StepStone Group Inc. Class A Common Stock Barclays 24th Annual Global Financial Services Conference

Great. Thanks, Ben. Good to be here.

Sure. Great. Thanks, Ben. As a solution provider and one of the leaders in our space, I guess I'll answer the question through a framing or a perspective that we have, which begins with our total capital responsibility today is approximately $900 billion. So just under $1 trillion, of which $230 billion are assets under management, and the remaining are assets under advisement. That gives us a broad view across the entire spectrum of private markets. Within the markets, we're deploying close to $75 billion each year. When we think about what's going on with LP behavior, our perspective is real-time. It's lived every day across every asset class, geography, and strategy. I would say there are a couple of themes that we're seeing in the marketplace when it comes to LP behavior.

I think the first theme is LPs have, at least on the public pension side, seen over the last year a denominator effect where public market recoveries have improved, but allocations are typically at or a little bit above policy targets. As a result, some of the larger pension funds out there have been slow to deploy relative to prior years. I would say the insurance industry and family offices continue to remain pretty active. Insurance typically has an allocation range of somewhere between 5%-8%, and they are typically hovering around 7% right now. So we expect insurance industries to continue to remain active. The last thing I would say, the family offices and more opportunistic investors continue to be active. There is a complexity, though, within LP behavior that is worth noting, and that is, it is really the theme of distributions.

I think LPs are still waiting for GPs to send capital back for them to reinvest in the next fund. When we look at our data over the last 20 years or so, distributions as a percentage of the portfolio value, considering maybe last year's NAV, have typically run around 20, 21, 22% of a yield. The last three years, we have seen that yield cut in half, and we are seeing distributions coming off of prior portfolios, existing portfolios in that 11, 12, 13%. So I think the LP behavior is more about distributions and less about the numerator, denominator, and where they are relative to policy targets.

Sure, Ben. We have just come off a record year of nearly $30 billion of gross AUM additions. So the demand for StepStone's work product has not wavered one bit. I think where we are seeing a lot of interest and demand is in the secondary market, and in certain asset classes, such as private credit and infrastructure, continue to see strong demand. We would expect to see the next year to be particularly positive for StepStone for three reasons. First, the one algorithm we have talked about in each earnings call is our separate managed account business. Our managed accounts really operate like evergreen vehicles. These are funds of one, and our LPs have a re-up rate of roughly three to five years. When they do re-up, we have enjoyed a 90% re-up rate at about 120% of the size of the prior vintage vehicle.

You have this growth algorithm of a same-store sales model, if you will, of north of 100% on the managed account side of the business. The second growth algorithm is our commingled fund business. You have seen StepStone's commingled fund platform expand over the years. As we enter the market this particular fiscal year starting, call it April of 2026, we go forward a full year to the end of this fiscal year, March of 2027, all of StepStone's flagship commingled funds are in the market. When we add up the prior vintage year fund sizes, that amounts to close to $17 billion. Add a little bit of growth to that, Ben, and we are seeing close to a $20 billion year starting at the beginning of the fiscal year of commingled funds. As we finished June 30th quarter, we were roughly $9 billion into that $20 billion program.

We feel we are on or a little bit ahead of target. I suspect we will touch on this in a minute later, Ben, but it goes without saying, StepStone's wealth management platform is one of its biggest and greatest, strongest growth engines, and we do not see that slowing down.

Well, we came into the year pretty optimistic about deployment, and we continue to remain optimistic, but it is slow. I mean, what we are seeing is bid-ask spreads continue to be gapped out. With the 10-year treasury now close to 5%, we would expect to see deployment continue to really, I would say, most of the capital is going to the highest quality companies out there that are up for sale. What we are seeing statistically is the dollar amount of capital being deployed is up roughly 10% year-over-year, but the number of deals is certainly smaller. What that says is GPs are looking for larger, better operating companies, higher quality companies. On the realization front, again, it is really a narrative of two tales. I think one tale is how many dollars are being realized and sent back to LPs.

The second I alluded to earlier is what does that look like in terms of a yield relative to the size of the portfolio they are currently sitting on? The good news is dollar value of distributions or realizations back to LPs have been improving year-over-year. But as net asset value has been expanding significantly over the years as a result of a lower yield, we are seeing the yield narrative continue to be on LPs mind more so than ever right now. We remain cautiously optimistic about deployment realizations. We were hoping to see the backlog of deals that have been building over the last year start to flow through. We remain optimistic on both fronts, but fairly cautious. The StepStone view on both fronts has a little bit to do with how we manage our platform with the commercial structures that we have.

I mentioned our managed accounts. Our managed accounts often charge our clients on deployed capital, invested capital. As a result, they commit a bunch of capital to us upfront, and then we will invest it over a 3-5 year period. The amount of capital that is being committed to StepStone platform but remains undeployed is roughly $40 billion. We expect to see call it $8 billion-$9 billion a year of deployment run rate. Having seen over 5,000 unique investment opportunities over the last year, we do not have any concerns about deploying that capital.