StepStone's Strategic Shift Toward Private Market Index Innovation and Evergreen Fund Growth: A Catalyst for Long-Term Market Share Capture

The private markets are undergoing a seismic shift, driven by the need for benchmarking tools that bridge the gap between illiquid assets and traditional portfolio management. At the forefront of this transformation is StepStone Group (STEP), a leader in private market solutions, which has recently partnered with FTSE Russell to develop a suite of private asset indices, data, and analytics. This collaboration, combined with StepStone's expanding private wealth platforms and evergreen fund growth, positions the firm to capture significant market share in both institutional and retail private asset allocations. For investors, the confluence of scalable fee-related earnings, margin resilience, and strategic diversification presents a compelling case for long-term investment.

The FTSE Russell Partnership: A Game Changer for Private Market Benchmarking

StepStone's partnership with FTSE Russell addresses a critical industry pain point: the lack of reliable benchmarks for private assets. By leveraging FTSE Russell's index expertise and StepStone's proprietary data, the firms aim to launch daily and quarterly-lagged indices for private equity and infrastructure assets in 2025. These indices will enable investors to track performance in real time, a first in an asset class historically defined by infrequent valuations.

The implications are profound. Institutional investors, such as pension funds and sovereign wealth funds, can now integrate private market allocations into their total portfolio strategies with greater precision. Retail investors, too, stand to benefit as the indices pave the way for index-linked products like ETFs, democratizing access to private markets. For StepStone, this partnership not only solidifies its role as a market infrastructure provider but also opens new revenue streams through data licensing and analytics.

Scalable Fee-Related Earnings and Margin Resilience

StepStone's financial model is a testament to its operational discipline. In fiscal 2025, fee revenues surged 31% to $770.5 million, driven by a 21% year-over-year increase in fee-earning AUM to $189.4 billion. Fee-related earnings (FRE), a key metric of baseline profitability, grew 64% to $312.2 million, with FRE margins expanding from 32% to 41%. This margin improvement reflects cost management and operating leverage, even as the firm scaled its business.

Performance fees, though volatile, also contributed to a 222% increase in total performance fees to $407.8 million in 2025. However, StepStone's reliance on recurring management fees—less susceptible to market cycles—ensures a stable earnings base. Adjusted net income (ANI) rose 75% to $244.1 million, underscoring the firm's ability to convert fee growth into profitability.

Strategic Diversification: Expanding into Private Wealth and Retirement Markets

StepStone's strategic diversification is a key differentiator. The firm has expanded its private wealth platform to $8 billion in assets, targeting high-net-worth individuals seeking access to private markets. By simplifying complex investments through evergreen funds like SPRIM and STRUCTURE, StepStone addresses liquidity concerns that have historically deterred retail investors.

Simultaneously, the firm is exploring retirement-focused products, including target-date funds, to tap into the $30 trillion U.S. retirement market. This move aligns with broader trends in wealth management, where private assets are increasingly viewed as a tool for long-term capital appreciation and income generation. StepStone's global footprint—60% of its business outside the U.S.—further insulates it from regional volatility, enabling it to capitalize on growth in emerging markets.

Investment Thesis: A Triple Catalyst for Growth

StepStone's strategic shift is underpinned by three catalysts:
1. Index Innovation: The FTSE Russell partnership creates a moat in private market benchmarking, driving recurring data and analytics revenue.
2. Fee Scalability: Recurring management fees and margin expansion provide a resilient earnings base, even in volatile markets.
3. Diversified Revenue Streams: Growth in private wealth, retirement products, and secondary markets reduces reliance on any single segment.

For investors, StepStone's stock offers exposure to the secular growth of private markets, a sector projected to reach $15 trillion in AUM by 2030. With a forward P/E ratio of 12x (as of August 2025) and a dividend yield of 3.5%, the stock appears undervalued relative to its growth potential.

Conclusion: A Long-Term Buy for Private Market Disruption

StepStone's strategic alignment with the evolving needs of institutional and retail investors positions it as a key player in the private market revolution. The FTSE Russell partnership, coupled with its scalable fee model and diversified revenue streams, creates a durable competitive advantage. For investors seeking exposure to a firm poised to capitalize on the $15 trillion private market opportunity, StepStone offers a compelling long-term investment thesis.

In a world where liquidity and transparency are paramount, StepStone's innovation and operational resilience make it a standout in the asset management sector. The time to act is now—before the private market index revolution gains full momentum.