STEP Q3 Deep Dive: Private Wealth Momentum and Product Innovation Drive Results

Private markets investment firm StepStone Group (NASDAQ:STEP) reported Q3 CY2025 results beating Wall Street’s revenue expectations, with sales up 35.2% year on year to $282.3 million. Its non-GAAP profit of $0.54 per share was 10.6% above analysts’ consensus estimates.

Is now the time to buy STEP? Find out in our full research report (it’s free for active Edge members).

StockStory’s Take

StepStone Group’s third-quarter results outpaced Wall Street’s expectations, with revenue and non-GAAP profit both above consensus. Management linked this performance to robust client demand and record inflows across its Private Wealth platform, notably driven by the successful launch of new products and expansion into international markets. CEO Scott Hart emphasized that the firm’s customized approach and long-standing client relationships, particularly in managed accounts, were instrumental in maintaining fundraising momentum despite broader industry headwinds. The quarter also saw StepStone leveraging its data and technology capabilities to enhance client offerings and reinforce its position in the private markets ecosystem.

Looking ahead, management’s outlook is anchored by ongoing expansion of the private wealth product suite, deepening distribution relationships, and further international growth. The company is focused on maximizing cross-sell opportunities with existing partners while exploring new channels, such as retirement schemes in the U.K. and other international regions. President Jason Ment noted that while the recent surge in subscriptions from new product launches is expected to moderate, StepStone anticipates continued growth as it invests in operational infrastructure and broadens its reach. CFO David Park cautioned that general and administrative costs will rise in the near term due to investment in technology and upcoming industry conferences.

Key Insights from Management’s Remarks

Management attributed Q3 performance to record-breaking private wealth subscriptions, strong institutional fundraising, and the successful introduction of new investment products.

• Private Wealth platform momentum: The firm saw unprecedented subscriptions in its Private Wealth channel, highlighted by $2.4 billion in new inflows and the rapid uptake of the new STPEX private equity interval fund, which alone attracted over $700 million in its first month. Management credited this to meeting specific channel partner needs and expanding its suite of offerings.
• Institutional fundraising strength: StepStone continued to deliver robust institutional inflows, generating $3.8 billion in managed account additions. The company’s high retention rate—above 90%—demonstrates continued client loyalty, and more than one-third of managed account inflows came from new or expanded relationships.
• Geographic and product diversification: The company expanded its global presence by opening offices in the Netherlands, Spain, South Korea, and Saudi Arabia, increasing its reach across Europe, Asia, and the Middle East. These moves supported broader client engagement and growth in both new and existing markets.
• Advances in data and technology: Management highlighted the launch of the Kroll StepStone Private Credit benchmarks and FTSE StepStone Global Private Market Indices. These tools provide daily institutional-grade benchmarks and lay the foundation for new index-based investment products in the future.
• Expense trends and investment: Operating expenses rose due to increased spending on technology, travel, and expansion projects. Management expects further cost increases in upcoming quarters tied to major industry events and ongoing infrastructure investments, which are intended to support long-term scale and client service.

Drivers of Future Performance

StepStone’s forward outlook is shaped by sustained private wealth inflows, new product commercialization, and continued global expansion, though rising operating costs present a near-term headwind.

• Distribution expansion and cross-sell: Management sees significant untapped potential with its 650 distribution partners, aiming to deepen penetration by encouraging uptake of additional products across existing relationships. The goal is to drive higher cross-sell rates, though not all partners are expected to adopt the full suite.
• International and retirement channel growth: The recently announced partnership with Aviva in the U.K. is expected to open new opportunities in the retirement savings market, with meaningful inflows anticipated from 2026 onward. The company is also pursuing defined contribution channels in other international markets, though these efforts remain in early stages.
• Operational investment and margin pressure: As StepStone scales its technology, data capabilities, and global footprint, management expects general and administrative expenses to increase in the near term. Upcoming industry events and infrastructure investments will temporarily pressure margins, even as the company positions itself for long-term earnings growth.

Catalysts in Upcoming Quarters

Over the coming quarters, the StockStory team will closely monitor (1) the pace of cross-sell among distribution partners and incremental adoption of new private wealth products; (2) early signs of inflows and participant engagement from international and retirement channels, particularly the Aviva partnership; and (3) the impact of increased operational spending on margins and scalability. Progress in data and technology commercialization will also be a key area of focus.

StepStone Group currently trades at $62.00, in line with $62.16 just before the earnings. Is there an opportunity in the stock?See for yourself in our full research report (it’s free for active Edge members).

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