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For informational purposes only. Not investment advice.

StepStone Group Inc.

STEP

FAVORABLE

June 1, 2026

Research Conclusion

At ~$52, StepStone trades at the floor of its synthesized fair-value range ($50-66, mid $58) with modest 12% upside to midpoint and 2.8:1 bull/bear asymmetry. Probability-weighted PT $60 (+16%). This is a quality private-markets-advisory compounder at a reasonable but not exceptional price. Recommended stance: Hold/Accumulate on weakness for quality sleeves; Buy if FPAUM growth re-accelerates above 15% YoY or private wealth ramp visibly steps up.

Company Overview & Moat Assessment

StepStone Group Inc. (NASDAQ: STEP) is a global private markets investment firm providing customized investment solutions, advisory and data services across PE, infrastructure, real estate, and private credit. Founded 2007; IPO September 2020; fiscal year ends March 31. ~$675B total AUM (advisory-weighted ~85%) but only ~$100B FPAUM (economic base). FY2025 FRE run-rate ~$190-211M, ~40-44% margin. Distinct from GP-model peers: STEP is a multi-asset-class advisor/gatekeeper allocating LP capital across underlying managers, earning 5-10% carry plus advisory fees. CEO Scott Hart. Closest public peer: Hamilton Lane (HLNE).

▲ Bull Case

  • ◆Private wealth scale-up to HLNE-like prominence drives FRE margin convergence to 45-48%; FPAUM CAGR lifts toward 15%; multiple re-rates from 25x → 35x P/FRE
  • ◆Advisory-to-discretionary conversion accelerates beyond 3%/yr base case. Each 1pp acceleration adds ~$5-7B FPAUM at higher fee rates, increasing blended fee economics.
  • ◆Carry monetization cycle delivers $115-150M/yr in realized carry across FY2026-2028 (vs. base $70-110M), supporting DE per-share growth above 15%.

▼ Bear Case

  • ◆Multiple compression to PGHN-level 24x P/FRE if growth slows; FPAUM CAGR below 8%; private wealth stalls. Implied price $43 (-17%).
  • ◆Industry alts-allocation peak (CalPERS-style reductions in target alts allocation) — STEP is leveraged to LP allocations; advisory mandates can be paused or reduced.
  • ◆Compensation pressure — STEP's professional-services-like cost structure makes margin expansion harder than GP-model peers; FRE margin could stall at 40%.
Primary Debate on Wall Street

“The Street debate centers on whether STEP's advisory model can drive HLNE-like multiple expansion. Bull frame: private wealth + data services build secular FRE moat; multiple gap to HLNE (32x vs STEP 25x) closes. Bear frame: advisory/gatekeeper model has structural ceiling; HLNE's data narrative (HALO platform) is not replicable; multiple gap is permanent. Sell-side typically targets $58-65 — modest 10-25% upside, reflecting quality compounder framing rather than deep value.”

Top Catalysts
  • ◆Q3 FY2025 / FY2025 full-year earnings — FPAUM milestone $110B+; FRE margin trajectory
  • ◆Private wealth AUM milestone — first quarter at $10B+
  • ◆Carry realization cycle — first significant quarter ($100M+)
  • ◆New mandate wins announced (sovereign wealth, major pension)
  • ◆Greenspring VC carry crystallizations as 2018-2020 vintages mature
Top Risks
  • ◆Multiple compression if growth slows below 10% FPAUM CAGR
  • ◆Private wealth ramp disappointment — competition from BX/HLNE/KKR retail products
  • ◆Advisory contract losses (binary; concentrated in large SWF/pension relationships)
  • ◆Carry-interest tax reform (less impactful than for GP-model peers given lower carry rate)
  • ◆Compensation creep — investment-professional comp pressure could compress FRE margin

Full Memo Continues

5 more sections, locked

  • ●
    Valuation Range & DCF
    Base/bull/bear fair-value range, WACC, terminal growth, sensitivity to revenue + margin assumptions.
  • ●
    Risk/Reward Assessment
    Position-sizing framework with explicit upside/downside skew and entry conditions.
  • ●
    Management & Capital Allocation
    Multi-year capital-allocation track record, incentive alignment, and management readout.
  • ●
    Monitoring Framework
    What to watch each quarter — leading indicators and inflection signals tracked by the analyst.
  • ●
    Unresolved Questions
    Open analyst questions and follow-up research items — the depth signal.

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Margin of Insight

For informational purposes only. Not investment advice.