Stepstone Group Inc. · NASDAQ:STEP
Stepstone — Investor Day (June 2023)
134 slides from Stepstone's investor day presentation, Jun 6, 2023
Slide 1: StepStone Investor Day June 6, 2023
StepStone Investor Day JUNE 6, 2023
Slide 2: Disclaimer
2STEPSTONE GROUP Disclaimer Some of the statements in this presentation may constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995. All statem
Slide 3: Introduction
INTRODUCTION
Slide 4: Today's Presenters
4STEPSTONE GROUP Today’s Presenters Scott Hart Chief Executive Officer Tom Sittema Executive Chairman, StepStone Private Wealth Mike McCabe Head of Strategy Johnny Randel Chief Financial Officer James O’Leary Head of Infrastructure Marcel Schindler Head of Private Debt Jeff Giller Head of Real Estat
Slide 5: Agenda
5STEPSTONE GROUP Agenda Introduction – Seth Weiss StepStone and the Private Markets Ecosystem – Scott Hart StepStone’s Performance and Growth Drivers – Mike McCabe Asset Class Overviews • Private Equity / Venture Capital – Scott Hart • Private Debt – Marcel Schindler • Real Estate – Jeff Giller • In
Slide 6: StepStone and the Private Markets Ecosystem
STEPSTONE AND THE PRIVATE MARKETS ECOSYSTEM
Slide 7: StepStone Is Capitalizing on the Market Opportunity to Drive Growth
7STEPSTONE GROUP StepStone Is Capitalizing on the Market Opportunity to Drive Growth MARKET OPPORTUNITY THE STEPSTONE ADVANTAGE GROWTH DRIVERS
Slide 8: StepStone's Mission
8STEPSTONE GROUP StepStone’s Mission Our mission is to be the trusted partner of choice for private markets solutions globally E m p o w e r e d E x p e r t s 95 Partners with an average of 20 years of private market experience, empowered to act swiftly and decisively to create the best possible str
Slide 9: Strong Growth in the Private Markets Industry
9STEPSTONE GROUP Strong Growth in the Private Markets Industry AUM Since StepStone’s Founding in 2007 Source: Preqin, as of May 2023 0 2,000 4,000 6,000 8,000 10,000 12,000 Private Equity Real Estate Infrastructure Private Debt 12% CAGR PRIVATE MARKETS AUM ($B) SEPTEMBER 2022 Private Debt $1.5T Infr
Slide 10: Private Markets Represent a Wide, Complex, and Growing Landscape
10STEPSTONE GROUP 2,875 7,349 2,424 1,138 668 124 120 # Active Managers (2000) North America Europe Asia Australia Latin America Rest of World # Active Managers (2022) Private Markets Represent a Wide, Complex, and Growing Landscape 2,875 7,349 675 1,059 677 807 485 771 # Active Managers (2000) Buyo
Slide 11: Private Markets Beat Public Equivalents on Return and Risk
11STEPSTONE GROUP S&P 500 MSCI US REIT S&P Global Infrastructure Bloomberg US Aggregate Bond Index Private Equity Venture Capital Private Real Estate Private Infrastructure Private Debt 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20% AN N U AL R ET U RN ANNUAL VOLATILITY Pr
Slide 12: Private Markets Outperformance Driven by Asymmetric Risk Capture
12STEPSTONE GROUP Private Markets Outperformance Driven by Asymmetric Risk Capture -45% -33% -47% -29% -20% -8% Total Drawdown Annual ized Recovery Limited Downside Capture 18% 22% 15% 15% 42% 53% 74% 61% 39% Superior Upside Capture 122% 100% 126% 3/31/00 – 9/30/02 9/30/07 – 3/31/09 12/31/19 – 3/31/
Slide 13: Private Markets Investing Comes with Distinct Challenges
13STEPSTONE GROUP Private Markets Investing Comes with Distinct Challenges ACCESS EXPERTISE RESOURCES INFORMATION COST LIQUIDITY Access to top managers may be limited Data is not widely available or easily accessible Liquidity constraints require sophisticated modeling Limited number of ways to redu
Slide 14: The Private Market Ecosystem has Evolved Significantly
14STEPSTONE GROUP The Private Market Ecosystem has Evolved Significantly DIRECT FUND INVESTING CONSULTANTS Features: + Public market beating returns + Limited correlation to public markets Limitations: ̶ Cost ̶ Access ̶ J-Curve ̶ Lack of tailored advice ̶ Large and complex FUND OF FUNDS Features: +
Slide 15: Utilizing all Our Tools to Deliver Diversified and High Performing Portfolios
15STEPSTONE GROUP Utilizing all Our Tools to Deliver Diversified and High Performing Portfolios Access to all private market asset classes Manager diversification Strong net returns An efficient cost structure • Scale driven discounts • Favorable fee and carry structure on co-investment J-
Slide 16: StepStone Delivers Comprehensive Private Markets Solutions
16STEPSTONE GROUP StepStone Delivers Comprehensive Private Markets Solutions AUM/AUA as of March 31, 2023. Reflects final data for the prior period (December 31, 2022), adjusted for net new client account activity through March 31, 2023. Does not include post-period investment valuation or cash acti
Slide 17: StepStone has a Wide Global Presence with Deep Relationships
17STEPSTONE GROUP LONDO N BEIJ IN G SEOUL PERTH TOKYO SYDNEY DUBL IN ZURICH SÃO PAULO LUXEMBOUR G ROMESAN FRANCI S C O NEW YORK LA JOLLA TORONT O CLEVELAN D CHARLOTT E BALTIMO R E MIAMI P ALO ALTO FRANKFUR T SANTIA G O MEXICO CITY ORLAND ODALLAS StepStone has a Wide Global Presence with Deep Relatio
Slide 18: StepStone has a Diversified, Integrated Platform
18STEPSTONE GROUP StepStone has a Diversified, Integrated Platform We believe our deep platform allows investors to design single or multi-asset class private market exposures to fit their portfolio needs INFRASTRUCTURE EQUITY 60+ Investment Professionals $14B Approved in 2022 $74B+ Total Capital Re
Slide 19: StepStone has Successfully Utilized M&A to Strengthen the Platform
19STEPSTONE GROUP StepStone has Successfully Utilized M&A to Strengthen the Platform 2010 Accelerate buildout of private equity co- investments Strengthen investor relations and communications capabilities Geographic expansion (New York and London) 2012 2014 2016 2018 2021 Accelerate buildout of pri
Slide 20: StepStone has Built Significant Scale
20STEPSTONE GROUP StepStone has Built Significant Scale TOTAL CAPITAL RESPONSIBILITY ($B) $1 $5 $9 $27 $47 $54 $62 $64 $84 $116 $130 $155 $266 $296 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 FY'17 FY'18 FY'19 FY'20 FY’21 FY'22 FY'23 Assets Under Management ("AUM") Assets Under Advisement ("AU
Slide 21: StepStone Serves as a Trusted Partner for LPs and GPs Alike
21STEPSTONE GROUP StepStone Serves as a Trusted Partner for LPs and GPs Alike Reviewed over 3,600 investment opportunities annually2 $80B in annual private markets capital allocations¹ Primaries Secondaries Co-investments Global Private Markets Clients Private Equity Infrastructure Private Debt Real
Slide 22: Real Estate, Infrastructure, and Private Debt Positioned to Accelerate
22STEPSTONE GROUP $0 $50 $100 $150 $200 $250 Year 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Year 16 Private Equity ('07-'22) Real Estate ('14-'22) Infrastructure ('14-'22) Private Debt ('17-'22) ORGANIC MANAGEMENT & ADVISORY FEES ($M)1,2 Real Estate, Infrastructure, and Private Debt Positioned to Accele
Slide 23: Management and Advisory Fee Mix and Opportunities for Growth
23STEPSTONE GROUP Management and Advisory Fee Mix and Opportunities for Growth PRIVATE EQUITY VENTURE CAPITAL REAL ESTATE INFRASTRUCTURE PRIVATE DEBT ADVISORY SEPARATELY MANAGED ACCOUNTS COMMINGLED FUNDS PRIVATE WEALTH Not Offered / N/A Contribution of Management and Advisory Fees Heavy Contribution
Slide 24: StepStone's Performance and Growth Drivers
STEPSTONE’S PERFORMANCE AND GROWTH DRIVERS
Slide 25: Reminders of Why StepStone Went Public
25STEPSTONE GROUP Reminders of Why StepStone Went Public EQUITY CULTURE • The September 2020 IPO yielded a public float of 31% of the company and extended ownership to over 500 employees • The public float has since expanded to 56% of the company, as of March 31, 2023, with employees owning roughly
Slide 26: Organic Growth Across Key Measures Since the IPO
26STEPSTONE GROUP PRE-IPO POST-IPO FEAUM ($B) MGMT & ADVISORY FEES PER SHARE FRE PER SHARE ‘18-’23 CAGR: 41% StepStone Has Achieved 20%+ Organic Growth Across Key Measures Since the IPO 22.3 32.2 41.2 52.0 63.8 74.0 11.4 11.4 FY'18 FY'19 FY'20 FY'21 FY'22 FY'23 Organic Acquired ‘20-’23 Organic CAGR:
Slide 27: FRE Progression Driven by Revenue Growth and Margin Expansion
27STEPSTONE GROUP FRE Progression Driven by Revenue Growth and Margin Expansion $0.56 $1.34 $0.48 $0.30 Adjusted FY'2020 Revenue Growth Margin Expansion Adjusted FY'2023 >30% ANNUALIZED GROWTH IN ADJ. FRE PER SHARE ADJUSTED FRE PER SHARE GROWTH ($) Driven by strong revenue growth and by operating ma
Slide 28: Consistent Record of Margin Improvement
28STEPSTONE GROUP Consistent Record of Margin Improvement with Pathway for Further Expansion 24.0% 25.1% 26.6% 27.4% 29.1% 29.1% 29.3% 30.2% 30.9% 31.1% 31.7% 31.6% 31.0% F4Q'20 F1Q'21 F2Q'21 F3Q'21 F4Q'21 F1Q'22 F2Q'22 F3Q'22 F4Q'22 F1Q'23 F2Q'23 F3Q'23 F4Q'23 • Core FRE margins have expanded by 70
Slide 29: Appreciation in Carried Interest Drives Growth in Adjusted Net Income
29STEPSTONE GROUP Appreciation in Carried Interest Drives Further Growth in Adjusted Net Income • Accrued carried interest represents a backlog of revenue that may convert to cash over time as portfolios mature and investments are exited • Over $63 billion in performance fee-eligible capital as of M
Slide 30: Net Realized Performance Fees Are Growing Over Time
30STEPSTONE GROUP $6 $7 $5 $2 $5 $7 $6 $9 $1 $8 $6 $16 $13 $33 $29 $33 $28 $32 $18 $8 $7 $0 $10 $20 $30 $40 $50 $60 $70 $80 $90 $100 $110 $120 $130 Net Realized Performance Fees Are Growing Over Time QUARTERLY NET REALIZED PERFORMANCE FEES ($M) $23 $29 $24 $20 $19 $18 $20 $27 $23 $25 $24 $31 $43 $68
Slide 31: Growth Levers Laid out at the IPO
31STEPSTONE GROUP GROW WITH NEW CLIENTS GLOBALLY LEVERAGE SCALE TO ENHANCE OPERATING MARGINS PURSUE ACCRETIVE TRANSACTIONS TO COMPLEMENT THE PLATFORM +CONTINUE TO GROW WITH EXISTING CLIENTS Growth Levers Laid out at the IPO
Slide 32: SMA Fee Growth is Driven by Existing and New Clients
32STEPSTONE GROUP SMA Fee Growth is Driven by both Existing and New Clients SEPARATELY MANAGED ACCOUNT MANAGEMENT FEES ($M) 26% ANNUALIZED GROWTH
Slide 33: Evolution of a Client Relationship
33STEPSTONE GROUP Evolution of a Client Relationship PE Co-Invest SMA I PE Co-Invest SMA II PE Co-Invest SMA III Real Estate Co-Invest SMA I PE Co-Invest SMA I PE Co-Invest SMA II • Relationship began in 2008 through a private equity-focused advisory mandate • Evolution of StepStone’s platform has f
Slide 34: Similar Evolution Across our Other Clients
34STEPSTONE GROUP Similar Evolution Across our Other Clients +9x AUM Growth 2015 2023 Infra Co-Invest SMA Infra, PE, RE, and Co-Invest SMAs +5x AUM Growth 2015 2023 PE Advisory PE, RE, and Infra SMA +6x AUM Growth 2014 2023 PE Advisory PE/VC, RE, PD SMAs +5x AUM Growth 2017 2023 PE and Infra Co-Inve
Slide 35: Commingled Funds Offer Solid Foundation for Growth
35STEPSTONE GROUP Commingled Funds Offer Solid Foundation for Growth COMMINGLED FUND MANAGEMENT FEES ($M) 19% ANNUALIZED ORGANIC GROWTH # Fund Families: 19 # Funds: 57 # Fund Families: 5 # Funds: 17 $12 $151 1Represents annualized Greenspring revenue at the time of acquisition 1
Slide 36: StepStone's Commingled Fund Product Details
36STEPSTONE GROUP StepStone’s Commingled Fund Product Details FUND FAMILY DESCRIPTION FUND SIZE ($M)1 PRIVATE EQUITY StepStone Capital Partners Funds (“SCP”) Private Equity Co-Investments StepStone Secondaries Opportunities Funds (“SSOF”) Private Equity Secondaries StepStone Tactical Growth Funds (“
Slide 37: StepStone's Commingled Fund Product Details (continued)
37STEPSTONE GROUP FUND FAMILY DESCRIPTION FUND SIZE ($M)1 StepStone VC Global Partners Multi-Strategy Global Venture Capital StepStone VC Opportunities Expansion Stage Venture Capital Directs StepStone VC Secondaries Venture Capital Secondaries StepStone VC Early Stage Early Stage Venture Capital Di
Slide 38: Commingled Fund Details: Private Wealth / Evergreen
38STEPSTONE GROUP StepStone’s Commingled Fund Product Details: Private Wealth / Evergreen FUND FAMILY DESCRIPTION FUND SIZE ($M) StepStone Private Markets Fund (“SPRIM”) Core Private Markets StepStone Private Venture and Growth Fund (“SPRING”) Diversified Venture and Growth Equity $1.3B $0 $200 $400
Slide 39: Greenspring Acquisition Augmented VC Capabilities
39STEPSTONE GROUP Greenspring Acquisition Augmented VC Capabilities; Accretive to EPS • StepStone acquired Greenspring, a dedicated venture and growth equity platform, in September 2021, materially increasing StepStone’s venture and growth equity capabilities, while adding more than 2,000 distinct L
Slide 40: Capital Management: Shareholder Dividends
40STEPSTONE GROUP Capital Management: Shareholder Dividends $0.07 $0.07 $0.07 $0.15 $0.15 $0.15 $0.20 $0.20 $0.20 $0.45 Normal Quarterly Dividend Supplemental Dividend Robust and predictable payout of fee-related earnings through normal quarterly dividends augmented through supplemental payouts driv
Slide 41: Capital Management: Buy-in of Non-Controlling Interest
41STEPSTONE GROUP Capital Management: Buy-in of Non-Controlling Interest over Time [PRES Option 2 of 2] • StepStone’s corporate structure reflects our equity culture, which continues to be highly effective • Our existing equity structure aligns the incentive of our teams to the growth of our non-PE
Slide 42: Path to At Least Double Fee-Related Earnings by Fiscal 2028
42STEPSTONE GROUP Path to At Least Double Fee-Related Earnings by Fiscal 2028 $156 FY'23 FY'28 FEE-RELATED EARNINGS ($M) AT LEAST 2x
Slide 43: Key Takeaways: Purpose-Built for the Market Opportunity
43STEPSTONE GROUP StepStone was purpose-built to take full advantage of the market opportunity • Scale • Diversity across asset classes • Product breadth • Geographic reach • Data and technology advantage • Customized solutions Large and growing addressable market for institutional and private wealt
Slide 44: Private Equity / Venture Capital
PRIVATE EQUITY / VENTURE CAPITAL
Slide 45: Private Equity Key Attributes
45STEPSTONE GROUP Private Equity Key Attributes Highest return potential among the private market asset classes Potential for the widest distribution of individual investment results Returns regularly outperform public markets Limited correlation to public markets Long-term, control-oriented investi
Slide 46: StepStone Private Equity at a Glance
46STEPSTONE GROUP StepStone Private Equity at a Glance Among the top global independent allocators of primary capital1 Over $90 billion of PE primary commitments approved across 500+ funds in the last 3 years2 Proactive calling and outreach effort Over 2,000 GP meetings in last twelve months Sourcin
Slide 47: Manager Selection is a Critical Success Factor
47STEPSTONE GROUP Manager Selection is a Critical Success Factor • There is significant performance variability between high performing and low performing private equity managers • StepStone aims to identify the best managers within the top quartile and avoid exposure to the bottom quartile VOLATILI
Slide 48: Small to Midsize Funds Comprise the Majority of PE Allocations
48STEPSTONE GROUP Small to Midsize Funds Comprise the Majority of StepStone’s PE Allocations StepStone directs most allocations to small and mid-size funds which have higher dispersion of returns than other segments 55% 30% 5% 10% <$1B $1B - $4B $4B - $7B >$7B Source: SPI, based on number of individ
Slide 49: Proactive and Highly Selective Co-investment Process
49STEPSTONE GROUP Proactive and Highly Selective Co-investment Process • StepStone is one of the most active private markets investors globally • Our primary, secondary, and co-investment platforms result in a large opportunity set, allowing us to maintain selectivity with a completion rate of 10% o
Slide 50: Robust Secondaries Capabilities across GP and LP Led Transactions
50STEPSTONE GROUP Robust Secondaries Capabilities across GP and LP Led Transactions LIMITED PARTNER LED TRANSACTIONS • Emphasis on sponsor and portfolio quality • GP-directed or influenced transactions with the ability to hand-pick select opportunities • Typically purchasing 1-2 select fund interest
Slide 51: Disciplined and Opportunistic Buyer of Secondary Interests
51STEPSTONE GROUP StepStone is a Disciplined and Opportunistic Buyer of Secondary Interests Wtd. Avg. Discount – LP interests2 18% 1st and 2nd quartile3 91% STEPSTONE SECONDARY STRATEGY Since inception, StepStone has achieved an aggregate weighted-average discount to NAV of 18% on LP interests trans
Slide 52: High-Quality GPs Increasingly Leveraging Secondaries
52STEPSTONE GROUP High-Quality GPs Increasingly Leveraging Secondaries GP-LED VOLUME BY QUARTILE1,2 • First and second quartile GPs are increasingly leveraging the secondary market • Single asset transactions are particularly attractive to top quality GPs who seek to further accrue value from “troph
Slide 53: Access and Selection are Crucial to Venture Capital Performance
53STEPSTONE GROUP -5% 0% 5% 10% 15% 20% 25% 30% Burgiss Private iQ: US Venture Capital Index Burgiss Private iQ: US Buyout Index US Large Cap Equity Index US Small Cap Equity Index US Fixed Income Index Upper Quartile Median Quartile Lower Quartile Access and Selection are Crucial to Venture Capital
Slide 54: Great Companies are Created in All Market Cycles
54STEPSTONE GROUP Great Companies are Created in All Market Cycles VC-BACKED COMPANIES VALUED OVER $1B, FOUNDED BY YEAR AS OF FEBRUARY 18, 2022 Source: Pitchbook. Logos represent $1 billion private and public venture-backed companies based on founding year. *Index values are adjusted for inflation 0
Slide 55: VC Investments Represent a Large Secondaries Opportunity
55STEPSTONE GROUP VC Investments in the Ground Represent a Large Secondaries Opportunity There is over $1.5 trillion of unrealized net asset value in venture funds that are 2018 or older as a result of strong performance, representing a large opportunity for secondary liquidity solutions $16 $45 $56
Slide 56: Comprehensive Suite of Venture Capital and Growth Equity Solutions
56STEPSTONE GROUP DIRECT INVESTMENTS SECONDARIES PRIMARIES Seed Stage VC (Angel/Micro) Early Stage VC (Series A) Later Stage VC (Series B-D+) Growth Equity HYBRID StepStone VC Secondaries StepStone VC Global Partners StepStone’s platform offers a comprehensive suite of venture capital and growth equ
Slide 57: Private Equity and Venture Capital Fee-Earning AUM Growth
57STEPSTONE GROUP Private Equity and Venture Capital Fee-Earning AUM Growth $13 $16 $20 $25 $29 $34 $40 $46 FY'18 FY'19 FY20 FY'21 FY'22 FY'23 Acquired Organic PRIVATE EQUITY FEE-EARNING AUM ($B) 20%+ COMPOUNDED ANNUAL ORGANIC GROWTH
Slide 58: PE Management and Advisory Fee Mix and Opportunities for Growth
58STEPSTONE GROUP PE Management and Advisory Fee Mix and Opportunities for Growth PRIMARY SECONDARY CO-INVESTMENT MULTI-STRATEGY ADVISORY SEPARATELY MANAGED ACCOUNTS COMMINGLED FUNDS PRIVATE WEALTH Not Offered / N/A Contribution of Management and Advisory Fees Heavy Contribution Light Contribution N
Slide 59: VC Management and Advisory Fee Mix and Opportunities for Growth
59STEPSTONE GROUP VC Management and Advisory Fee Mix and Opportunities for Growth PRIMARY SECONDARY CO-INVESTMENT MULTI-STRATEGY ADVISORY SEPARATELY MANAGED ACCOUNTS COMMINGLED FUNDS PRIVATE WEALTH Not Offered / N/A Contribution of Management and Advisory Fees Heavy Contribution Light Contribution N
Slide 60: Key Takeaways: Private Equity and Venture Capital
60STEPSTONE GROUP Key Takeaways: Private Equity and Venture Capital Largest private markets asset class Private equity and venture capital typically generate the highest returns in the public or private markets LPs are looking for assistance navigating a wide array of GPs that offer significant vari
Slide 61: Private Debt
PRIVATE DEBT
Slide 62: Private Debt Key Attributes
62STEPSTONE GROUP Private Debt Key Attributes Private debt offers an ideal replacement option for fixed income investors (yield pick-up) and / or public equity investors (better down-side protection) Private debt offers an attractive risk-adjusted premium over public debt with reliable cash flow str
Slide 63: Risk / Return that Compares Favorably to Public Equivalents
63STEPSTONE GROUP Risk / Return that Compares Favorably to Public Equivalents Time period 1/1/05 – 12/31/22 Source: S&P 500 Index, Credit Suisse High Yield Index, Barclays Global IG (January 2015 – December 2021) and S&P US Investment Grade Corporate Bond Index (January 2022 – December 2022), Barcla
Slide 64: Private Debt Offers Consistent Spreads Through the Cycle
64STEPSTONE GROUP Private Debt Offers Consistent Spreads Through the Cycle For illustrative purposes only. Source: StepStone, Internal Database, US First Lien Deals (more than 13,000 transactions and $400bn of invested capital). Risk free presents the weighted average of max (LIBOR, LIBOR Floor) of
Slide 65: Private Debt is a Large and Growing Addressable Market
65STEPSTONE GROUP Private Debt is a Large and Growing Addressable Market 1. Total Market Size estimate for Private Debt covers mainly Direct Lending and is based on SSG’s observations and calculations, as of Q3 2022. Note: This differs from the Total Addressable Market size as represented by many GP
Slide 66: StepStone Private Debt at a Glance
66STEPSTONE GROUP StepStone Private Debt at a Glance SIGNIFICANT PRIMARY ALLOCATOR BROAD EXPOSURE ACROSS ASSET CLASS AND CAPITAL STRUCTURE 1. StepStone metrics as of 3/31/23 • Customized portfolio construction for institutional clients, especially with insurances, pension plans & endowments • Senior
Slide 67: Private Debt Platform's Broad Sourcing Capabilities
67STEPSTONE GROUP StepStone Private Debt Platform’s Broad Sourcing Capabilities Total capital responsibility equals assets under management (AUM) plus assets under advisement (AUA) and is presented as of March 31. 2023. Private Debt includes all asset classes, including Real Estate and Infrastructur
Slide 68: Flexible Structure Allows for More Efficient Deployment
68STEPSTONE GROUP StepStone’s Flexible Structure Allows for More Efficient Deployment TRADITIONAL SOLUTIONS STEPSTONE SOLUTION LIMITATIONS MERITS + Reserved and Flexible Capacity + StepStone Controls the Investment Pace + Highly Diversified + Efficient Deployment = Capital at Work ̶ Availability Sub
Slide 69: Leading to Stronger Investment Performance
69STEPSTONE GROUP Leading to Stronger Investment Performance Source: StepStone as of Q1 2023 and Preqin 2023 Past performance is not necessarily indicative of future results and there can be no assurance that the investment will achieve comparable results or avoid substantial losses. PRIVATE DEBT OP
Slide 70: Versatility to Execute Defense and Offense
70STEPSTONE GROUP StepStone has Versatility to Execute Defense and Offense DEFENSE OFFENSE Increased need for primary lending activity through Private Debt Fund OPPORTUNITY: • Lender-friendly market • Attractive spreads • Increased volumes STRATEGY: SENIOR SECURED FIRST LIEN Market liquidity is dryi
Slide 71: Private Debt Fee-Earning AUM Growth
71STEPSTONE GROUP Private Debt Fee-Earning AUM Growth $4 $5 $6 $11 $12 $14 FY'18 FY'19 FY20 FY'21 FY'22 FY'23 PRIVATE DEBT FEE-EARNING AUM ($B) 30%+ COMPOUNDED ANNUAL GROWTH
Slide 72: Private Debt Management and Advisory Fee Mix
72STEPSTONE GROUP Private Debt Management and Advisory Fee Mix and Opportunities for Growth PRIMARY SECONDARY CO-INVESTMENT MULTI-STRATEGY ADVISORY SEPARATELY MANAGED ACCOUNTS COMMINGLED FUNDS PRIVATE WEALTH Not Offered / N/A Contribution of Management and Advisory Fees Heavy Contribution Light Cont
Slide 73: Key Takeaways: Private Debt
73STEPSTONE GROUP Key Takeaways: Private Debt Private debt offers an ideal replacement option for fixed income investors (yield pick-up with no duration risk) and / or public equity investors (better down-side protection) The addressable market is large, and private debt is capturing share from the
Slide 74: Real Estate
REAL ESTATE
Slide 75: Real Estate Key Attributes
75STEPSTONE GROUP Real Estate Key Attributes Strategies available across the risk return spectrum from debt to equity Low correlation to stocks Relatively low volatility and attractive Sharpe ratios vs stocks Similar volatility to bonds with higher returns Secondaries can deliver core plus (lower) r
Slide 76: StepStone Real Estate at a Glance
76STEPSTONE GROUP StepStone Real Estate at a Glance $18 billion allocated to real estate funds in 2022 $2 billion allocated to GP-led secondaries and co-investments in 2022 900+ Meetings with GPs in 2022 More than $325 billion secondaries and co-investments sourced / $5 billion executed (2%} Differe
Slide 77: Primaries, Secondaries, and Co-investments Work in Concert
77STEPSTONE GROUP Primaries, Secondaries, and Co-investments Work in Concert • Test drive manager • Deal sourcing • Information access • Manager track record, operational & RI DD • Fund terms, structures & legal DD • Test drive manager • Property-level underwriting • Evaluate manager’s risk analysis
Slide 78: StepStone Real Estate's Sourcing Advantage
78STEPSTONE GROUP StepStone Real Estate’s Sourcing Advantage 29% 71% Direct Intermediary 80% 20% 54 INVESTMENTS (2%) $4.5B 375 INVESTMENTS (14%) $42.5B SCREENED DUE DILIGENCE CLOSED 2,594 INVESTMENTS $325.7B DIFFERENTIATED PIPELINE2 fund investments approved for advisory clients since 20001 $159B+ o
Slide 79: SRE's Role in the Evolution of Secondaries
79STEPSTONE GROUP SRE’s Role in the Evolution of Secondaries • New secondaries market entrants emerge as transaction volume expands • GP-led secondaries become growing fixture of real estate market EARLY DEVELOPMENT (2006-2013) HIGH GROWTH (2014-PRESENT) PIONEERS (PRE-2006) • SRE team combined direc
Slide 80: Growing Real Estate Secondaries Market With Plenty of Runway
80STEPSTONE GROUP Growing Real Estate Secondaries Market With Plenty of Runway AUM SECONDARIES TRANSACTION VOLUME4 Real Estate Fund Market $2.1 Trillion2 Private Equity Fund Market $6.3 Trillion3 Total Market $11.4 Trillion1 Real Estate $12 Billion54 Private Equity $108 Billion6 1. MSCI; Prudential
Slide 81: Both LP and GP Secondaries Volumes Poised to Rise
81STEPSTONE GROUP Both LP and GP Secondaries Volumes Poised to Rise LP secondaries help with denominator effect; GP secondaries address funding gap 28% 29% 38% 66% 66% 80% 2017 2018 2019 2020 2021 2022 GP-led LP-led $5.0 $4.5 $6.5 $8.5 $10.6 $12.5 2017 2018 2019 2020 2021 2022 Source: Jeffries LLC,
Slide 82: Higher Rates Drive Opportunities for Recapitalizations
82STEPSTONE GROUP Higher Rates Drive Opportunities for Recapitalizations Sources: StepStone data, Federal Reserve, Bloomberg, March 2023. Figures reflect hypothetical stabilized multifamily asset with 10-year fixed rate debt. $75M $34M Jan-22 Mar-23 Maturing Loan $41M Gap $100M $75M New Loan Cost of
Slide 83: Shift of Capital Toward Larger Funds Drives Recap Opportunities
83STEPSTONE GROUP Post-GFC, Shift of Capital Toward Larger Funds Drives Recap Opportunities Source: Preqin data as of March 2022 and StepStone analysis; IREI 2021. "GFC" refers to the global financial crisis of 2008-2010. PROPORTION OF AGGREGATE CAPITAL RAISED BY FUND SIZE THE TOP 10 MANAGERS NOW AC
Slide 84: Significant Pipeline of LPs Seeking Liquidity
84STEPSTONE GROUP There is a Significant Pipeline of LPs Seeking Liquidity Source: StepStone Real Estate Manager survey data as of Q4 2022, March 2023. NCREIF ODCE FUND REDEMPTION QUEUES ($B) Until the denominator effect resolves, investors seek liquidity from open-ended funds -14% -12% -10% -8% -6%
Slide 85: Real Estate Fee-Earning AUM Growth
85STEPSTONE GROUP Real Estate Fee-Earning AUM Growth $1 $3 $4 $4 $5 $6 FY'18 FY'19 FY'20 FY'21 FY'22 FY'23 REAL ESTATE FEE-EARNING AUM ($B) 40%+ COMPOUNDED ANNUAL GROWTH
Slide 86: Real Estate Management and Advisory Fee Mix
86STEPSTONE GROUP Real Estate Management and Advisory Fee Mix and Opportunities for Growth PRIMARY SECONDARY CO-INVESTMENT MULTI-STRATEGY ADVISORY SEPARATELY MANAGED ACCOUNTS COMMINGLED FUNDS PRIVATE WEALTH Not Offered / N/A Contribution of Management and Advisory Fees Heavy Contribution Light Contr
Slide 87: Key Takeaways: Real Estate
87STEPSTONE GROUP Key Takeaways: Real Estate Real estate is a large asset class offering compelling return, yield, and diversification benefits Rising interest rates are spurring market dislocations leading to compelling investment opportunities We are entering an attractive point in the economic cy
Slide 88: Infrastructure
INFRASTRUCTURE
Slide 89: Infrastructure Key Attributes
89STEPSTONE GROUP Infrastructure Key Attributes Potential to invest across risk / return spectrum – Core through Value-add Potential for strong returns as allocations increase and sector matures Potential downside protection due to defensive characteristics Inherent inflation protection through reve
Slide 90: Significant Investment Need Driven by Major Global Themes
90STEPSTONE GROUP Significant Investment Need Driven by Major Global Themes 1Global Infrastructure Hub, 2023. https://outlook.gihub.org/sectors/telecommunication 2The Organization for Economic Co-operation and Development (OECD). Financing Climate Futures, Rethinking Infrastructure. T R A N S P O R
Slide 91: Infrastructure Sector Growth Brings Scale and Complexity
91STEPSTONE GROUP 205 679 667 2,679 $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 Dry Powder Unrealized Value Number of Fund Managers Number of Funds Raised Infrastructure Sector Growth Brings Scale and Complexity (2) Source: Preqin Data, SIRA analysis as of May 10, 2023 Note(s): (1) Preqin, Preqin Glo
Slide 92: StepStone Infrastructure at a Glance
92STEPSTONE GROUP StepStone Infrastructure at a Glance SIGNIFICANT ALLOCATOR INVESTMENT EXCELLENCEEXPERTISE 1Based on the SPI database as of March 31, 2023. Over $50 billion of Infrastructure primary commitments approved across almost 200 funds since 20141 Annual deployment now in excess of $15 bill
Slide 93: Strong Market Position in Infrastructure Solutions
93STEPSTONE GROUP StepStone Holds Strong Market Position in Infrastructure Solutions AUM OF INFRASTRUCTURE SOLUTIONS PROVIDERS ($B) YEAR OF INFRA INCEPTION Source: StepStone and public filings, as of March 31, 2023 $27B PEER 1 2000 PEER 2 2003 PEER 3 2006 PEER 4 2007 PEER 5 2009 PEER 6 2012 2014
Slide 94: Co-Investment Growth Significant for Investors
94STEPSTONE GROUP Source: SIRA Analysis $6.7B $35.0B 29 Deals 90 Deals 2016 2021 • Market complexity expanding with an increasing number of sectors, strategies and geographies for investors to consider 17% 28% 7% 24% 17% 7% 5% 13% 32% 3%7% 21% 10% 9% Power & Gas Renewables Telecommunications Commodi
Slide 95: ...and for StepStone
95STEPSTONE GROUP …and for StepStone STEPSTONE INFRASTRUCTURE CO-INVESTMENT ACTIVITY $0.1B $3B+ 2 Deals 28 Deals 2016 2021 ~90 Sourced ~200 Sourced StepStone has experienced significant growth in sourcing, deal execution and deployment in co-investments • Highly active GP engagement model (950+ meet
Slide 96: Secular Trends Support Growth in Infrastructure Secondaries
96STEPSTONE GROUP Secular Trends Support Growth in Infrastructure Secondaries • Infrastructure AUM has been growing rapidly, creating a larger pool of assets potentially available to trade in the secondary market 1Source: Preqin, GSAM 2.1 2.2 2.3 2.4 2.8 3.2 3.8 4.6 5.3 0.3 0.3 0.3 0.4 0.4 0.5 0.6 0
Slide 97: Infrastructure Fee-Earning AUM Growth
97STEPSTONE GROUP Infrastructure Fee-Earning AUM Growth $5 $8 $11 $13 $18 $19 FY'18 FY'19 FY20 FY'21 FY'22 FY'23 INFRASTRUCTURE FEE-EARNING AUM ($B) 30%+ COMPOUNDED ANNUAL GROWTH
Slide 98: Infrastructure Management and Advisory Fee Mix
98STEPSTONE GROUP Infrastructure Management and Advisory Fee Mix and Opportunities for Growth PRIMARY SECONDARY CO-INVESTMENT MULTI-STRATEGY ADVISORY SEPARATELY MANAGED ACCOUNTS COMMINGLED FUNDS PRIVATE WEALTH Not Offered / N/A Contribution of Management and Advisory Fees Heavy Contribution Light Co
Slide 99: Key Takeaways: Infrastructure
99STEPSTONE GROUP Key Takeaways: Infrastructure Global themes focused on transportation, renewables, and telecommunications are driving trillions of dollars of infrastructure investments over the coming decades As the infrastructure market matures, there is growing need for infrastructure solutions
Slide 100: Data and Technology
DATA AND TECHNOLOGY
Slide 101: Data and Technology Help Power our Solutions
101STEPSTONE GROUP Data and Technology Help Power our Solutions • 30+ person team dedicated to software development (staff and contractors) • 8-person Portfolio Management team developing industry-leading tools and optimizing portfolio construction • Digitizing offline processes to drive efficiency
Slide 102: Digitizing the Investment Process through Technology
102STEPSTONE GROUP Digitizing the Investment Process through Technology INVESTMENT SELECTION PORTFOLIO PLANNING PORTFOLIO REPORTING Note: Number of professionals as of March 31, 2023 • Identify and select fund managers using a research library of StepStone’s due diligence from over 320 investment pr
Slide 103: SPI: Front End Decision Tool Provides Leading Intelligence
103STEPSTONE GROUP SPI: Front End Decision Tool Provides Leading Intelligence Access & Transparency Leading Research Industry white papers, general partner profiles, fund reviews, investment memos and company profiles First-hand accounts and perspectives provided by StepStone’s research team from me
Slide 104: SPI Advantage: Access and Transparency
104STEPSTONE GROUP SPI Advantage: Access and Transparency SPI provides greater access and transparency into StepStone’s investment process than is usually provided from traditional private markets asset managers Traditional Private Markets Asset manager • Much of the work is performed behind the sce
Slide 105: SPI Advantage: Sophisticated Analytical Tools
105STEPSTONE GROUP SPI Advantage: Sophisticated Analytical Tools StepStone leverages proprietary data sets and has a clear information advantage with market-leading sample sizes. SPI tracks data on the following: 16,000 General Partners 82,000 Companies42,000 Funds 195,000 Investments StepStone’s De
Slide 106: Omni Portfolio Reporting
106STEPSTONE GROUP Omni Portfolio Reporting: Powerful, Secure, Integrated, and Easy to Use Omni’s powerful analytics capabilities and interactive dashboards provide sophisticated investors valuable insights into portfolio performance and exposures POWERFUL & PROVEN • Proprietary data sets where Step
Slide 107: Pacing: Transforming Data Into Insights
107STEPSTONE GROUP Pacing: Transforming Data Into Insights Pacing is StepStone’s web-based portfolio forecasting and planning tool A F E W F U N D S A U N I V E R S E S T A T I S T I C A L I N S I G H T S Pacing helps LPs forecast future cash flows and NAVs, customize inputs, generate commitment sch
Slide 108: Daily Valuation Engine: Real Time Visibility into Private Portfolios
108STEPSTONE GROUP Daily Valuation Engine: Providing Real Time Visibility into Private Portfolios PRIVATE MARKETS CHALLENGE Quarter-end valuations for private market assets are typically reported with a 60-to-120-day lag APPLICATIONS STEPSTONE SOLUTIONS DVE leverages StepStone’s proprietary data and
Slide 109: Data and Technology Help Fuel Private Markets Solutions
109STEPSTONE GROUP Data and Technology Help Fuel StepStone’s Private Markets Solutions StepStone utilizes data and technology to deliver superior risk-adjusted net returns and to overcome risk and liquidity hurdles to enable unique private market solutions while providing greater transparency to our
Slide 110: Private Wealth
PRIVATE WEALTH
Slide 111: Private Wealth Offers a Substantial Market Opportunity
111STEPSTONE GROUP Private Wealth Offers a Substantial Market Opportunity “Individual” assets recently surpassed “Institutional” and “Defined Contribution” assets. This trend is expected to continue into 2030, resulting in growing demand for products and distribution teams customized for the individ
Slide 112: The Wealth Channel Remains Vastly Under Allocated to Private Markets
112STEPSTONE GROUP The Wealth Channel Remains Vastly Under Allocated to the Private Markets Individual challenges for accessing the private markets 4% 28% 31% 37% 38% HNWI Sovereign Wealth Funds Public Pension Funds Endowments Single Family Offcies CURRENT TARGET ALLOCATION TO PRIVATE MARKETS ALTERN
Slide 113: Bringing Institutional Private Market Returns to the Individual Investor
113STEPSTONE GROUP StepStone Brings Institutional Private Market Returns to the Individual Investor StepStone Private Wealth (“SPW”) was formed to convert the advantages of private markets enjoyed by institutional investors to opportunities for high-net-worth investors and smaller institutions Insti
Slide 114: StepStone has Invested in Robust Distribution
114STEPSTONE GROUP StepStone has Invested in Robust Distribution ACTIVITY LEVELS IN 2022 102K Emails sent to advisors 4K Voicemails left for advisors 3K Calls with advisors 3K Meetings with advisors DISTRIBUTION CHANNELS Independent Broker Dealers Registered Investment Advisors Wirehouses Internatio
Slide 115: Private Wealth is Building on Positive Momentum
115STEPSTONE GROUP StepStone Private Wealth is Building on Positive Momentum $0.1 $0.1 $0.1 $0.2 $0.3 $0.5 $0.6 $0.8 $1.2 $1.5 $1.7 FEE-EARNING AUM ($B) Quarters are represented as calendar quarter, and includes subscriptions through quarter-end Q2 2023 AUM as of May 30, 2023,and includes June 1 sub
Slide 116: Product Overview: SPRIM – Core Private Market Solution
116STEPSTONE GROUP Product Overview: SPRIM – Core Private Market Solution SPRIM is a single ticket, core private market solution to give accredited investors fully diversified exposure to private markets across asset class, strategy, and manager via a convenient, efficient, and transparent product I
Slide 117: Product Overview: SPRING – Venture Capital and Growth Equity
117STEPSTONE GROUP Product Overview: SPRING – Venture Capital and Growth Equity • SPRING is a broadly diversified venture and growth strategy, predominantly emphasizing shorter duration, higher IRR opportunities via secondaries, later stage direct investments and seasoned primary fund investments •
Slide 118: Key Takeaways: Private Wealth
118STEPSTONE GROUP Key Takeaways: Private Wealth Individual investible assets are growing faster than institutional assets Private wealth is among the fastest growing client bases within alternative investments The individual investor remains significantly under allocated to the private markets Step
Slide 119: Concluding Remarks
CONCLUDING REMARKS
Slide 120: Appendix
APPENDIX
Slide 121: Understanding StepStone's Private Markets Strategies
121STEPSTONE GROUP Understanding StepStone’s Private Markets Strategies PRIMARY FUND INVESTMENT • Investments into a general partnership private market fund. • StepStone navigates a complex network of over 40,000 funds, helping our clients deploy capital across asset classes and geographies. • StepS
Slide 122: Understanding StepStone's Commercial Structures
122STEPSTONE GROUP SEPARATELY MANAGED ACCOUNTS • Owned by one client and managed according to their specific preferences • Address client’s specific portfolio risk / return, diversification, and liquidity objectives • Integrates a combination of investment strategies across one or more asset FOCUSED
Slide 123: StepStone's Powerful, Integrated Platform
123STEPSTONE GROUP StepStone’s Powerful, Integrated Platform StepStone’s process leverages specialized expertise across the platform leveraging sector / geographic experts, asset class resources, SPI database and legal and structuring resources INVESTMENT STRATEGIESPRIVATE EQUITY I N V E S T M E N T
Slide 124: Blue-chip, Sophisticated, Global Clientele
124STEPSTONE GROUP Blue-chip, Sophisticated, Global Clientele Note: As of March 31, 2023 1 Our top 10 clients comprise over 50 separate mandates and commitments to commingled funds. 2 Includes ~46% of management and advisory fee contribution from focused commingled funds. 59%26% 7% 8% > 7 years 3-7
Slide 125: Diversified Platform Spans Private Markets Solutions
125STEPSTONE GROUP StepStone’s Diversified Platform Spans Private Markets Solutions PRIVATE EQUITY REAL ESTATE INFRASTRUCTURE PRIVATE DEBT • Total AUM: $72B - SMA AUM: $36B - FCF AUM: $36B • Advisory AUA: $242B • $42B Approved in 2022 • Total AUM: $13B - SMA AUM: $5B - FCF AUM: $4B - Advisory AUM: $
Slide 126: Track Record Disclosures
126STEPSTONE GROUP Track Record Disclosures Note: Descriptions for certain terms can be found on the definitions pages in the following slides. 1 Investment returns reflect NAV data for underlying investments as of December 31, 2022, as reported by underlying managers up to 114 days following Decemb
Slide 127: Reconciliation of GAAP Income (Loss) before Income Tax to ANI and FRE
127STEPSTONE GROUP Reconciliation of GAAP Income (Loss) before Income Tax to ANI and FRE Note: See definitions of non-GAAP measures in the following slides. 1 Reflects the portion of pre-tax adjusted net income of our subsidiaries attributable to non-controlling interests. 2 Reflects equity-based co
Slide 128: Reconciliation of GAAP Fee Revenues to Adjusted Fee Revenues and FRE
128STEPSTONE GROUP Reconciliation of GAAP Fee Revenues to Adjusted Fee Revenues and FRE to Adjusted FRE and FRE Margin See definitions of non-GAAP measures in the following slides. Reflects the add back of management and advisory fee revenues for the Consolidated Funds, which have been eliminated in
Slide 129: Calculation and Reconciliation of FRE per share
129STEPSTONE GROUP Calculation and Reconciliation of FRE per share and Adjusted FRE per share (in thousands, except per share amounts) FY18 FY19 FY20 FY21 FY22 FY23 Fee-related earnings 23,836$ 45,342$ 61,559$ 89,484$ 122,242$ 156,158$ Adjusted FRE - - 54,713 80,168 115,188 153,475 FRE per share 0.2
Slide 130: Reconciliation of GAAP Realized Performance Fees
130STEPSTONE GROUP Reconciliation of GAAP Realized Performance Fees to Gross and Net Realized Performance Fees1 Note: Amounts may not sum to total due to rounding. 1 Excludes legacy Greenspring entities. ($ in millions) FQ4'18 FQ1'19 FQ2'19 FQ3'19 FQ4'19 FQ1'20 FQ2'20 FQ3'20 FQ4'20 FQ1'21 FQ2'21 FQ3
Slide 131: Definitions
131STEPSTONE GROUP Definitions • Company refers to SSG and its consolidated subsidiaries, including the Partnership, following the Reorganization and IPO and to the Partnership and its consolidated subsidiaries prior to the Reorganization and IPO. • StepStone Group Inc. or “SSG” refers solely to Ste
Slide 132: Definitions (continued)
132STEPSTONE GROUP Definitions (continued) • Fee-earning AUM, or “FEAUM”, reflects the assets from which we earn management fee revenue (i.e., fee basis) and includes assets in our SMAs, focused commingled funds and assets held directly by our clients for which we have fiduciary oversight and are pa
Slide 133: Definitions (continued)
133STEPSTONE GROUP Definitions (continued) • Fee-related earnings margin is a non-GAAP performance measure which is calculated by dividing fee-related earnings by management & advisory fees, net. We believe fee-related earnings margin is an important measure of profitability on revenues that are lar
Slide 134: Definitions (continued)
134STEPSTONE GROUP Definitions (continued) • Total capital responsibility equals AUM plus AUA. AUM includes any accounts for which StepStone Group has full discretion over the investment decisions, has responsibility to arrange or effectuate transactions, or has custody of assets. AUA refers to acco