stock entitled its holder to five votes on all matters to be voted on by stockholders generally, until the earliest to occur of certain ownership changes or September 18, 2025 as set forth in our then current Amended and Restated Certificate of Incorporation (the “Sunset”) and (ii) under our Amended and Restated Stockholders Agreement, dated as of September 20, 2021 (the “Stockholders Agreement”), certain Class A stockholders, Class B stockholders and Class C unitholders in the Partnership agreed to vote all of their shares of voting stock together with and as directed by the Class B Committee (as defined in the Stockholders Agreement). As a result, prior to September 18, 2025, we qualified as a “controlled company” within the meaning of the corporate governance rules of The Nasdaq Global Select Market LLC (“Nasdaq”). 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. Consistent with this, until the occurrence of the Sunset, we elected not to comply with certain corporate governance requirements, including the requirements 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.
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However, since the occurrence of the Sunset and expiration of the Stockholders Agreement on September 18, 2025, each share of Class A common stock and Class B common stock is entitled to one vote, and we no longer qualify as a “controlled company” within the meaning of the Nasdaq rules. As a result, we are required to come into compliance with Nasdaq’s corporate governance requirements applicable to non-controlled companies as described above no later than September 18, 2026. Under the Nasdaq rules, the Company may continue to rely on exemptions from certain corporate governance requirements during a one year “phase-in” period. While we are able to rely on such exemptions during this one year “phase-in” period, we do not currently satisfy all of Nasdaq’s corporate governance requirements applicable to non-controlled companies, and, accordingly, we must take actions to achieve compliance by September 18, 2026. In particular, on or before such date, we plan for our compensation and nominating and corporate governance committees of our board of directors to be composed entirely of independent directors, and for a majority of our board of directors to consist of independent directors. Until the Company fully complies with these requirements, stockholders may not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements under the Nasdaq rules. See “Risk Factors—Risks Related to Our Organizational Structure—We were previously a “controlled company” within the meaning of the Nasdaq Global Select Market listing standards and, as a result, we qualified for, and relied on, exemptions from certain corporate governance requirements. As of September 18, 2025, we are no longer a “controlled company” under Nasdaq rules and are required to comply with Nasdaq’s applicable corporate governance requirements no later than September 18, 2026. Unless and until we are fully compliant with such requirements, you will not have the same protections afforded to stockholders of companies that are subject to such requirements.”
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. We use, and expect to continue to use, a combination of our equity ownership, governance rights and other contractual arrangements to control operations of these businesses. As described above, SSG and the Partnership have entered into agreements with each of SRA, SRE and SPD, providing a path to full ownership of these subsidiaries. SSG consolidates all entities that it controls due to a majority voting interest or because it is the primary beneficiary of a variable interest entity. See note 4 to our consolidated financial statements included elsewhere in this annual report for information on variable interest entities. The diagram below summarizes the ownership structure of the Partnership’s consolidated operations on a fully diluted basis.
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Segments
We operate as one business, a fully-integrated private markets solutions provider. Our chief operating decision maker, who is our chief executive officer, utilizes a consolidated approach to assess performance and allocate resources. As such, we operate in one business segment.
Key Financial Measures
Our key financial measures are discussed below. Additional information regarding our significant accounting policies can be found in note 2 to our consolidated financial statements included in Part II, Item 8 of this annual report.
Revenues
We generate revenues primarily from management and advisory fees, incentive fees and allocations of carried interest.
Management and Advisory Fees, Net
Management and advisory fees, net, consist of fees received from managing SMAs and focused commingled funds, advisory and data services, and portfolio analytics and reporting. Management fees include income-based incentive fees, which are predictable and recurring in nature and paid quarterly based on net investment income of certain funds .
• Management fees from SMAs are generally based on a contractual rate applied to committed capital or net invested capital. These fees will vary over the life of the contract due to changes in the fee basis or contractual rate changes or thresholds, built-in declines in applicable contractual rates, and/or changes in net invested capital balances. The weighted-average management fee rate from SMAs was approximately 0.39% and 0.38% of average FEAUM in fiscal 2025 and 2026, respectively.
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• 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. Thereafter, management fees are typically calculated based on a contractual rate applied against net invested capital, or a stepped-down fee rate applied against the initial commitment. The weighted-average management fee rate from focused commingled funds was approximately 1.06% and 1.01% of average FEAUM in fiscal 2025 and 2026, respectively, and primarily reflected the timing of new funds and growth in our private wealth funds which earn higher fee rates.
• The weighted-average management fee rate across SMAs and focused commingled funds was approximately 0.65% and 0.64% of average FEAUM in fiscal 2025 and 2026, respectively, and primarily reflected the timing of new funds, shifts in mix between SMAs and focused commingled funds and growth in our private wealth funds which earn higher fee rates.
• Fee revenues from advisory, StepStone Portfolio Analytics & Reporting (“SPAR”) and SPI Research are generally annual fixed fees, which vary based on the scope of services we provide. We also provide certain project-based or event-driven advisory services. The fees for these services are negotiated and typically paid upon successful delivery of services or on the execution of the event-driven service. Because advisory fees are negotiated and typically paid upon successful delivery of services or on the execution of the event-driven service, advisory fees do not necessarily correlate with the total size of our AUA.
• Management fees are reflected net of (i) certain professional and administrative services that we arrange to be performed by third parties on behalf of investment funds and (ii) certain distribution and servicing fees paid to third-party financial institutions. In both situations, we are acting as an agent because we do not control the services provided by the third parties before they are transferred to the customer.
Performance Fees
We earn two types of performance fee revenues: incentive fees and carried interest allocations, as described below. As of March 31, 2026, we had over $115 billion of performance fee-eligible capital (excluding certain legacy Greenspring funds) across over 250 programs.
Incentive fees comprise fees earned from certain client investment mandates for which we do not have a general partnership interest in a StepStone Fund. 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. 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). 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. 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.
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Carried interest allocations include the allocation of performance-based fees, commonly referred to as carried interest, to us from limited partners in the StepStone Funds in which we hold an equity interest. 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 the respective fund’s governing documents. We account for our investment balances in the StepStone Funds, including carried interest allocations, under the equity method of accounting because we are presumed to have significant influence as the general partner or managing member. Accordingly, carried interest allocations are not deemed to be within the scope of Accounting Standards Codification Topic 606 (“ASC 606”), Revenue from Contracts with Customers .
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. We account for the investment balances in the legacy Greenspring funds, including carried interest allocations, under the equity method of accounting because we are presumed to have significant influence as the general partner or managing member. Accordingly, legacy Greenspring carried interest allocations are not deemed to be within the scope of ASC 606. We do not have any direct economic interests in the legacy Greenspring general partner entities and thus are not entitled to any carried interest allocation from the legacy Greenspring funds. All of the carried interest allocations in respect of such legacy Greenspring funds are payable to employees who are considered affiliates to us and are therefore reflected as legacy Greenspring performance fee-related compensation in the consolidated statements of income (loss) .
We recognize revenue attributable to carried interest allocations from a StepStone Fund based on the amount that would be due to us pursuant to the fund’s governing documents, assuming the fund was liquidated based on the current fair value of its underlying investments as of that date. 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. We record the amount of carried interest allocated to us as of each period end as accrued carried interest allocations, which is included as a component of investments in the consolidated balance sheets. Our determination of fair value for investments in the underlying funds includes various valuation techniques. 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.
Carried interest is realized when an underlying investment is profitably disposed of and the fund’s cumulative returns are in excess of the specific hurdle rates, as defined in the applicable governing documents. Carried interest is subject to reversal to the extent that the amount received to date exceeds the amount due to us based on cumulative results. As such, a liability is accrued for the potential clawback obligations if amounts previously distributed to us would require repayment to a fund if such fund were to be liquidated based on the current fair value of their underlying investments as of the reporting date. Actual repayment obligations generally do not become realized until the end of a fund’s life. As of March 31, 2026 and 2025, no material amounts for potential clawback obligations had been accrued.
Expenses
Cash-based compensation primarily includes salaries, bonuses, employee benefits, cash-based incentive awards and employer-related payroll taxes.
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Equity-based compensation represents grants of equity related awards or arrangements to certain employees and directors and expense associated with the employee stock purchase plan (“ESPP”).
Performance fee-related compensation represents the portion of carried interest allocation revenue and incentive fees that have been awarded to employees as a form of long-term incentive compensation. Performance fee-related compensation is generally tied to the investment performance of the StepStone Funds. Approximately 50% of carried interest allocation revenue is awarded to employees as part of our long-term incentive compensation plan, fostering alignment of interest with our clients and investors, and retaining key investment professionals. Carried interest-related compensation is accounted for as compensation expense in conjunction with the related carried interest allocation revenue and, until paid, is recorded as a component of accrued carried interest-related compensation in the consolidated balance sheets. Amounts presented as realized indicate the amounts paid or payable to employees based on the receipt of carried interest allocation revenue from realized investment activity. Carried interest-related compensation expense may be subject to reversal to the extent that the related carried interest allocation revenue is reversed. Carried interest-related compensation paid to employees may be subject to clawback on an after-tax basis under certain scenarios. To date, no material amounts of realized carried interest-related compensation have been reversed. Incentive fee-related compensation is accrued as compensation expense when it is probable and estimable that payment will be made. On April 1, 2024, certain of our non-wholly owned subsidiaries underwent transactions to effect unitization of the outstanding limited partnership interests, including the class of interests relating to awards of carried interest allocations granted to employees, to combine into a single class of limited partnership interests and redesignated into units. The class of interests relating to awards of carried interest allocations granted to employees were previously presented as carried interest-related compensation expense.
Legacy Greenspring performance fee-related compensation represents the legacy Greenspring carried interest allocations which are entirely payable to certain employees. Legacy Greenspring carried interest-related compensation is accounted for as compensation expense in conjunction with the related legacy Greenspring carried interest allocation revenue and, until paid, is recorded as a component of legacy Greenspring accrued carried interest-related compensation in the consolidated balance sheets. Legacy Greenspring carried interest-related compensation expense may be subject to reversal to the extent that the related legacy Greenspring carried interest allocation revenue is reversed. However, none of the legacy Greenspring carried interest allocation revenue is attributable to the Company.
General, administrative and other includes occupancy, travel and related costs, insurance, legal and other professional fees, depreciation, amortization of intangible assets, system-related costs, and other general costs associated with operating our business. General, administrative and other includes costs associated with the Consolidated Funds. Expenses of the Consolidated Funds have no impact on net income or loss attributable to us to the extent such expenses are borne by third-party investors.
Other Income (Expense)
Investment income (loss) primarily represents our share of earnings (losses) from the investments we make in our SMAs and focused commingled funds. We, either directly or through our subsidiaries, generally have a general partner interest in the StepStone Funds, which invest in primary funds, secondary funds and co-investment funds, or a combination thereof. Investment income will increase or decrease based on the earnings of the StepStone Funds, which are primarily driven by net realized and unrealized gains (losses) on the underlying investments held by the funds. Our co-investment funds invest in underlying portfolio companies and therefore their valuation changes from period to period are more influenced by individual companies than our primary and secondary funds, which have exposures across multiple portfolio companies in underlying private markets funds. Our SMAs and focused commingled funds invest across various industries, strategies and geographies.
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Consequently, our general partner investments do not include any significant concentrations in a specific sector or geography outside the United States. Investment income and legacy Greenspring investment income exclude carried interest allocations, which are presented as revenues as described above.
Legacy Greenspring investment income (loss) represents our share of earnings (losses) from the investments we make in certain legacy Greenspring funds through the legacy Greenspring general partner entities. We have no direct economic interests in the legacy Greenspring general partner entities. As a result, all such income is reflected as non-controlling interests in legacy Greenspring entities. Legacy Greenspring investment income will increase or decrease based on the earnings of such legacy Greenspring funds, which are primarily driven by net realized and unrealized gains (losses) on the underlying investments held by the funds.
Investment income (loss) of Consolidated Funds represents gains (losses) from the investments held by the Consolidated Funds.
Interest income consists of income earned on cash and cash equivalents, restricted cash, and amounts associated with the Consolidated Funds.
Interest expense primarily consists of the interest expense on the Revolver and the Notes, the related amortization of deferred financing costs, and amounts associated with the Consolidated Funds.
Other income (loss) includes foreign currency transaction gains and losses, non-operating activities, and amounts associated with the Consolidated Funds.
Income Tax Expense
We are a corporation for U.S. federal income tax purposes and therefore are subject to U.S. federal and state income taxes on our share of taxable income generated by the Partnership. The Partnership is treated as a pass-through entity for U.S. federal and state income tax purposes. As such, income generated by the Partnership flows through to its limited partners, including us, and is generally not subject to U.S. federal or state income tax at the Partnership level. Our non-U.S. subsidiaries generally operate as corporate entities in non-U.S. jurisdictions, with certain of these entities subject to local or non-U.S. income taxes. Additionally, certain of our subsidiaries are subject to local jurisdiction income taxes at the entity level, which are reflected within income tax expense in the consolidated statements of income. 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.
Non-Controlling Interests
NCI reflects the portion of income or loss and the corresponding equity attributable to third-party equity holders and employees in certain consolidated subsidiaries that are not 100% owned by us. Non-controlling interests are presented as separate components in our consolidated statements of income (loss) to clearly distinguish between our interests and the economic interests of third parties and employees in those entities. Net income (loss) attributable to SSG, as reported in the consolidated statements of income (loss), is presented net of the portion of net income (loss) attributable to holders of non-controlling interests.
Non-controlling interests in subsidiaries represent the economic interests in the consolidated subsidiaries of the Partnership held by third parties and employees, and the economic interests in certain Consolidated Funds that are not held by us but are held by the third-party investors in the funds. 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.
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Non-controlling interests in legacy Greenspring entities represent the economic interests in the legacy Greenspring general partner entities. We did not acquire any direct economic interests in the legacy Greenspring general partner entities. As a result, all of the net income (loss) attributable to the legacy Greenspring general partner entities is allocated to non-controlling interests in legacy Greenspring entities.
Non-controlling interests in the Partnership represent the economic interests in the Partnership held by the Class B, Class C and Class D unitholders of the Partnership. Non-controlling interests in the Partnership are allocated a share of income or loss in the Partnership in proportion to their relative ownership interests, after consideration of contractual arrangements that govern allocations of income or loss.
Redeemable non-controlling interests in Consolidated Funds represent the economic interests in the redeemable Consolidated Funds which are not held by us, but are held by the third-party investors in the funds. Redeemable non-controlling interests in Consolidated Funds are allocated a share of income or loss in the respective fund in proportion to their relative ownership interests, after consideration of contractual arrangements that govern allocations of income or loss.
Redeemable non-controlling interests in subsidiaries represent the redeemable economic interests in the consolidated subsidiaries of the Partnership held by third parties and employees in those entities that were established in connection with the Transaction Agreements. Redeemable 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.
Key Operating Metrics
We monitor certain operating metrics that are either common to the asset management industry or that we believe provide important data regarding our business.
Assets Under Management
AUM primarily reflects the assets associated with our SMAs and focused commingled funds. We classify assets as AUM if we have full discretion over the investment decisions in an account or have responsibility or custody of assets. Although management fees are based on a variety of factors and are not linearly correlated with AUM, we believe AUM is a useful metric for assessing the relative size and scope of our asset management business.
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. Our AUM reflects the investment valuations in respect of the underlying investments of our funds and accounts on a three-month lag, adjusted for new client account activity through the period end. Our AUM does not include post-period investment valuation or cash activity. AUM as of March 31, 2026 reflects final data for the prior period (December 31, 2025), adjusted for net new client account activity through March 31, 2026. NAV data for underlying investments is as of December 31, 2025, as reported by underlying managers up to the business day occurring on or after 115 days following December 31, 2025. When NAV data is not available by the business day occurring on or after 115 days following December 31, 2025, such NAVs are adjusted for cash activity following the last available reported NAV.
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Assets Under Advisement
AUA consists of client assets for which we do not have full discretion to make investment decisions but play a role in advising the client or monitoring their investments. We generally earn revenue for advisory-related services on a contractual fixed fee basis. Advisory-related services include asset allocation, strategic planning, development of investment policies and guidelines, screening and recommending investments, legal negotiations, monitoring and reporting on investments, and investment manager review and due diligence. Advisory fees vary by client based on the scope of services, investment activity and other factors. Most of our advisory fees are fixed, and therefore, increases or decreases in AUA do not necessarily lead to proportionate changes in revenue. We believe AUA is a useful metric for assessing the relative size of our advisory business.
Our AUA is calculated as the sum of (i) the NAV of client portfolio assets for which we do not have full discretion and (ii) the unfunded commitments of clients to the underlying investments. Our AUA reflects the investment valuations in respect of the underlying investments of our client accounts on a three-month lag, adjusted for new client account activity through the period end. Our AUA does not include post-period investment valuation or cash activity. AUA as of March 31, 2026 reflects final data for the prior period (December 31, 2025), adjusted for net new client account activity through March 31, 2026. NAV data for underlying investments is as of December 31, 2025, as reported by underlying managers up to the business day occurring on or after 115 days following December 31, 2025. When NAV data is not available by the business day occurring on or after 115 days following December 31, 2025, such NAVs are adjusted for cash activity following the last available reported NAV.
Fee-Earning AUM
FEAUM reflects the assets from which we earn management fee revenue (i.e., fee basis) and includes assets in our SMAs, focused commingled funds and assets held directly by our clients for which we have fiduciary oversight and are paid fees as the manager of the assets. Our SMAs and focused commingled funds typically pay management fees based on capital commitments, net invested capital and, in certain cases, NAV, depending on the fee terms. Management fees are only marginally affected by market appreciation or depreciation because substantially all of the StepStone Funds pay management fees based on capital commitments or net invested capital. As a result, management fees and FEAUM are not materially affected by changes in market value. We believe FEAUM is a useful metric in order to assess assets forming the basis of our management fee revenue.
Our calculation of FEAUM may differ from the calculations of other asset managers and, as a result, may not be comparable to similar measures presented by other asset managers.
Undeployed Fee-Earning Capital
Undeployed fee-earning capital represents the amount of capital commitments to StepStone Funds that has not yet been invested or considered active but will generate management fee revenue once this capital is invested or activated. We believe undeployed fee-earning capital is a useful metric for measuring the amount of capital that we can put to work in the future and thus earn management fee revenue thereon.
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Consolidation of StepStone Funds
The activity of the Consolidated Funds is reflected within the consolidated financial statement line items as indicated by reference thereto. The impact of the Consolidated Funds decrease revenues reported under GAAP to the extent these amounts are eliminated upon consolidation. The assets and liabilities of our Consolidated Funds are held within separate legal entities and, as a result, the liabilities of our Consolidated Funds are typically non-recourse to us. The net economic ownership interests of our Consolidated Funds held by third parties are reflected in our consolidated financial statements as either non-controlling interests in subsidiaries or redeemable non-controlling interests in Consolidated Funds when the equity of the fund is redeemable. We generally deconsolidate funds when we are no longer deemed to have a controlling financial interest in the entity. 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. The Consolidated Funds are not necessarily the same entities in each year presented due to changes in ownership, changes in limited partners’ or investor rights, and the creation and termination of funds and entities. The following is a discussion of our consolidated results of operations for the periods presented. The information is derived from our accompanying consolidated financial statements prepared in accordance with GAAP.
In fiscal 2026, we deconsolidated an investment fund that was previously consolidated in our results as it was determined that we no longer held a controlling financial interest. Also, we consolidated four additional StepStone Funds as it was determined that we hold a controlling financial interest in these funds.
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Year Ended March 31,
(in thousands)
Revenues
Management and advisory fees, net
Performance fees:
Incentive fees
Carried interest allocations:
Realized
Unrealized
Total carried interest allocations
Legacy Greenspring carried interest allocations (1)
Total performance fees
Total revenues
Expenses
Compensation and benefits:
Cash-based compensation
Equity-based compensation
Performance fee-related compensation:
Realized
Unrealized
Total performance fee-related compensation
Legacy Greenspring performance fee-related compensation (1)
Total compensation and benefits
General, administrative and other
Total expenses
Other income (expense)
Investment income
Legacy Greenspring investment income (loss) (1)
Investment income of Consolidated Funds
Interest income
Interest expense
Other income (loss)
Total other income
Income (loss) before income tax
Income tax expense (benefit)
Net income (loss)
Less: Net income attributable to non-controlling interests in subsidiaries
Less: Net income (loss) attributable to non-controlling interests in legacy Greenspring entities (1)
Less: Net income (loss) attributable to non-controlling interests in the Partnership
Less: Net income attributable to redeemable non-controlling interests in Consolidated Funds
Less: Net income attributable to redeemable non-controlling interests in subsidiaries
Net income (loss) attributable to StepStone Group Inc.
(1) Reflects amounts attributable to consolidated VIEs for which we did not acquire any direct economic interests. See notes 2, 3 and 5 to our consolidated financial statements included elsewhere in this annual report.
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Revenues
Year Ended March 31, 2026 Compared to Year Ended March 31, 2025
Total revenues increased $818.8 million, or 70%, to $1,993.6 million for fiscal 2026 as compared to fiscal 2025. The overall increase was driven by higher carried interest allocations, higher incentive fees, higher management and advisory fees, net, and higher legacy Greenspring carried interest allocations, in each case, as described below.
Management and advisory fees, net increased $159.5 million, or 21%, to $926.5 million for fiscal 2026 as compared to fiscal 2025. The increase was driven by new client activity, 23% growth in average FEAUM across the platform and higher income-based incentive fees. Fiscal 2026 included retroactive fees of $5.1 million from the closings of StepStone’s Real Estate Partners V, infrastructure secondaries and multi-strategy venture capital funds. The prior year period included retroactive fees of $42.8 million from the closings of StepStone’s Secondary Opportunities V, Real Estate Partners V, Infrastructure Co-Investment Partners 2022, Tactical Growth Fund IV and VC Global Partners XI funds.
Incentive fees increased $187.9 million, or 582%, to $220.1 million for fiscal 2026 as compared to fiscal 2025, reflecting higher incentive fees generated by StepStone’s Private Venture and Growth Fund (“SPRING”) due to strong returns in the 2025 calendar year and a higher asset base.
Realized carried interest allocation revenues increased $8.9 million, or 6%, to $168.6 million for fiscal 2026 as compared to fiscal 2025, reflecting higher realization activity within our private equity funds. Unrealized carried interest allocation revenues include the reversal of realized carried interest allocation revenues. Excluding the reversal of $168.6 million, unrealized carried interest allocation revenues increased $407.1 million, or 135%, to $708.3 million for fiscal 2026 compared to fiscal 2025. The increase in unrealized carried interest allocations for fiscal 2026 primarily reflected a higher net increase in the cumulative allocation of gains associated with the underlying portfolios within our private equity, infrastructure and real estate funds.
Legacy Greenspring carried interest allocation revenues increased $64.4 million, or 87%, to $138.7 million for fiscal 2026 as compared to fiscal 2025 as a result of higher net unrealized appreciation in the fair value of certain underlying fund investments in the current year period as compared to the prior year period. Fiscal 2026 reflects gross realized carried interest allocations of $19.7 million and unrealized carried interest allocations, net of the reversal of realized carried interest allocations, of $119.0 million. Fiscal 2025 reflects gross realized carried interest allocations of $63.1 million and unrealized carried interest allocations, net of the reversal of realized carried interest allocations, of $11.2 million.
Year Ended March 31, 2025 Compared to Year Ended March 31, 2024
Total revenues increased $463.2 million, or 65%, to $1,174.8 million for fiscal 2025 as compared to fiscal 2024. The overall increase was driven by higher management and advisory fees, net, positive legacy Greenspring carried interest allocations in the current period as compared to a reversal in the prior year period, higher carried interest allocations and higher incentive fees, in each case, as described below.
Management and advisory fees, net increased $181.9 million, or 31%, to $767.0 million for fiscal 2025 as compared to fiscal 2024. The increase was driven by new client activity and 23% growth in average FEAUM across the platform, as well as retroactive fees of $42.8 million from the closings of StepStone’s Secondary Opportunities V, Real Estate Partners V, Infrastructure Co-Investment Partners 2022, Tactical Growth Fund IV and VC Global Partners XI funds. The prior year period included $11.6 million of retroactive fees from the closings of StepStone’s Secondary Opportunities V, VC Global Partners XI and Infrastructure Co-Investment Partners 2022 funds.
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Incentive fees increased $6.9 million, or 27%, to $32.3 million for fiscal 2025 as compared to fiscal 2024, largely due to higher incentive fees generated by SPRING.
Realized carried interest allocation revenues increased $110.3 million, or 223%, to $159.7 million for fiscal 2025 as compared to fiscal 2024, reflecting higher realization activity within our private equity and infrastructure funds. Unrealized carried interest allocation revenues include the reversal of realized carried interest allocation revenues. Excluding the reversal of $159.7 million, unrealized carried interest allocation revenues increased $124.9 million, or 71%, to $301.2 million for fiscal 2025 compared to fiscal 2024. The increase in unrealized carried interest allocations for fiscal 2025 primarily reflected a higher net increase in the cumulative allocation of gains associated with the underlying portfolios within our private equity funds as compared to the prior year.
Legacy Greenspring carried interest allocation revenues increased $149.5 million to $74.3 million for fiscal 2025 as compared to fiscal 2024 as a result of net unrealized appreciation in the fair value of certain underlying fund investments in the current year period as compared to net unrealized depreciation in the prior year period. Fiscal 2025 reflects gross realized carried interest allocations of $63.1 million and unrealized carried interest allocations, net of the reversal of carried interest allocations, of $11.2 million. Fiscal 2024 reflects gross realized carried interest allocations of $59.7 million and unrealized carried interest allocations, net of the reversal of realized carried interest allocations, of $(134.9) million.
Expenses
Year Ended March 31, 2026 Compared to Year Ended March 31, 2025
Total expenses increased $1,575.3 million, or 109%, to $3,017.0 million for fiscal 2026 as compared to fiscal 2025. The overall increase resulted from increases in equity-based compensation, performance fee-related compensation, cash-based compensation, legacy Greenspring performance fee-related compensation, and general, administrative and other expenses, in each case, as described below.
Cash-based compensation increased $82.3 million, or 25%, to $414.1 million for fiscal 2026 as compared to fiscal 2025, due to 16% higher average headcount, increased compensation levels from merit increases and higher income-based incentive fee compensation in the current year period as compared to the prior year period.
Equity-based compensation increased $1,072.9 million, or 160%, to $1,742.1 million for fiscal 2026 as compared to fiscal 2025. The increase was primarily attributable to a $1,069.1 million increase in expenses for liability classified awards related to the profits interest issued in SPW in the current year period as compared to the prior year period, a $7.1 million increase for restricted stock units (“RSUs”) and performance-based RSUs (“PRSUs”) granted in the current year period with no comparable expense for these grants in the prior year period, and an increase of $1.7 million for the acceleration of RSU expense in the current year period with no comparable expense in the prior year period. These increases were partially offset by a decrease of $5.0 million in expense due to the final vesting of RSUs issued in connection with our IPO. We expect that there may be additional significant increases in equity-based compensation in future periods due to further increases in the fair value of liability classified awards, which is driven by the performance of SPW. SPW generated profitability in fiscal 2025 and fiscal 2026, and we expect that there will be an increase in the profitability generated by SPW in the future which would increase the fair value of the associated liability for the profits interest issued in SPW. As of March 31, 2026 and 2025, we had recognized $2,265.8 million and $663.9 million, respectively, for liability classified awards within accrued compensation and benefits in the consolidated balance sheets.
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Total performance fee-related compensation expense increased $345.8 million, or 183%, to $534.8 million for fiscal 2026 as compared to fiscal 2025, primarily reflecting the increase in carried interest allocation and incentive fee revenues. Realized performance fee-related compensation increased $97.8 million, or 103%, to $192.6 million for fiscal 2026 as compared to fiscal 2025, primarily reflecting higher realization activity and higher incentive fees from SPRING.
Legacy Greenspring performance fee-related compensation expense increased $64.4 million, or 87%, to $138.7 million for fiscal 2026 as compared to fiscal 2025. Fiscal 2026 reflects gross realized performance fee-related compensation expense of $19.7 million and unrealized performance fee-related compensation expense, net of the reversal of realized performance fee-related compensation expense, of $119.0 million. Fiscal 2025 reflects gross realized performance fee-related compensation expense of $63.1 million and unrealized performance fee-related compensation expense, net of the reversal of realized performance fee-related compensation expense, of $11.2 million.
General, administrative and other expenses increased $9.9 million, or 6%, to $187.3 million for fiscal 2026 as compared to fiscal 2025. The overall increase primarily reflected $7.7 million in platform fees, $6.1 million in professional fees, $4.9 million in travel and associated costs for investment evaluation and client service, $3.1 million in information and technology expense, $1.7 million in occupancy costs, $1.2 million in human resources and recruiting expenses and other general operating expenses, partially offset by a $15.9 million lower expense for change in fair value for contingent consideration obligation as compared to the prior year period.
Year Ended March 31, 2025 Compared to Year Ended March 31, 2024
Total expenses increased $901.8 million, or 167%, to $1,441.6 million for fiscal 2025 as compared to fiscal 2024. The overall increase resulted from increases in equity-based compensation, legacy Greenspring performance fee-related compensation, performance fee-related compensation, cash-based compensation and general, administrative and other expenses, in each case, as described below.
Cash-based compensation increased $38.8 million, or 13%, to $331.8 million for fiscal 2025 as compared to fiscal 2024, due to increased staffing and compensation levels. Our average headcount increased 8% in the current year period as compared to the prior year period.
Equity-based compensation increased $626.8 million to $669.1 million for fiscal 2025 as compared to fiscal 2024. The increase was primarily attributable to a $629.0 million increase in expenses for liability classified awards related to the profits interest issued in SPW in the current year period as compared to the prior year period, as well as $3.5 million related to 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 and no comparable expense for these grants in the prior year period. These increases were partially offset by a decrease of $5.5 million in expense due to the final vesting of RSUs issued in connection with our IPO.
Total performance fee-related compensation expense increased $76.6 million, or 68%, to $189.0 million for fiscal 2025 as compared to fiscal 2024, primarily reflecting the increase in carried interest allocation revenue. Realized performance fee-related compensation increased $57.1 million, or 151%, to $94.7 million for fiscal 2025 as compared to fiscal 2024, primarily reflecting higher realization activity and higher incentive fees from SPRING.
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Legacy Greenspring performance fee-related compensation expense increased $149.5 million to $74.3 million for fiscal 2025 as compared to fiscal 2024. Fiscal 2025 reflects gross realized performance fee-related compensation expense of $63.1 million and unrealized performance fee-related compensation expense, net of the reversal of realized performance fee-related compensation expense, of $11.2 million. Fiscal 2024 reflects gross realized performance fee-related compensation expense of $59.7 million and unrealized performance fee-related compensation expense, net of the reversal of realized performance fee-related compensation expense, of $(134.9) million.
General, administrative and other expenses increased $10.0 million, or 6%, to $177.4 million for fiscal 2025 as compared to fiscal 2024. The overall increase primarily reflected $3.9 million in travel and associated costs for investment evaluation and client service, $3.5 million in marketing and conference expenses, $2.5 million in professional fees, $2.1 million in information and technology expenses, $1.6 million in general and administrative expenses for the Consolidated Funds, $1.4 million in human resources and recruiting expenses, $1.3 million in occupancy costs and other general operating expenses, partially offset by decreases of $3.9 million in transaction costs, $1.9 million in accelerated depreciation for leasehold improvements due to a reduction in lease terms in the prior year, $1.4 million in intangibles amortization and $1.1 million for lower loss on change in fair value for contingent consideration obligation.
Other Income (Expense)
Year Ended March 31, 2026 Compared to Year Ended March 31, 2025
Investment income increased $25.7 million, or 170%, to $40.8 million for fiscal 2026 as compared to fiscal 2025, primarily reflecting overall changes in the valuations of the underlying investments in StepStone Funds.
Legacy Greenspring investment loss decreased $6.1 million to income of $4.9 million for fiscal 2026 as compared to fiscal 2025. Fiscal 2026 reflects gross realized investment income of $3.0 million and unrealized investment income, net of the reversal of realized investment income, of $2.0 million. Fiscal 2025 reflects gross realized investment income of $7.9 million and unrealized investment loss, net of the reversal of realized investment income, of $9.1 million.
Investment income of Consolidated Funds increased $27.0 million, or 41%, to $92.4 million for fiscal 2026 as compared to fiscal 2025, primarily reflecting overall changes in the valuations of the underlying investments of the Consolidated Funds.
Interest income increased $1.0 million, or 9%, to $11.8 million for fiscal 2026 as compared to fiscal 2025 primarily due to higher average cash and cash equivalent balances during the current year period as compared with the prior year period, partially offset by the impact of deconsolidation of one of the Consolidated Funds during the current year period. Interest income attributable to Consolidated Funds was $4.3 million in the current year period as compared to $4.8 million in the prior year period.
Interest expense increased $5.8 million, or 46%, to $18.5 million for fiscal 2026 as compared to fiscal 2025. The increase was due to higher average outstanding debt balances during the current year period as compared with the prior year period, partially offset by the lower interest rate on the Revolver for the current year period.
Other income (loss) increased $33.3 million to income of $0.7 million for fiscal 2026 as compared to a loss of $32.7 million for fiscal 2025, primarily due to a loss of $32.5 million in the prior year period associated with payment made in connection with a secondary transaction executed by one of our private wealth funds that did not reoccur in the current year period and net foreign currency transaction gains in the current year period as compared with net foreign currency transaction losses in the prior year period, partially offset by a loss of $4.2 million related to adjustments for the Tax Receivable Agreements during the current year period.
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Year Ended March 31, 2025 Compared to Year Ended March 31, 2024
Investment income increased $7.6 million, or 103%, to $15.1 million for fiscal 2025 as compared to fiscal 2024, primarily reflecting overall changes in the valuations of the underlying investments in StepStone Funds.
Legacy Greenspring investment loss decreased $7.9 million, or 87%, to $1.2 million for fiscal 2025 as compared to fiscal 2024. Fiscal 2025 reflects gross realized investment income of $7.9 million and unrealized investment loss, net of the reversal of realized investment income, of $9.1 million. Fiscal 2024 reflects gross realized investment income of $5.3 million and unrealized investment loss, net of the reversal of realized investment income, of $14.4 million.
Investment income of Consolidated Funds increased $36.9 million, or 130%, to $65.4 million for fiscal 2025 as compared to fiscal 2024, primarily reflecting overall changes in the valuations of the underlying investments of the Consolidated Funds on higher investment balances during the current year period as compared with the prior year period.
Interest income increased $7.2 million, or 196%, to $10.9 million for fiscal 2025 as compared to fiscal 2024, primarily due to higher average cash and cash equivalent balances during the current year period as compared with the prior year period. Interest income attributable to Consolidated Funds was $4.8 million in the current year period as compared to $1.6 million in the prior year period.
Interest expense increased $3.4 million, or 36%, to $12.7 million for fiscal 2025 as compared to fiscal 2024. The increase was due to higher average outstanding balances during the current year period as compared with the prior year period, partially offset by the lower interest rate on the Notes for a portion of the current year period.
Other income decreased $35.1 million to a loss of $32.7 million for fiscal 2025 as compared to fiscal 2024, primarily reflecting a loss associated with payment made in connection with a secondary transaction executed by one of our private wealth funds of $32.5 million in the current year period and a gain of $5.3 million in the prior year period for amounts received as part of negotiations with a third party related to certain corporate matters, partially offset by a loss of $0.8 million associated with the sale of a subsidiary in the prior year period and lower net foreign currency transaction losses in the current year period as compared with the prior year period.
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 16.6%, 22.2%, and 14.1% for fiscal 2026, 2025 and 2024, respectively. Our overall effective tax rate in fiscal 2026 is less than the statutory rate primarily due to a portion of net loss allocated to non-controlling interests and the related tax benefit being borne by the holders of non-controlling interests. Our overall effective tax rate in fiscal 2025 differs from the statutory rate primarily because of the impact of nondeductible items. Our overall effective tax rate in fiscal 2024 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.
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The Organization for Economic Co-operation and Development (“OECD”) implemented Pillar Two, which establishes a global minimum corporate tax rate of 15% on large multinational enterprises across their worldwide operations. While legislation pertaining to these rules is already in effect or advancing in several of the jurisdictions where we operate, the U.S. has not adopted Pillar Two legislation. For the fiscal years ended March 31, 2026 and 2025, Pillar Two did not have a material impact on our tax provision. In January 2026, the OECD Inclusive Framework released a "Side-by-Side" package intended to coordinate Pillar Two with existing U.S. and other domestic tax regimes, which provides exemptions for qualifying U.S.-headquartered multinationals from certain Pillar Two collection mechanisms and introduces new safe harbors, including a permanent simplified effective tax rate safe harbor and an extension of the transitional country-by-country reporting safe harbor, though adoption by individual jurisdictions remains ongoing. We will continue to evaluate both U.S. and global legislative developments concerning Pillar Two for future reporting periods.
Year Ended March 31, 2026 Compared to Year Ended March 31, 2025
Income tax benefit increased $98.7 million, or 201%, to $147.9 million for fiscal 2026 as compared to fiscal 2025. The increase in income tax benefit was primarily driven by the increase in pre-tax net loss for fiscal 2026 as compared to fiscal 2025.
Year Ended March 31, 2025 Compared to Year Ended March 31, 2024
Income tax expense decreased $76.8 million to a benefit of $49.2 million for fiscal 2025 as compared to expense for fiscal 2024. The decrease in tax expense was primarily driven by pre-tax net loss for fiscal 2025 compared to pre-tax net income for fiscal 2024.
Net Income Attributable to Non-Controlling Interests in Subsidiaries
Net income attributable to non-controlling interests in subsidiaries increased $24.5 million, or 31%, to $103.8 million for fiscal 2026 as compared to fiscal 2025. The increase was primarily attributable to an increase in income generated by our consolidated subsidiaries not wholly-owned by us, partially offset by an increase in our economic interests in the Asset Class Entities as a result of the Transaction Agreements resulting in a lower rate of allocation of net income to non-controlling interests in subsidiaries.
Net income attributable to non-controlling interests in subsidiaries increased $42.0 million, or 113%, to $79.3 million for fiscal 2025 as compared to fiscal 2024. The increase was primarily attributable to an increase in income generated by our consolidated subsidiaries not wholly-owned by us and an increase in our economic interests in the Asset Class Entities as a result of the Transaction Agreements.
Net Income (Loss) Attributable to Non-Controlling Interests in Legacy Greenspring Entities
Net income (loss) attributable to non-controlling interests in legacy Greenspring entities represents the net income or loss attributable to the interests held by the legacy Greenspring general partner 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. Net income (loss) attributable to non-controlling interests in legacy Greenspring entities was $4.9 million, $(1.2) million, and $(9.1) million for fiscal 2026, 2025 and 2024, respectively.
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Net Income (Loss) Attributable to Non-Controlling Interests in the Partnership
Net income (loss) attributable to non-controlling interests in the Partnership represents the portion of net income or loss attributable to the interests held by the Class B, Class C and Class D unitholders of the Partnership. Net income (loss) attributable to non-controlling interests in the Partnership was $(384.6) million, $(125.9) million and $60.0 million for fiscal 2026, 2025 and 2024, respectively.
Net Income Attributable to Redeemable Non-Controlling Interests in Consolidated Funds
Net income attributable to redeemable non-controlling interests in Consolidated Funds represents income of the Consolidated Funds attributable to third-party investors. Net income attributable to redeemable non-controlling interests in Consolidated Funds was $66.0 million, $53.7 million and $15.8 million for fiscal 2026, 2025 and 2024, respectively.
Net Income Attributable to Redeemable Non-Controlling Interests in Subsidiaries
Net income attributable to redeemable non-controlling interests in subsidiaries was $2.5 million, $0.8 million and $5.8 million for fiscal 2026, 2025 and 2024, respectively.
Operating Metrics
Assets Under Management
AUM was $157 billion as of March 31, 2024, $189 billion as of March 31, 2025 and $233 billion as of March 31, 2026.
Assets Under Advisement
Assets related to our advisory accounts were $521 billion as of March 31, 2024, $520 billion as of March 31, 2025 and $652 billion as of March 31, 2026.
Fee-Earning AUM
Year Ended March 31, 2026
FEAUM increased $22.7 billion, or 19%, to $144.0 billion as of March 31, 2026 as compared to $121.4 billion as of March 31, 2025. Of the increase, $8.6 billion was from SMAs and $14.0 billion was from focused commingled funds.
Year Ended March 31, 2025
FEAUM increased $27.5 billion, or 29%, to $121.4 billion as of March 31, 2025 as compared to $93.9 billion as of March 31, 2024. Of the increase, $14.3 billion was from SMAs and $13.3 billion was from focused commingled funds.
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Year Ended March 31, 2026
(in millions)
SMAs
Focused Commingled Funds
Total
Beginning balance
Contributions (1)
Distributions (2)
Market value, FX and other (3)
Ending balance
Year Ended March 31, 2025
(in millions)
SMAs
Focused Commingled Funds
Total
Beginning balance
Contributions (1)
Distributions (2)
Market value, FX and other (3)
Ending balance
(1) Contributions consist of new capital commitments that earn fees on committed capital and capital contributions to funds and accounts that earn fees on net invested capital or NAV.
(2) Distributions consist of returns of capital from funds and accounts that pay fees on net invested capital or NAV and reductions in fee-earning AUM from funds that moved from a committed capital to net invested capital fee basis or from funds and accounts that no longer pay fees.
(3) Market value, FX and other primarily consist of changes in market value appreciation (depreciation) for funds that pay on NAV and the effect of foreign exchange rate changes on non-U.S. dollar denominated commitments.
The following tables set forth FEAUM by asset class and selected weighted-average management fee rate data:
As of March 31,
(in millions)
FEAUM
Private equity
Infrastructure
Private debt
Real estate
Total
As of March 31,
Weighted-average fee rate (1)
Private equity (2)
Real estate, infrastructure and private debt asset classes (3)
Total
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(1) Weighted-average fee rates reflect the applicable management fees for the last 12 months ending on each period presented, and is inclusive of any retroactive fees for such period.
(2) The change in weighted-average fee rates primarily reflected the timing of new funds, shifts in mix between SMAs and focused commingled funds and growth in our private wealth funds which earn higher fee rates.
(3) The change in weighted-average fee rates primarily reflected the timing of new funds, shifts in asset class mix, shifts in mix between SMAs and focused commingled funds and growth in our private wealth funds which earn higher fee rates.
Undeployed Fee-Earning Capital
As of March 31, 2026, we had $40.1 billion of undeployed fee-earning capital, which will generate management fee revenue once invested or activated.
Non-GAAP Financial Measures
Below is a description of our non-GAAP financial measures. These measures are presented on a basis other than GAAP and should be considered in addition to, and not as a substitute for or superior to, financial measures calculated in accordance with GAAP.
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. ANI does not reflect legacy Greenspring carried interest allocation revenues, legacy Greenspring carried interest-related compensation and legacy Greenspring investment income (loss) as none of the economics are attributable to us. The components of revenues used in the determination of ANI (“adjusted revenues”) comprise fee revenues, adjusted incentive fees and realized carried interest allocations. In addition, ANI excludes: (a) unrealized carried interest allocation revenues and related compensation, (b) unrealized investment income (loss), (c) 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, (d) amortization of intangibles, (e) net income (loss) attributable to non-controlling interests in our subsidiaries and realized gains attributable to the profits interests issued in the private wealth subsidiary, (f) charges associated with acquisitions and corporate transactions, and (g) certain other items that we believe are not indicative of our core operating performance (as listed in the below table). ANI is fully taxed at our blended statutory rate. We believe ANI and adjusted revenues are useful to investors because they investors to evaluate the performance of our business across reporting periods.
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Adjusted Revenues
Adjusted revenues represents the components of revenues used in the determination of ANI and comprise fee revenues, adjusted incentive fees and realized carried interest allocations. We believe adjusted revenues is useful to investors because it presents a measure of realized revenues.
Fee-Related Earnings
Fee-related earnings (“FRE”) is a non-GAAP performance measure used to monitor our baseline earnings from recurring management and advisory fees. FRE is a component of ANI and comprises fee revenues 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). FRE is presented before income taxes. We believe FRE is useful to investors because it provides additional insight into the operating profitability of our business and our ability to cover direct base compensation and operating expenses from total fee revenues.
Fee Revenues
Fee revenues represents management and advisory fees, net, including amounts earned from the Consolidated Funds which are eliminated in consolidation. We believe fee revenues is useful to investors because it presents the net amount of management and advisory fee revenues attributable to us.
Adjusted Weighted-Average Shares and Adjusted Net Income Per Share
ANI per share measures our per-share earnings assuming all Class B units, Class C units and Class D units in the Partnership were exchanged for Class A common stock in SSG, including the dilutive impact of outstanding equity-based awards. ANI per share is calculated as ANI divided by adjusted weighted-average shares outstanding. We believe adjusted weighted-average shares and ANI per share are useful to investors because they enable investors to better evaluate per-share operating performance across reporting periods.
Fee-Related Earnings
Year Ended March 31, 2026 Compared to Year Ended March 31, 2025
FRE increased $42.2 million, or 14%, to $354.4 million for fiscal 2026 as compared to fiscal 2025, primarily reflecting higher fee revenues, partially offset by higher adjusted cash-based compensation, adjusted general, administrative and other expenses and adjusted equity-based compensation.
Year Ended March 31, 2025 Compared to Year Ended March 31, 2024
FRE increased $122.4 million, or 64%, to $312.2 million for fiscal 2025 as compared to fiscal 2024, primarily reflecting higher fee revenues, partially offset by higher adjusted cash-based compensation, adjusted general, administrative and other expenses and adjusted equity-based compensation.
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Adjusted Revenues and Adjusted Net Income
Year Ended March 31, 2026 Compared to Year Ended March 31, 2025
Adjusted revenues increased $350.4 million, or 36%, to $1,320.2 million for fiscal 2026 as compared to fiscal 2025, primarily reflecting increases in adjusted incentive fees, fee revenues and realized carried interest allocations.
ANI increased $20.5 million, or 8%, to $264.6 million for fiscal 2026 as compared to fiscal 2025, primarily due to the increase in FRE as discussed above, higher performance fee-related earnings, higher adjusted realized investment income and higher interest income. The overall increase was partially offset by a higher allocation of income to non-controlling interests and higher interest expense.
Year Ended March 31, 2025 Compared to Year Ended March 31, 2024
Adjusted revenues increased $304.7 million, or 46%, to $969.7 million for fiscal 2025 as compared to fiscal 2024, primarily reflecting increases in fee revenues, realized carried interest allocation revenues and adjusted incentive fees.
ANI increased $104.7 million, or 75%, to $244.1 million for fiscal 2025 as compared to fiscal 2024, primarily due to an increase in FRE as discussed above, higher performance fee-related earnings (adjusted incentive fees, plus realized carried interest allocation revenues, less realized performance fee-related compensation), higher interest income and higher adjusted realized investment income. The overall increase was partially offset by a higher allocation of income to non-controlling interests and higher interest expense.
Adjusted Weighted-Average Shares and Adjusted Net Income Per Share
The following table shows a reconciliation of diluted weighted-average shares of Class A common stock outstanding to adjusted weighted-average shares outstanding used in the computation of ANI per share for fiscal 2026, 2025 and 2024.
Year Ended March 31,
(in thousands, except share and per share amounts)
ANI
Weighted-average shares of Class A common stock outstanding – Basic
Assumed vesting of RSUs
Assumed vesting and exchange of Class B2 units (1)
Assumed purchase under ESPP
Exchange of Class B units in the Partnership (2)
Exchange of Class C units in the Partnership (2)
Exchange of Class D units in the Partnership (2)
Adjusted weighted-average shares
ANI per share
(1) The Class B2 units fully vested in June 2024.
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(2) Assumes the full exchange of Class B units, Class C units or Class D units in the Partnership for Class A common stock of SSG pursuant to the Class B Exchange Agreement, Class C Exchange Agreement or Class D Exchange Agreement, respectively.
Reconciliation of GAAP to Non-GAAP Financial Measures
The table below shows a reconciliation of revenues to adjusted revenues.
Year Ended March 31,
(in thousands)
Total revenues
Unrealized carried interest allocations
Deferred incentive fees
Legacy Greenspring carried interest allocations
Management and advisory fee revenues for the Consolidated Funds (1)
Incentive fees for the Consolidated Funds (2)
Adjusted revenues
(1) Reflects the add back of management and advisory fee revenues for the Consolidated Funds, which have been eliminated in consolidation.
(2) Reflects the add back of incentive fee revenues for the Consolidated Funds, which have been eliminated in consolidation.
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The table below shows a reconciliation of GAAP measures to additional non-GAAP measures. We use the non-GAAP measures presented below as components when calculating FRE and ANI. We believe these additional non-GAAP measures are useful to investors in evaluating both the baseline earnings from recurring management and advisory fees, which provide additional insight into the operating profitability of our business, and the after-tax net realized income attributable to us, allowing investors to evaluate the performance of our business. These additional non-GAAP measures remove the impact of Consolidated Funds that we are required to consolidate under GAAP, and certain other items that we believe are not indicative of our core operating performance.
Year Ended March 31,
(in thousands)
GAAP management and advisory fees, net
Adjustments (1)
Fee revenues
GAAP incentive fees
Adjustments (2)
Adjusted incentive fees
GAAP realized investment income
Adjustments (3)
Adjusted realized investment income
GAAP interest income
Adjustments (4)
Adjusted interest income
GAAP other income (loss)
Adjustments (5)
Adjusted other income (loss)
(1) Reflects the add-back of management and advisory fee revenues for the Consolidated Funds, which have been eliminated in consolidation.
(2) Reflects the add back of incentive fee revenues for the Consolidated Funds, which have been eliminated in consolidation, and deferred incentive fees that are not included in GAAP revenues.
(3) Reflects the realization of a seed capital investment in the StepStone Funds which is eliminated in consolidation.
(4) Reflects the removal of interest income earned by the Consolidated Funds.
(5) Reflects the removal of amounts for Tax Receivable Agreements adjustments recognized as other income (loss), gain associated with amounts received as part of negotiations with a third party related to certain corporate matters, loss on sale of subsidiary, loss associated with payment made in connection with a secondary transaction executed by one of our private wealth funds and the impact of consolidation of the Consolidated Funds.
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The table below shows a reconciliation of income (loss) before income tax to ANI and FRE.
Year Ended March 31,
(in thousands)
Income (loss) before income tax
Net income attributable to non-controlling interests in subsidiaries (1)
Net (income) loss attributable to non-controlling interests in legacy Greenspring entities
Unrealized carried interest allocations
Unrealized performance fee-related compensation
Unrealized investment income
Impact of Consolidated Funds
Deferred incentive fees
Equity-based compensation (2)
Amortization of intangibles
Tax Receivable Agreements adjustments through earnings
Non-core items (3)
Pre-tax ANI
Income taxes (4)
ANI
Income taxes (4)
Realized carried interest allocations
Realized performance fee-related compensation
Adjusted realized investment income (5)
Adjusted incentive fees (6)
Adjusted interest income (7)
Interest expense
Adjusted other (income) loss (8)
Net income attributable to non-controlling interests in subsidiaries (1)
FRE
(1) Reflects the portion of pre-tax ANI attributable to non-controlling interests in our subsidiaries and realized gains attributable to the profits interests issued in the private wealth subsidiary. Amounts attributable to the profits interests issued in the private wealth subsidiary were $136.2 million in fiscal 2026, $23.2 million in fiscal 2025 and $3.1 million in fiscal 2024. Amounts specifically attributable to non-controlling interests in subsidiaries not attributable to the private wealth subsidiary were $81.4 million in fiscal 2026, $79.7 million in fiscal 2025 and $46.1 million in fiscal 2024.
(2) Reflects equity-based compensation for awards granted prior to and in connection with the 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.
(3) Includes (income) expense related to transaction costs ($0.7 million in fiscal 2026, $1.0 million in fiscal 2025, and $4.9 million in fiscal 2024), unrealized amounts associated with cash-based incentive awards tracked to investment funds ($0.1 million in fiscal 2026), gain realized upon vesting of cash-based incentive awards tracked to investment funds ($0.1 million in fiscal 2026), lease remeasurement adjustments ($(0.1) million in fiscal 2024), accelerated depreciation of leasehold improvements for changes in lease terms ($1.9 million in fiscal 2024), loss on change in fair value for contingent consideration obligation ($0.2 million in fiscal 2026, $16.1 million in fiscal 2025, and $17.2 million in fiscal 2024), compensation paid to certain employees as part of an acquisition earn-out ($0.4 million in fiscal 2025 and $2.2 million in fiscal 2024), loss associated with payment made in connection with a secondary
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transaction executed by one of our private wealth funds ($32.5 million in fiscal 2025), gain associated with amounts received as part of negotiations with a third party related to certain corporate matters ($5.3 million in fiscal 2024), unrealized amounts associated with deferred compensation liability adjustments ($13 thousand in fiscal 2026), loss on sale of subsidiary ($0.8 million in fiscal 2024) and other non-core operating income and expenses.
(4) Represents corporate income taxes at a blended statutory rate of 22.6% applied to pre-tax ANI for fiscal 2026 and a blended statutory rate of 22.3% applied to pre-tax ANI for fiscal 2025 and fiscal 2024. The 22.6% rate is based on a federal statutory rate of 21.0% and a combined state, local and foreign rate net of federal benefits of 1.6%. The 22.3% rate is based on a federal statutory rate of 21.0% and a combined state, local and foreign rate net of federal benefits of 1.3%. The increase in the blended statutory rate for fiscal 2026 compared to fiscal 2025 was due to updates in our state apportionment.
(5) Reflects the realization of a seed capital investment in the StepStone Funds which is eliminated in consolidation.
(6) Reflects the add-back of incentive fee revenues for the Consolidated Funds, which have been eliminated in consolidation, and deferred incentive fees that are not included in GAAP revenues.
(7) Reflects the removal of interest income earned by the Consolidated Funds.
(8) Reflects the removal of the impact of consolidation of the Consolidated Funds and amounts for Tax Receivable Agreements adjustments recognized as other income (loss) ($(4.2) million in fiscal 2026, $0.3 million in fiscal 2025, and $(0.3) million in fiscal 2024), loss associated with payment made in connection with a secondary transaction executed by one of our private wealth funds ($32.5 million in fiscal 2025), gain associated with amounts received as part of negotiations with a third party related to certain corporate matters ($5.3 million in fiscal 2024), and loss on sale of subsidiary ($0.8 million in fiscal 2024).
Investment Performance
The following table presents information relating to the performance of all the investments that StepStone has recommended and subsequently tracked across asset classes and investment strategies, except as set forth in greater detail below. The data for these investments are generally presented from the inception date of each strategy and asset class through December 31, 2025 and have not been adjusted to reflect acquisitions or disposals of investments subsequent to that date.
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.
Historical and future returns of investments included in our track record are not directly correlated to potential returns on our Class A common stock.
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For the purposes of the following table:
• “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, 2025;
• “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, 2025 (except as noted otherwise below), based on contributions, distributions and unrealized value;
• “Net IRR” refers to IRR net of fees and expenses charged by both the underlying fund managers and StepStone; and
• “Net TVM” refers to the total value to paid-in capital or invested capital expressed as a multiple, and is calculated as distributions plus unrealized valuations divided by invested capital (including all capitalized costs).
StepStone Performance Summary by Asset Class
PRIVATE EQUITY BUYOUT*
VENTURE CAPITAL & GROWTH EQUITY
REAL ESTATE
INFRASTRUCTURE
PRIVATE DEBT
INVESTMENT STRATEGY (1,3,4)
NET IRR (2)
INVESTMENT STRATEGY (1,3,5)
NET IRR (2)
INVESTMENT STRATEGY (1,3,6)
NET IRR (2)
INVESTMENT STRATEGY (1,3,7)
NET IRR (2)
INVESTMENT STRATEGY (1,3,9)
NET IRR (2)
Primaries
Primaries
Core/core+ fund investments
Core/debt - all strategies
Primaries
Secondaries
Secondaries
Value-add/opportunistic fund investments
Core+/value-add - primary fund investments
Direct lending
Co-investments
Directs/co-investments
Real estate debt fund investments
Core+/value-add - secondary fund investments
Opportunistic
Value-add/opportunistic secondaries & co-investments
Core+/value-add - co-investments (8)
Co-investments/secondaries
Direct lending
Opportunistic
Customized managed accounts
(1) Investment returns reflect NAV data for underlying investments as of December 31, 2025, as reported by underlying managers up to the business day occurring on or after 115 days following December 31, 2025. For investment returns where NAV data is not available by the business day occurring on or after 115 days following December 31, 2025, such NAVs are adjusted for cash activity following the last available reported NAV. Investment returns are calculated on a constant currency adjusted reporting basis converting non-USD investment cash flows and NAVs to USD using the foreign currency exchange rate corresponding to each client’s first cash flow date.
(2) Net IRR and Net TVM are presented solely for illustrative purposes and do not represent actual returns received by any investor in any of the StepStone Funds. Returns represented above are net of fees and expenses charged by both the underlying investment and hypothetical StepStone fees. 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):
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i. Primaries management fee: 25 basis points of net invested capital for private equity, real estate and infrastructure; 25 basis points of net asset value for private debt; 75 basis points of committed capital for the StepStone VC Platform.
ii. Secondaries management fee: 125 basis points, 125 basis points and 95 basis points of capital commitments for private equity, real estate and infrastructure, respectively, in years 1 through 4 for management fees, charged quarterly; in year 5, management fees step down to 90% of the previous year’s fee; 65 basis points of net asset value for private debt; 75 basis points of committed capital for the StepStone VC Platform.
iii. Co-investments management fee: 100 basis points of capital commitments for private equity in year 1 through 4 for management fees, charged quarterly; in year 5, management fees step down to 90 basis points of the net invested capital, charged quarterly; 100 basis points of net committed capital for real estate; 90 and 50 basis points of net committed capital for infrastructure co-investments and direct asset management investments, respectively; 65 basis points of net asset value for private debt; 200 basis points of net invested capital for the StepStone VC Platform.
iv. All investments assess 5 basis points of capital commitments for fund expenses, charged quarterly, and 1 basis point of capital commitments drawn down in the first cash flow quarter for organizational costs.
v. Private equity secondaries and co-investments include 12.5% and 10.0% of paid and unrealized carry, respectively, with an 8.0% preferred return hurdle; infrastructure secondaries and co-investments include 10.0% of paid and unrealized carry, respectively, with an 8.0% preferred return hurdle; real estate secondaries and co-investments include 15.0% of paid and unrealized carry, with an 8.0% preferred return hurdle; private debt secondaries and co-investments include 10.0% of paid and unrealized carry, with a 5.0% preferred return hurdle; and the StepStone VC Platform primaries, secondaries and co-investments/directs include 5.0%, 5.0% and 20.0%, respectively, of paid and unrealized carry with no preferred return hurdle.
Net IRR and Net TVM for investments reflect the underlying fund manager’s use of subscription backed credit facilities, if reported to StepStone as such by the underlying managers. Aggregate net performance returns for private equity buyout secondaries and co-investments are presented on a levered basis, assuming the use of a subscription line of credit drawn for 180 days, at a cost based on the historical interest rate of SOFR +200bps. Without the subscription lines, Net IRR/Net TVM for secondaries and co-investments would be 15.3%/1.3x and 14.7%/1.6x, respectively. Reinvested/recycled amounts increase contributed capital.
(3) Investment returns of client portfolios are included in the performance summary past the client’s termination date until such time as StepStone stops receiving current investment data (quarterly valuations and cash flows) for such investment. At that point, StepStone will then ‘liquidate’ the fund by entering a distribution amount equal to the last reported NAV, thus ending the investment’s contribution to the track record as of that date. Historical performance contribution will be maintained up until the ‘liquidation’ date.
(4) Private equity buyout performance includes buyout-focused strategies comprising 1,116 investments totaling $165.6 billion of capital commitments, and excludes (i) venture capital and growth equity direct investments, reported separately; (ii) 178 client-directed buyout investments, totaling $32.3 billion of capital commitments; (iii) 91 investments with fund-of-funds, energy, opportunistic and other non-buyout-focused strategies totaling $9.3 billion of capital commitments; (iv) two advisory co-investments totaling $100 million; and (v) any investments that do not have client data monitored in SPI Reporting.
* Private equity buyout investment returns have replaced private equity investment returns. Private equity buyout investment returns represent StepStone’s buyout focused investment strategies and therefore do not include venture capital and growth equity direct investments, fund-of-funds investments, energy, opportunistic and other non-buyout-focused investment strategies previously reported as part of private equity investment returns. In addition, secondary and co-investment performance was previously presented on an unlevered basis. Private equity Net IRR/Net TVM investment returns for primaries, secondaries and co-investments, as previously presented would have been, for primary investments, secondaries and co-investments 13.5%/1.5x, 14.3%/1.3x, and 15.2%/1.6x, respectively.
(5) Venture capital and growth equity includes 2,213 investments totaling $63.9 billion of capital commitments and excludes (i) 70 client-directed investments, totaling $2.4 billion of capital commitments, and (ii) investments that do not have client data monitored in SPI Reporting. StepStone's venture capital and growth equity strategy is composed of a) investments in the StepStone venture capital platform, comprising venture capital focused commingled funds and separately managed accounts (the “StepStone VC Platform”) and b) underlying venture capital investments within StepStone’s broader private equity accounts (“StepStone PE Accounts”).
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(6) Real estate includes 523 investments totaling $94.0 billion of capital commitments and excludes (i) 100 client-directed real estate investments, totaling $17.2 billion of capital commitments, (ii) 20 secondary/co-investment core/core+ or credit investments, totaling $1.2 billion of capital commitments, (iii) four advisory fund investments totaling $463.6 million of capital commitments, and (iv) investments that do not have client data monitored in SPI Reporting.
(7) Infrastructure includes 360 investments totaling $74.0 billion of capital commitments and excludes (i) eight infrastructure investments made by the Partnership prior to the formation of the infrastructure subsidiary in 2013 or made prior to StepStone’s acquisition of Courtland Partners, Ltd. on April 1, 2018 (the “Courtland acquisition”), totaling $501.9 million of capital commitments, (ii) 50 client-directed infrastructure investments, totaling $12.3 billion of capital commitments, and (iii) investments that do not have client data monitored in SPI Reporting.
(8) Infrastructure co-investment performance includes asset management direct investments.
(9) Private debt includes 1,874 investments totaling $70.3 billion of capital commitments and excludes (i) 48 client-directed debt investments, totaling $4.3 billion of capital commitments, (ii) 50 real estate credit investments that were recommended by Courtland Partners, Ltd. prior to the Courtland acquisition, totaling $5.1 billion of capital commitments, and (iii) investments that do not have client data monitored in SPI Reporting. *Net IRRs are not aggregated and shown for customized managed accounts (which include capacity-negotiated GP co-investment accounts and GP primary managed accounts) totaling $35.4 billion of committed capital, as the investment objective of those investments are customized to the respective client’s investment target on multiple-on-committed-capital (“MOCC”) and can differ significantly.
Liquidity and Capital Resources
Sources and Uses of Liquidity
We generate cash primarily from management and advisory fees and performance fees. We have historically managed our liquidity and capital resource needs through (a) cash generated from our operating activities, (b) realizations from investment activities, (c) borrowings, interest payments and repayments under credit agreements, senior note issuances and other borrowing arrangements, (d) funding capital commitments to our funds, and (e) funding our growth initiatives, including capital expenditures for property, equipment, and acquisitions to expand into new businesses.
As of March 31, 2026, we had $213.6 million of cash, cash equivalents and restricted cash ($1,119.0 million including Consolidated Funds) and $2,286.3 million of investments in StepStone Funds ($3,001.7 million including Consolidated Funds), including $2,036.9 million of accrued carried interest allocations, against $270.6 million in debt obligations, net of debt issuance costs ($1,201.8 million including Consolidated Funds), and $1,100.6 million in accrued carried interest-related compensation payable.
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. We use cash flow from operations and distributions from our investments in the StepStone Funds to pay compensation and related expenses, general and administrative expenses, income taxes, debt service, capital expenditures, dividends to our stockholders and distributions to holders of Partnership units, make repurchases under our stock repurchase program and to make investments in the StepStone Funds. We believe we will have sufficient ability to meet our liquidity and capital resources requirements for the next 12 months through cash flows from operating activities, existing cash and cash equivalents, and our ability to obtain future financing.
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Cash Flows
The accompanying consolidated cash flows include the Consolidated Funds, which activities primarily consist of raising capital from third-party investors, purchasing investments, making payment for the operating costs of the fund, generating cash flows from realized income allocations of investments and sales of investments, and making distributions to investors. The Consolidated Funds are accounted for as investment companies and therefore the cash flows from investing activities are included in cash flows from operations.
The following table summarizes our cash flows attributable to operating, investing and financing activities:
Year Ended March 31,
(in thousands)
Net cash provided by operating activities
Net cash provided by (used in) investing activities
Net cash provided by (used in) financing activities
Effect of exchange rate changes
Net increase in cash, cash equivalents and restricted cash
Operating Activities
Operating activities provided $66.5 million, $64.9 million and $161.5 million of cash for fiscal 2026, 2025 and 2024, respectively. For fiscal 2026, 2025 and 2024, respectively, these amounts primarily consisted of the following:
• net income, after adjustments for non-cash items (including unrealized mark-to-market changes in the fair value of the profits interests issued in the private wealth subsidiary, unrealized carried interest allocations, unrealized performance fee-related compensation, unrealized investment (income) loss and fair value adjustment for acquisition-related contingent consideration), of $478.6 million, $419.3 million and $243.9 million;
• net change in operating assets and liabilities of $(16.0) million, $(19.8) million and $18.8 million;
• payments made for acquisition-related contingent consideration of $0 million, $51.5 million and $0 million;
• adjustments for unrealized investment income from Consolidated Funds of $84.9 million, $62.2 million and $26.1 million;
• net purchases of investments of Consolidated Funds of $326.6 million, $221.0 million and $75.1 million; and
• net change in operating assets and liabilities of Consolidated Funds of $15.3 million, $32 thousand and $0.1 million.
Investing Activities
Investing activities provided (used) $732.9 million, $(43.5) million and $(47.3) million of cash for fiscal 2026, 2025 and 2024, respectively, and primarily consisted of the following amounts:
• net contributions to investments of $41.4 million, $42.8 million and $19.0 million;
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• net (contributions to) distributions from investments in legacy Greenspring entities of $1.9 million, $4.4 million and $(8.8) million;
• net cash recognized upon initial consolidation of funds of $812.1 million, $0 million and $0 million;
• net cash derecognized from deconsolidation of fund of $37.0 million, $0 million and $0 million; and
• purchases of fixed assets of $2.6 million, $5.1 million and $19.6 million.
Financing Activities
Financing activities provided (used) $37.4 million, $87.5 million and $(58.0) million of cash for fiscal 2026, 2025 and 2024, respectively, and primarily consisted of the following:
• net borrowings (repayments) on revolving credit facility of $0 million, $(50.0) million and $50.0 million;
• proceeds from issuance of notes payable of $0 million, $175.0 million and $0 million;
• deferred financing costs of $0 million; $5.4 million and $0 million;
• purchase of non-controlling interests of $10.3 million, $5.4 million and $0 million;
• sale of non-controlling interests of $0 million, $0 million and $3.0 million;
• redemption of redeemable non-controlling interests of $0 million, $13.0 million and $0 million;
• proceeds from capital contributions from non-controlling interests $3.3 million, $8.8 million and $43 thousand;
• distributions to non-controlling interests of $164.6 million, $129.3 million and $97.3 million;
• proceeds from capital contributions to legacy Greenspring entities of $1.4 million, $19.6 million and $12.5 million;
• distributions to non-controlling interests in legacy Greenspring entities of $6.2 million, $32.0 million and $9.0 million;
• payments made for acquisition-related contingent consideration of $0 million, $17.8 million and $0 million;
• dividends paid to common stockholders of $117.8 million, $75.8 million and $68.5 million;
• payments for taxes related to the net settlement of equity-based awards of $0.4 million, $1.5 million and $0.7 million;
• proceeds from issuance of Class A common stock under ESPP of $3.7 million, $2.5 million and $0 million;
• payments for repurchases of Class A common stock of $8.7 million, $0 million and $0 million;
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• payments to related parties under the Tax Receivable Agreements of $12.6 million, $9.8 million and $10.3 million;
• net repayments on fund credit facility of $0 million, $40 thousand and $0 million;
• contributions from redeemable non-controlling interests in Consolidated Funds of $403.3 million, $240.3 million and $62.3 million; and
• redemptions of redeemable non-controlling interests in Consolidated Funds of $53.7 million, $18.7 million and $0 million.
Debt Obligations
Debt Obligations of the Company
Revolving Credit Facility
We are party to a credit agreement, as amended and restated in May 2024 (the “Credit Agreement”), which, among other things, increased the aggregate principal amount of the commitments thereunder to $300.0 million from $225.0 million and extended the maturity date of the revolving facility to May 2029. The Credit Agreement was arranged by JPMorgan Chase Bank, N.A., as the administrative agent and collateral agent, and certain other lenders party thereto and provides for a $300.0 million multicurrency Revolver.
Borrowings under the Revolver bear interest at a variable rate per annum. We may designate each borrowing as (i) in the case of any borrowing in U.S. dollars, a base rate loan or a Term Secured Overnight Financing Rate (“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. 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, 2026 was 5.79%.
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. Any outstanding principal amounts, together with any accrued interest thereon, shall be due and payable on the maturity date. The maturity date for the Revolver is May 16, 2029.
The Revolver bears a fee on undrawn commitments equal to 0.25% per annum if total utilization of revolving commitments is equal to or greater than 50% and 0.35% per annum if total utilization of revolving commitments is less than 50%.
We can use available funding capacity under the Revolver to satisfy letters of credit in amounts up to $10.0 million. Amounts used to satisfy the letters of credit reduce the available capacity under the Revolver. As of March 31, 2026, we had outstanding letters of credit totaling $10.1 million.
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Senior Notes
On October 22, 2024, we issued $175.0 million aggregate principal amount of our 5.52% Series A senior notes due October 22, 2029, pursuant to the Note Purchase Agreement, dated as of October 22, 2024, in a private placement exempt from registration under the Securities Act.
Interest on the Notes is payable semi-annually in arrears on April 22 and October 22 of each year. Interest on the Notes accrues from and including October 22, 2024. The Notes will mature on October 22, 2029. We may, at our option, prepay at any time all, or from time to time any part of, the Notes, in an amount not less than 5% of the aggregate principal amount of the Notes then outstanding at a redemption price equal to 100% of the principal amount thereof plus any applicable “make-whole amount” and accrued and unpaid interest to the redemption date. So long as no default or event of default shall have occurred and be continuing under the Note Purchase Agreement, no make-whole amount will be due if the Notes are paid on or after April 22, 2029.
Debt Obligations of Consolidated Funds
Debt obligations of the Consolidated Funds primarily comprise amounts due to holders of debt securities issued by a consolidated collateralized financing entity (“CFE”). We are not liable for any of the notes payable issued by the CFE which are collateralized by the assets held by the CFE. As of March 31, 2026, the collateral of the CFE consisted of cash and cash equivalents and investments in funds which are generally organized as partnership and LLC interests. The notes payable may only be repaid from collateral proceeds, which will occur as distributions are received from underlying assets. Notes payable of the Consolidated Funds are collateralized by the assets held by the Consolidated Funds and the assets of one fund may not be used to satisfy the liabilities of another fund.
As of March 31, 2026, the consolidated CFE has the ability to issue up to $1,396.8 million of additional notes payable.
Certain Consolidated Funds may maintain revolving credit facilities that are secured by fund assets to fund investments on a short-term basis. The debt obligations of the Consolidated Funds are non-recourse to us.
In December 2024, one of our consolidated investment funds entered into a credit agreement with Northern Trust Global Service SE (the “Fund Credit Facility”). The Fund Credit Facility provides for a multi-currency revolving credit facility of up to $125.0 million. Amounts drawn under the facility must be repaid within 180 days. As of March 31, 2026, there were no outstanding borrowings under the Fund Credit Facility.
Borrowings under the Fund Credit Facility bear interest at a variable rate per annum. Borrowings in USD will bear interest at the applicable federal funds target rate (upper range) plus a margin of 250 basis points. Borrowings in GBP will bear interest at the Bank of England base rate plus a margin of 250 basis points. Borrowings in EUR will bear interest at the European Central Bank main refinancing rate plus a margin of 250 basis points.
In March 2026, our consolidated CFE entered into a credit agreement arranged by Alter Domus LLC, as the administrative agent, and certain other lenders party thereto that provides for a revolving credit facility (the “Liquidity Loan Facility”) of up to $408.4 million. As of March 31, 2026, there were no outstanding borrowings under the Liquidity Loan Facility.
Borrowings under the Liquidity Loan Facility bear interest at a variable rate per annum at the Term SOFR plus a margin of 270 basis points. The facility also bears an unused commitment fee of 1.00% per annum.
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Borrowings under the Liquidity Loan Facility may be repaid at any time during the term of the Agreement and, subject to certain terms and conditions, may be reborrowed prior to the maturity date. Any outstanding principal amounts, together with any accrued interest thereon, shall be due and payable on the maturity date. The maturity date for the Liquidity Loan Facility is March 23, 2031.
Debt Covenants
Under the terms of the Credit Agreement, certain of our assets serve as pledged collateral. In addition, the Credit Agreement contains covenants that, among other things: limit our ability to incur indebtedness; create, incur or allow liens; transfer or dispose of assets; merge with other companies; make certain investments; pay dividends or make distributions in certain circumstances; engage in new or different lines of business; and engage in certain transactions with affiliates. 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.
The Note Purchase Agreement contains certain covenants, including those requiring us to (a) maintain a total net leverage ratio, (b) maintain a minimum total of fee-earning assets under management, (c) cause at least 80% of all management fees payable by material subsidiaries to us to be collected each period without deferral, waiver or reduction, (d) limit the amount of secured indebtedness to be incurred by us, and (e) other customary covenants. The Note Purchase Agreement also provides for customary events of default, which, if any occur and is continuing, could permit or require the entire unpaid principal amount of any or all Notes, plus all accrued and unpaid interest thereon and any applicable “make-whole amount” to become or to be declared due and payable immediately.
Under the terms of the Fund Credit Facility, certain of the assets of the Consolidated Funds serve as pledged collateral. In addition, the Fund Credit Facility contains covenants that, among other things: limit the ability of the fund to incur indebtedness; create, incur or allow liens; and other customary covenants. The Fund Credit Facility also provides for customary events of default, which, if any occur and are continuing, could permit or require the entire unpaid principal amount of any or all loans under the Fund Credit Facility, plus all accrued and unpaid interest thereon to become or to be declared due and payable immediately.
Liquidity Loan Facility
Under the terms of the Liquidity Loan Facility, certain assets of the Consolidated Funds serve as pledged collateral. In addition, the Liquidity Loan Facility contains covenants that, among other things: limit the ability of the fund to incur indebtedness; create, incur or allow liens; and other customary covenants. The Liquidity Loan Facility also provides for customary events of default, which, if any occur and are continuing, could permit or require the entire unpaid principal amount of any or all loans under the Liquidity Loan Facility, plus all accrued and unpaid interest thereon to become or to be declared due and payable immediately.
As of March 31, 2026, we were in compliance with the covenants under our various debt agreements.
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Equity Transactions
In June 2025, we issued 152,768 shares of Class A common stock to certain limited partners of the Partnership in exchange for 152,768 Class B units of the Partnership in accordance with the elective exchange notices submitted pursuant to the Class B Exchange Agreement. 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. We also issued 18,000 shares of Class A common stock to certain limited partners of the Partnership in exchange for 18,000 Class C units of the Partnership in accordance with the elective exchange notices submitted pursuant to the Class C Exchange Agreement, and a corresponding number of Class A units of the Partnership were issued to us. We also issued 864,640 shares of Class A common stock to certain limited partners of the Partnership in exchange for 864,640 Class D units of the Partnership in accordance with the elective exchange notices submitted pursuant to the Class D Exchange Agreement, and a corresponding number of Class A units of the Partnership were issued to us.
In September 2025, we issued 370,470 shares of Class A common stock to certain limited partners of the Partnership in exchange for 370,470 Class B units of the Partnership in accordance with the elective exchange notices submitted pursuant to the Class B Exchange Agreement. 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. We also issued 16,658 shares of Class A common stock to certain limited partners of the Partnership in exchange for 16,658 Class C units of the Partnership in accordance with the elective exchange notices submitted pursuant to the Class C Exchange Agreement, and a corresponding number of Class A units of the Partnership were issued to us. We also issued 135,697 shares of Class A common stock to certain limited partners of the Partnership in exchange for 135,697 Class D units of the Partnership in accordance with the elective exchange notices submitted pursuant to the Class D Exchange Agreement, and a corresponding number of Class A units of the Partnership were issued to us.
In December 2025, we issued 116,000 shares of Class A common stock to certain limited partners of the Partnership in exchange for 116,000 Class B units of the Partnership in accordance with the elective exchange notices submitted pursuant to the Class B Exchange Agreement. 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. We also issued 892,169 shares of Class A common stock to certain limited partners of the Partnership in exchange for 892,169 Class D units of the Partnership in accordance with the elective exchange notices submitted pursuant to the Class D Exchange Agreement, and a corresponding number of Class A units of the Partnership were issued to us.
In March 2026, we issued 379,955 shares of Class A common stock to certain limited partners of the Partnership in exchange for 379,955 Class B units of the Partnership in accordance with the elective exchange notices submitted pursuant to the Class B Exchange Agreement. 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.
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Stock Repurchase Program
On March 9, 2026, our board of directors authorized a stock repurchase program of up to $100.0 million of our Class A common stock, excluding fees and expenses. Under the stock repurchase program, repurchases may be made from time to time through open market purchases, in privately negotiated transactions, or by other means, including through the use of trading plans intended to qualify under Rule 10b5-1 under the Exchange Act. The stock repurchase program may be modified, suspended or discontinued by the board of directors at any time without prior notice and does not have a specified expiration date. Each share of Class A common stock repurchased is funded with the proceeds, on a dollar-for-dollar basis, from the repurchase of Class A units by the Partnership from us in order to maintain the one-to-one ratio between outstanding shares of Class A common stock and Class A units.
Future Sources and Uses of Liquidity
In the future, we may issue additional equity or debt with the objective of increasing our available capital. We believe that we will be able to continue to meet our current and long-term liquidity and capital requirements through our cash flows from operating activities, existing cash and cash equivalents, and our ability to obtain future financing.
Dividends
On May 20, 2026, we announced a quarterly cash dividend of $0.28 per share of Class A common stock and a supplemental cash dividend of $0.55 per share of Class A common stock, both payable on June 30, 2026 to holders of record as of the close of business on June 15, 2026. The quarterly cash dividend and supplemental cash dividend relate to earnings in respect of our fourth fiscal quarter and full fiscal year 2026, respectively. The declaration of this supplemental dividend does not guarantee that we will declare supplemental dividends in the future and our board of directors may, in its discretion, decrease the level of dividends or discontinue the payment of dividends entirely. 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. In addition, any repurchases of our Class A common stock are discretionary and may be limited by applicable legal requirements and other considerations.”
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The following table presents information regarding quarterly cash 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
June 30, 2023
Supplemental 2
June 30, 2023
Second quarter
September 15, 2023
Third quarter
December 15, 2023
Fourth quarter
March 15, 2024
Total dividends paid in FY2024
First quarter
June 28, 2024
Supplemental 2
June 28, 2024
Second quarter
September 13, 2024
Third quarter
December 13, 2024
Fourth quarter
March 14, 2025
Total dividends paid in FY2025
First quarter
June 30, 2025
Supplemental 2
June 30, 2025
Second quarter
September 15, 2025
Third quarter
December 15, 2025
Fourth quarter
March 13, 2026
Total dividends paid in FY2026
(1) Dividends paid, as reported in this table, relate to the preceding quarterly period in which they were earned.
(2) The supplemental cash dividend relates to earnings in respect of our full fiscal years 2023 , 2024 and 2025, respectively.
We may pay additional dividends to holders of our Class A common stock in the future. The declaration and payment by us of any future dividends to Class A stockholders is at the sole discretion of our board of directors. Subject to funds being legally available, we will cause the Partnership to make pro rata distributions to its limited partners, including us, in amounts sufficient to make payment of applicable income and other taxes, to make payments under the Tax Receivable Agreements, and to make payment for corporate and other general expenses. 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.
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Tax Receivable Agreements
We have entered into an Exchanges Tax Receivable Agreement with the Class B limited partners, Class C limited partners, and Class D limited partners and a Reorganization Tax Receivable Agreement with certain pre-IPO institutional investors (collectively, the “Tax Receivable Agreements”). The Tax Receivable Agreements provide for payment by SSG to these partners and pre-IPO institutional investors of the Partnership of 85% of the amount of the net cash tax savings, if any, that SSG realizes (or, under certain circumstances, is deemed to realize) as a result of increases in tax basis (and utilization of certain other tax benefits) resulting from (i) SSG’s acquisition of such partner’s and institutional investor’s Partnership units and (ii) in the case of the Exchanges Tax Receivable Agreement, any payments SSG makes under the Exchanges Tax Receivable Agreement (including tax benefits related to imputed interest). SSG will retain the benefit of the remaining 15% of these net cash tax savings under the Tax Receivable Agreements.
Capital Requirements of Regulated Entities
We are required to maintain minimum net capital balances for regulatory purposes in the United States and certain non-U.S. jurisdictions in which we do business. These net capital requirements are met by retaining cash and cash equivalents in those jurisdictions. As a result, we may be restricted in our ability to transfer cash between different operating entities and jurisdictions. As of March 31, 2026, we were required to maintain approximately $27.1 million in net capital at these subsidiaries and were in compliance with all regulatory minimum net capital requirements.
Option Agreement Payment
In November 2022, we entered into arrangements with the SPW management team (the “Private Wealth Transaction”) under which 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. The applicable call or put price is, in certain circumstances, subject to an earn-out or earn-down. The call or put price will be payable in cash unless we elect to pay up to 75% of the consideration in units of the Partnership, each to be exchangeable into shares of our Class A common stock, and, in either case, rights under one or more tax receivable agreements. As of March 31, 2026, based on the fair value of the liability classified awards, the estimated minimum and maximum amount of cash that would be potentially payable to settle the liability under the Private Wealth Transaction was $564.4 million and $2,257.6 million, respectively. We believe that we will be able to meet the cash requirements for settlement of the liability through our ability to obtain future financing. See note 10 to our consolidated financial statements included elsewhere in this annual report for more information. Certain assumptions used in determining the fair value are inherently subjective; therefore, the ultimate settlement amount for the liability classified awards may differ materially from the current estimate.
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Contractual Obligations and Commitments
In the ordinary course of business, we enter into contractual arrangements that require future cash payments.
The following table sets forth information regarding our anticipated future cash payments under our contractual obligations as of March 31, 2026:
Total
Less than 1 year
Years 1-3
Years 3-5
Thereafter
Operating lease obligations (1)
Debt obligations (2)
Interest on debt obligations (3)
Debt obligations of Consolidated Funds (4)
Capital commitments (5)
Capital commitments of Consolidated Funds (6)
Capital commitments in legacy Greenspring funds (7)
Total
(1) We lease office space and certain office equipment under agreements that expire periodically through 2039. The table only includes guaranteed minimum lease payments under these agreements, including leases signed but not yet commenced at the period end, and does not project other lease-related payments.
(2) Debt obligations presented in the table relate to the Revolver and Notes, which have maturity dates of May 16, 2029 and October 22, 2029, respectively. The balance outstanding under the Revolver as of March 31, 2026 has been presented as an obligation payable in the years 3-5 column as there are no scheduled or required principal payments on the Revolver until the maturity date on May 16, 2029. The balance outstanding under the Notes as of March 31, 2026 has been presented as an obligation payable in the years 3-5 column as there are no scheduled or required principal payments on the Notes until the maturity date on October 22, 2029.
(3) 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, 2026 and semi-annual interest payments for the aggregate principal amount of the Notes using the coupon rate of 5.52%, which has been calculated assuming no additional principal payments will be made and the outstanding balance will be held until its final maturity date. These projected interest payments may differ in the future based on the balances outstanding on the Revolver and Notes, respectively, as well as changes in market interest rates for the Revolver.
(4) Debt obligations of Consolidated Funds presented in the table represent amounts due to holders of debt securities issued by the Consolidated CFE vehicle. These obligations include interest to be paid on debt securities issued by the CFE vehicle and assume that no prepayments of principal are made and outstanding notes payable are held until maturity. For debt securities that bear only the rights to the residual value of the Consolidated CFE vehicle and have no stated interest rate, no interest payments were included in this calculation. The maturity date of the notes payable issued by the Consolidated CFE vehicle is April 2041.
(5) Capital commitments represent our obligations to provide general partner capital funding to the StepStone Funds. These amounts are generally due on demand, and accordingly, have been presented as obligations payable in the less than 1 year column. Capital commitments are expected to be called over a period of several years. As of March 31, 2026, we had unfunded commitments totaling $187.5 million before the consolidation of funds, and $110.0 million after the consolidation of funds.
(6) Capital commitments of Consolidated Funds represent our obligations to provide capital funding to the StepStone Funds held through the Consolidated Funds. These amounts are generally due on demand, and accordingly, have been presented as obligations payable in the less than 1 year column. Capital commitments are expected to be called over a period of several years.
(7) In connection with the Greenspring acquisition, we, indirectly through our subsidiaries, became the sole and/or managing member of certain entities, each of which is the general partner of an investment fund (“legacy Greenspring general partner entities”). We did not acquire any direct economic interests attributable to the legacy Greenspring
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general partner entities, including legacy Greenspring investments in funds and carried interest allocations. We determined that the legacy Greenspring general partner entities are VIEs and that we are the primary beneficiary of each such entity because we have a controlling financial interest in each entity. As a result, we consolidate these entities. Capital commitments in legacy Greenspring funds represent our obligations to provide general partner capital funding in legacy Greenspring funds for which we do not hold any direct economic interests. These amounts are generally due on demand, and accordingly, have been presented as obligations payable in the less than 1 year column. Capital commitments are expected to be called over a period of several years.
The payments that we are required to make under the Tax Receivable Agreements are expected to be substantial and are not reflected in the contractual obligations table set forth above as they are dependent upon future taxable income.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that would expose us to any liability or require us to fund losses or guarantee target returns to clients in our funds that are not reflected in our consolidated financial statements. See notes 4 and 16, respectively, to our consolidated financial statements included in Part II, Item 8 of this annual report for information on variable interest entities and commitments and contingencies.
Critical Accounting Policies
We prepare our consolidated financial statements in accordance with GAAP. In applying many of these accounting principles, we need to make assumptions, estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses in our consolidated financial statements. We base our estimates and judgments on historical experience and other assumptions that we believe are reasonable under the circumstances. These assumptions, estimates and judgments, however, are both subjective and subject to change, and actual amounts may differ from our assumptions and estimates. If actual amounts are ultimately different from our estimates, the revisions are included in our results of operations for the period in which the actual amounts become known. We believe the following critical accounting policies could potentially produce materially different results if we were to change underlying assumptions, estimates or judgments. See note 2 to our consolidated financial statements included in Part II, Item 8 of this annual report for a summary of our significant accounting policies.
Consolidation
We consolidate all entities that we control through a majority voting interest or as the primary beneficiary of a variable interest entity (“VIE”). We use, and expect to continue to use, a combination of our equity ownership, governance rights and other contractual arrangements to control operations of these entities. However, these arrangements may not be as effective in providing us with control over these operations as would wholly owning these entities. See note 4 to our consolidated financial statements included in Part II, Item 8 of this annual report for information on variable interest entities.
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. In evaluating whether we hold a variable interest, we review all of our financial relationships to determine whether we are exposed to the risks and rewards created and distributed by an entity. We hold variable interests in certain operating subsidiaries not wholly-owned by us and in the StepStone Funds in which we serve as the general partner or managing member. We also assess whether the fees received from the StepStone Funds as a decision maker or in exchange for services (including management fees, incentive fees and carried interest allocations) are customary and commensurate with the level of effort required to provide the services. We consider all economic interests, including indirect interests, to determine if a fee is considered a variable interest. We determined our fee arrangements with the StepStone Funds are not considered to be variable interests.
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If we have a variable interest in an entity, we further assess whether the entity is a VIE and, if so, whether we are the primary beneficiary. Entities that do not qualify as VIEs are assessed for consolidation under the voting interest model. Under the voting interest model, we consolidate those entities we control through a majority voting interest. The assessment of whether an entity is a VIE requires an evaluation of qualitative factors and, where applicable, quantitative factors. These judgments include: (a) determining whether the entity has sufficient equity at risk, (b) evaluating whether the equity holders, as a group, lack the ability to make decisions that significantly affect the economic performance of the entity and (c) determining whether the entity is structured with disproportionate voting rights in relation to their equity interests.
For entities that are determined to be VIEs, we are required to consolidate those entities where we have concluded that we are the primary beneficiary. The primary beneficiary is defined as the variable interest holder with (a) the power to direct the activities of a VIE that most significantly affect the entity’s economic performance and (b) the obligation to absorb losses of the entity or the right to receive benefits from the entity that could potentially be significant to the VIE. In evaluating whether we are the primary beneficiary, we evaluate our economic interests in the entity held either directly or indirectly by us. At each reporting date, we determine whether any reconsideration events have occurred that require us to revisit the primary beneficiary analysis, and we will consolidate or deconsolidate accordingly.
We provide investment advisory services to the StepStone Funds, which have third-party investors. StepStone Funds are generally VIEs because they have not granted the third-party investors substantive rights to terminate or remove the general partner or participating rights. We do not consolidate most of the StepStone Funds that are VIEs because we are not the primary beneficiary of those funds, primarily because our fee arrangements are considered customary and commensurate and thus not deemed to be variable interests, and we do not hold any other interests in those funds that are considered more than insignificant. We consolidate certain of our operating subsidiaries that are VIEs because we are the primary beneficiary.
The Consolidated Funds comprise certain entities that constitute client investment funds that we manage or control and have been consolidated in the accompanying consolidated financial statements. Including the results of the Consolidated Funds increases the reported amounts of the assets, liabilities, expenses and cash flows in the accompanying consolidated financial statements, and amounts related to economic interests held by third-party investors are reflected as redeemable non-controlling interests in Consolidated Funds. 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.
Revenues
We recognize revenue in accordance with ASC 606. Revenue is recognized in a manner that depicts the transfer of promised goods or services to customers and for an amount that reflects the consideration to which we expect to be entitled in exchange for those goods or services. The application of ASC 606 requires us to identify our contract(s) with a customer, identify the performance obligations in a contract, determine the transaction price, allocate the transaction price to the performance obligations in the contract and recognize revenue when (or as) the entity satisfies a performance obligation. In determining the transaction price, variable consideration is included only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized would not occur when the uncertainty associated with the variable consideration is resolved. We have elected to apply the variable consideration allocation exception for our fee arrangements with our customers.
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Management and Advisory Fees, Net
We recognize management and advisory fee revenues when control of the promised services is transferred to customers, in an amount that reflects the consideration that we expect to receive in exchange for those services. For asset management services and the arrangement of administrative services, we satisfy these performance obligations over time because the customer simultaneously receives and consumes the benefits of the services as they are performed. Advisory fees from contracts where we do not have discretion over investment decisions are generally based on fixed amounts and typically billed quarterly. Management fees are reflected net of certain professional and administrative services and distribution and servicing fees paid to third parties for which we are acting as an agent. Management fees include income-based incentive fees, which are based on net investment income of certain funds.
Performance Fees
We earn two types of performance fee revenues: incentive fees and carried interest allocations, as described below.
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. 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). 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. 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.
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. 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. We account for our investment balances in the StepStone Funds, including carried interest allocations, under the equity method of accounting because it is presumed to have significant influence as the general partner or managing member. Accordingly, carried interest allocations are not deemed to be within the scope of ASC 606.
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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. We account for the investment balances in the legacy Greenspring funds, including carried interest allocations, under the equity method of accounting because it is presumed to have significant influence as the general partner or managing member. Accordingly, legacy Greenspring carried interest allocations are not deemed to be within the scope of ASC 606. We do not hold any direct economic interests in the legacy Greenspring general partner entities and thus are not entitled to any carried interest allocation from the legacy funds. All of the carried interest allocations in respect of the legacy Greenspring funds are payable to employees who are considered affiliates to us and are therefore reflected as legacy Greenspring performance fee-related compensation in the consolidated statements of income (loss).
We recognize revenue attributable to carried interest allocations from a fund based on the amount that would be due to us pursuant to the fund’s governing documents, assuming the fund was liquidated based on the current fair value of its underlying investments as of that date. 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. We record the amount of carried interest allocated to us as of each period end as accrued carried interest allocations receivable, which is included as a component of investments in the consolidated balance sheets. Our determination of fair value for investments in the underlying funds includes various valuation techniques. 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.
Carried interest is generally realized when an underlying investment is profitably disposed of and the fund’s cumulative returns are in excess of the specific hurdle rates, as defined in the applicable governing documents. Carried interest is generally subject to reversal to the extent that the amount received to date exceeds the amount due to us based on cumulative results. As such, a liability is accrued for potential clawback obligations if amounts previously distributed to us would require repayment to a fund if such fund were to be liquidated based on the current fair value of their underlying investments as of the reporting date. Actual repayment obligations generally do not become realized until the end of a fund’s life.
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. Market price observability is affected by a number of factors, including the type of financial instrument, the characteristics specific to the financial instrument and the state of the marketplace – including the existence and transparency of transactions between market participants. Financial instruments with readily available quoted prices in active markets generally will have a higher degree of market price observability and therefore a lesser degree of judgment is used in measuring their fair value.
Financial instruments measured and reported at fair value are classified and disclosed based on the observability of inputs used in the determination of their fair values, as follows:
• Level I – Pricing inputs are unadjusted, quoted prices in active markets for identical assets or liabilities as of the measurement date.
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• Level II – Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the measurement date, and fair value is determined through the use of models or other valuation methodologies. The types of financial instruments classified in this category include less liquid securities traded in active markets and securities traded in other than active markets.
• Level III – Pricing inputs are unobservable for the financial instruments and include situations where there is little, if any, market activity for the financial instrument. The inputs into the determination of fair value require significant management judgment or estimation.
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls has been determined based on the lowest level input that is significant to the fair value measurement in its entirety. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and consideration of factors specific to the financial instrument.
The availability of observable inputs can vary depending on the financial asset or liability and is affected by a wide variety of factors including, for example, the type of instrument, whether the instrument has recently been issued, whether the instrument is traded on an active exchange or in the secondary market, and current market conditions. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised in determining fair value is greatest for financial instruments categorized in Level III. 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, notes payable, and revolving credit facility to be financial instruments. The carrying amounts of cash, cash equivalents, restricted cash, fees and accounts receivable and accounts payable equal or approximate their fair values due to their nature and/or the relatively short period over which they are held. See note 9 for additional details regarding the fair value of our notes payable and revolving credit facility balances.
Equity-Based Compensation
We account for grants of equity-based awards, including service-based RSUs and PRSUs, to certain employees and directors at fair value as of the grant date. We recognize non-cash compensation expense attributable to these grants on a straight-line basis over the requisite service and performance period, which is generally the vesting period. Expense related to grants of PRSUs is recognized if it is probable that the performance condition will be satisfied. Expense related to grants of equity-based awards is recognized as equity-based compensation expense in the consolidated statements of income (loss). The fair value of RSUs and PRSUs is determined by the closing stock price on the grant date. Forfeitures of equity-based awards are recognized as they occur. Awards classified as liabilities are remeasured at the end of each reporting period until settlement. Equity-based compensation cost for the employee stock purchase plan (“ESPP”) is measured as the discount the employee receives upon purchase of shares and the option value of a share when the offering contains a look-back option feature. See note 10 to our consolidated financial statements for additional information regarding our accounting for equity-based awards.
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Performance Fee-Related Compensation
A portion of the carried interest allocation revenue and incentive fees we earn is awarded to employees and other carry participants in the form of award letters (“carry awards”) as a form of long-term incentive compensation. Performance fee-related compensation is generally tied to the investment performance of the StepStone Funds. Approximately 50% of carried interest allocation revenue is awarded to employees and other participants as part of our long-term incentive compensation plan, fostering alignment of interest with our clients and investors, and retaining key investment professionals. Carry awards to employees and other participants are accounted for as a component of compensation and benefits expense in conjunction with our recognition of the related realized and unrealized carried interest allocation revenue and, until paid, is recorded as accrued carried interest-related compensation in the consolidated balance sheets. Upon a reversal of carried interest allocation revenue, the related compensation expense, if any, is also reversed. Liabilities recognized for carried interest-related compensation amounts due to affiliates are not paid until the related carried interest allocation revenue is realized. Incentive fee-related compensation is accrued as performance fee-related compensation expense when it is probable and estimable that payment will be made. The incentive fee-related compensation accrual is based on a number of factors, including the cumulative activity for the period and the distribution of the net proceeds in accordance with the applicable governing agreement. On April 1, 2024, certain of our non-wholly owned subsidiaries underwent transactions to effect unitization of the outstanding limited partnership interests, including the class of interests relating to awards of carried interest allocations granted to employees, to combine into a single class of limited partnership interests and redesignated into units. The class of interests relating to awards of carried interest allocations granted to employees were previously presented as carried interest-related compensation expense.
Income Taxes
SSG is a corporation for U.S. federal income tax purposes and therefore is subject to U.S. federal and state income taxes on its share of taxable income generated by the Partnership. The Partnership is treated as a pass-through entity for U.S. federal and state income tax purposes. As such, income generated by the Partnership flows through to its limited partners, including SSG, and is generally not subject to U.S. federal or state income tax at the Partnership level. The Partnership’s non-U.S. subsidiaries generally operate as corporate entities in non-U.S. jurisdictions, with certain of these entities subject to non-U.S. income taxes. Additionally, certain subsidiaries are subject to local jurisdiction taxes at the entity level, which are reflected within income tax expense in the consolidated statements of income (loss). 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.
Taxes are accounted for using the asset and liability method of accounting. Under this method, deferred tax assets and liabilities are recognized for the expected future tax consequences of differences between the carrying amounts of assets and liabilities and their respective tax bases, using tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period when the change is enacted. Deferred tax liabilities are included within accounts payable, accrued expenses and other liabilities in the consolidated balance sheets. The principal items giving rise to temporary differences are certain basis differences resulting from exchanges of Partnership units. See Tax Receivable Agreements below.
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 realization of deferred tax assets is dependent on the amount, timing and character of our future taxable income. When evaluating the realizability of deferred tax assets, all evidence – both positive and negative – is considered. This evidence includes, but is not limited to, expectations regarding future earnings, future reversals of existing temporary tax differences and tax planning strategies.
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We are subject to the provisions of ASC Subtopic 740-10, Accounting for Uncertainty in Income Taxes . This standard establishes consistent thresholds as it relates to accounting for income taxes. It defines the threshold for recognizing the benefits of tax return positions in the financial statements as more-likely-than-not to be sustained by the relevant taxing authority and requires measurement of a tax position meeting the more-likely-than-not criterion, based on the largest benefit that is more than 50% likely to be realized. If upon performance of an assessment pursuant to this subtopic, management determines that uncertainties in tax positions exist that do not meet the minimum threshold for recognition of the related tax benefit, a liability is recorded in the consolidated financial statements. We recognize interest and penalties, if any, related to unrecognized tax benefits as interest expense and general, administrative and other expenses, respectively, in the consolidated statements of income (loss). See note 11 to our consolidated financial statements for more information.
The Company has elected to account for global intangible low-taxed income (“GILTI”) earned by foreign subsidiaries in the period the tax is incurred.
Tax laws are complex and subject to different interpretations by the taxpayer and respective governmental taxing authorities. Significant judgment is required in determining tax expense and in evaluating tax positions, including evaluating uncertainties under GAAP. We review our tax positions quarterly and adjust our tax balances as new information becomes available.
Tax Receivable Agreements
The Tax Receivable Agreements provide for payment by SSG to the Class B limited partners, Class C limited partners, Class D limited partners and pre-IPO institutional investors of the Partnership of 85% of the amount of the net cash tax savings, if any, that SSG realizes (or, under certain circumstances, is deemed to realize) as a result of increases in tax basis (and utilization of certain other tax benefits) resulting from (i) SSG’s acquisition of such partners’ and institutional investors’ Partnership units and (ii) in the case of the Exchanges Tax Receivable Agreement, any payments SSG makes under the Exchanges Tax Receivable Agreement (including tax benefits related to imputed interest). SSG will retain the benefit of the remaining 15% of these net cash tax savings under the Tax Receivable Agreements. In connection with the Greenspring acquisition, the sellers receiving Class C units of the Partnership became parties to the Exchanges Tax Receivable Agreement and in connection with the closings under the Transaction Agreements for SRA and SRE, the sellers receiving Class D units of the Partnership became parties to the Exchanges Tax Receivable Agreement. See note 14 to our consolidated financial statements for more information.
Recent Accounting Developments
Information regarding recent accounting developments and their effects to us can be found in note 2 to our consolidated financial statements included in Part II, Item 8 of this annual report.
