Q1 2025 StepStone Group LP Earnings Call
Good day and thank you for standing by. Welcome to the first Fiscal Quarter 2025 Stepstone Group, Inc. Earnings Conference Call. At this time, all participants are in a listen-only mode.
Operator: Inc. Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during this session, you will need to press star 11 on your telephone. You will then hear an automated message advising you that your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Seth Weiss, Vice President of Investor Relations. Please go ahead.
After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you will need to press star 11 on your telephone. You will then hear an automated message advising you your hand is raised.
to a draw your question, please press star one one again. Please be advised today's conference is being recorded. I would now like to hand the conference over to your speaker today, Seth Weiss. Vice President of Investor Relations, please go ahead.
Seth Weiss: Thank you and good afternoon. Joining me on today's call are Scott Hart, chief executive officer; Jason Ment, president and co-chief operating officer; Mike McCabe, head of strategy; and David Park, chief financial officer. During our prepared remarks, we will be referring to a presentation which is available on our investor relations website at shareholders.stepstonegroup.com. Before we begin, I'd like to remind everyone that this conference call, as well as the presentation, contain certain forward-looking statements regarding the company's expected operating and financial performance for future periods.
Seth Weiss: Thank you and good afternoon. Joining me on today's call are Scott Hart, Chief Executive Officer, Jason Ment, President and Co-Chief Operating Officer, Mike McCabe, Head of Strategy, and David Park, Chief Financial Officer.
Speaker Change: During our prepared remarks, we will be referring to a presentation which is available on our investor relations website at shareholders.stepstonegroup.com.
Seth Weiss: Forward-looking statements reflect management's current plans, estimates, and expectations, and are inherently uncertain and are subject to various risks, uncertainties, and assumptions. Actual results for future periods may differ materially from those expressed or implied by these forward-looking statements due to changes in circumstances or a number of risks or other factors that are described in the risk factor section of Stepstone's periodic filing. These forward-looking statements are made only as of today and will be accepted as required. We undertake no obligation to update or revise anything.
Speaker Change: Before we begin, I'd like to remind everyone that this conference call, as well as the presentation, contains certain forward-looking statements regarding the company's expected operating and financial performance for future periods.
Seth Weiss: Forward-looking statements reflect management's current plans, estimates, and expectations, and are inherently uncertain and are subject to various risks, uncertainties, and assumptions.
Seth Weiss: Actual results for future periods may differ materially from those expressed or implied by these forward-looking statements due to changes in circumstances or a number of risks or other factors that are described in the risk factor section of Stepstone's periodic filings.
Seth Weiss: These four looking statements are made only as of today and accept as required we have to take no obligation to update or revise any of them.
Seth Weiss: Today's presentation contains references to non-GAAP financial measures. Reconciliations to the Most Directly Comparable GAAP Financial Measures are included in our earnings release, our presentation, and our filings with the FCC. Turning to our financial results for the first quarter of fiscal 2025, beginning with slide three, we reported GAP net income of $48.0 million. Gap net income attributable to Stepstone Group Incorporated was $13.3 million, or 20 cents per share. Moving to slide five, we generated fee-related earnings of $71.7 million, up 61% from the prior year quarter, and we generated an FRE margin of 40%.
Seth Weiss: Today's presentation contains references to non-GAAP financial measures. Reconciliations to the most directly comparable GAAP financial measures are included in our earnings release, our presentation, and our filings with the SEC.
Speaker Change: Turning to our financial results for the first quarter of fiscal 2025.
Speaker Change: The beginning with slide three, we reported gap net income, a 48.0 million dollars.
Seth Weiss: Gaff net income attributable to Stepstone Group Incorporated was $13.3 million or 20 cents per share.
Seth Weiss: Moving to slide 5, we generated fee-related earnings of $71.7 million, up 61% from the prior year quarter. And we generated an FRE margin of 40%.
Seth Weiss: The quarter reflected retroactive fees primarily from our Private Equity Secondaries Fund, Special Situation Real Estate Secondaries Fund, and Infrastructure Co-Investment Fund. Retroactive fees contributed $19.1 million to revenue, which compares to retroactive fees of $2.8 million in the first quarter of fiscal 2024. Finally, we earned $57.2 million in adjusted net income for the quarter, or $0.48 per share. This is up from $29.4 million, or $0.26 per share, in the first fiscal quarter of last year, driven by both higher fee-related earnings and higher realized performance fees. I'll now hand the call over to Scott.
Seth Weiss: The quarter-replanted retroactive fees primarily from our private equity secondary spawn, special situation real estate secondary spawn, and infrastructure of co-investment spawn.
Seth Weiss: Retroactive fees contributed $19.1 million to revenue, which compares to retroactive fees of $2.8 million in the first quarter of fiscal 2024.
Seth Weiss: Finally, we earned $57.2 million in the Justinett income for the quarter or 48 cents per share.
Scott Hart: This is up from $29.4 million, or $0.26 per share, in the first fiscal quarter of last year, driven by both higher fee-related earnings and higher realized performance fees. I'll now hand the call over to Scott.
Scott Hart: Thanks, Seth. We carried over the momentum from last year as we entered our new fiscal period with very strong operating and financial performance. Our first quarter was a record period on several key fronts, and it was our strongest period ever for fundraising, our strongest period ever for net contribution to fee-earning assets, which surpassed $100 billion, and our strongest period ever for net additions to undeployed fee-earning capital, which reached our highest level ever of $27.6 billion. This sets us up for a strong fiscal 2025 and for sustained growth beyond this year.
Scott Hart: Thanks, Seth. We carried over the momentum from last year as we enter our new fiscal period with very strong operating and financial performance.
Scott Hart: A first quarter was a record period on several D-friends.
Scott Hart: With our strongest period ever for fundraising, our strongest period ever for net contribution to fearing assets, which serve past $100 billion, and our strongest period ever for net additions to underploying fearing capital, which reached our highest level ever of $27.6 billion.
Scott Hart: This sets Stepstone up for a strong fiscal 2025 and for sustained growth beyond this year. Our diverse array of offerings, supportive client base, and in-demand strategies and asset classes all contributed to our results.
Scott Hart: Our diverse array of offerings, supportive client base, and in-demand strategies and asset classes all contributed to our results. In the quarter, we generated a record $12.6 billion of gross AUM addition. Fundraising was strong across commercial structures, with commingled funds raising over $3 billion, and separately managed accounts raising over $9 billion.
Scott Hart: In the quarter, we generated a record $12.6 billion of gross AUM additions.
Scott Hart: Fundrating with strong across commercial structures with co-mingled funds raising over $3 billion and separately managing accounts raising over $9 billion.
Scott Hart: Over the last 12 months, we have raised nearly $28 billion, our strongest 12-month period ever, as we have successfully closed on several managed account re-ups and new mandates, executed on several successful commingled fundraisers, particularly in venture capital secondaries and private equity secondaries, and continue to ramp up our private wealth offer. Our success in raising capital is a result of years of building relationships, capabilities, and track records. The last 12 months, in particular, are emblematic of the fruits of those efforts.
Scott Hart: Over the last 12 months, we have raised nearly 28 billion dollars, a strong 12-month period ever, as we have successfully closed on several managed account re-ups and new mandates. Executed on several successful co-mingled fund raises, particularly in venture capital secondaries in private equities, and continue to ramp our private wealth offerings.
Scott Hart: Our success in raising capital is a result of years of building relationships, capabilities, and track records. The last 12 months in particular are emblematic of the fruits of those efforts.
Scott Hart: While the pacing of fundraising can be episodic at times, the corresponding growth in fear-earning AUM and the billed and undeployed fear-earning capital provides a runway for consistent top-line growth. Included in this quarter's fundraising is over $800 million in private wealth subscriptions, which is our strongest private wealth quarter ever. We have four evergreen private wealth funds in the market, S Prime, our all private markets fund, Spring, our venture and growth equity fund, Strux, our infrastructure fund, and Credex, our private credit fund, for which we accepted our first subscriptions in June. I'm also pleased to announce that Spring was recently added to a second wirehouse. We are now distributing Stepstone Evergreen funds with nearly 400 partners, with S-Prime and Spring each on two wirehouses.
Scott Hart: While the pacing of fundraising can be episodic at times, the corresponding growth in fear-earning AUM and the build in undeployed fear-earning capital provides a runway for consistent top-line growth.
Scott Hart: Included in this quarter's fundraising is over $800 million of private wealth subscriptions, which is our strongest private wealth quarter ever.
Scott Hart: We have forever green private well funds in market. At the prime, our all-private markets fund, spring, our venture in growth equity fund, drops, our infrastructure fund, and critics are private credit fund, for which we accept that our first subscriptions in June.
Scott Hart: I'm also pleased to announce that Spring was recently added to a second wire house.
Scott Hart: We are now distributing Stepstone Evergreen funds with nearly 400 partners, with S-Prime and Spring each on two wire houses.
Scott Hart: We're thrilled with the development and uptake of our Private Wealth suite of offerings and continue to see a strong runway for growth. Pivoting to our financial results, we generated $179 million in management and advisory fees and $72 million in fee-related earnings, which are up 29% and 61% year-over-year, respectively. We generated an FRE margin of 40%, which benefited from strong retroactive feed. Excluding the impact of retro fees, our fee-related revenue and fee-related earnings would have increased 18% and 35% year-on-year, respectively, driven by strong growth in our fee-earning AUM.
Scott Hart: We're thrilled with the development and uptake of our private well suite of offerings and continue to see a strong runway for growth.
Scott Hart: Pivoting to our financial results, we generated $179 million in management and advisory fees, and $72 million in fee-related earnings, which are up to 29% and 61% year over year, respectively.
Scott Hart: We generated an FRE margin of 40% which benefited from strong retroactive fees.
Scott Hart: Excluding the impact from retro fees, our fee-related revenue and fee-related earnings would have increased 18% and 35% year-on-year, respectively, driven by strong growth in our fee-earning AUM.
Scott Hart: The combination of robust fundraising over the past 12 months, along with recent commingled fund activations, has set Stepstone up to deliver strong financial performance in fiscal 2025 and positions Stepstone well to achieve the five-year growth target of doubling fee-related earnings, which we established last year at our Investor Day. Lastly, real-life performance fees of $43 million were the highest level in the last two years. As you're aware, performance fees are largely dependent on a healthy realization environment, so we anticipate some volatility quarter to quarter.
Scott Hart: The combination of robust fundraising over the past 12 months, along with recent coming-of-fund activations, at Seth Steffton up to deliver strong financial performance in fiscal 2025, and positions us well to achieve the five-year growth target of doubling fee-related earnings, which we established last year at our investor day.
Scott Hart: Lastly, real-life performance fees of 43 million dollars were the highest level in the last two years.
Scott Hart: As you're aware, performance speeder largely dependent on a healthy realization environment, so we anticipate some volatility in the quarter quarter.
Scott Hart: While capital market activity is still relatively muted and the last week has clearly been an eventful one for the public markets, with major stock indices entering correction territory and volatility measures more than doubling, we expect realizations of performance fees to continue to trend up off the low levels of last year. To sum up, this was a very strong quarter, with all key operating and financial metrics clicking. While we do not expect this pace of retroactive fees to persist, the growth of fearing assets and undeployed fearing capital creates a higher base for sustainable sources of earnings. We feel excellent about the accomplishments of recent periods and even more excited about the progress we are making toward our longer-term goals. With that, I'll pass the call to Mike.
Scott Hart: While Capitol Market activity is still relatively new to it, and the last week has clearly been an eventful one for the public markets. With major stock and disease entering correction territory and volatility measures more than doubling, we expect realizations of performance fees to continue to trend up off the low levels of last year.
Scott Hart: To sum up, this was a very strong quarter, with all key operating and financial metrics clicking.
Speaker Change: Well, you do not expect this pace of retroactive fees to persist, the growth of fearing assets and underplay fearing capital create the higher bids for sustainable sources of earnings.
Scott Hart: We feel excellent about the accomplishments of recent periods and even more excited about the progress we are making towards our longer-term goals. With that, I'll pass the call to Mike.
Mike McCabe: Turning to slide 8, as Scott highlighted, we generated nearly $28 billion of gross AUM inflows during the last 12 months, with over $18 billion coming from our separately managed accounts and over $9 billion coming from our commingled funds. In the quarter, our commingled fund additions included $800 million in our private equities secondaries fund. Our PE Secondaries Fund has now raised over $4 billion, which is the first Stepstone Fund to reach the $4 billion mark and is well above the prior PE Secondaries Fund size of $2.1 billion. We expect a final close of a few hundred million dollars in this fiscal second quarter.
Mike McCabe: Thanks, Scott. Turning to slide 8, as Scott highlighted, we generated nearly $28 billion of gross AUM inflows during the last 12 months, with over $18 billion coming from our separately managed accounts and over $9 billion coming from our commingled funds.
Mike McCabe: In the quarter, our commingled fund additions included $800 million in our private equity secondaries fund.
Speaker Change: Our PE Secondaries Fund has now raised over $4 billion, which is the first Stepstone Fund to reach the $4 billion mark, and is well above the prior PE Secondaries Fund size of $2.1 billion.
Mike McCabe: We expect the final close of a few hundred million dollars in this fiscal second quarter.
Mike McCabe: In real estate, we raised over $400 million in our Special Situations Secondary Fund. This fund has now surpassed the prior vintage's size of $1.4 billion, and we anticipate it will remain in the market through at least the end of this calendar year. While limited partners remain relatively cautious on real estate, our special situations secondary strategy remains a bright spot in the market.
Scott Hart: In real estate, we raised over $400 million in our Special Situations Secondary Fund.
Scott Hart: This fund has now surpassed the prior vintage's size of $1.4 billion, and we anticipate it will remain in market through at least the end of this calendar year.
Scott Hart: While limited partners remain relatively cautious on real estate, our special situations secondary strategy remains a bright spot in the market.
Mike McCabe: Other notable commingled fund additions include approximately $800 million for the final close of our Venture Capital Secondaries Fund, which is consistent with the amount we discussed on our May earnings call and brings the total fund size to $3.3 billion, the largest venture capital secondaries fund in the history of our industry. We also generated over $800 million in private wealth subscriptions and raised approximately $300 million across infrastructure, private debt, and other venture capital funds. As a reminder, we include a list of our major funds on page 29 of our earnings presentation.
Scott Hart: Other notable comminglet fund additions include approximately $800 million for the final close of our venture capital secondary fund, which is consistent with the amount we discussed on our main earnings call.
Scott Hart: This brings the total fund size to $3.3 billion.
Speaker Change: The largest French capital secondary spawn in the history of our industry.
Scott Hart: We also generated over $800 million in private wealth subscriptions.
Scott Hart: and raised approximately $300 million across infrastructure, private debt, and other venture capital funds.
Scott Hart: As a reminder, we include a list of our major funds on page 29 of our earnings presentation.
Mike McCabe: Turning to managed accounts, we generated $9 billion of SMA additions, with strength in Private Equity and Infrastructure. 60% of the gross additions came from Rio.
Scott Hart: Turning to managed accounts, we generated $9 billion of SMA additions with strength in private equity and infrastructure.
Mike McCabe: And 40% came from a combination of new client relationships and expansion of existing client relationships. This is an exceptional result that illustrates our ability to win new accounts and grow with existing clients. Managed accounts are a core strength for Stepstone and are central to the value proposition we offer as a solutions provider.
Scott Hart: 60% of the gross additions came from re-ups.
Speaker Change: and 40% came from a combination of new client relationships and expansion of existing client relationships.
Scott Hart: This is an exceptional result that illustrates our ability to win new accounts and grow with existing clients.
Scott Hart: Managed accounts are a core strength for Stepstone and are central to the value proposition we offer as a solutions provider.
Mike McCabe: Slide 9 shows our fee-earning AUM by structure and asset class. For the quarter, we grew fee-earning assets by $7 billion, our largest quarterly addition of fee-earning capital in our history. This quarter's fee-earning AUM growth benefited from an activation of our Venture Capital Secondaries Fund, contributing $3.3 billion to the fee-earning balance. Additionally, we continue to grow our undiploisphere in capital, for your information, to $27.6 billion, up $5 billion quarter over quarter.
Speaker Change: Flight 9 shows are fearing a U.M. by structure and asset class.
Scott Hart: For the quarter, we grew fearing assets by $7 billion, our largest quarterly edition of fearing capital in our history.
Scott Hart: This quarter's fee-earning AUM growth benefited from an activation of our Venture Capital Secondaries Fund, contributing $3.3 billion to the fee-earning balance.
Scott Hart: Additionally, we continue to grow our undeployed fee-earning capital, or UFEC, to $27.6 billion, up $5 billion quarter over quarter.
Mike McCabe: As Scott mentioned, this is our highest UFEC balance on record and has our greatest quarterly net increase in UFEC, which is notable considering the $3.3 billion activated from our VC secondary fund. The combination of our fee-earning AUM and undeployed fee-earning capital stands at $128 billion, up 10% sequentially and up 23% year-over-year, providing us with a high degree of visibility for continued growth in management fees as We anticipate activating over $4 billion of capital from managed accounts by the end of this calendar year.
Scott Hart: As Scott mentioned, this is our highest UFEC balance on record, and has our greatest quarterly net increase in UFEC, which is notable considering the $3.3 billion activated from our BC Secondaries Fund.
Scott Hart: The combination of our fee-earning AUM and undeployed fee-earning capital stands at $128 billion.
Scott Hart: Up 10% sequentially and up 23% year-over-year, providing us with a high degree of visibility for continued growth and management fees as capital is deployed or activated.
Speaker Change: We anticipate activating over $4 billion capital from managed accounts by the end of this calendar year.
Mike McCabe: Slide 10 shows the evolution of our management and advisory business, which generated a blended management fee rate of 61 basis points for the last 12 months, higher than the 59 basis points from the prior year as we benefited from retroactive fees and a higher fee rate from our private wealth offering. Before concluding my remarks, I am pleased to announce that we are raising our quarterly dividend from $0.21 per share to $0.24 per share. This reflects our confidence in strong and sustainable growth in fee-related earnings. With that, I'll turn the call over to David.
Scott Hart: Flight 10 shows the evolution of our management and advisory fees.
Scott Hart: We generated a blended management fee rate of 61 basis points for the last 12 months, higher than the 59 basis points from the prior year, as we benefited from retroactive fees and a higher fee rate from our private wealth offerings.
Scott Hart: Before concluding by remarks, I am pleased to announce that we are raising our quarterly dividend from 21 cents per share to 24 cents per share.
Scott Hart: This reflects our confidence in strong and sustainable growth in peer-related earnings.
David Park: Thanks, Mike. I'd like to turn your attention to slide 12 to speak to our financial highlights. For the quarter, we earned management and advisory fees of $179 million, up 29% from the prior year quarter. The increase was driven by strong growth in V-Earning AUM across commercial structures, a favorable impact from retroactive fees, and a higher blended average fee rate. Fee-related earnings were $72 million for the quarter, up 61% from a year ago; we generated an FRE margin of 40% for the quarter, which is 800 basis points versus the prior year quarter. Normalizing for retroactive fees, core FRE margins expanded over 300 basis points for this prior year period.
Scott Hart: With that, I'll turn the call over to David.
David Park: Thanks, Mike. I'd like to turn your attention to slide 12 to speak to our financial highlights.
David Park: For the quarter, we earned management and advisory fees of $179 million, up 29% from the prior year quarter. The increase was driven by strong growth in fee-earning AUM across commercial structures, a favorable impact from retroactive fees, and a higher blended average fee rate.
Scott Hart: Fee-related earnings were $72 million for the quarter, up 61% from a year ago. We generated an FRE margin of 40% for the quarter, up 800 basis points versus the prior year quarter.
Scott Hart: Normalizing for retroact disease, core FRE margins expanded over 300 basis points for prior year of period.
David Park: Moving to expenses, cash-based compensation was $78 million, up 5% from last quarter and up 12% from the prior year. Growth reflected higher business development and revenue sharing tied to retroactive and a seasonal step up in the cash bonus accrual, which we signaled on the last call. Looking to the remainder of the year, we expect to see continued growth in cash compensation due to incremental hires for a new analyst class, as we continue to invest in our business development team, private wealth team, and other areas to support the growth of our business. Equity-based compensation expense grew to $2.4 million, up from $1.7 million in the prior quarter. This reflects the layering of the third year's issuance of RSU awards.
Scott Hart: Moving to expenses, cash-based compensation was $78 million, up 5% from last quarter and up 12% from the prior year.
David Park: The growth reflected higher business development revenue sharing tied to retroactive fees and the seasonal step up in the cash bonus accrual which we signals on the last call.
David Park: Looking to the remainder of the year, we expect to see continued growth in cash compensation due to incremental hires for our new analyst class, as we continue to invest in our business development team, private wealth team, and other areas to support the growth in our business.
David Park: Equity-based compensation expense grew to $2.4 million, up from $1.7 million in the prior quarter.
David Park: RSUs are best over four years, so you can expect to see the impact of the final layering of RSU expenses in our first fiscal quarter of 2026. General and administrative expenses were $27 million, up $4 million from a year ago, and down slightly when... Roast realized performance fees were $43 million for the quarter and $22 million net of related compensation. Both were the highest levels we've seen in two years.
David Park: This reflects the layering of the third year's issuance of RSU awards.
Scott Hart: RSU is best over four years, so you can expect to see the impact of the final layering of RSU expenses in our first fiscal quarter of 2026.
Scott Hart: General and Administrative expenses were $27 million, up $4 million from a year ago, and down slightly you see points to it.
Scott Hart: Gross Realized Performance Fees were 43 million dollars for the quarter and 22 million dollars net of related compensation expense.
David Park: Add it all up, and adjusted net income per share was $0.48, up 85% from a year ago, driven by growth in fee-related revenues, FRME margin expansion, and higher net performance. Moving to key items on the balance sheet on slide 13, net accrued carry finished the quarter at $677 million, up 7% from last quarter, driven primarily by underlying fund valuation depreciation. As a reminder, our fund valuations are reported with a one-quarter lag.
David Park: Both were the highest level we've seen in two years.
David Park: Add it all up, and adjusted net income per share was $0.48, up 85% from a year ago, driven by growth in fee-related revenues, FRME margin expansion, and higher net performance fees.
Scott Hart: Moving to key items on the balance sheet on slide 13, net accrued carry finished the quarter at $677 million, up 7% from last quarter driven primarily by underlying fund valuation appreciation.
Scott Hart: As a reminder, our fund valuations are reported on a one-quarter lag.
David Park: Our own investment portfolio ended the quarter at $218 million, and unfunded commitments to our investment programs were $109 million as of quarter end. As of June 30th, we had over $80 billion of performance fee-eligible capital, which is widely diversified across multiple vintage years and over 200 programs. 85% of our net unrealized carry is tied to programs from vintages of 2019 or earlier, which means that these programs are largely out of their investment period and in harvest.
Scott Hart: Our own investment portfolio ended the quarter at $218 million. Unfunded commitments to our investment programs were $199 million as a quarter end.
Scott Hart: As of June 30th, we had over $80 billion of performance fee eligible capital, which is widely diversified across multiple vintage years and over 200 programs.
Scott Hart: 85% of our net unrealized carriers tied to programs from vintage's of 2019 or earlier, which means that these programs are largely out there and best in periods and in harvest mode.
David Park: Of this amount, 54% is sourced from vehicles with deal-by-deal waterfalls, meaning realized carry may be payable at the time of investment exit. This concludes our prepared remarks. I'll now turn it back over to the operator to open the line for any questions. Thank you.
Scott Hart: Of this amount, 54% is sourced from vehicles with deal-by-deal waterfalls, meaning realized carry may be payable at the time of investment exit.
Speaker Change: This concludes our prepared remarks. I'll now turn it back over to the operator to open the line for any questions.
Operator: Thank you. As a reminder, to ask a question at this time, please press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 1 again.
Speaker Change: Thank you. As a reminder to ask a question at this time please press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question please press star 1 1 again. One moment for our first question.
Operator: One moment for our first question. And our first question is going to come from the line of Kenneth Worthington with J.P. Morgan. Your line is open. Please go ahead. Hi.
Speaker Change: And our first question is going to come from the line of Kenneth Worthington with J.P. Morgan. Your line is open. Please go ahead.
Jason Ment: Hi, good afternoon. Thanks for taking the time to ask the question. I wanted to start with innovation in wealth management around the tickers. So where do you see independent advisors now in terms of the education process here around ticker-based products? And $800 million in sales is sort of a strong endorsement of what you've developed and sort of begs the question of what sort of feedback you're getting on the structure. Is it the ticker that you think is making the difference here, or is it really just the performance has been good, the brand name is solid, anything you can talk about in terms of attribution of the ticker in terms of strength of sales?
Kenneth Worthington: Hi, good afternoon, thanks for taking the question. I wanted to start with the innovation and wealth management around the tickers.
Kenneth Worthington: So where do you see the independent advisors now in terms of the education process here around the ticker-based products?
Speaker Change: and 800 million of sales is sort of a strong endorsement.
Speaker Change: of what you've developed and sort of begs the question of what sort of feedback you're getting on the structure. Is it the ticker that you think is making the difference here or is it really just the performance has been good, the brand name is solid?
Speaker Change: anything you can talk about in terms of attribution of the ticker in terms of strength of sales
Jason Ment: Thanks again, Jason here. Look, the overall goal of all these products is to sand off all the rough edges of how hard it is for the individual investor to invest in private markets. And some of these
Jason Ment: Thanks again, Jason here.
Speaker Change: Look, the overall goal of all these products is to sand off all the rough edges of how hard it is for the individual investor
Speaker Change: to invest in private markets.
Jason Ment: Rough edges are sanded off by the structure alone, right? 1099 tax reporting versus K-1s, and no capital calls, et cetera. The ticker innovation, we think, is probably the most material development in sanding off those rough edges because the subscription process for a private fund is lengthy. The feedback has been very supportive, and we've seen the percentage for those funds that offer the ticker, we've seen those flows continue to creep up in terms of the mix between ticker versus subscription document.
Speaker Change: and some of these...
Speaker Change: Ruff Edges are stands off by the structure alone, right? 1099 tax reporting versus K1s.
Speaker Change: and no capital calls, et cetera. The ticker innovation we think is...
Speaker Change: probably the most material development in sanding off those rough edges because the subscription process for a private fund is lengthy.
Speaker Change: The feedback's been very supportive, and we've seen the percentage, for those funds that offer the ticker, we've seen those flows continue to creep up in terms of the mix between ticker versus subscription document.
Jason Ment: It's certainly contributing hard to quantify exactly how much it's contributing to the growth, but we're at the point now where about half of the flows we see in the U.S. funds that offer the ticker are coming from the ticker as opposed to sub-ticker.
Speaker Change: It's certainly contributing, hard to quantify exactly how much it's contributing to the growth, but we're at the point now where about half of the flows we see in the U.S. funds that offer the ticker are coming from ticker as opposed to sub-doc.
David Park: Perfect, you answered it better than I asked it, so I appreciate that. Moving on, you sold, I think, the Greenspring back office this quarter. I believe you acquired the non-controlling interest. I think it was throughout the quarter, maybe from April to June. I hope I didn't miss this in your prepared remarks. If you can take us into P&L, talk about sort of what those events did in terms of impacting the P&L this quarter and how we should, if there's anything different, in terms of what we should expect, you know, next quarter, the quarter after based on the timing, you know, this quarter.
Speaker Change: Perfect. He answered it better than I asked it, so I appreciate that.
Speaker Change: Moving on, you sold, I think the green spring back office this quarter, I believe you acquired the non-controlling interests, I think it was throughout the quarter, maybe from April to June.
Speaker Change: and hopefully to miss this and your prepare the marks. What?
Speaker Change: If you can take us in the P&L talk about sort of what those events did in terms of impacting the P&L this quarter and how we should, if there's anything different in terms of what we should expect, you know, next quarter the quarter after based on the timing.
David Park: Ken, this is David. So I don't think you should expect anything different next quarter. Everything is fully baked in this quarter. The NCI buy-in was effective April 1st. The Greenspring back office sale occurred at the end of December. So again, you know, I think what we had communicated before was that we did expect to see about a $2 million benefit to the bottom line with the sale of the Greenspring back office. That was fully baked in for the calendar 1Q and this first fiscal quarter. So again, it should all be in run rate.
Speaker Change: and now this quarter.
Speaker Change: Yeah, Ken, this is David. So I don't think you should expect anything different next quarter. Everything is fully baked in this quarter. The NCI buy-in was effective April 1st.
Speaker Change: The Greenspring back office sale occurred at the end of December .
Speaker Change: So again, I think when we had communicated before, was we did expect to see about $2 million benefit to the bottom line with the sale of the back office. That was fully baked in the counter one cue and this first disco quarter. So again, it should all be in run rate.
David Park: Okay, great. Thank you very much.
Operator: Thank you, and one moment as we move on to our next question. And our next question is going to come from the line of Alex Blostein with Goldman Sachs. Your line is open. Please go ahead.
Speaker Change: Okay, great. Thank you very much.
Speaker Change: Thank you, and one moment as we move on to our next question.
Speaker Change: And our next question is going to come from the line of Alex Blostein with Goldman Sachs. Your line is open. Please go ahead.
Jason Ment: Hi, this is Anthony on behalf of Alex. I wanted to touch on fundraising and the coming funds. I know there are a few funds in the market right now and wanted to get an update on fund size expectations as well as which ones you expect to be generating retro fees for the rest of the fiscal year.
Speaker Change: Hi, this is Anthony on for Alex. I wanted to hit on fundraising and the co-manual funds. I know there's a few funds in the market right now and wanted to get an update on fund size expectations as well as which ones you expect to be generating retro fees for the rest of the fiscal year.
Jason Ment: Sure, thanks Anthony for the question. So you heard Mike talk during the prepared remarks about the key commingled fund flows during the quarter, and just to recap those. There was about $800 million that was raised during the quarter for our private equity secondaries fund, about $800 million that brought us to the final close of the venture capital secondaries fund. Additionally, over $400 million was raised across our real estate, special situation secondaries fund.
Speaker Change: Sure, thanks Anthony for the question. So you heard Mike talk during the prepared remarks about the key
Speaker Change: Co-mingled fund flows during the quarter, and just to recap those, there was about $800 million that was raised during the quarter for our private equity secondaries fund about $800 million that brought us to the final close of the venture capital secondaries fund. There was over $400 million raised across our real estate special situation secondaries fund. And the remainder, if I said aside the private wealth business, the remainder was spread across a number of infrastructure private debt and venture capital strategies.
Speaker Change: So, in terms of, you know, where we get to final fund size, the Venture Capital Secondaries Fund, as I mentioned, has now had a final close at about $3.3 billion.
Speaker Change: Mike mentioned during the call that our private equity secondary's phone is now a bit over four billion dollars and we expect to have a final close in the coming months.
Jason Ment: And again, we compared that to where the previous fund was at about 2.1 billion. But as it relates to the remaining funds that continue to raise, you're still in the process of getting those completed. We mentioned that real estate would wrap up around the end of the year, but we didn't give any specific guidance in terms of fund size on any of the other vehicles.
Mike McCabe: of a few hundred additional million dollars.
Speaker Change: And, again, we compared that to where the previous fund was at about $2.1 billion. But as it relates to the remaining funds that continue to raise, you know, still in the progress of getting those.
Mike McCabe: to completed. We mentioned that real estate would wrap up around the end of the year, but no specific guidance in terms of fun size on any of the other vehicles there.
David Park: Great, thanks. And my second question is on margins. Just given the high jumping off point, this quarter, benefiting from retrofees, do you still expect FRE margins in the mid-30s? Or is there some upside to that number, just given the retrofee dynamic for the fiscal year?
Speaker Change: Great, thanks. And my second follow-up is on margins.
Speaker Change: Just given the high jumping off point this quarter benefiting from retrofees, do you still expect FRE margins in the mid-30s, or is there some upside to that number just given the retrofee dynamic for the fiscal year?
David Park: This is David. So again, like with the benefit of the retro fees, we hit a 40% margin. But to your point, even with that, the retro fees margin saw a pretty healthy increase from last year. And just as Scott mentioned, the majority of the 19 million in retro fees this quarter were largely related to the PE Secondaries Fund. And we do expect another close next quarter. So you can expect to see some level of retro fees throughout the year.
Speaker Change: Yeah, this is David. So again, like with the benefit of the retro fees, we hit a 40% margin.
Speaker Change: But to your point, even with that, the retro fees margin saw a pretty healthy increase from last year. And just as Scott mentioned, the majority of the $19 million in retro fees this quarter was largely related to the PE Secondaries Fund.
Speaker Change: and we do expect another close next quarter, so you can expect to see some level of retro fees throughout the year, but even without that we feel like
David Park: But even without that, we feel pretty good about where we are today and the progress we've made to date. And we do feel we're firmly on track to achieve margins in the mid-30s over the medium term.
Speaker Change: We feel pretty good about where we are today and the progress we've made to date. And we do feel we're firmly on track to achieve the margins in the mid-30s over the medium term.
David Park: It's very helpful. Thank you.
Operator: Thank you, and one moment for our next question. And our next question is going to come from the line of Ben Budish with Barclays. Your line is open. Please go ahead.
Speaker Change: Very helpful. Thank you.
Speaker Change: Thank you, and one moment for our next question.
Speaker Change: And our next question is going to come from the line of Ben Budish with Barclays. Your line is open. Please go ahead.
Operator: Hey, good evening. This is Nick Benoit on the call for Ben tonight.
Jason Ment: I just want to ask about the pipeline outlook for SMA flows. Looks like EPSMAs have picked up over the last two quarters, and we just want to think about the trajectory for the rest of the year and maybe how we should think about more normalized levels going forward.
Nick Benoit: Hey, good evening. This is Nick Benoit on the call for Ben tonight. I just want to ask about the pipeline outlook for SMA flows. Looks like EPSMA has picked up over the last two quarters, and we just want to think about the trajectory for the rest of the year, and maybe how we should think about more normalized levels going forward.
Jason Ment: Sure. Thanks, Nick, for the question.
Speaker Change: Sure. Thanks, Nick, for the question. So, you know, on the SMA flows, you'll have both the gross AUM flows as well as then, and Mike outlined some of this, the conversion of undeployed fear earning capital into fear earning AUM. So, you have the fear, your related fear earning AUM flows as well. But I would say the pipeline continues to be solid. Obviously, we're coming off a record-breaking quarter this quarter, and we've always gotten to the fact that there will be some lumpiness from quarter to quarter, but we feel good about the continued pipeline of both re-up and new opportunities, I'd say, particularly outside the U.S. and in parts of the world like Asia, Middle East, and parts of Europe , you know, quite a bit of activity.
Jason Ment: So, you know, on the SMA flows, you'll have both the gross AUM flows as well as then, and Mike outlined some of this, the conversion of undeployed fearing capital into fearing AUM. So, you have the related fearing AUM flows as well. Look, I would say the pipeline continues to be solid.
Jason Ment: Obviously, we're coming off of a record-breaking quarter this quarter, and we've always got into the fact that there will be some lumpiness from quarter to quarter, but we feel good about the continued pipeline of both re-ups and new opportunities, I'd say particularly outside the U.S. and in parts of the world, like Asia, the Middle East, and parts of Europe, you know, quite a bit of activity. But then, as it relates to the fearing AUM flows, you know, we talked during the prepared remarks about the fact that, you know, over $4 billion of undeployed fearing capital is likely to be activated by the end of the calendar year.
Nick Benoit: and Nativity, but then as a relates to the fearening AUM flows.
Speaker Change: You know, we talked during the prepare to mark about the fact that, you know, over $4 billion of unemployed parent capital is likely to activate by the end of the calendar year on top of that. You know, if you were to look at the presentation, we talk about the fact this quarter we had about $4.1 billion.
Jason Ment: On top of that, you know, if you were to look at the presentation, we talk about the fact that this quarter we had about $4.1 billion of UFEC that converted into fearing AUM. A sizable part of that was the activation of the Venture Secondaries Fund, but there was about $1.3 billion of UFEC deployment as well. And look, if we think about the current deployment environment, we've certainly seen a rebound from the lows of the first half of 2023, but it is still a somewhat muted environment today, albeit with a more exciting pipeline as we look out to the second half of the year. So we generally expect to see some positive momentum as it relates to the conversion of UFEC into fearing AUM.
Nick Benoit: of UFAC that converted into fearing a UM. A sizable part of that was the activation of the venture secondary's fund, but there was about $1.3 billion of UFAC deployment as well.
Nick Benoit: And look, if we think about the current deployment environment, we've certainly seen a rebound from the lows of the first half of 2023, but still a somewhat muted environment today, albeit with a more exciting pipeline as we look out to the second half of the year here. So we generally expect to see some positive momentum as it relates to the conversion of UFEC into Fearing AUM.
Jason Ment: Great, thanks for the response. And then separately, it was great to hear Springett at its second Wirehouse during the quarter. I just want to touch on the kind of competition you're seeing on the wires and how much harder it is to get product on these various platforms, you know, compared to 12 months ago, with all the influx of products coming to the market seems like. Thanks.
Speaker Change: Great, thanks for the response. And then separately, it was great to hear Spring Edge, which is the second wirehouse, during the quarter. I just want to touch on the kind of competition you're seeing on the wires and how much harder it is to get product on these various platforms, you know, compared to 12 months ago with all the influx of products coming to the market, it seems like. Thanks.
Jason Ment: Thanks, Jason here. Look, the products that we've created for the Wealth Channel, we believe are relatively differentiated versus what the lead sponsors bring, as well as what their peers. Spring in particular stands out as a rather unique product in the venture growth space, as a multi-manager. I mean, if it's getting more difficult, I would say... It may be, but Spring got on faster onto these two wires than we were able to get S-Prime on.
Jason Ment: Thanks Jason here.
Speaker Change: Look, the products that we've created for the well-channel we believe are relatively differentiated versus what the lead sponsors bring as well as the peers.
Speaker Change: Spring in particular stands out as a rather unique product in the venture growth space, multi-manager, and
Speaker Change: I mean, if it's getting more difficult, I would say.
Jason Ment: So I think we're going to get our share of shelf space based on the products we've developed, the performance that we're showing, and the large dedicated team that we've put on the field to market these products and service the clients after.
Nick Benoit: It may be, but Spring got on fast on to these two wires and we were able to get S-prime on, so I think we're going to get our share of shell space based on
Nick Benoit: The product we developed, the performance that we're showing.
Nick Benoit: and the large dedicated team that we've put on the field.
Nick Benoit: to market these products and service the clients afterwards.
Operator: Thank you. One moment for our next question, and our next question is going to come from the line of Michael Cyprys with Morgan Stanley. Your line is open. Please go ahead.
Guy: Guy, thank you.
Speaker Change: Thank you and moment for our next question.
Speaker Change: And our next question is going to come from the line of Michael Cyprys with Morgan Stanley . Your line is open. Please go ahead.
Operator: Great, thank you. Good afternoon.
Michael Cyprys: Great, thank you, good afternoon. Maybe just some private wealth seems like the ticker, you're getting a bit of traction with there. And six series, as you think about sort of the next stage of innovation in the private wealth channel, what else can be done to remove?
Jason Ment: Maybe just on private wealth, it seems like the ticker you're getting a bit of traction with there. I'm just curious, as you think about sort of the next stage of innovation in the private wealth channel, what else can be done to remove frictions for investors coming into the private market space? One thing that comes to mind, and I'm curious to get your thoughts on it, is the potential development of model portfolios for private markets. I'm curious where we are on that journey. What steps are you guys taking as you think about removing even more friction and opening up access further? Thank you.
Speaker Change: Frictions for investors coming in too.
Speaker Change: the private market space. One thing that comes to mind, I'm curious to get your thoughts on it is potential development of model portfolios for private markets. I'm curious where we are in that journey. What steps are you guys taking as you think about removing even more frictions and opening up access further? Thank you.
Jason Ment: Thanks, Mike. We do believe that model portfolios will play a part in the growth of private markets inside the portfolios of individual investors, that's for sure. We expect that the DC space will be part of that as well. And in terms of friction, you know, the ticker in the U.S. is now a path that people are starting to understand. We do believe that there will be solutions outside the U.S. to help with this as well.
Speaker Change: but...
Speaker Change: Thanks, Mike. We do believe that model portfolios will play a part in
Speaker Change: The growth of private markets inside the portfolios of individual investors, that's for sure. We expect that the DC space will be part of that as well.
Speaker Change: And in terms of friction, you know, the ticker in the U.S. is now a path that people are starting to understand. We do believe that there will be solutions outside the U.S. to help with this as well.
Jason Ment: And those different legs, I think, each will provide a lot of avenues for innovation. And we still think that there's space for innovation in the product offerings, i.e., products that we're able to bring to bear that aren't out there yet. And so those are all different avenues where I think we'll continue to innovate.
Speaker Change: And those different legs, I think, each will provide a lot of avenues for innovation. And we still think that there's space for innovation in the product offerings, i.e.
Speaker Change: products that we're able to bring to bear that aren't out there yet. And so those are all different avenues where I think we'll...
David Park: Great. And just a follow-up question on the margin profile. I think you mentioned the margin would be up a couple hundred basis points year on year, excluding the retro fees, suggesting sort of an underlying margin profile of about 35%. If I have that right in the quarter. So just curious why that is not, or should that be the right jumping off point as we go forward from here, putting aside any incremental retro fees? Why or why not? Is there an expectation for investment spend hiring to accelerate meaningfully that would take it a bit slower? Just curious about the moving part. Yeah,
Speaker Change: continue to innovate.
Speaker Change: Great, and just a follow-up question on the margin profile I think you mentioned.
Speaker Change: The margin would be up a couple hundred basis points year-on-year, excluding the retro fees suggesting.
Speaker Change: sort of an underlying margin profile of about 35% if I have that right in the quarter, such as curious why that is not, or should that be the right jumping off point as we go forward from here, putting any incremental retro fees, why or why not, is there an expectation for investment spend hiring to accelerate, meaningfully that would take it a bit slower, just curious to think about the moving parts there.
David Park: Yeah, David, I think that's right. If you exclude the retroactive fees for this quarter, you're closer to about 34% margin. You know, we do expect, like I said in the prepared remarks, to invest in our business development team, our private wealth team, and other key support areas. So that's going to be a little bit of a drag on margins. But again, we do feel we're in a good place, and we are, you know, the trajectory is still going up into the mid-30s over the median term.
Speaker Change: Yeah, David here. I think that's right. Like, if you exclude the retroactive fees for this quarter, you're closer to about 34% margin.
Speaker Change: We do expect, like I said in the prepared remarks, to invest in our business development team, private wealth team.
Speaker Change: and other key support areas. So that's gonna be a little bit of a drag on margins, but again, we do feel we're in a good place and the trajectory is still going up into the mid 30s over the median term.
Operator: Thank you. And again, ladies and gentlemen, if you would like to ask a question at this time, please press star 11 on your telephone. And one moment for our next question. And our next question will come from the line of Adam Beatty with UBS. Your line is open. Please go ahead.
Speaker Change: Great, thank you.
Speaker Change: Thank you and again ladies and gentlemen if you would like to ask a question at this time please press star 1 1 on your telephone and one moment for our next question.
Speaker Change: And our next question will come from the line of Adam Beattie with UBS. Your line is open, please go ahead.
Operator: Thank you and good afternoon. I just wanted to parse out the fee rate a little bit. Obviously, some nice momentum there, and you mentioned, obviously, the catch-up fees, as well as some lift from momentum in the wealth channel. So just wondering if you could maybe parse that out, either on a trailing 12-month basis or for the quarter, in terms of the contribution of wealth management that we should think of as sort of a positive going forward. Thanks.
Adam Beattie: Thank you, and good afternoon. I just wanted to parse out the fee rate a little bit. Obviously, some nice momentum there, and you mentioned, obviously, the catch-up fees, as well as some lift from momentum in the wealth channel. So, just wondering if you could maybe parse that out, either on a trailing 12-month basis or for the quarter, in terms of the contribution of wealth management that we should think of as sort of a positive going forward. Thanks.
David Park: Yeah, and this is David. So if you look at our blended fee rate of 61 basis points this quarter, it certainly did benefit from retroactive fees. So if you exclude that, we're kind of right back in the high 50s. And if you look at private wealth, it's right around 4.2 billion in total assets. So, you know, it grew about a billion dollars from last year. So, you can see that, as it continues to grow, it's going to, with the higher fee rate, it will tend to lift the overall blended fee rate. But at 4 billion, you know, it's going to take a little bit of time to really move the needle.
Speaker Change: Yeah, and this David, so if you look at our blended, the rate of 61 basis points, this quarter certainly did benefit from retroactive fees, so if you exclude that, we're kind of right back in the high 50s.
Speaker Change: and if you look at private wealth...
Speaker Change: It's right around $4.2 billion in total assets.
Speaker Change: You know, it grew about a billion dollars.
Speaker Change: from last year so you can see that, you know, as it continues to grow, it's going to...
Speaker Change: with the higher fee rate. It will tend to lift the overall blended fee rate, but at 4 billion, it's going to take a little bit of time to really use the needle.
Jason Ment: Okay, that makes sense. Thank you, David. And then just on some of the wealth management products, interesting how you mentioned that you were getting on platforms maybe at a more accelerated rate, which speaks to the relationships that you've been able to develop. So just wondering, you know, in terms of the positive flows there, you know, what you're seeing in terms of preferences, wirehouses, maybe versus other distributors, or maybe, you know, by segment in terms of the customer base. Thank you.
Speaker Change: Okay, makes sense. Thank you, David. And then, just on some of the wealth management products, interesting how you mentioned that you were getting on platforms maybe at a more accelerated rate, which speaks to
Speaker Change: to the relationships that you've been able to develop. So just wondering, you know, in terms of the positive flows there, you know, what you're seeing in terms of preferences, why are houses maybe versus other distributors or maybe, you know, by by segment in terms of the customer base. Thank you.
Jason Ment: Thanks, Adam. In terms of the syndicate that we put together for the different funds. At this point, we've got just about 100 different partners that are distributing more than one product, meaning two products, and about half that or so that are distributing even more than that. So certainly, cross-sell is part of the play here as opposed to mixing among the different types of platforms as different, whether it be an RIA, an IBD, WIRE, or an international partner, have had a good experience with us with one fund.
Speaker Change: Thanks, Adam. In terms of the
Speaker Change: the syndicate that we put together for the different funds.
Speaker Change: At this point we've got, you know, just about a hundred.
Speaker Change: different partners that are distributing more than one product, meaning two products, and about half that or so that are distributing even more than that.
Speaker Change: So...
Speaker Change: Certainly cross-sell is part of the play here as opposed to mix among the different types of platforms as different whether it be an RIA, an IBD, WIRE, or international partner have had a good experience with us with one fund.
Jason Ment: They are providing us with additional shelf space as they evaluate the other products that we've got. So I think that that is probably... One of the interesting parts of this, in terms of the mix between the different types of channels, we still continue to be a U.S.-dominated distribution with all of the funds. We're continuing to invest in our non-U.S. distribution. The wires are definitely a growing portion of the allocation, and we're happy there, but we're equally dedicated to our other distribution partners. They all make up an important part of this ecosystem and have different needs, and we're dedicated to ensuring that we meet each one of those distribution partners where they are.
Speaker Change: They are providing us additional shelf space as they evaluate the other products that we've got. So I think that is probably...
Speaker Change: One of the interesting parts of this.
Speaker Change: In terms of the mix between the different types of channels, we still continue to be a U.S.-dominated distribution. With all of the funds, we're continuing to invest in our non-U.S. distribution.
Speaker Change: And the wires are definitely a growing portion of the allocation, and we're happy there, but we're...
Speaker Change: equally dedicated to our other distribution partners. They all make up an important part of this ecosystem and have different needs. And we're dedicated to ensuring that we meet each one of those distribution partners where they are.
Jason Ment: Super, I appreciate the detail. Thank you, Jason. Thank you.
Operator: Thank you. One moment for our next question, http://TheBusinessProfessor.com. And we have a follow-up question from the line of Michael Cyprys with Morgan Stanley. Your line is open. Please go ahead.
Speaker Change: Super appreciate the detail. Thank you, Jason.
Speaker Change: Thank you. One moment for our next question.
Speaker Change: And we have a follow-up question from the line of Michael Cyprys with Morgan Stanley . Your line is open. Please go ahead.
Jason Ment: Oh, hey, thanks for taking the follow-up question here. I just want to circle back to the UFIC balance growth being up substantially in the quarter. I was hoping maybe you could help unpack some of the moving pieces there. Was it like $9 billion or so added to the top of the funnel? And then just on the $4 billion of SMA capital that you expect to be activated, I believe by calendar year, I'm just curious what drives the confidence around that, as I don't recall hearing that sort of commentary in the past.
Michael Cyprys: Thanks for taking the follow-up question here. I just want to circle back to the UFIC balance growth up substantially in the quarter. I was hoping maybe you could help unpack
Michael Cyprys: Some of the moving pieces there, was it like 9 billion or so added to the top of the funnel And then just on the 4 billion investment in capital that you expect to be activated I believe by calendar year and just curious what drives the confidence around that It's like don't recall hearing that sort of commentary in the past. Thank you.
Jason Ment: Sure, so if you think about the moving pieces relative to last quarter, you're right, there were about $9 billion of SMA-related AUM flows, essentially all of which flowed into that undeployed funeral capital balance. And then offsetting that was the activation of the Venture Capital Secondaries Fund. And again, that was raised at, the final close was $3.3 billion, but it was less than $800 million that was raised during the quarter. So it was less than that that kind of came out of the UFEC balance.
Speaker Change: So you can think about the moving piece is relative to last quarter, you're right, there were about $9 billion of SMA related AUM flows, essentially all of which.
Speaker Change: Floating into that, under-point-fearing capital, balance.
Speaker Change: and then off-setting that was the activation of the venture capital secondary's fund, and again, that was...
Speaker Change: raised at, his final close was $3.3 billion, but it was less than, $800 million was raised during the quarter, so it was less than that that kind of came out of the...
Jason Ment: So those are the main drivers, together with the $1.3 billion of deployment that I mentioned, that get us to the current balance. And I think one of the ways to think about that, this isn't specifically related to your question, but we've always talked about our ability to deploy that UFEC over a three- to five-year time period. And just to kind of reiterate some of the math we walked through last quarter, if you think about the $1.3 billion of deployment this quarter, and we're to annualize that to get to about $5.2 billion run rate, you know, implies just over a four-year investment period, despite the fact that deployment has been somewhat muted here, but just over four years once you adjust for the four-plus billion dollars of activations.
Speaker Change: the UFEC balance. Those are the main drivers, together with the $1.3 billion of deployment that I mentioned that get us to the current balance.
Speaker Change: And, you know, I think one of the ways to think about that, it wasn't specifically related to your question, but we've always talked about our ability to deploy that UFEC over a three to five-year time period. And just to kind of reiterate some of the math we walked through last quarter, if you think about the $1.3 billion of deployment this quarter, and we're to annualize that to get to about $5.2 billion run rate, you know, implies just over a four-year investment period, despite the fact that deployment has been somewhat.
Speaker Change: muted here, but just over four years once you adjust for the four plus billion dollars of activations. Just as it relates to your final question on the activations, as a reminder, you know, some of our separate accounts do in fact pay on committed capital, and so these were separate accounts that closed during the quarter, have not yet activated, you know, mostly because we are still investing the prior fund for those that were re-ups, and so our confidence level comes from expectations around when we expect to be fully deployed on the prior vehicle, and therefore we'll be able to activate those those separate accounts.
Jason Ment: Just as it relates to your final question on the activations, as a reminder, you know, some of our separate accounts do, in fact, pay on committed capital. And so these were separate accounts that closed during the quarter have not yet activated, you know, mostly because we are still investing the prior fund for those that were re-ups. And so our confidence level comes from expectations around when we expect to be fully deployed on the prior vehicle, and therefore, we'll be able to activate those separate accounts.
Jason Ment: Great. Anything to be aware of on step-downs on a fee or fee basis on those prior vintages as you activate the next structure?
Speaker Change: Great. And anything to be aware of on step-downs on fees or fee basis on those prior vintages as you activate the next structure?
Jason Ment: Well, yes, I mean, typically, when we do activate a new tranche, it will result in a step down to the fee base of the prior vehicle. These are all vehicles that we have kind of gone through re-ups for in the past, so nothing we would call out as it relates to unusual step downs in the fee base, which we've, again, committed to calling out for you going forward here.
Speaker Change: Typically, when we do activate a new tranche, it will result in a step-down to the fee base of the prior vehicle. These are all vehicles that we have gone through re-ups for in the past, so nothing we would call out as it relates to unusual step-downs in fee base, which we've, again, committed to calling out for you going forward here.
Scott Hart: Thank you, and I would now like to hand the conference back to Scott Hart for any closing remarks.
Speaker Change: Great. Thanks so much.
Speaker Change: Thank you, and I would now like to hand the conference back to Scott Hart for any closing remarks.
Scott Hart: Well, thank you everyone for your time and continued interest in Stepstone. We appreciate the time today, and hopefully, you sense the level of excitement around here for both the quarter that we just achieved as well as the outlook going forward here. So we look forward to updating everyone again next quarter. Thank you.
Scott Hart: Well, thanks everyone for your time and continued interest in in Stepstone. We appreciate the time today and hopefully you sense the level of excitement around here for both the quarter that we just achieved as well as the outlook going forward here. So we look forward to updating everyone again next quarter. Thank you.
Operator: This concludes today's conference call. Thank you for participating, and you may now disconnect. Everyone, have a great day.
Speaker Change: This concludes today's conference call. Thank you for participating and you may now disconnect. Everyone, have a great day!
Jason Ment: And the remainder, if I said aside, the private wealth business, the remainder was spread across a number of infrastructure, private debt, and venture capital strategies. So in terms of where we get to the final fund size, the Venture Capital Secondaries Fund, as I mentioned, now had a final close at about $3.3 billion. Mike mentioned during the call that our Private Equity Secondaries Fund is now a bit over $4 billion, and we expect to have a final close in the coming months of a few hundred additional million dollars.