StepStone (US:STEP)2023-05-25 01:05Financial Data and Key Metrics Changes - The company reported GAAP net income of $56.8 million, with net income attributable to StepStone Group Incorporated at $28.8 million [4] - Fee related earnings for the quarter were $37.8 million, adjusted net income was $27.1 million, and adjusted net income per share was $0.24, down from $44 million or $0.38 per share in the fourth quarter of the previous year [6][4] - The FRE margin for the quarter was 28%, with a full year margin of 31%, which is in line with expectations [6][17] Business Line Data and Key Metrics Changes - Fee related assets under management (AUM) grew by 14% year-over-year, with gross AUM additions of over $5 billion in the recent quarter [6] - The company generated $16 billion of gross AUM inflows over the last 12 months, with $6 billion from commingled funds and $10 billion from managed accounts [13] - The private wealth platform's fee earning AUM exceeded $1.5 billion at the end of the quarter, with strong investment performance from SPRIM and SPRING funds [13] Market Data and Key Metrics Changes - The company noted that venture capital activities, which account for 15% of fee earning AUM, were minimally impacted by the failure of Silicon Valley Bank [7] - The demand for liquidity in the venture ecosystem is increasing, particularly for secondary sales, driven by regional banking turmoil [8] - The company’s global office exposure in commercial real estate is only 10% of total real estate AUM, indicating a cautious approach to this sector [9] Company Strategy and Development Direction - The company aims to capitalize on structural tailwinds in private markets and specific growth drivers within its asset classes [7] - Strategies such as venture secondaries and growth equity are highlighted as particularly well-suited for the current market environment [8] - The company is focused on expanding its retail franchise and developing new products for institutional investors [25] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term prospects of venture capital and growth equity despite near-term macro headwinds [7] - The company anticipates continued pressure on private real estate valuations but believes its high-quality exposure will create opportunities [10] - Management emphasized the importance of consistent investment and an experienced team to navigate market challenges [8] Other Important Information - The company declared a supplemental dividend of $0.25 per share, in addition to the normal quarterly dividend of $0.20 per share [14] - The net accrued performance fees stand at nearly $600 million, serving as a backlog for future distributions [14] Q&A Session Summary Question: Distribution build-out and international platforms - Management noted that distribution flows have been consistent, with a growing syndicate approved on over 150 platforms globally, and emphasized the ongoing build-out of dedicated European coverage [22][23] Question: Fund closes and expectations for June - The multi-strategy global venture capital fund and real estate secondaries fund had interim closings, with the latter currently at over $900 million in commitments [24] Question: Fiscal '24 investment priorities - Management highlighted the focus on supporting growth and profitability, expanding the retail franchise, and developing new products for institutional investors [25] Question: SMA contributions and trends - The company is seeing a combination of re-ups and new separate accounts driving AUM inflows, with continued activity expected in the year ahead [26] Question: LP attitudes towards venture capital - Management indicated that while existing portfolios face markdowns, there is growing excitement about new investment opportunities, particularly in secondaries and growth equity [31] Question: Secondary market opportunities - There is over a trillion dollars of unrealized net asset value in venture portfolios, leading to increased willingness to sell, particularly in the LP secondary market [33]