StepStone: Private Wealth Buy-In Set to Accrete, SPRING Powers Record Subscriptions

Q1 FY2027 shows double-digit AUM growth and FRE +30% on Private Wealth strength; the buy-in of the Private Wealth profits interest becomes the key EPS driver.

STEP · Earnings Call · 2026-08-06

Record Quarter, Record Fundraise

StepStone Group kicked off fiscal 2027 with a textbook beat: fee-related earnings rose 30% year over year to $106 million, and core FRE (ex-retroactive fees) grew 33% to $105 million. The quarter was fueled by managed account additions and a record $10 billion of gross inflows split evenly between managed accounts and commingled funds — the best 12-month period ever for the firm. As CEO Scott Hart put it,

We are comfortably generating run rate management and advisory fees of over $1 billion per year and generating run rate fee-related earnings of well over $400 million per year.
Scott Hart, Chief Executive Officer · 2026-08-06

The engine is clearly the Private Wealth platform. Subscriptions hit a record $2.8 billion in the quarter, pushing Private Wealth assets above $21 billion — more than double the NAV of a year ago. Wealth assets are increasingly the firm's growth driver, and within that, SPRING (the venture/growth evergreen fund) is the standout. SPRING generated nearly $1.7 billion of inflows and delivered 23% net returns in the first half of calendar 2026, underpinned by several large value-creation events. Jason Ment was quick to temper expectations, noting the fund is “not about any one company or a small group of companies” — even ex-SpaceX, SPRING was up mid- to high-20s, well above its target.

The Buy-In: Accretion at a Discount

The centerpiece of the call was the structural buy-in of the profit interest in the Private Wealth business. StepStone entered the put period in the June quarter, and the call period begins in Q3 CY2027. Management stressed that the transaction is materially accretive — StepStone captures 100% of the economics of its highest-growth segment at a significant discount to its public multiple. Mike McCabe laid out the financing:

The structure provides a lot of flexibility, including the ability to fund up to 75% of the consideration in StepStone equity with the balance being funded in cash.
Michael McCabe, Head of Strategy · 2026-08-06

To fund the cash portion, the firm will likely tap the debt market while preserving its A+ credit rating. Scott Hart addressed the inevitable overhang: 30% of issued shares are tradable immediately and the remainder vests over three years — a familiar lockup cadence from the IPO and prior acquisitions. The market has been watching this closely; the stock remains 34% below its January 2026 peak, but the recent 90-day tape shows a +8.9% recovery.

Fee Rate Drag and Data Partnerships

Not everything is accelerating. Management guided to a flattish blended fee rate for the next few quarters as the newly activated secondaries funds (with lower fees) come online. That said, the fee-earning AUM + UFEC stack grew to ~$193 billion, up $9 billion sequentially. The data partnerships (FTSE Russell, PitchBook, Kroll) are starting to gain adoption but remain immaterial to revenue — Mike McCabe explicitly said they will not show up as a line item until later this year.

Realizations: Partial Progress, Wait-and-See

Net accrued carry finished at $935 million, up 19% year over year, with over 70% tied to programs older than 5 years — ripe for harvest. But as McCabe explained, the market is seeing more partial realizations (continuation vehicles, minority sales) that often do not yet trigger carry payments. Investors should expect a continued lumpy path to cash. Total revenue for the latest quarter came in at $589 million, up 56% year over year, but the series is volatile due to performance fee recognition. The underlying FRE margin held at 39% (ex-retro), and management raised the quarterly dividend 18% to $0.33.

What Changed?

StepStone's story is increasingly about the wealth channel and the upcoming buy-in. The prior quarter's concerns (software exposure, AI disruption from the Feb 2026 call) have been replaced by execution and capital-structure optionality. As Scott noted on the prior call, “the vast majority of that is direct secondaries” — the sourcing advantage remains intact. For now, the market is voting with its feet: the stock is up 14% over the last six weeks, and the buy-in math suggests meaningful EPS upside is still being discounted.