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Item 1. Business

2024-05-24 compared with 2023-05-26 · 130 added, 140 removed, 391 unchanged (41% of the section changed)

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

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.

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• Our proprietary data and technology .

Our proprietary data and technology platforms, including StepStone Private Markets Intelligence (“SPI”), our private markets intelligence database, Omni, our performance monitoring software, and Pacing, our portfolio cash flow, investment allocation and liquidity forecasting tool provide valuable information advantages, enhance our private markets insight, improve operational efficiency and facilitate portfolio monitoring and reporting functions.

Our proprietary data and technology platforms, including SPI by StepStone (“SPI”), a platform comprising SPI Research, our private markets intelligence database, SPI Reporting, our performance monitoring software, and SPI Pacing, our portfolio cash flow, investment allocation and liquidity forecasting tool provide valuable information advantages, enhance our private markets insight, improve operational efficiency and facilitate portfolio monitoring and reporting functions.

These benefits accrue to our clients and to us.

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

As of March 31, 2023, 95 partners led the firm, with an average of nearly 20 years of investment or industry experience.

As of March 31, 2024, 100 partners led the firm, with an average of over 20 years of investment or industry experience.

As of March 31, 2024, we had 990 total employees, including 335 investment professionals and 655 employees across our operating team and implementation teams dedicated to sourcing, executing, analyzing and monitoring private markets opportunities.

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During the year ended March 31, 2024, we reviewed over 3,900 investment opportunities and conducted approximately 5,300 meetings with fund managers across multiple geographies and all four asset classes.

During the 12 months ended December 31, 2022, we allocated approximately $80 billion in capital to private markets on behalf of our clients, excluding legacy funds, feeder funds and research-only, non-advisory services.

During the last three years ended December 31, 2023, we allocated an average of $70 billion annually in capital to private markets on behalf of our clients, excluding legacy funds, feeder funds and research-only, non-advisory services.

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

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Focused commingled funds comprised $49 billion of our AUM as of March 31, 2024.

• Advisory, data and administrative services .

• Advisory and data 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;

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

and (vi) administrative services to unaffiliated investment advisors.

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

Advisory relationships comprised $521 billion of our AUA and $14 billion of our AUM as of March 31, 2024.

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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, Omni.

Omni tracked detailed information on over $905 billion of client commitments as of March 31, 2023, inclusive of our total capital responsibility, previously exited investments and investments of former clients.

Mandates for portfolio analytics and reporting services typically include licensed access to our proprietary performance monitoring software, SPI Reporting.

We provided portfolio analytics and reporting on over $685 billion of client commitments as of March 31, 2024, inclusive of our total capital responsibility, previously exited investments and investments of former clients.

Our Competitive Strengths

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We believe our focus on hiring local talent, supported by a deep bench of experienced investment professionals, has been critical in helping us attract a blue-chip, global client base.

During the year ended March 31, 2023, nearly two-thirds of our management and advisory fees came from clients based outside of the United States.

Full-Service, Customized Approach to Delivering Solutions

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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, 2023, we had 279 bespoke SMAs and focused commingled funds (including high-net-worth programs).

As of March 31, 2024, we had 314 bespoke SMAs and focused commingled funds.

For the year ended March 31, 2024, approximately 51% of our management and advisory fees were generated from focused commingled funds, 38% from SMAs, 10% from advisory, data and administrative services and 1% from fund reimbursement revenues.

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

Net asset value (“NAV”) data for underlying investments is as of December 31, 2022, as reported by underlying managers up to 114 days following December 31, 2022.

When NAV data is not available 114 days following December 31, 2022, such NAVs are adjusted for cash activity following the last available reported NAV.

Net asset value (“NAV”) data for underlying investments is as of December 31, 2023, as reported by underlying managers up to the business day occurring on or after 115 days following December 31, 2023.

When NAV data is not available by the business day occurring on or after 115 days following December 31, 2023, such NAVs are adjusted for cash activity following the last available reported NAV.

(1) Allocation of AUM by asset class is presented by underlying investment asset classification.

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Our data are organized around our proprietary software systems:

• SPI monitors investment opportunities and is used by our investment professionals as an investment decision making tool.

As of March 31, 2023, SPI contained information on over 82,000 companies, over $28 trillion of AUM across over 42,000 funds and over 16,000 fund managers showing fund-level performance for nearly 15,000 funds.

SPI initially augmented our own due diligence, investment and portfolio construction processes.

• SPI Research monitors investment opportunities and is used by our investment professionals as an investment decision making tool.

As of March 31, 2024, SPI Research contained information on approximately 18,000 fund managers, 46,000 funds, 105,000 companies, and 227,000 investments .

SPI Research initially augmented our own due diligence, investment and portfolio construction processes.

In response to growing industry demand for private markets intelligence, we subsequently developed an interface for direct client access.

Through SPI, our clients can access detailed, regularly updated information on managers through an intuitive, web-based user interface.

Through SPI Research, our clients can access detailed, regularly updated information on managers through an intuitive, web-based user interface.

Our research professionals utilize this technology to collect and develop qualitative and quantitative perspectives on investment opportunities.

• Omni monitors the performance of our clients’ investments and allows users, including our clients, to generate detailed analytics.

As of March 31, 2023, Omni tracked detailed information on nearly 9,000 investments across more than 85,000 underlying portfolio companies.

Omni is used extensively by our 105 person StepStone Portfolio Analytics & Reporting (“SPAR”) team to provide customized portfolio analytics and reporting on the performance of our clients’ investments.

We also have a number of additional proprietary tools that we use and license in service of our clients, including our Pacing tool that enables clients to forecast liquidity needs, our daily valuation engine that facilitates asset management solutions offering periodic subscription or liquidity (such as the mass affluent and defined contribution plan markets), ESG reporting dashboards that allow our clients to monitor their portfolio against these non-financial metrics, and a secondary pricing engine that drives operating leverage in our evaluation of larger and more complex transactions.

The combination of SPI, Omni, and our other tools offers an end-to-end software technology and data solution that delivers significantly more information than most private markets investors have available, providing us with a meaningful advantage in our investment, due diligence and client relations efforts.

• SPI Reporting monitors the performance of our clients’ investments and allows users, including our clients, to generate detailed analytics.

SPI Reporting is used extensively by our StepStone Portfolio Analytics & Reporting (“SPAR”) team to provide customized portfolio analytics and reporting on the performance of our clients’ investments.

We also have a number of additional proprietary tools that we use and license in service of our clients, including our SPI Pacing tool that enables clients to forecast liquidity needs, our daily valuation engine that facilitates asset management solutions offering periodic subscription or liquidity (such as the mass affluent and defined contribution plan markets), ESG reporting dashboards that allow our clients to monitor their portfolio against these non-financial metrics, and a secondary pricing engine that drives operating leverage in our evaluation of larger and more complex transactions.

The combination of SPI Research, SPI Reporting, and our other tools offers an end-to-end software technology and data solution that delivers significantly more information than most private markets investors have available, providing us with a meaningful advantage in our investment, due diligence and client relations efforts.

Data science within private markets has historically been difficult due to the lack of standardization and the labor-intensive process of collecting and processing information.

We have a dedicated Data Science and Engineering team with approximately 30 members, which manages and continues to develop our SPI and Omni platforms (and our additional proprietary tools built on these platforms) and supports our efforts to be a market leader in an area that is essential to evaluating private markets.

We have a dedicated Data and Software Engineering team, which manages and continues to develop our SPI Research and SPI Reporting platforms (and our additional proprietary tools built on these platforms) and supports our efforts to be a market leader in an area that is essential to evaluating private markets.

Strong Investment Performance Track Record

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Our management and advisory fees grew from $191 million in fiscal 2019 to $585 million in fiscal 2024, representing a 25% compounded annual growth rate.

For the year ended March 31, 2023, 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, 2024, we had $22.6 billion of committed but undeployed fee-earning capital, which we expect to generate management fees when deployed or activated.

As of March 31, 2023, we had nearly 400 revenue-generating asset management and advisory programs and therefore are not dependent upon or concentrated in any single investment vehicle or client.

As of March 31, 2024, we had approximately 425 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, 2024, no single client contributed more than 6% of our total management and advisory fees, and our top 10 clients, which comprise over 55 separate mandates and commitments to commingled funds, contributed approximately 23% of our total management and advisory fees.

Upside from performance fees

As of March 31, 2023, we had approximately 180 investment programs with the potential to earn performance fees, consisting of over $63 billion in committed capital.

As of March 31, 2024, we had over 200 investment programs with the potential to earn performance fees, consisting of over $75 billion in committed capital.

As of March 31, 2024, our accrued carried interest allocations balance, which we view as a backlog of future carried interest allocation revenue, was $1,354 million.

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Led by a Seasoned Team of Professionals Whose Interests Are Aligned with Clients and Our Stockholders

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

As of March 31, 2023, 95 partners led the firm, with an average of nearly 20 years of investment or industry experience.

As of March 31, 2023, over half of our employees have equity interests in us in the form of direct equity interests and/or restricted stock units under our 2020 Long-Term Incentive Plan (“LTIP”), and more than 200 employees are entitled to participate in our carried interest allocations in one or more of the asset classes.

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

As of March 31, 2024, 100 partners led the firm, with an average of over 20 years of investment or industry experience.

As of March 31, 2024, nearly half of our employees have equity interests in us in the form of direct equity interests and/or restricted stock units under our 2020 Long-Term Incentive Plan (“LTIP”), and more than 200 employees are eligible to participate in our carried interest allocations in one or more of the asset classes.

Strategic Priorities

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

As of March 31, 2023, we had approximately 130 professionals worldwide dedicated to business development, marketing and client relations.

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

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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, StepStone Private Wealth LLC (“SPW”) which was formerly known as Conversus, designed to expand access to the private markets for accredited investors.

We have developed an investment platform, StepStone Private Wealth LLC (“SPW”), designed to expand access to the private markets for accredited investors.

Leverage Our Scale to Enhance Operating Margins

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Monetize Our Data and Analytics Capabilities

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

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.

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

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

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

Omni and SPI both allow users to leverage our research data, further enhancing our client experience and services.

We also strategically use SPI and Omni as a competitive product bundle, for example, by providing both offerings to clients to secure more comprehensive mandates.

SPI Reporting and SPI Research both allow users to leverage our research data, further enhancing our client experience and services.

We also strategically use SPI Research and SPI Reporting as a competitive product bundle, for example, by providing both offerings to clients to secure more comprehensive mandates.

Pursue Accretive Transactions to Complement Our Platform

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We aim to build top-performing global private markets portfolios through a research-intensive investment approach and strive to identify fund managers with top-quartile performance through active sourcing and in-depth evaluation, complemented by excellent deal execution.

We leverage our SPI database of over 82,000 companies, over $28 trillion of AUM across over 42,000 funds and over 16,000 fund managers showing fund-level performance for nearly 15,000 funds to track a large cross section of fund managers and funds globally—irrespective of fundraising cycles.

Secondaries refer to investments in existing private markets funds through the acquisition of an existing interest in a private markets fund by one investor from another in a negotiated transaction.

We leverage our SPI Research database to track a large cross section of fund managers and funds globally—irrespective of fundraising cycles.

Secondaries refer to investments in existing private markets funds or companies through the acquisition of an existing interest by one investor from another in a negotiated transaction.

In so doing, the buyer will agree to take on future funding obligations in exchange for future returns and distributions.

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.

Because secondary investments are generally made when a primary investment fund is three to seven years into its life, these investments are viewed as more mature.

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

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• valuation analysis to determine which fund managers are appropriately reflecting risk in their reporting.

Fund managers’ information is entered into Omni, our proprietary, web-based application and database for private market portfolio analytics and reporting.

Fund managers’ information is entered into SPI Reporting, our proprietary, web-based application and database for private market portfolio analytics and reporting.

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

In order to be included in 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.

Omni supports investment monitoring and portfolio management and enhances transparency by providing users with a fast and intuitive user interface and web-based access to portfolio data.

Omni users can access all of the data tracked by SPAR, including daily cash flow activity, quarterly valuations, and underlying asset-level detail, and have fully integrated access to our SPI research platform.

Omni users can analyze investment-level and underlying asset-level performance by custom investment attributes, apply data filters, run grouped or granular reports while also having the ability to easily export these analyses.

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

Performance data monitored by SPI Reporting is available back to 1971.

SPI Reporting supports investment monitoring and portfolio management and enhances transparency by providing users with a fast and intuitive user interface and web-based access to portfolio data.

SPI Reporting users can access all of the data tracked by SPAR, including daily cash flow activity, quarterly valuations, and underlying asset-level detail, and have fully integrated access to our SPI by StepStone platform.

SPI Reporting users can analyze investment-level and underlying asset-level performance by custom investment attributes, apply data filters, run grouped or granular reports while also having the ability to easily export these analyses.

Users also have the ability to edit, run and export various portfolio analytics, including analyzing various return and preference metrics commonly used in the investment industry, such as return J-Curve, cash flow activity over time, multi-period internal rates of return and time-weighted rate of return.

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Responsible Investment Philosophy

Responsible investment, which encompasses ESG and impact investing considerations, is a core tenet of our operating and investment philosophies.

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 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 is a core tenet of our operating and investment philosophies.

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

We aim to continually improve and evolve our practices.

As part of our responsible investment journey, we:

• Developed a responsible investment policy;

• Became a signatory to the United Nations Principles for Responsible Investment (“UNPRI”) in 2013;

• Created a StepStone Responsible Investment Committee in 2017;

• Became a signatory to the Financial Stability Board Task Force on Climate-Related Financial Disclosures (“TCFD”);

• Became a member of the GRESB and the Sustainability Accounting Standards Board (“SASB”);

• Implemented a stewardship policy reflecting an emphasis on stewardship practices in our investments;

• Developed bespoke responsible investing guidance materials for fund managers across our asset classes;

• Became a signatory to the UK Stewardship Code.

• Adopted a Responsible Investment policy in 2014, which is reviewed annually;

• Became a formal supporter of the Task Force on Climate-Related Financial Disclosures (“TCFD”);

• Became a member of the Sustainability Accounting Standards Board (“SASB”) and created asset class responsible investment workgroups in 2019;

• Became a member of the GRESB and a founding signatory to the ILPA Diversity in Action initiative in 2020;

• Implemented standalone policies for climate and stewardship in 2022, reflecting TCFD-aligned climate considerations within our investment process and our approach to corporate sustainability, as well as our continued emphasis on stewardship practices in our investments;

• Became a founding financial services member supporting Ownership Works in 2022, a consortium of organizations dedicated to promoting employee ownership programs;

• Became a signatory to the UK Stewardship Code in 2023.

Responsible Investment in the Investment Process

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

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

Composed of leaders from across our organization, the Responsible Investment Committee provides oversight and direction for our responsible investment process.

Among other things, it reviews ESG-focused due diligence within our investment memoranda before they are submitted to the relevant Investment Committee.

Our 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.

Key areas where we focus are:

• the level of engagement of partner and senior-level management in responsible investment policy and monitoring;

• whether or not a fund manager or fund clearly identified a responsible person for designing, executing and implementing its responsible investment policy;

• understanding what policy framework the fund manager or fund is adhering to (e.g., UNPRI, TCFD);

• the approach to responsible investment training and how the fund manager or fund ensures it is current with best practice;

• how the fund manager or investee identifies and manages ESG risks and opportunities including use of external resources;

• how the fund manager or investee identifies specific risks concerning modern slavery and human trafficking, particularly in their supply chains;

• whether and how the fund manager establishes non-financial impact objectives in addition to financial ones;

• how the fund manager assesses and measures non-financial impacts;

• how the fund manager or investee explicitly considers climate change with both a risk and return lens;

• how ESG compliance is monitored and reported to various stakeholders.

Primary Investments

For all primary investments, we perform a review of each fund manager and fund’s responsible investment policy, implementation and monitoring framework.

We evaluate the level of commitment, accountability and leadership engagement across the fund manager.

We seek to understand how aligned their ESG processes are to established frameworks and how specific material risks and opportunities are considered including climate and modern slavery (e.g., forced labor, child labor, and human trafficking).

Further, we evaluate their ESG monitoring and reporting systems.

Where relevant, for impact strategies, we layer on an additional layer of due diligence focused on the quality of the fund manager's impact practices.

Co-investments

With respect to our co-investments, we complete an ESG assessment at both the manager and asset level.

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

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

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

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

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

In cases where we hold a board or observer seat at the fund, we seek to be active in ensuring these issues are standard agenda items.

In cases where we hold a board or observer seat at the fund, we seek to be active in advocating for material issues as standard agenda items.

With respect to secondary transactions, we utilize primary ESG assessments along with an evaluation of the ESG risk and opportunities of the key, value-driving assets.

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As such, our platform creates a significant advantage due to the breadth of information we typically already have on the fund manager in a secondary transaction.

We have observed that investors globally are increasingly focused on the non-financial impacts of their investment programs, referred to as impact investing.

We look to work with clients in crafting customized investment programs that target non-financial objectives side-by-side with financial objectives.

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

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.

We have observed that investors globally are increasingly focused on the real world outcomes of their investment programs, typically referred to as impact investing.

We look to work with clients in crafting customized investment programs that target non-financial objectives side-by-side with commercial financial objectives.

These may include a focus on, for example, climate change, social equity and the United Nations’ Sustainable Development Goals.

We believe impact programs build on our firm’s strong ESG foundations supplemented with specific impact practice considerations and evaluation.

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 are committed to incorporating ESG factors across our operational decision making and internal policies.

Diversity, Equity and Inclusion

Our key focus areas are diversity, equity and inclusion (“DEI”), managing our carbon footprint, and community engagement.

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 global Diversity, Equity & Inclusion Committee comprising senior and mid-level members of our firm across our asset classes and geographies, to evaluate and support our 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.

We believe that a diverse and inclusive workforce improves the investment process because the different life experiences, backgrounds and insights of our professionals can be leveraged to perform more effective diligence and analysis.

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

In addition to being the right thing to do, we believe building and maintaining a diverse, equitable and inclusive firm is critical to our mission and our success as a business.

In short, we believe DEI:

• Makes us better investors, sharpens our analysis and makes us more effective communicators;

• Enables our firm to tap into our employees’ full potential;

• Improves performance and contributes to a more sustainable enterprise.

In 2017, we established a global DEI Committee comprising senior and mid-level members from across our organization to evaluate our current diversity efforts, lead new initiatives to improve DEI at our firm, and continue to improve upon our policies and culture.

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 for high performing and high potential mid-career professionals, with a focus on female and diverse team members, and provides them with rigorous developmental tools, 360-degree assessments, education and executive coaching opportunities alongside sponsorship by one of the firm’s partners.

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 have launched multiple Employee Resource Groups (“ERGs”) established with the intention of providing a supportive community for employees of certain affinity groups and their allies such as the LatinX community and the LGBTQ+ community.

In fiscal 2023, the number of our ERGs grew to five with the addition of a Pan-Asian, parental and environmental ERGs.

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 (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 to maintain carbon neutrality as a stated firm goal.

We actively monitor our progress in this regard.

Talent development, promotion and retention are also key components of our DEI efforts.

This includes sponsorship programs, education and executive coaching opportunities.

We have also continued to review and expand relevant policies, including our parental leave policies and related benefits.

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

As an example, our employees have launched multiple Employee Resource Groups (“ERGs”) established with the intention of providing a supportive community for employees of certain affinity groups and their allies .

In addition, from time to time, we host internal and external networking and educational events in various jurisdictions, in support of DEI.

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

Managing Our Carbon Footprint

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

As such, the following efforts have been undertaken:

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

• Implementing 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.

• Introducing 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.

• Prioritizing selection of highly rated Leadership in Energy and Environmental Design (LEED) or comparable standard in leasing office space, and attaining certification as carbon neutral and receiving a five-star energy rating for one of our global offices.

• Since 2019, engaged a consultant on an annual basis to conduct a comprehensive carbon footprint measurement and analysis of our operations.

Based on this analysis, we have funded several sustainable development projects to offset our carbon emissions and achieve carbon neutral status within our operations;

• Implementing tailored carbon reduction initiatives across our global offices, including recycling protocols, transitioning to electronic tablets during meetings and encouraging a “paperless” approach where practicable.

As part of our vendor due diligence process, we have added specific climate-related queries to help us understand and evaluate vendor environmental efforts, such as whether they measure their carbon footprint and have initiatives in place to minimize or offset emissions;

• Prioritizing selection of highly rated Leadership in Energy and Environmental Design (LEED) or comparable standard in leasing office space.

Community Engagement

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Projects are organized locally and partnered with various service organizations within our communities dedicated to causes encompassing public service, education, environmental efforts, healthcare, and military veterans.

Additionally, we have implemented a volunteer time off policy that gives employees 16 hours per calendar year of paid time to volunteer at the organization of their choice.

Additionally, we have implemented a volunteer time-off policy that gives employees 16 hours per calendar year of paid time to volunteer at an organization of their choice.

We actively monitor participation in these programs.

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

In fiscal 2023, we donated to GiveWell’s Top Charities Fund which allocates donations to organizations and causes that have been determined to have the greatest ability to make a meaningful difference.

We also made a donation to the International Rescue Committee, a well established humanitarian organization with a global presence that is dedicated to providing lifesaving aid to people in communities devastated by conflict and disaster.

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 solutions for registered investment advisors, independent broker dealers and wirehouses in the United States and wealth managers internationally;

• registered funds available to accredited investors in the United States;

• registered funds available to mass affluent and accredited investors in the United States;

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

In October 2020, SPW held the first closing for its inaugural fund, StepStone Private Markets (“SPRIM”), which was formerly known as Conversus StepStone Private Markets or CPRIM, a fund that offers, through a single investment, access to major private markets asset classes in a proportion dynamically allocated by us.

In fiscal 2023, SPW subsequently launched its StepStone Private Venture and Growth fund (“SPRING”), and expanded its distribution outside the United States to include Europe and Australia.

As of May 1, 2023, the total retail platform assets surpassed $1.6 billion of AUM, and SPRIM and SPRING have generated annualized returns of approximately 30% and 20%, respectively, since the inception of each fund.

We believe SPRIM offers broad diversification in private markets.

Through a single investment in SPRIM, investors gain exposure to four major asset classes within the private markets:

private equity, infrastructure, private debt and real estate.

We believe SPRING offers diversified exposure across the innovation economy by providing global access to top-tier venture and growth managers.

In addition, our Private Wealth funds offer the following areas of differentiation to potential investors:

Our Private Wealth funds offer the following areas of differentiation to potential investors:

• Favorable structure .

SPRIM and SPRING are structured to provide 1099 tax reporting instead of K-1s, a single investment instead of recurring capital calls, and potential liquidity in the form of regular, current income.

Our funds are structured to provide 1099 tax reporting instead of K-1s for US investors, a single investment instead of recurring capital calls, and the potential for periodic liquidity.

• Attractive track record and deep knowledge and expertise in private markets .

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• Proprietary database and insights .

Our proprietary SPI system represents one of the industry’s most comprehensive and powerful databases.

Our proprietary SPI by StepStone system represents one of the industry’s most comprehensive and powerful databases.

• Differentiated access .

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We refer to these provisions as “clawbacks.”

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:

Advisory and Data Services

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

(i) recurring support of portfolio construction and design;

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(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.

Omni allows our clients to customize performance measurement and benchmarking according to their unique specifications.

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

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

SPI Reporting allows our clients to customize performance measurement and benchmarking according to their unique specifications.

Our advisory relationships comprised $521 billion of our AUA and $14 billion of our AUM as of March 31, 2024.

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.

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.

We generally do not earn incentive fees on advisory contracts.

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.

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.

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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Failure to comply with the requirements of the Investment Advisers Act or the rules and regulations promulgated by the SEC could have a material adverse effect on our business.

Recently, the SEC has adopted a number of significant new rules that may have a significant impact on our business, including new rules imposing a number of significant new disclosure and reporting requirements on private fund advisers and imposing substantive restrictions on certain types of practices by the private fund advisers that the SEC has deemed to be unfair or present conflicts of interest.

In addition, the SEC has recently adopted amendments to Regulation S-P (the privacy regulations applicable to financial institutions, including investment advisers) that will expand the scope of the regulation and mandate notification to clients and customers in the event of privacy breaches.

A number of new rules have also been proposed by the SEC that, if adopted, could also have a significant impact on our business.

These include new rules proposed by the SEC on ESG investing, safekeeping of client assets, management of cybersecurity risk by investment advisors, monitoring of service providers, and the use of artificial intelligence.

In addition, the SEC and FinCEN have recently jointly proposed a new rule that will require investment advisers to adopt formal anti-money laundering and customer identification programs.

If all of these rules are adopted in substantially the form in which they have been proposed, this will result in a significant increase in the compliance risks and regulatory burden of operating our business.

Our SMAs and the majority of our focused commingled funds are not registered under the Investment Company Act because we only form SMAs for, and offer interests in our focused commingled funds to, persons who we reasonably believe to be “qualified purchasers” as defined in the Investment Company Act.

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We provide investment advisory and other services and raise funds in a number of countries and jurisdictions outside the United States.

In a number of these countries and jurisdictions, which include the UK, European Union (“EU”), the European Economic Area (“EEA”) and certain of the individual member states of each of the EU and EEA (including Ireland and Luxembourg), Switzerland, Japan, Korea, Canada and Brazil, our operations, and in some cases our personnel, are subject to regulatory oversight and affirmative requirements.

In a number of these countries and jurisdictions, which include the UK, European Union (“EU”), the European Economic Area (“EEA”) and certain of the individual member states of each of the EU and EEA (including Ireland and Luxembourg), Switzerland, Japan, Korea, Singapore, Canada and Brazil, our operations, and in some cases our personnel, are subject to regulatory oversight and affirmative requirements.

These requirements variously relate to registration, licenses for our personnel, periodic inspections, the provision and filing of periodic reports and obtaining certifications and other approvals.

In the EU, we are subject to the EU Alternative Investment Fund Managers Directive (“AIFMD”) and the Undertakings for Collective Investment in Transferable Securities Directive (“UCITS”) under which we are subject to regulatory requirements regarding, among other things, registration for marketing activities, the structure of remuneration for certain of our personnel and reporting obligations.

In the EU, we are subject to the EU Alternative Investment Fund Managers Directive (“AIFMD”), the EU Alternative Investment Fund Managers Directive II (“AIFMD II”) and the Undertakings for Collective Investment in Transferable Securities Directive (“UCITS”) under which we are subject to regulatory requirements regarding, among other things, registration for marketing activities, the structure of remuneration for certain of our personnel and reporting obligations.

The EU published AIFMD II in the Official Journal of the European Union on March 26, 2024.

AIFMD II entered into force on April 15, 2024 and member states will have two years after publication to implement the rules into national law.

Our EU-based subsidiary, StepStone Group Europe Alternative Investments Limited (“SGEAIL”), engages in regulated activities within the EU.

SGEAIL is authorized by the Central Bank of Ireland pursuant to AIFMD and UCITS and authorized to provide certain MiFID II services, and is preparing for compliance with AIFMD II.

Switzerland and individual member states of the EU have imposed additional requirements that may include internal arrangements with respect to risk management, liquidity risks, asset valuations, and the establishment and security of depository and custodial requirements.

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Continuing compliance with MiFID II may result in greater overall complexity, higher compliance, administration and operational costs, and less overall flexibility.

The complexity, operational costs and reduction in flexibility may be further compounded as a result of UK’s departure from the EU, as discussed more fully below.

This is because the UK:

(i) is no longer generally required to transpose EU law into UK law and (ii) has transposed certain EU legislation into UK law subject to various amendments and subject to the UK Financial Conduct Authority’s oversight rather than that of EU regulators.

Taken together, this could result in divergence between the UK and EU regulatory frameworks.

Outside the UK and the EEA, the regulations to which we are subject relate primarily to registration and reporting obligations.

It is expected that additional laws and regulations will come into force in the UK, the EEA, the EU, and other countries in which we operate.

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Among other things, this legislation introduces rules regarding the pre-marketing of funds.

The European Commission is introducing a package of legislative proposals to reform the EU anti-money laundering and counter-terrorist financing regime.

The proposals, amongst others, clarify rules relating to internal policies and procedures, introduce more granular client due diligence requirements, clarify reliance on outsourcing and harmonize suspicious activity reporting.

The European Parliament voted on the proposed legislation at its plenary session on April 24, 2024.

The proposals are subject to formal adoption by the European Council, after which the adopted texts will be published in the Official Journal of the European Union.

This is expected in summer 2024.

EU member states will then have 36 months to transpose the legislation in to national law.

Regulation (EU) 2022/2554 on digital operational resilience for the financial sector (‘’DORA”) establishes a harmonized and comprehensive digital operational resilience framework across the whole EU financial sector by requiring a wide range of financial entities, including asset managers and investment firms, to manage their information and communication technology (“ICT”) risks in a robust and effective way through internal governance, control and risk frameworks.

DORA also requires financial institutions to report major ICT-related incidents to regulatory authorities and undertake digital operational resilience testing.

DORA will apply from January 17, 2025.

The EU Corporate Sustainability Reporting Directive (“CSRD”) is a framework that requires companies to include a large body of sustainability information in their annual reporting.

It first takes effect for financial years beginning on or after January 1, 2024 for companies (EU and non-EU) with securities listed on an EU “regulated market.” From 2025, large private EU companies will be in scope.

Asset managers with EU companies in their group may themselves be in scope of CSRD, subject to a size threshold.

The CSRD will also impact EU portfolio companies, given the amount of preparation required to complete the reports required in 2025.

There have also been significant legislative developments affecting the private equity industry in Europe and there continues to be discussion regarding enhancing governmental scrutiny and/or increasing regulation of the private equity industry.

With the expiration of the Brexit transition period on December 31, 2020, UK regulated entities lost the right to passport their services to EEA countries, and EEA entities lost the right to reciprocal passporting into the UK (subject to a transitional regime).

As noted above, we engaged our affiliate, StepStone Group Europe Alternative Investments Limited (“SGEAIL”), which is based in the EU, to allow the group to continue to engage in regulated activities within the EU.

SGEAIL is authorized by the Central Bank of Ireland pursuant to AIFMD and UCITS and authorized to provide certain MiFID II services.

We have established offices in various EU jurisdictions to employ and supervise operations in such jurisdictions, including the establishment of branches of SGEAIL.

Human Capital

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Total Rewards

We continuously strive to provide a competitive total rewards package.

We strive to provide a competitive total rewards package.

Our compensation approach is performance based and determined by considering a combination of firm and individual performance.

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

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

Our LTIP provides us the ability to offer a variety of equity-based awards and our Employee Stock Purchase plan allows us to offer equity for purchase at an attractive discount to the market price through payroll deductions, in each case, to further incentivize our employees.

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

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The committee also supports the firm’s various employee-led ERGs.

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

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

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

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

In addition, from time to time, we host internal and external networking and educational events in various jurisdictions, in support of DEI.

We periodically review and seek to improve our parental leave policies and related benefits.

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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