What changed in this filing

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Item 1. Business

2022-05-31 compared with 2021-06-23 · 87 added, 123 removed, 432 unchanged (33% of the section changed)

We are a global private markets investment firm focused on providing customized investment solutions and advisory and data services to our clients.

We are a global private markets investment firm focused on providing customized investment solutions and advisory, data and administrative 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.

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• Our global-and-local approach .

With offices in 19 cities across 13 countries across five continents, we have built a global operating platform, organically and via acquisition, with strong local teams that possess valuable regional insights and deep-rooted relationships.

With offices in 23 cities across 14 countries on five continents, we have built a global operating platform, organically and via acquisition, with strong local teams that possess valuable regional insights and deep-rooted relationships.

This allows us to combine the advantages of having a knowledgeable on-the-ground presence with the benefits of operating as a global organization.

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Since our inception, we have focused on recruiting and retaining the best talent.

As of March 31, 2021, over 60 partners led the firm, with an average of more than 20 years of investment or industry experience.

As of March 31, 2022, nearly 80 partners led the firm, with an average of nearly 20 years of investment or industry experience.

As of March 31, 2022, we had over 790 total employees, including over 280 investment professionals and more than 500 employees across our operating team and implementation teams dedicated to sourcing, executing, analyzing and monitoring private markets opportunities.

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During the year ended March 31, 2022, we reviewed over 3,400 investment opportunities and conducted approximately 3,700 meetings with fund managers across multiple geographies and all four asset classes.

During the twelve months ended December 31, 2020, we allocated over $50 billion in capital to private markets on behalf of our clients, excluding legacy funds, feeder funds and research-only, non-advisory services.

During the 12 months ended December 31, 2021, we allocated over $75 billion in capital to private markets on behalf of our clients, excluding legacy funds, feeder funds and research-only, non-advisory services.

We have a flexible business model whereby many of our clients engage us for solutions across multiple asset classes and investment strategies.

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Focused commingled funds comprised $44 billion of our AUM as of March 31, 2022.

• Advisory and data services .

• Advisory, data and administrative services .

These services include one or more of the following for our clients:

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(iv) consulting on investment pacing, policies, strategic plans, and asset allocation to investment boards and committees;

and (v) licensed access to SPI and our other proprietary tools.

(v) licensed access to SPI and our other proprietary tools;

and (vi) administrative services to unaffiliated investment advisors.

Advisory relationships comprised $436 billion of our AUA and $12 billion of our AUM as of March 31, 2022.

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Omni tracked detailed information on over $805 billion of client commitments as of March 31, 2022, inclusive of our combined AUM/AUA, previously exited investments and investments of former clients.

Our Market Opportunity

We operate in the large and growing private markets industry, which we believe represents one of the most attractive segments within the broader asset management landscape.

According to the 2020 report by PricewaterhouseCoopers (“PwC”), Asset & Wealth Management Revolution:

The Power to Shape the Future, total global AUM is expected to grow from approximately $111 trillion in 2019 to $139 trillion in 2025, implying a compound annual growth rate (“CAGR”) of approximately 4%.

During the same period, private markets industry AUM is expected to grow from approximately $13 trillion to approximately $19 trillion, implying a CAGR of approximately 7% and representing approximately 14% of total global AUM in 2025.

We believe our leading position in private markets and comprehensive solutions across a diversified range of asset classes place us at the center of several favorable trends, including the following:

Growth in Institutional Wealth

Global institutional wealth has increased significantly in recent years and is expected to continue to grow.

According to PwC’s 2020 report, the total assets of institutional investors, such as pension funds, insurance companies, and sovereign wealth funds are expected to increase from $91 trillion in 2019 to $115 trillion in 2025, reflecting a CAGR of approximately 4%.

Globalization of Private Markets

The macroeconomic position of international markets has improved significantly over the last 20 years, driven by several monetary and structural reforms, such as floating exchange rates, fiscal restraint and trade liberalization.

We expect international markets, led by stronger, more stable economies, to become a source of scalable and long-term capital for private markets fundraising.

Democratization of Private Markets

According to PwC’s 2020 report, global population growth, lower and less attractive annuity rates and the shift in retirement savings to defined contribution plans, have propelled significant growth in the asset management industry over the last decade.

At the same time, we believe both high-net-worth and mass affluent investors continue to remain significantly under-allocated to the private markets in comparison with institutional investors.

As defined contribution pension plans in the United States continue to grow and participants in these plans become more familiar with private markets as a means to diversify their investment portfolios and achieve differentiated returns, we believe defined contribution pension plans will be a significant driver of growth in private markets.

Performance of Private Markets Investments vis-à-vis Public Markets

Numerous academic studies have found that private markets have a track record of strong returns and outperformance versus public markets.

In addition to seeking high absolute and relative returns, institutional investors have been increasing their allocations to private markets investments to attain diversification, macro hedges, stable income, and low volatility relative to traditional public market allocations.

The adoption of private markets strategies in the past 30 years has primarily been driven by institutions such as foundations, endowments, public pensions, sovereign wealth funds and other institutions focused on return enhancement.

We expect further adoption to be driven by a widening network of institutions that value lower volatility strategies, including insurance companies that value private markets strategies such as private debt.

Proliferation of Choices

According to StepStone research and data, from 2000 to 2020, the number of active institutional managers across the private markets more than doubled to approximately 6,400, with approximately 50% of the growth coming from managers based outside of North America and nearly 50% of new entrants coming from asset classes other than private equity.

We believe that the growing number of private markets-focused fund managers increases the operational burdens on institutional investors and will lead to a greater reliance on highly trusted advisers to help investors navigate the complexity associated with global, multi-manager alternative portfolios.

This growth increases demands on private markets investors’ in-house investment management and monitoring teams, which tend to have limited resources, leading to increased demand for third-party expertise from firms like us that offer a comprehensive view across the private markets asset classes.

Diversification Across Asset Classes Is Critical in Today’s Complex Universe of Available Investment Opportunities

The purview of private markets has meaningfully broadened over the last decade.

As investors increase their allocations to private markets investments and become more sophisticated, they are demanding increased diversification across private markets asset classes.

Additionally, investors are trying to limit the number of fund manager relationships they maintain by trimming duplicative strategies and consolidating similar risk and return profiles with fewer fund managers.

These changes have led to an increasing focus on fund managers providing multi-asset class offerings.

Data Advantage and Technology Infrastructure Are Becoming More Important as Investors Demand Greater Analytics and Transparency

Most organizations do not have an adequate technology infrastructure to respond to escalating demands for private markets investment.

As a result, investors seek to partner with firms that not only have a proven track record of investing across multiple asset classes and strategies, but also offer highly sophisticated non-investment functions, such as portfolio monitoring, customized performance benchmarking and associated compliance, administrative and tax capabilities.

Shift Towards Customized Portfolio Construction

We believe that private markets investors have shifted their interest away from generic funds-of-funds toward long term portfolio management through SMAs.

Commingled fund structures have historically worked successfully for investors seeking simple exposure to a fund manager’s reference fund or a diversified portfolio through a fund-of-funds.

However, as private markets evolve and become more institutionalized, there is greater emphasis on the importance of fees, portfolio construction and governance standards, including increased transparency, a greater degree of customization and more advanced risk controls.

The largest, most sophisticated investors have varying needs, depending on their existing exposure to private markets, risk thresholds, return targets, liquidity horizons and other factors.

Greater Focus on Responsible Investing

We believe responsible investing will continue to gain prominence as ESG and impact investing considerations, including climate change, increasingly intersect with, and are reflected in, asset allocation and investment decisions.

We believe this growth will continue over the next several years, driven by investor demand and regulatory influence.

Our Competitive Strengths

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Since our founding, we have invested significant time and resources building a global platform that we believe is well positioned to benefit from the continued growth and globalization of the private markets.

Today, we have investment and implementation professionals in 19 cities across 13 countries across five continents.

Today, we have investment and implementation professionals in 23 cities across 14 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.

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Our focus on offering full-service, customized solutions to our clients is reflected in our business composition.

As of March 31, 2021, we had over 200 bespoke SMAs and focused commingled funds (including high-net-worth programs).

For the year ended March 31, 2021, approximately 48% of our management and advisory fees (excluding fund reimbursement revenues) were generated from SMAs, as compared to 34% from focused commingled funds and 18% from advisory and data services.

As of March 31, 2022, we had 240 bespoke SMAs and focused commingled funds (including high-net-worth programs).

For the year ended March 31, 2022, approximately 46% of our management and advisory fees (excluding fund reimbursement revenues) were generated from SMAs, as compared to 39% from focused commingled funds and 15% from advisory, data and administrative services.

Scale Across Private Markets Asset Classes

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Does not include post-period investment valuation or cash activity.

NAV data for underlying investments is as of December 31, 2020, as reported by underlying managers up to 130 days following December 31, 2020.

Net asset value (“NAV”) data for underlying investments is as of December 31, 2020, as reported by underlying managers up to 115 days following December 31, 2021.

When NAV data is not available by 115 days following December 31, 2021, such NAVs are adjusted for cash activity following the last available reported NAV.

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In many instances, existing clients have increased allocations to additional asset classes and commercial structures and deployed capital across our asset management, advisory and data services businesses.

Our dedicated in-house business development and client relations teams, comprising approximately 75 professionals in offices across 11 countries, maintain an active and transparent dialogue with our diverse and global client base.

In many instances, existing clients have increased allocations to additional asset classes and commercial structures and deployed capital across our asset management and advisory services businesses.

Our dedicated in-house business development and client relations teams, comprising nearly 100 professionals in offices across 11 countries, maintain an active and transparent dialogue with our diverse and global client base.

Consistent with our staffing model on the investment side, we ensure local clients are interfacing with business development professionals who have local expertise.

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Our track record is a key point of differentiation to our clients.

As shown below, we have outperformed the PME+ across all of our investment strategies on an inception-to-date basis as of December 31, 2020.

As shown below, we have outperformed the MSCI ACWI Index, calculated on a Direct Alpha Equivalent basis, the benchmark index used for comparison across all of our investment strategies on an inception-to-date basis as of December 31, 2021.

See “Part II, Item 7.

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Sustainable and recurring management and advisory fees

For the year ended March 31, 2021, approximately 80% of our adjusted revenues came from management and advisory fees.

Over the same period, approximately 58% of our management fees were from SMAs and focused commingled funds with a remaining tenor of seven years or more.

Our management and advisory fees grew from $141 million in fiscal 2018 to $380 million in fiscal 2022, representing a 28% compounded annual growth rate (or 24% excluding the Greenspring acquisition).

For the year ended March 31, 2022, approximately 60% of our management fees were from SMAs and focused commingled funds with a remaining tenor of seven years or more.

We have had a high level of success in retaining our advisory clients with an over 90% retention rate since inception.

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As of March 31, 2022, we had over 330 revenue-generating asset management and advisory programs and therefore are not dependent upon or concentrated in any single investment vehicle or client.

For the year ended March 31, 2021, no single client contributed more than 7% of our total management and advisory fees, and our top 10 clients contributed approximately 30% of our total management and advisory fees.

For the year ended March 31, 2022, no single client contributed more than 6% of our total management and advisory fees, and our top 10 clients, which comprise over 50 separate mandates and commitments to commingled funds, contributed approximately 27% of our total management and advisory fees.

Upside from performance fees

As of March 31, 2022, we had approximately 155 investment programs with the potential to earn performance fees, consisting of over $55 billion in committed capital.

As of March 31, 2021, our accrued carried interest allocations balance, which we view as a backlog of future carried interest allocation revenue, was $897 million with approximately 90 programs in accrued carried interest positions.

As of March 31, 2022, our accrued carried interest allocations balance, which we view as a backlog of future carried interest allocation revenue, was $1,481 million.

Approximately 69% of current accrued carried interest allocations is from StepStone Fund vintages of 2017 or prior.

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We believe our biggest asset is our people, and therefore we focus on consistently recruiting the best people, all of whom are proven leaders in their areas of expertise.

As of March 31, 2021, over 60 partners led the firm, with an average of more than 20 years of investment or industry experience.

Following our IPO, over 500 of our employees have equity interests in us in the form of direct equity interests and/or restricted stock units under our 2020 Long-Term Incentive Plan (“LTIP”), and more than 120 employees are entitled to participate in our carried interest allocations in one or more of the asset classes.

As of March 31, 2022, nearly 80 partners led the firm, with an average of nearly 20 years of investment or industry experience.

As of March 31, 2022, over 480 of our employees have equity interests in us in the form of direct equity interests and/or restricted stock units under our 2020 Long-Term Incentive Plan (“LTIP”), and more than 190 employees are entitled to participate in our carried interest allocations in one or more of the asset classes.

Strategic Priorities

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Deploy already raised committed capital .

As of March 31, 2021, we had approximately $14 billion of capital not yet deployed across our various investment vehicles, which we expect to generate management fees when deployed or activated.

As of March 31, 2022, we had approximately $17 billion of capital not yet deployed across our various investment vehicles, which we expect to generate management fees when invested or activated.

Add New Clients Globally

Over the past decade, we have invested in and grown both our in-house and third-party distribution networks.

As of March 31, 2021, we had more than 70 professionals worldwide dedicated to business development and client relations.

As of March 31, 2022, we had nearly 100 professionals worldwide dedicated to business development and client relations.

Our local business development professionals lead conversations with potential local clients.

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We have seen this pattern developing across many geographies, including Europe, the Middle East, Latin America, Australia, Japan, South Korea, Southeast Asia and China, and have positioned ourselves to take advantage of it by establishing local presence with global investment capabilities.

As of March 31, 2021, we had over 570 employees operating from 19 offices across 13 countries across five continents.

We believe our global footprint places us in a favorable position to tap the global pools of demand for private markets.

Continue to Expand Our Distribution Channel for Private Wealth Clients

According to PwC’s 2020 report, the combined investable assets of high-net-worth and mass affluent individuals are expected to reach approximately $203 trillion by 2025.

However, many high-net-worth and mass affluent individual investors continue to have difficulty accessing private markets investment opportunities because of a lack of products currently available that satisfy regulatory and structural requirements related to liquidity, transparency and administration.

We have developed an investment platform designed to expand access to the private markets for private wealth clients.

Many high-net-worth and mass affluent individual investors continue to have difficulty accessing private markets investment opportunities because of a lack of products currently available that satisfy regulatory and structural requirements related to liquidity, transparency and administration.

We have developed an investment platform, Conversus, designed to expand access to the private markets for private wealth clients.

Leverage Our Scale to Enhance Operating Margins

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Our proprietary database, SPI, provides access to valuable data that forms the cornerstone of our investing process.

We have recently begun licensing SPI to clients in the form of a traditional licensed offering as well as an “advisory-like” service where we offer the SPI license and limited advisory-type support from our team.

We license SPI to clients in the form of a traditional licensed offering as well as an “advisory-like” service where we offer the SPI license and limited advisory-type support from our team.

This has allowed us to support the private markets activities of clients that are too small to participate in our full-service advisory offerings.

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Our strategy will focus on opportunities that expand our scale in existing markets, add complementary capabilities, enhance distribution, or provide access to new markets.

For example, in September 2021, we acquired Greenspring, a venture capital platform, further enhancing our private equity offerings.

The acquisition has enhanced our capabilities as a private markets solution provider, helping us forge deeper relationships with clients, limited partners and general partners, and we believe has made us a clear market leader in venture capital and growth equity.

Investment Strategies

We offer customized solutions across the global private markets through synergistic investment strategies:

primary fund investments, secondary investments, and co-investments.

StepStone constructs solutions across all three investment strategies for each asset class:

private equity, infrastructure, private debt and real estate.

We offer customized solutions across the global private markets through synergistic investment strategies – primary fund investments, secondary investments, and co-investments.

StepStone constructs solutions across all three investment strategies for each asset class – private equity, infrastructure, private debt and real estate.

Being an active investor across all investment strategies provides us with meaningful insights into fund managers, their portfolios, return characteristics and direct investment opportunities.

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Primaries are generally closed-end funds and only accept new capital commitments during a finite period.

Private equity, real estate and infrastructure primary investment funds typically range in duration from ten to twelve years, including extensions, while private debt primary investment funds typically range in duration from eight to ten years.

Private equity, real estate and infrastructure primary investment funds typically range in duration from 10 to 18 years, including extensions, while private debt primary investment funds typically range in duration from eight to 10 years.

Underlying investments in portfolio investments generally have a three to six year range of duration for private equity, with potentially shorter periods for private debt or real estate, and longer for infrastructure.

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Because secondary investments are generally made when a primary investment fund is three to seven years into its investment period and has deployed a significant portion of its capital into portfolio companies, these investments are viewed as more mature.

Secondaries have historically generated high risk-adjusted IRR relative to other strategies in the private equity market.

Secondaries have historically generated a high risk-adjusted internal rate of return (“IRR”) relative to other strategies in the private equity market.

This performance is due, in part, to:

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Since the inception of our private equity secondaries strategy in 2008, we have sourced over 11,400 secondary transactions of which over 63% were limited or proprietary processes as calculated by deal size.

As of March 31, 2021, our secondaries portfolio in aggregate had more than $7 billion in commitments across more than 160 transactions with nearly 300 underlying funds and more than 1,400 underlying companies.

Co-investments

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Our co-investment program benefits from the access to fund managers we have through our scale and the approximately 3,700 meetings and calls that we conduct with fund managers on an annual basis.

In each of these meetings and calls, we follow a protocol of inquiring about co-investments, monitoring compliance with the protocol through an automated tracking system.

As of March 31, 2021, our co-investment portfolio had nearly $15 billion in invested capital across more than 300 investments and more than 170 unique fund managers.

In each of these meetings and calls, we follow a protocol of inquiring about co-investments and monitoring compliance with the protocol through an automated tracking system.

Portfolio Analytics and Reporting

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Data are reconciled daily to ensure data integrity and that pertinent details are entered correctly.

In order to be included in Omni, a fund manager must send us sufficient materials, including specific fields required by us.

In order to be included in Omni, a fund manager must send us sufficient materials, including specific data fields required by us.

Performance data monitored by Omni is available back to 1971.

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Risk Management

We have an investment risk management function overseen by our Head of Portfolio Management and our Head of Risk.

Additionally, taking into account the nature, scale and complexity of our business, we have established a Portfolio and Risk Management Committee for each of our asset classes and additional policies and procedures to give effect to local regulations in jurisdictions around the world.

We have an investment risk management function overseen by our Head of Research and Portfolio Management and our Head of Risk.

Additionally, taking into account the nature, scale and complexity of our business, we have a Portfolio and Risk Management Committee for each of our asset classes and additional policies and procedures to give effect to local regulations in jurisdictions around the world.

Our risk management process focuses on risk identification, measurement, treatment/mitigation, monitoring and management/reporting, with particular risk assessments tailored by asset class and individual client.

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We believe that full integration of ESG factors in both our investment process and internal operations will improve long-term, risk-adjusted returns for our clients.

We developed a responsible investment policy, became a signatory to the UNPRI in 2013 and created a StepStone Responsible Investment Committee in 2017, and have since become a signatory to the TCFD as well as a member of the GRESB and the SASB.

We developed a responsible investment policy, became a signatory to the United Nations Principles for Responsible Investment (“UNPRI”) in 2013 and created a StepStone Responsible Investment Committee in 2017, and have since become a signatory to the Financial Stability Board Task Force on Climate-Related Financial Disclosures (“TCFD”) as well as a member of the GRESB and the Sustainability Accounting Standards Board (“SASB”).

We aim to continually improve and evolve, reviewing our policy annually, holding regular trainings and responsible investment education sessions for our investment teams, and looking for ways to enhance our systems and processes, and have incorporated GRESB data and benchmarks in our decision-making process where relevant.

Responsible Investment in the Investment Process

We have established a Responsible Investment Committee, comprising leadership from all four of our asset classes and other firm leaders.

This Responsible Investment Committee provides oversight and direction for our responsible investment process, including reviewing ESG-focused due diligence within our investment memoranda before they are submitted to the relevant Investment Committee.

We have established an ESG due diligence process that is tailored for each asset class and strategy and incorporated into the broader business, financial, and operational diligence process, detailing a comprehensive set of ESG-related risk and return considerations.

Our Responsible Investment Committee comprises leadership from all four of our asset classes and other firm leaders.

The Responsible Investment Committee provides oversight and direction for our responsible investment process, including reviewing ESG-focused due diligence within our investment memoranda before they are submitted to the relevant Investment Committee.

Our ESG due diligence process is tailored for each asset class and strategy, and incorporated into the broader business, financial, and operational diligence process, detailing a comprehensive set of ESG-related risk and return considerations.

We perform a review of each fund manager and fund’s responsible investment policy, implementation and monitoring framework.

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We use several tools when completing the latter, including information from the manager and company, along with SASB materiality standards, and for specific sectors information from GRESB.

Post investment, we closely monitor the co-investment’s performance, including financial and ESG factors.

Post investment, we monitor the co-investment’s performance, including financial and ESG factors.

The majority of this monitoring is conducted through regular engagement with the fund manager supplemented by Limited Partner Advisory Committees of which we are a member.

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These may include a focus on, for example, climate change, social equity and sustainable development goals.

We have integrated impact considerations throughout the investment process to support our clients from investment due diligence, through to monitoring and reporting on such impact programs.

We believe such impact programs build on our firm’s strong ESG foundations.

We have integrated responsible investment considerations throughout the investment process to support our clients from investment due diligence, through to monitoring and reporting on relevant investments.

We believe impact programs build on our firm’s strong ESG foundations.

The impact sector is fast-growing and we see developments in this sector that we believe will increasingly allow for the deployment of capital at scale.

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We value diversity among our staff and leadership, recognizing that through diversity, we gain a variety of perspectives, views, and ideas which strengthen our ability to strategize, communicate, and deliver on our mission.

In 2017, we developed a Diversity Committee comprising senior members of our firm, to evaluate our current diversity efforts, lead new initiatives to improve diversity and inclusion at our firm, and to continuously improve upon our policies and culture.

Our mission statement on why diversity matters states:

• We believe building and maintaining a diverse and inclusive culture is not only the “right thing to do,” but is also critical from a business standpoint.

• Diversity and inclusion makes businesses stronger as it brings different perspectives to the table, different ways of approaching a problem or analyzing an investment.

In 2017, we developed a global Diversity, Equity & Inclusion Committee comprising senior and mid-level members of our firm across functions and asset classes, to evaluate our current diversity efforts, lead new initiatives to improve diversity, equity and inclusion at our firm, and to continuously improve upon our policies and culture.

Our mission statement on why diversity, equity and inclusion matter states:

• We believe building and maintaining a diverse, equitable and inclusive culture is not only the “right thing to do,” but is also critical from a business standpoint.

• We believe that diversity of backgrounds and perspectives among our employees strengthens our ability to analyze, invest, communicate and deliver on our mission.

• We believe fostering an inclusive culture and working environment enables all colleagues to engage and contribute to their fullest potential.

• We believe diverse and inclusive perspectives drive better outcomes, and better investment decisions.

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This belief is supported by research showing that diversity and inclusiveness contributes to better performing and more sustainable businesses.

We are also focused on growing and developing strong mid-level talent into senior roles.

In addition to our mentorship program, we have a sponsorship program that targets high performing and high potential mid-career women and minorities and provides them with rigorous developmental tools, 360-degree assessments, education and executive coaching opportunities alongside their sponsor.

We have also launched the StepStone Diversity and Inclusion Network which provides networking and educational opportunities to all of our employees globally and has contributed to the development of more flexible working arrangements and improved parental leave policies.

We are also a leading sponsor for the Women in Alternatives Career Forum hosted by WAVE (Women’s Association of Venture & Equity).

The Forum brings together women candidates and employers to discuss a broad continuum of careers in private equity and venture capital.

Further, we host an event in La Jolla for local female students seeking careers in private equity, accounting, human resources and marketing, among others.

We are a strong supporter of the Robert Toigo Foundation, whose mission is to increase the participation of minorities in the financial industry.

To build a diverse workforce, we are focused on expanding our recruiting processes and outreach to broaden our pipeline of potential candidates.

These efforts allow us to build more diverse slates of prospective new hires.

Talent development and retention are also key components of our diversity, equity and inclusion efforts, including our focus on growing and developing strong mid-level talent into senior roles.

In addition to our mentorship program, we have a sponsorship program that includes high performing and high potential mid-career female and diverse professionals and provides them with rigorous developmental tools, 360-degree assessments, education and executive coaching opportunities alongside their sponsor.

We have also continuously reviewed and expanded our parental leave policies and related benefits.

Building awareness and engagement around the importance of diversity, equity and inclusion, both internally and externally, represents another core tenet of our efforts.

As an example, the StepStone Diversity, Equity and Inclusion Network provides networking and educational opportunities to all of our employees globally.

In addition, our employees launched our first two Employee Resource Groups (“ERGs”) focused on the LatinX community and the LGBTQ+ community and we expect additional ERGs to be formed in the future.

Finally, StepStone is a strong supporter of several organizations that advocate for further diversity in our industry.

For example, we are a strong supporter of the Robert Toigo Foundation, whose mission is to increase the participation of minorities in the financial industry.

In addition, we proactively network with affinity organizations at universities and business schools to develop a pipeline of female and minority candidates for consideration.

We also participate in industry groups created to improve diversity among private markets professionals, such as Girls Who Invest, Women’s Association of Venture & Equity, Robert Toigo Foundation, SEO (Seizing Every Opportunity) Alternative Investments, Private Equity Women Investor Network (PEWIN) and Level20 Women in Private Equity.

We also participate in industry groups created to improve diversity among private markets professionals, such as Girls Who Invest, Women’s Association of Venture & Equity (WAVE), SEO (Seizing Every Opportunity) Alternative Investments, Private Equity Women Investor Network (PEWIN), Making the Leap and Level20 Women in Private Equity.

Reducing Our Carbon Footprint

We are focused on the firm’s carbon footprint as we seek carbon neutrality as a stated firm goal.

We are focused on the firm’s carbon footprint as we seek to maintain carbon neutrality as a stated firm goal.

As such the following efforts have been undertaken:

• Engaged a consultant to conduct a firmwide carbon footprint evaluation and purchased carbon offsets to achieve carbon neutrality for 2019 and 2020.

• Engaged a consultant to conduct a comprehensive carbon footprint measurement and analysis and have funded several sustainable development projects and purchased carbon offsets to offset carbon emissions to achieve status as a carbon neutral company since 2019.

• Implemented tailored carbon reduction initiatives across our global offices and as part of our vendor due diligence process, by adding specific climate-related queries to help us understand and evaluate vendor environmental efforts such as collecting information on any targets and initiatives in place to minimize or offset emissions and reduce waste.

• Introduced a range of initiatives focused on reducing energy, waste and water usage across the firm, including recycling, transitioning to electronic tablets during client and other business meetings and generally encouraging a “paperless” approach where practicable.

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We actively monitor participation in these programs.

We recently established a more formalized charitable giving program with an employee matching component.

We have also established a formalized charitable giving program with an employee matching component.

Recently, our Community Engagement Committee has encouraged employee contributions and volunteer efforts toward Ukraine’s relief and recovery efforts.

We believe the value proposition we offer across our asset management, advisory, data, portfolio monitoring and reporting services has resulted in strong relationships with our clients.

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Private Wealth Sector Strategy

We have served defined contribution plans, family office and private wealth clients for over ten years, and have more recently expanded to delivering our institutional capabilities to high-net-worth and mass affluent investors.

We have served defined contribution plans, family offices and private wealth clients for over 10 years, and have more recently expanded to delivering our institutional capabilities to high-net-worth and mass affluent investors.

Our platform leverages our deep expertise across private equity, infrastructure, private debt and real estate to develop and distribute innovative products for individual investors, integrating primaries, secondaries and co-investments to create customized product solutions for the private wealth sector.

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• global distribution of our institutional funds to family office investors and high-net-worth investors.

In October 2020, Conversus, our investment platform designed to expand access to the private markets for high-net-worth and accredited investors, held the first closing for Conversus StepStone Private Markets (“CPRIM”), a fund that offers, through a single investment, access to major private markets asset classes in a proportion dynamically allocated by us.

In October 2020, Conversus, our investment platform designed to expand access to the private markets for high-net-worth and accredited investors, held the first closing for its inaugural fund Conversus StepStone Private Markets (“CPRIM”), a fund that offers, through a single investment, access to major private markets asset classes in a proportion dynamically allocated by us.

As of May 1, 2022, CPRIM surpassed $550 million of AUM and has generated a total return per share of 76.6% through April 30, 2022 since inception in October 2020.

We believe CPRIM offers the following areas of differentiation to potential investors:

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Key Terms of SMAs and Focused Commingled Funds

Management fees from SMAs are generally based on a contractual rate applied to net invested capital under management, although specific terms vary significantly from client to client and may be based on capital commitment or NAV.

Management fees from SMAs are generally based on a contractual rate applied to net invested capital, although specific terms vary significantly from client to client and may be based on capital commitment or NAV.

Management fees from focused commingled funds are generally based on a contractual rate applied initially to limited partners’ capital commitments, although specific terms vary significantly from fund to fund and may be based on net invested capital or NAV.

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We refer to these provisions as “clawbacks.”

Advisory and Data Services

Depending on the mandate, advisory and data services may include one or more of the following:

Advisory, Data and Administrative Services

Depending on the mandate, advisory, data and administrative services may include one or more of the following for our clients:

(i) recurring support of portfolio construction and design;

(ii) discrete or project-based due diligence, advice, investment recommendations on specific private markets investments (typically primaries) and special projects;

(iii) detailed review of existing private markets investments, including repositioning recommendations where appropriate at the portfolio level;

(iv) consulting on investment policies, strategic plans, and asset allocation to investment boards and committees;

(v) licensed access to our proprietary SPI platform, which enables clients to expand their market coverage by accessing the collective knowledge of our SPAR team;

or (vi) licensed access to a number of additional proprietary tools that we use and license in service of our clients, including our Pacing tool that enables clients to forecast liquidity needs.

(ii) discrete or project-based due diligence, advice, and investment recommendations;

(iii) detailed review of existing private markets investments, including portfolio-level repositioning recommendations where appropriate;

(iv) consulting on investment pacing, policies, strategic plans, and asset allocation to investment boards and committees;

(v) licensed access to our proprietary data and technology platforms, including SPI and our other proprietary tools;

or (vi) administrative services to unaffiliated investment advisors.

Mandates for SPAR services typically include licensed access to Omni, our proprietary web-based performance monitoring and reporting solution.

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Our advisory relationships comprised $436 billion of our AUA and $12 billion of our AUM as of March 31, 2022.

Our advisory and data services clients are generally charged annual fixed fees, which vary depending on the services we provide and the volume of capital deployed.

Our advisory, data and administrative services clients are generally charged annual fixed fees, which vary depending on the services we provide and the volume of capital deployed.

We generally do not earn incentive fees on advisory contracts.

Our advisory and data services contracts have various durations ranging from one year to indefinite terms and renew at the option of the client at the end of the stated term.

Advisory and data service contracts can typically be terminated by our clients for any reason upon short notice, generally 30 to 90 days.

Advisory and data service contracts with governmental pension plans typically are subject to a renewal process involving our submission of information in response to an RFP issued by the client.

Our advisory, data and administrative services contracts have various durations ranging from one year to indefinite terms and renew at the option of the client at the end of the stated term.

Advisory, data and administrative service contracts can typically be terminated by our clients for any reason upon short notice, generally 30 to 90 days.

Advisory, data and administrative service contracts with governmental pension plans typically are subject to a renewal process involving our submission of information in response to an RFP issued by the client.

We compete in all aspects of our business with a large number of asset management firms, commercial banks, broker-dealers, insurance companies and other financial institutions.

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We compete primarily in the advisory services area of the business with firms that are regionally based and with a select number of large consulting firms for whom private markets investments is only one, often small, portion of their overall business.

See “Risk Factors—Risks Related to Our Industry— The investment management and investment advisory business is intensely competitive .”

In order to grow our business, we must maintain our existing client base and attract additional clients in advisory services, SMA and focused commingled fund areas of the business.

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The asset management business is intensely competitive, and in addition to the above factors, our ability to continue to compete effectively will depend upon our ability to attract highly qualified investment professionals and retain existing employees.

See “Risk Factors—Risks Related to Our Business— Our ability to retain our senior leadership team and attract additional qualified professionals is critical to our success .”

Regulatory Environment

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We also offer competitive health and wellness benefits, parental benefits described further below, volunteer time off, and company contributions to employees’ 401(k) plans.

Becoming a public company also allowed us to diversify our employee ownership by providing equity grants to employees.

In connection with our IPO, we granted restricted stock units (“RSUs”) pursuant to our LTIP to over 500 of our approximately 560 employees at the time of the offering, and our LTIP provides us the ability to offer a variety of equity-based awards in the future to further incentivize our employees.

As a public company, we are able to diversify our employee ownership by providing equity grants to employees.

In connection with our IPO, we granted restricted stock units (“RSUs”) pursuant to our LTIP to over 500 of our approximately 560 employees at the time of the offering.

Our LTIP provides us the ability to offer a variety of equity-based awards in the future to further incentivize our employees.

In February 2022, we granted restricted stock units to approximately 250 of our employees.

In addition, we award annually a portion of carried interest allocations earned by us to certain employees.

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We have established various initiatives and programs to promote and foster diversity and inclusion within StepStone and the broader financial services community, including:

• StepStone Diversity & Inclusion Committee – The committee was established to promote, monitor and implement our diversity and inclusion strategy, and comprises employees from different asset classes, functions, seniority, geographies, gender and race, ethnicity and national origin.

• StepStone Diversity & Inclusion Network – The network provides opportunities for our employees to learn about various diversity and inclusion matters and initiatives and to meet and talk to experts who are championing these causes.

• StepStone Diversity, Equity & Inclusion Committee – The committee was established to promote, monitor and implement our diversity and inclusion strategy, and comprises employees from different asset classes, functions, seniority, geographies, gender and race, ethnicity and national origin.

• StepStone Diversity, Equity & Inclusion Network – The network provides opportunities for our employees to learn about various diversity, equity and inclusion matters and initiatives and to meet and talk to experts who are championing these causes.

• Mentorship and Sponsorship Programs – The mentorship program provides interested employees with structured access to one of their more senior colleagues who provide guidance and career advice.

The sponsorship program pairs promising mid-level women and minorities with one of the firm’s partners as well as an executive coach and is intended to support participants in advancing their professional development and leadership skills.

The sponsorship program pairs promising mid-level employees, including female and diverse professionals, with one of the firm’s partners as well as an executive coach and is intended to support participants in advancing their professional development and leadership skills.

• Partnerships and Outreach – In addition to promoting diversity and inclusion through our own events, such as hosting events encouraging undergraduate female students to pursue careers in finance, we sponsor and partner with several organizations dedicated to making financial services more diverse and inclusive.

• Expanded Benefits – We provide benefits such as paid parental leave, parental leave coaching for managers and employees, paying for travel for newborns and caretakers when the employee has business required travel, paid shipping of breast milk, wellness rooms for new parents at our offices and paid volunteer time off.

Our diversity statistics as of May 31, 2021 are set forth below:

__________________________

Diverse indicates female and/or ethnic racial minority.

Available Information

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business