StepStone (US:STEP)2023-02-10 03:34Financial Data and Key Metrics Changes - The company reported a GAAP net loss of $13.6 million, with a net loss attributable to StepStone Group, Inc. of $6.9 million [32] - Fee-related earnings were $39.0 million, and adjusted net income was $31.2 million, translating to adjusted net income per share of $0.27, down from $0.42 per share in the same quarter last year [33][68] - The blended management fee rate increased to 54 basis points, attributed to a shift towards comingled funds [7] Business Line Data and Key Metrics Changes - Fee-earning assets grew by $3 billion for the quarter, driven by healthy deployment across several SMAs and activations of the PE secondaries fund [6] - The company generated over $4 per share in management and advisory fees over the last 12 months, representing an annual growth rate of 25% since 2018 [7] - The venture capital secondaries market is becoming more active, with over $1 trillion of unrealized venture assets anticipated to spur deal flow [70] Market Data and Key Metrics Changes - Industry-wide deal activity in secondaries topped $100 billion in 2022, trailing only the record volumes from 2021 [3] - The company has seen a significant interest in secondaries across various asset classes, with a notable shift in allocations among LPs [25][34] - The company finished the quarter with $134 billion of assets under management and $83 billion of fee-earning assets [68] Company Strategy and Development Direction - The company is focusing on expanding its private wealth platform and has launched offshore parallel and feeder funds in Europe and Australia [79] - There is an emphasis on the secondaries market as a critical area for growth, particularly in infrastructure and real estate [78] - The company aims to maintain a disciplined approach to capital distribution, aligning it with its business model [80] Management's Comments on Operating Environment and Future Outlook - Management noted that the current environment presents opportunities for selective investments, particularly in down markets [111] - There is a recognition of the need for LPs to rebalance their portfolios, leading to increased utilization of the secondary market [34] - Management expressed optimism about the venture capital sector, highlighting its resilience and potential for growth despite current market volatility [35] Other Important Information - The company anticipates a step-up in G&A expenses next quarter due to increased headcount and incentive payments [8] - Gross accrued carry finished the quarter at approximately $1.1 billion, reflecting a decrease due to reduced underlying valuations [9] - The company has declared an aggregate of $0.60 per share in dividends for the first three quarters of fiscal 2023, representing nearly 100% of fee-related earnings available to common shareholders [80] Q&A Session Summary Question: What is driving the elevated distributions this quarter? - Management indicated that elevated distributions were primarily due to normal activities across various drivers, with a notable exception being the expiration of an account in the infrastructure business [84] Question: How do you see investors altering their asset allocation? - Management noted that sentiment among clients is balanced, with some decreasing allocations while others maintain or slightly increase them, emphasizing the importance of not missing out on vintage years [85] Question: What are the expectations for expanding the retail platform in Europe and Australia? - Management highlighted that the markets are structured differently, with a smaller number of players in Europe and Australia compared to the U.S., which may require a different approach [102]