StepStone Group Inc

Previous wording

We are a global private markets investment firm focused on providing customized investment solutions and advisory and data services to our clients. Our clients include some of the world’s largest public and private defined benefit and defined contribution pension funds, sovereign wealth funds and insurance companies, as well as prominent endowments, foundations, family offices and private wealth clients, which include high-net-worth and mass affluent individuals. We partner with our clients to develop and build private markets portfolios designed to meet their specific objectives across the private equity, infrastructure, private debt and real estate asset classes. These portfolios utilize several types of synergistic investment strategies with third-party fund managers, including commitments to funds (“primaries”), acquiring stakes in existing funds on the secondary market (“secondaries”) and investing directly into companies (“co-investments”). As of December 31, 2023, we were responsible for approximately $659 billion of total capital, including $149 billion of AUM and $510 billion of AUA.

Current wording

We are a global private markets investment firm focused on providing customized investment solutions and advisory and data services to our clients. Our clients include some of the world’s largest public and private defined benefit and defined contribution pension funds, sovereign wealth funds and insurance companies, as well as prominent endowments, foundations, family offices and private wealth clients, which include high-net-worth and mass affluent individuals. We partner with our clients to develop and build private markets portfolios designed to meet their specific objectives across the private equity, infrastructure, private debt and real estate asset classes. These portfolios utilize several types of synergistic investment strategies with third-party fund managers, including commitments to funds (“primaries”), acquiring stakes in existing funds on the secondary market (“secondaries”) and investing directly into companies (“co-investments”). As of June 30, 2024, we were responsible for approximately $701 billion of total capital, including $169 billion of AUM and $531 billion of AUA.

Previous wording

We are a global firm and believe that our multi-asset class expertise, local knowledge, business relationships, proprietary data and technology, and presence are all critical to securing a competitive edge in the private markets. We deploy a local staffing model, operating from 27 cities across 16 countries on five continents. Our offices are staffed by investment professionals who bring valuable regional insights and language proficiency to enhance existing client relationships and build new client relationships. Since our inception in 2007, we have invested and continue to invest heavily in our platforms to drive growth and expand our investment solutions capabilities and service offerings, including through opportunistic transactions that have helped accelerate the growth of our team and capabilities. As of December 31, 2023, we had approximately 980 total employees, including 340 investment professionals and approximately 640 employees across our operating team and implementation teams dedicated to sourcing, executing, analyzing and monitoring private markets opportunities.

Current wording

We are a global firm and believe that our multi-asset class expertise, local knowledge, business relationships, proprietary data and technology, and presence are all critical to securing a competitive edge in the private markets. We deploy a local staffing model, operating from 27 cities across 16 countries on five continents. Our offices are staffed by investment professionals who bring valuable regional insights and language proficiency to enhance existing client relationships and build new client relationships. Since our inception in 2007, we have invested and continue to invest heavily in our platforms to drive growth and expand our investment solutions capabilities and service offerings, including through opportunistic transactions that have helped accelerate the growth of our team and capabilities. As of June 30, 2024, we had approximately 1,010 total employees, including 340 investment professionals and approximately 670 employees across our operating team and implementation teams dedicated to sourcing, executing, analyzing and monitoring private markets opportunities.

Previous wording

•Separately managed accounts (“SMAs”). Owned by one client and managed according to their specific preferences, SMAs integrate a combination of primaries, secondaries and co-investments across one or more asset classes. SMAs are meant to address clients’ specific portfolio objectives with respect to return, risk tolerance, diversification and liquidity. SMAs, including directly managed assets, comprised $89 billion of our AUM as of December 31, 2023.

Current wording

•Separately managed accounts (“SMAs”). Owned by one client and managed according to their specific preferences, SMAs integrate a combination of primaries, secondaries and co-investments across one or more asset classes. SMAs are meant to address clients’ specific portfolio objectives with respect to return, risk tolerance, diversification and liquidity. SMAs, including directly managed assets, comprised $103 billion of our AUM as of June 30, 2024.

Previous wording

•Focused commingled funds. Owned by multiple clients, our focused commingled funds deploy capital in specific asset classes with defined investment strategies. Focused commingled funds comprised $46 billion of our AUM as of December 31, 2023.

Current wording

•Focused commingled funds. Owned by multiple clients, our focused commingled funds deploy capital in specific asset classes with defined investment strategies. Focused commingled funds comprised $52 billion of our AUM as of June 30, 2024.

Previous wording

•Advisory and data services. These services include one or more of the following for our clients: (i) recurring support of portfolio construction and design; (ii) discrete or project-based due diligence, advice and investment recommendations; (iii) detailed review of existing private markets investments, including portfolio-level repositioning recommendations where appropriate; (iv) consulting on investment pacing, policies, strategic plans, and asset allocation to investment boards and committees, and (v) licensed access to our proprietary data and technology platforms, including StepStone Private Markets Intelligence (“SPI”) Research and our other proprietary tools. Advisory relationships comprised$510 billion of our AUA and $15 billion of our AUM as of December 31, 2023.

Current wording

•Advisory and data services. These services include one or more of the following for our clients: (i) recurring support of portfolio construction and design; (ii) discrete or project-based due diligence, advice and investment recommendations; (iii) detailed review of existing private markets investments, including portfolio-level repositioning recommendations where appropriate; (iv) consulting on investment pacing, policies, strategic plans, and asset allocation to investment boards and committees; and (v) licensed access to our proprietary data and technology platforms, including StepStone Private Markets Intelligence (“SPI”) Research and our other proprietary tools. Advisory relationships comprised$531 billion of our AUA and $15 billion of our AUM as of June 30, 2024.

Previous wording

•Portfolio analytics and reporting. We provide clients with tailored reporting packages, including customized performance benchmarks as well as associated compliance, administrative and tax capabilities. Mandates for portfolio analytics and reporting services typically include licensed access to our proprietary performance monitoring software, SPI Reporting. SPI Reporting tracked detailed information on over $1,015 billion of client commitments as of December 31, 2023, inclusive of our total capital responsibility, previously exited investments and investments of former clients.

Current wording

•Portfolio analytics and reporting. We provide clients with tailored reporting packages, including customized performance benchmarks as well as associated compliance, administrative and tax capabilities. Mandates for portfolio analytics and reporting services typically include licensed access to our proprietary performance monitoring software, SPI Reporting. SPI Reporting tracked detailed information on over $710 billion of client commitments as of June 30, 2024, inclusive of our total capital responsibility, previously exited investments and investments of former clients.

Previous wording

Our business is affected by a variety of factors, including conditions in the financial markets and economic and political conditions. Changes in global economic conditions and regulatory or other governmental policies or actions can materially affect the values of the StepStone Funds’ holdings and the ability to source attractive investments and completely utilize the capital that we have raised. However, we believe our disciplined investment philosophy across our diversified investment strategies has historically contributed to the stability of our performance throughout market cycles. Furthermore, we operate at scale across all four private markets asset classes and service clients across a broad range of geography, type, and size, which contributes to our operating resilience and mitigates against concentration risk.

Current wording

Our business is affected by a variety of factors, including conditions in the financial markets, regulatory environment, and economic and political conditions. Changes in global economic conditions and regulatory or other governmental policies or actions can materially affect the values of the StepStone Funds’ holdings, our ability to source attractive investments and completely utilize the capital that we have raised, and result in increased compliance costs and administrative burdens. However, we believe our disciplined investment philosophy across our diversified investment strategies has historically contributed to the stability of our performance throughout market cycles. Furthermore, we operate at scale across all four private markets asset classes and service clients across a broad range of geography, type, and size, which contributes to our operating resilience and mitigates against concentration risk.

Previous wording

We are continuing to closely monitor developments related to inflation, rising interest rates, the ongoing Russia-Ukraine conflict, banking system volatility, the Israel-Hamas conflict and the geopolitical responses thereto, and to assess the impact on financial markets and on our business. Our results and the overall industry results have been and may continue to be adversely affected by slowdowns in fundraising activity and the pace of capital deployment, which have resulted in, and may continue to result in, delayed or decreased management fees. Further, fund managers have been unable or less able to exit existing investments profitably. Such conditions have resulted in, and may continue to result in, delayed or decreased performance fee revenues. It is currently not possible to predict the ultimate effects of these events on the financial markets, overall economy and our condensed consolidated financial statements. See “Risk Factors—Risks Related to Our Industry—Difficult or volatile market and political conditions can adversely affect our business by reducing the market value of the assets we manage, causing our clients to reduce their investments in private markets, reducing the number of high-quality investment managers with whom we may invest, and reducing the ability of our funds to raise or deploy capital” and “Risk Factors—Banking system volatility may adversely affect the results and financial condition of the StepStone Funds or StepStone generally” included in our annual report on Form 10-K for the fiscal year ended March 31, 2023.

Current wording

We are continuing to closely monitor developments related to inflation, higher interest rates, potential regulatory developments as a result of U.S. elections, banking system volatility, geopolitical tension, unrest or conflicts, including in Russia, Ukraine, and the Middle East, and assess the impact on financial markets and on our business. Our results and the overall industry results have been and may continue to be adversely affected by slowdowns in fundraising activity and the pace of capital deployment, which have resulted in, and may continue to result in, delayed or decreased management fees. Further, fund managers have been unable or less able to exit existing investments profitably. Such conditions have resulted in, and may continue to result in, delayed or decreased performance fee revenues. It is currently not possible to predict the ultimate effects of these events on the financial markets, overall economy and our condensed consolidated financial statements. See “Risk Factors—Risks Related to Our Industry—Difficult or volatile market and political conditions can adversely affect our business by reducing the market value of the assets we manage, causing our clients to reduce their investments in private markets, reducing the number of high-quality investment managers with whom we may invest, and reducing the ability of our funds to raise or deploy capital” and “Risk Factors—Banking system volatility may adversely affect the results and financial condition of the StepStone Funds or StepStone generally” included in our annual report on Form 10-K for the fiscal year ended March 31, 2024.

Previous wording

In September 2023, we issued 105,598 shares of Class A common stock to certain limited partners of the Partnership in exchange for 105,598 Class B units in accordance with elective exchange notices submitted pursuant to an agreement with the Class B limited partners (the “Class B Exchange Agreement”) to allow for exchange of Class B units of the Partnership to shares of our Class A common stock on a one-for-one basis, subject to certain restrictions. A corresponding number of shares of Class B common stock were automatically redeemed at par value and canceled in connection with such exchange and a corresponding number of Class A units of the Partnership were issued to us. On the same date, we also issued 551,954 shares of Class A common stock to certain limited partners of the Partnership in exchange for 551,954 Class C units in accordance with the elective exchange notices submitted pursuant to an agreement with the Class C limited partners (the “Class C Exchange Agreement”) to allow for exchange of Class C units of the Partnership to shares of our Class A common stock on a one-for-one basis, subject to certain restrictions. A corresponding number of Class A units of the Partnership were issued to us.

Current wording

In June 2024, we issued 1,731,807 shares of Class A common stock to certain limited partners of the Partnership in exchange for 1,731,807 Class B units in accordance with elective exchange notices submitted pursuant to an agreement with the Class B limited partners (the “Class B Exchange Agreement”) to allow for exchange of Class B units of the Partnership to shares of our Class A common stock on a one-for-one basis, subject to certain restrictions. A corresponding number of shares of Class B common stock were automatically redeemed at par value and canceled in connection with such exchange and a corresponding number of Class A units of the Partnership were issued to us. On the same date, we also issued 71,766 shares of Class A common stock to certain limited partners of the Partnership in exchange for 71,766 Class C units in accordance with the elective exchange notices submitted pursuant to an agreement with the Class C limited partners (the “Class C Exchange Agreement”) to allow for exchange of Class C units of the Partnership to shares of our Class A common stock on a one-for-one basis, subject to certain restrictions. A corresponding number of Class A units of the Partnership were issued to us.

Previous wording

SSG is a holding company and its only business is to act as the managing member of the General Partner, and its only material assets are Class A units in the Partnership and 100% of the interests in the General Partner. In its capacity as the sole managing member of the General Partner, SSG indirectly operates and controls all of the Partnership’s business and affairs. Therefore, we consolidate the financial results of the Partnership and report non-controlling interests (“NCI”) related to the Class B units and Class C units held by partners of the Partnership in our consolidated financial statements.

Current wording

SSG is a holding company and its only business is to act as the managing member of the General Partner, and its only material assets are Class A units in the Partnership and 100% of the interests in the General Partner. In its capacity as the sole managing member of the General Partner, SSG indirectly operates and controls all of the Partnership’s business and affairs. Therefore, we consolidate the financial results of the Partnership and report non-controlling interests (“NCI”) related to the Class B units, Class C units and Class D units held by partners of the Partnership in our consolidated financial statements.

Previous wording

Pursuant to the StepStone Limited Partnership Agreement, the Class B Exchange Agreement and Class C Exchange Agreement that SSG and the Partnership entered into with partners holding Class B units and Class C units of the Partnership, respectively, each Class B unit or Class C unit is exchangeable for one share of SSG’s Class A common stock or, at SSG’s election, for cash, subject to certain restrictions specified in the relevant exchange agreement. When a Class B unit or Class C unit is surrendered for exchange, it will not be available for reissuance. When a Class B unit is exchanged for a share of SSG’s Class A common stock, a corresponding share of SSG’s Class B common stock will automatically be redeemed by SSG at par value and canceled. There are no corresponding shares of common stock for the Class C units.

Current wording

Pursuant to the StepStone Limited Partnership Agreement, the Class B Exchange Agreement, the Class C Exchange Agreement and the Class D Exchange Agreement that SSG and the Partnership entered into with partners holding Class B units, Class C units and Class D units of the Partnership, respectively, each Class B unit, Class C unit or Class D unit is exchangeable for one share of SSG’s Class A common stock or, at SSG’s election, for cash, subject to certain restrictions specified in the relevant exchange agreement. When a Class B unit, Class C unit or Class D unit is surrendered for exchange, it will not be available for reissuance. When a Class B unit is exchanged for a share of SSG’s Class A common stock, a corresponding share of SSG’s Class B common stock will automatically be redeemed by SSG at par value and canceled. There are no corresponding shares of common stock for the Class C and Class D units.

Previous wording

•certain employee owners who own Class C units.

Current wording

•certain employee owners who own Class C units; and

Previous wording

A “Sunset” is triggered upon the earliest to occur of the following: (i) Monte Brem, Scott Hart, Jason Ment, Jose Fernandez, Johnny Randel, Michael McCabe, Mark Maruszewski, Thomas Keck, Thomas Bradley, David Jeffrey and Darren Friedman (including their respective family trusts and any other permitted transferees, the “Sunset Holders”) collectively cease to maintain direct or indirect beneficial ownership of at least 10% of the outstanding shares of Class A common stock (determined assuming all outstanding Class B units have been exchanged for Class A common stock); (ii) the Sunset Holders cease collectively to maintain direct or indirect beneficial ownership of an aggregate of at least 25% of the aggregate voting power of our outstanding Class A common stock and Class B common stock, before giving effect to a Sunset; and (iii) September 18, 2025. As of December 31, 2023 the Sunset Holders collectively maintained direct or indirect beneficial ownership of approximately 30.8% of the Class A common stock (determined assuming all outstanding Class B units have been exchanged for Class A common stock) and approximately 56.1% of the aggregate voting power of our outstanding Class A common stock and Class B common stock.

Current wording

A “Sunset” is triggered upon the earliest to occur of the following: (i) Monte Brem, Scott Hart, Jason Ment, Jose Fernandez, Johnny Randel, Michael McCabe, Mark Maruszewski, Thomas Keck, Thomas Bradley, David Jeffrey and Darren Friedman (including their respective family trusts and any other permitted transferees, the “Sunset Holders”) collectively cease to maintain direct or indirect beneficial ownership of at least 10% of the outstanding shares of Class A common stock (determined assuming all outstanding Class B units have been exchanged for Class A common stock); (ii) the Sunset Holders cease collectively to maintain direct or indirect beneficial ownership of an aggregate of at least 25% of the aggregate voting power of our outstanding Class A common stock and Class B common stock, before giving effect to a Sunset; and (iii) September 18, 2025. As of June 30, 2024 the Sunset Holders collectively maintained direct or indirect beneficial ownership of approximately 30.4% of the Class A common stock (determined assuming all outstanding Class B units have been exchanged for Class A common stock) and approximately 57.1% of the aggregate voting power of our outstanding Class A common stock and Class B common stock.

Previous wording

•Management fees from SMAs are generally based on a contractual rate applied to committed capital or net invested capital. These fees will vary over the life of the contract due to changes in the fee basis or contractual rate changes or thresholds, built-in declines in applicable contractual rates, and/or changes in net invested capital balances. The weighted-average management fee rate from SMAs was approximately 0.40% and 0.40% of average FEAUM for the twelve months ended December 31, 2022 and 2023, respectively.

Current wording

•Management fees from SMAs are generally based on a contractual rate applied to committed capital or net invested capital. These fees will vary over the life of the contract due to changes in the fee basis or contractual rate changes or thresholds, built-in declines in applicable contractual rates, and/or changes in net invested capital balances. The weighted-average management fee rate from SMAs was approximately 0.40% and 0.39% of average FEAUM for the twelve months ended June 30, 2023 and 2024, respectively.

Previous wording

•Management fees from focused commingled funds are generally based on a specified fee rate applied against client capital commitments during a defined investment or commitment period. Thereafter, management fees are typically calculated based on a contractual rate applied against net invested capital, or a stepped-down fee rate applied against the initial commitment. The weighted-average management fee rate from focused commingled funds was approximately 0.80% and 0.90% of average FEAUM for the twelve months ended December 31, 2022 and 2023, respectively, and primarily reflected the timing of new funds, and shifts in asset class mix.

Current wording

•Management fees from focused commingled funds are generally based on a specified fee rate applied against client capital commitments during a defined investment or commitment period. Thereafter, management fees are typically calculated based on a contractual rate applied against net invested capital, or a stepped-down fee rate applied against the initial commitment. The weighted-average management fee rate from focused commingled funds was approximately 0.84% and 0.99% of average FEAUM for the twelve months ended June 30, 2023 and 2024, respectively, and primarily reflected the timing of new funds, and shifts in asset class mix.

Previous wording

•The weighted-average management fee rate across SMAs and focused commingled funds was approximately 0.54% and 0.58% of average FEAUM for the twelve months ended December 31, 2022 and 2023, respectively, and primarily reflected the timing of new funds and shifts in mix between SMAs and focused commingled funds.

Current wording

•The weighted-average management fee rate across SMAs and focused commingled funds was approximately 0.55% and 0.61% of average FEAUM for the twelve months ended June 30, 2023 and 2024, respectively, and primarily reflected the timing of new funds and shifts in mix between SMAs and focused commingled funds.

Previous wording

We earn two types of performance fee revenues: incentive fees and carried interest allocations, as described below. As of December 31, 2023, we had over $70 billion of performance fee-eligible capital (excluding certain legacy Greenspring funds) across over 200 programs.

Current wording

We earn two types of performance fee revenues: incentive fees and carried interest allocations, as described below. As of June 30, 2024, we had over $80 billion of performance fee-eligible capital (excluding certain legacy Greenspring funds) across over 200 programs.

Previous wording

Carried interest allocations include the allocation of performance-based fees, commonly referred to as carried interest, to us from limited partners in the StepStone Funds in which we hold an equity interest. We are entitled to a carried interest allocation (typically 5% to 15%) based on cumulative fund or account performance to date, irrespective of whether such amounts have been realized. These carried interest allocations are subject to the achievement of minimum return levels (typically 5% to 10%), in accordance with the terms set forth in the respective fund’s governing documents. We account for our investment balances in the StepStone Funds, including carried interest allocations, under the equity method of accounting because we are presumed to have significant influence as the general partner or managing member. Accordingly, carried interest allocations are not deemed to be within the scope of Accounting Standards Codification Topic 606 (“ASC 606”), Revenue from Contracts with Customers.

Current wording

Carried interest allocations include the allocation of performance-based fees, commonly referred to as carried interest, to us from limited partners in the StepStone Funds in which we hold an equity interest. We are entitled to a carried interest allocation (typically 5% to 20%) based on cumulative fund or account performance to date, irrespective of whether such amounts have been realized. These carried interest allocations are subject to the achievement of minimum return levels (typically 5% to 10%), in accordance with the terms set forth in the respective fund’s governing documents. We account for our investment balances in the StepStone Funds, including carried interest allocations, under the equity method of accounting because we are presumed to have significant influence as the general partner or managing member. Accordingly, carried interest allocations are not deemed to be within the scope of Accounting Standards Codification Topic 606 (“ASC 606”), Revenue from Contracts with Customers.

Previous wording

Performance fee-related compensation represents the portion of carried interest allocation revenue and incentive fees that have been awarded to employees as a form of long-term incentive compensation. Performance fee-related compensation is generally tied to the investment performance of the StepStone Funds. Approximately 50% of carried interest allocation revenue is awarded to employees as part of our long-term incentive compensation plan, fostering alignment of interest with our clients and investors, and retaining key investment professionals. Carried interest-related compensation is accounted for as compensation expense in conjunction with the related carried interest allocation revenue and, until paid, is recorded as a component of accrued carried interest-related compensation in the condensed consolidated balance sheets. Carried interest-related compensation expense also includes the portion of net carried interest allocation revenue attributable to equity holders of our consolidated subsidiaries that are not 100% owned by us. Amounts presented as realized indicate the amounts paid or payable to employees based on the receipt of carried interest allocation revenue from realized investment activity. Carried interest-related compensation expense may be subject to reversal to the extent that the related carried interest allocation revenue is reversed. Carried interest-related compensation paid to employees may be subject to clawback on an after-tax basis under certain scenarios. To date, no material amounts of realized carried interest-related compensation have been reversed. Incentive fee-related compensation is accrued as compensation expense when it is probable and estimable that payment will be made.

Current wording

Performance fee-related compensation represents the portion of carried interest allocation revenue and incentive fees that have been awarded to employees as a form of long-term incentive compensation. Performance fee-related compensation is generally tied to the investment performance of the StepStone Funds. Approximately 50% of carried interest allocation revenue is awarded to employees as part of our long-term incentive compensation plan, fostering alignment of interest with our clients and investors, and retaining key investment professionals. Carried interest-related compensation is accounted for as compensation expense in conjunction with the related carried interest allocation revenue and, until paid, is recorded as a component of accrued carried interest-related compensation in the condensed consolidated balance sheets. Amounts presented as realized indicate the amounts paid or payable to employees based on the receipt of carried interest allocation revenue from realized investment activity. Carried interest-related compensation expense may be subject to reversal to the extent that the related carried interest allocation revenue is reversed. Carried interest-related compensation paid to employees may be subject to clawback on an after-tax basis under certain scenarios. To date, no material amounts of realized carried interest-related compensation have been reversed. Incentive fee-related compensation is accrued as compensation expense when it is probable and estimable that payment will be made. On April 1, 2024, certain of our non-wholly owned subsidiaries underwent transactions to effect unitization of the outstanding limited partnership interests, including the class of interests relating to awards of carried interest allocations granted to employees, to combine into a single class of limited partnership interests and redesignated into units. The class of interests relating to awards of carried interest allocations granted to employees were previously presented as carried interest-related compensation expense.

Previous wording

General, administrative and other includes occupancy, travel and related costs, insurance, legal and other professional fees, depreciation, amortization of intangible assets, system-related costs, and other general costs associated with operating our business. Beginning in the quarter ended December 31, 2022, general, administrative and other includes costs associated with the Consolidated Funds. Expenses of the Consolidated Funds have no impact on net income or loss attributable to us to the extent such expenses are borne by third-party investors.

Current wording

General, administrative and other includes occupancy, travel and related costs, insurance, legal and other professional fees, depreciation, amortization of intangible assets, system-related costs, and other general costs associated with operating our business. General, administrative and other includes costs associated with the Consolidated Funds. Expenses of the Consolidated Funds have no impact on net income or loss attributable to us to the extent such expenses are borne by third-party investors.

Previous wording

Non-controlling interests in the Partnership represent the economic interests in the Partnership held by the Class B and Class C unitholders of the Partnership. Non-controlling interests in the Partnership are allocated a share of income or loss in the Partnership in proportion to their relative ownership interests, after consideration of contractual arrangements that govern allocations of income or loss.

Current wording

Non-controlling interests in the Partnership represent the economic interests in the Partnership held by the Class B, Class C and Class D unitholders of the Partnership. Non-controlling interests in the Partnership are allocated a share of income or loss in the Partnership in proportion to their relative ownership interests, after consideration of contractual arrangements that govern allocations of income or loss.

Previous wording

Total revenues decreased $10.4 million to $(14.6) million for the three months ended December 31, 2023 as compared to the three months ended December 31, 2022. The overall decrease was driven by a larger reversal of carried interest allocations in the current period as compared to the prior year period, partially offset by increases due to higher net management and advisory fees, a lower reversal of legacy Greenspring carried interest allocations and higher incentive fees in each case, as described below.

Current wording

Total revenues increased $8.4 million, or 5%, to $186.4 million for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023. The overall increase was driven by higher management and advisory fees, net, a lower reversal of legacy Greenspring carried interest allocations in the current period as compared to the prior year period and higher incentive fees, partially offset by a decrease in carried interest allocations, in each case, as described below.

Previous wording

Net management and advisory fees increased $67.1 million, or 18%, to $431.7 million for the nine months ended December 31, 2023 as compared to the nine months ended December 31, 2022. The increase was driven by new client activity and 10% growth in average FEAUM across the platform. The nine months ended December 31, 2023 included retroactive fees of $9.5 million from the closings of StepStone’s private equity secondaries, multi-strategy global venture capital and infrastructure co-investment funds, and the nine months ended December 31, 2022 included retroactive fees of $2.4 million from the final closing of StepStone Capital Partners V.

Current wording

Management and advisory fees, net increased $39.9 million, or 29%, to $178.0 million for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023. The increase was driven by new client activity and 12% growth in average FEAUM across the platform. The three months ended June 30, 2024 included retroactive fees of $19.1 million from the closings of StepStone’s private equity secondaries, special situation real estate secondaries and infrastructure co-investment funds. The three months ended June 30, 2023 included retroactive fees of $2.8 million from the closings of StepStone’s private equity secondaries, infrastructure co-investment and StepStone VC Global Partners XI funds.

Previous wording

Realized carried interest allocation revenues decreased $1.0 million, or 6%, to $15.3 million for the three months ended December 31, 2023 as compared to the three months ended December 31, 2022, reflecting lower realization activity within our private equity funds. Unrealized carried interest allocation revenues include the reversal of realized carried interest allocation revenues. Excluding the reversal of $15.3 million, unrealized carried interest allocation revenues decreased $67.2 million, or 143%, to $(114.3) million for the three months ended December 31, 2023 as compared to the three months ended December 31, 2022. The decrease in unrealized carried interest allocations for the three months ended December 31, 2023 primarily reflected a net decrease in the cumulative allocation of gains associated with the underlying portfolios within our private equity funds.

Current wording

Realized carried interest allocation revenues increased $27.3 million, or 189%, to $41.8 million for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023, reflecting higher realization activity within our private equity and infrastructure funds. Unrealized carried interest allocation revenues include the reversal of realized carried interest allocation revenues. Excluding the reversal of $41.8 million, unrealized carried interest allocation revenues decreased $47.2 million, or 74%, to $16.6 million for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023. The decrease in unrealized carried interest allocations for the three months ended June 30, 2024 primarily reflected a smaller net increase in the cumulative allocation of gains associated with the underlying portfolios within our private equity funds.

Previous wording

Legacy Greenspring carried interest allocation revenues increased $19.2 million, or 22%, to $(69.7) million for the three months ended December 31, 2023 as compared to the three months ended December 31, 2022 as a result of lower net unrealized depreciation in the fair value of certain underlying fund investments in the current year period as compared to the prior year period. The three months ended December 31, 2023 reflect gross realized carried interest allocations of $0.1 million and unrealized carried interest allocations, net of the reversal of realized carried interest allocations, of $(69.8) million. The three months ended December 31, 2022 reflect gross realized carried interest allocations of $5.2 million and unrealized carried interest allocations, net of the reversal of realized carried interest allocations, of $(94.1) million.

Current wording

Legacy Greenspring carried interest allocation revenues increased $14.9 million, or 62%, to $(9.1) million for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023 as a result of lower net unrealized depreciation in the fair value of certain underlying fund investments in the current year period as compared to the prior year period. The three months ended June 30, 2024 reflect gross realized carried interest allocations of $6.6 million and unrealized carried interest allocations, net of the reversal of realized carried interest allocations, of $(15.7) million. The three months ended June 30, 2023 reflect gross realized carried interest allocations of $0.9 million and unrealized carried interest allocations, net of the reversal of realized carried interest allocations, of $(24.9) million.

Previous wording

Total expenses increased $13.9 million to $19.2 million for the three months ended December 31, 2023 as compared to the three months ended December 31, 2022. The overall increase resulted from a lower reversal of legacy Greenspring performance fee-related compensation in the current year period as compared to the prior year period, and increases in cash-based compensation, equity-based compensation and general, administrative and other expenses, partially offset by a decrease due to higher reversal of performance fee-related compensation in each case, as described below.

Current wording

Total expenses increased $18.1 million, or 15%, to $139.3 million for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023. The overall increase resulted from a lower reversal of legacy Greenspring performance fee-related compensation in the current year period as compared to the prior year period, and increases in equity-based compensation, cash-based compensation, and general, administrative and other expenses, partially offset by a decrease in performance fee-related compensation in each case, as described below.

Previous wording

Cash-based compensation increased $11.0 million, or 18%, to $73.6 million for the three months ended December 31, 2023 as compared to the three months ended December 31, 2022, due to increased staffing and compensation levels. Our average full-time headcount increased 12% in the current year period as compared to the prior year period.

Current wording

Cash-based compensation increased $8.1 million, or 12%, to $78.2 million for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023, due to increased staffing and compensation levels. Our average full-time headcount increased 4% in the current year period as compared to the prior year period.

Previous wording

Equity-based compensation increased $5.9 million, or 73%, to $14.0 million for the three months ended December 31, 2023 as compared to the three months ended December 31, 2022. The increase was primarily attributable to an increase in expenses related to liability classified awards in the current year period of $5.2 million as compared to the prior year period, as well as additional grants of RSUs made in February 2023 and no comparable expense for these grants in the prior year period.

Current wording

Equity-based compensation increased $10.7 million, or 126%, to $19.2 million for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023. The increase was primarily attributable to a $9.6 million increase in expenses related to liability classified awards in the current year period as compared to the prior year period, additional grants of RSUs made in February 2024 and no comparable expense for these grants in the prior year period, and expense related to the first offering period for the employee stock purchase plan.

Previous wording

Performance fee-related compensation expense decreased $26.7 million to $(46.8) million for the three months ended December 31, 2023 as compared to the three months ended December 31, 2022, primarily reflecting the decrease in carried interest allocation revenue. Realized performance fee-related compensation increased $3.7 million, or 32%, to $15.4 million for the three months ended December 31, 2023 as compared to the three months ended December 31, 2022, primarily reflecting higher realization activity.

Current wording

Performance fee-related compensation expense decreased $23.4 million, or 70%, to $9.9 million for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023, primarily reflecting the decrease in carried interest allocation revenue. Realized performance fee-related compensation increased $11.7 million, or 129%, to $20.8 million for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023, primarily reflecting higher realization activity.

Previous wording

Legacy Greenspring performance fee-related compensation expense increased $19.2 million, or 22%, to $(69.7) million for the three months ended December 31, 2023 as compared to the three months ended December 31, 2022. The three months ended December 31, 2023 reflect gross realized performance fee-related compensation expense of $0.1 million and unrealized performance fee-related compensation expense, net of the reversal of realized performance fee-related compensation expense, of $(69.8) million. The three months ended December 31, 2022 reflect gross realized performance fee-related compensation expense of $5.2 million and unrealized performance fee-related compensation expense, net of the reversal of realized performance fee-related compensation expense, of $(94.1) million.

Current wording

Legacy Greenspring performance fee-related compensation expense increased $14.9 million, or 62%, to $(9.1) million for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023. The three months ended June 30, 2024 reflect gross realized performance fee-related compensation expense of $6.6 million and unrealized performance fee-related compensation expense, net of the reversal of realized performance fee-related compensation expense, of $(15.7) million. The three months ended June 30, 2023 reflect gross realized performance fee-related compensation expense of $0.9 million and unrealized performance fee-related compensation expense, net of the reversal of realized performance fee-related compensation expense, of $(24.9) million.

Previous wording

General, administrative and other expenses increased $4.4 million, or 10%, to $48.0 million for the three months ended December 31, 2023 as compared to the three months ended December 31, 2022. The overall increase primarily reflected increases of $7.1 million due to higher loss on change in fair value for contingent consideration obligation, $1.3 million in professional fees, $1.1 million in travel and associated costs for investment evaluation and client service and $0.7 million in information and technology expenses, partially offset by decreases of $6.1 million in transaction fees, $1.0 million in insurance costs and other general operating expenses.

Current wording

General, administrative and other expenses increased $7.7 million, or 23%, to $41.0 million for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023. The overall increase primarily reflected increases of $4.2 million due to loss on change in fair value for contingent consideration obligation as compared to gain on change in fair value for contingent consideration obligation in the prior period, $1.6 million in travel and associated costs for investment evaluation and client service, $0.9 million in marketing expenses, $0.7 million in professional fees and other general operating expenses.

Previous wording

Legacy Greenspring investment loss decreased $6.7 million, or 75%, to $2.2 million for the three months ended December 31, 2023 as compared to the three months ended December 31, 2022. The three months ended December 31, 2023 reflected gross realized investment income of $0.4 million and unrealized investment loss, net of the reversal of realized investment income, of $2.6 million. The three months ended December 31, 2022 reflected gross realized investment income of $0.7 million and unrealized investment loss, net of the reversal of realized investment income, of $9.7 million.

Current wording

Legacy Greenspring investment loss decreased $1.6 million, or 56%, to $1.3 million for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023. The three months ended June 30, 2024 reflected gross realized investment income of $0.9 million and unrealized investment loss, net of the reversal of realized investment income, of $2.1 million. The three months ended June 30, 2023 reflected gross realized investment income of $0.2 million and unrealized investment loss, net of the reversal of realized investment income, of $3.1 million.

Previous wording

Investment income of Consolidated Funds increased $6.3 million, or 129%, to $11.2 million for the three months ended December 31, 2023 as compared to the three months ended December 31, 2022, primarily reflecting overall changes in the valuations of the underlying investments of the Consolidated Funds.

Current wording

Investment income of Consolidated Funds increased $5.3 million, or 223%, to $7.6 million for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023, primarily reflecting overall changes in the valuations of the underlying investments of the Consolidated Funds.

Previous wording

Interest income increased $0.1 million, or 18%, to $0.8 million for the three months ended December 31, 2023 as compared to the three months ended December 31, 2022, primarily due to higher average interest rates earned on cash and cash equivalent balances. Interest income attributable to the Consolidated Funds was $0.5 million in the current year period as compared to none in the prior year period.

Current wording

Interest income increased $1.6 million, or 377%, to $2.1 million for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023, primarily due to higher average interest rates earned on cash and cash equivalent balances and higher average cash and cash equivalent balances during the current year period, as compared with the prior year period. Interest income attributable to the Consolidated Funds was $0.9 million in the current year period as compared to $0.2 million in the prior year period.

Previous wording

Interest expense increased $1.5 million, or 131%, to $2.6 million for the three months ended December 31, 2023 as compared to the three months ended December 31, 2022. The increase was due to higher average interest rates and higher average outstanding balances under the Revolver during the current year period, as compared with the prior year period.

Current wording

Interest expense increased $1.0 million, or 49%, to $3.0 million for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023. The increase was due to higher average interest rates and higher average outstanding balances under the Revolver during the current year period, as compared with the prior year period.

Previous wording

Our effective income tax rate was 3.0% and 5.1% for the three months ended December 31, 2023 and 2022, respectively, and 15.5% and 6.3% for the nine months ended December 31, 2023 and 2022, respectively. Our overall effective tax rate in each of the periods described above is less than the statutory rate as a portion of income was allocated to non-controlling interests and the tax liability on such income is borne by the holders of non-controlling interests. For the three months ended December 31, 2023 as compared to the three months ended December 31, 2022, the primary rate difference was due to a decrease in tax expense associated with income allocated to non-controlling interests, partially offset by an increase in tax expense related to return to provision adjustments. For the nine months ended December 31, 2023 and 2022, the primary rate difference was due to the Company recognizing pre-tax net income for the nine months ended December 31, 2023 as compared to the Company recognizing pre-tax net loss for the nine months ended December 31, 2022. Additionally, there was an increase in foreign tax expense for the nine months ended December 31, 2023.

Current wording

Our effective income tax rate was 12.4% and 14.8% for the three months ended June 30, 2024 and 2023, respectively. Our overall effective tax rate in each of the periods described above is less than the statutory rate as a portion of income was allocated to non-controlling interests and the tax liability on such income is borne by the holders of non-controlling interests. For the three months ended June 30, 2024 as compared to the three months ended June 30, 2023, the primary rate difference was due to a decrease in tax expense associated with income allocated to non-controlling interests, partially offset by certain tax expense adjustments that were recorded to our outside tax basis difference in the Partnership for the three months ended June 30, 2023 that did not reoccur during the three months ended June 30, 2024.

Previous wording

Income tax expense increased $22.5 million to $15.6 million for the nine months ended December 31, 2023 as compared to the nine months ended December 31, 2022. The increase in income tax expense was primarily driven by pre-tax net income recognized for the nine months ended December 31, 2023 as compared to pre-tax net loss recognized for the nine months ended December 31, 2022. Additionally, there was an increase in foreign tax expense for the nine months ended December 31, 2023.

Current wording

Income tax expense decreased $1.8 million, or 21%, to $6.8 million for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023. The decrease in income tax expense was primarily driven by lower pre-tax income for the three months ended June 30, 2024 compared to the three months ended June 30, 2023.

Previous wording

Net income attributable to non-controlling interests in subsidiaries increased $4.0 million, or 42%, to $13.6 million for the three months ended December 31, 2023 as compared to the three months ended December 31, 2022. The increase was primarily attributable to an increase in income generated by our consolidated subsidiaries not wholly-owned by us.

Current wording

Net income attributable to non-controlling interests in subsidiaries increased $7.0 million, or 73%, to $16.6 million for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023. The increase was primarily attributable to an increase in income generated by our consolidated subsidiaries not wholly-owned by us and an increase in our economic interests in the Asset Class Entities as a result of the Transaction Agreements.

Previous wording

Net income (loss) attributable to non-controlling interests in legacy Greenspring entities represents the net income or loss attributable to the interests held by the legacy Greenspring general partner entities. We did not acquire any direct economic interests in the legacy Greenspring general partner entities. As a result, all of the net income or loss related to the legacy Greenspring general partner entities is allocated to non-controlling interests in legacy Greenspring entities. Net loss attributable to non-controlling interests in legacy Greenspring entities was $2.2 million and $9.0 million for the three months ended December 31, 2023 and 2022, respectively, and $9.1 million and $32.9 million for the nine months ended December 31, 2023 and 2022, respectively.

Current wording

Net income (loss) attributable to non-controlling interests in legacy Greenspring entities represents the net income or loss attributable to the interests held by the legacy Greenspring general partner entities. We did not acquire any direct economic interests in the legacy Greenspring general partner entities. As a result, all of the net income or loss related to the legacy Greenspring general partner entities is allocated to non-controlling interests in legacy Greenspring entities. Net loss attributable to non-controlling interests in legacy Greenspring entities was $1.3 million and $2.9 million for the three months ended June 30, 2024 and 2023, respectively.

Previous wording

Net income (loss) attributable to non-controlling interests in the Partnership represents the portion of net income or loss attributable to the interests held by the Class B and Class C unitholders of the Partnership. Net income (loss) attributable to non-controlling interests in the Partnership was $(20.1) million and $(7.6) million for the three months ended December 31, 2023 and 2022, respectively, and $22.7 million and $(48.2) million for the nine months ended December 31, 2023 and 2022, respectively.

Current wording

Net income (loss) attributable to non-controlling interests in the Partnership represents the portion of net income or loss attributable to the interests held by the Class B, Class C and Class D unitholders of the Partnership. Net income attributable to non-controlling interests in the Partnership was $13.3 million and $19.9 million for the three months ended June 30, 2024 and 2023, respectively.