StepStone Group Inc. (NASDAQ:STEP) Q2 2025 Earnings Call Transcript

StepStone Group Inc. (NASDAQ:STEP) Q2 2025 Earnings Call Transcript November 9, 2024

Operator: Good day and thank you for standing by. Welcome to the StepStone Second Quarter of Fiscal Year 2025 Conference Call and Webcast. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your first speaker today, Seth Weiss. Please go ahead.

Seth Weiss: Thank you and good evening. 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 contains certain forward-looking statements regarding the company’s expected operating and financial performance for future periods. 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 Factors section of StepStone’s periodic filings. These forward-looking statements are made only as of today, and except as required, we undertake no obligation to update or revise any of them. 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. Turning to our financial results for the second quarter of fiscal 2025. Beginning with Slide 3, we reported GAAP net income of $53.1 million.

GAAP net income attributable to StepStone Group Inc. was $17.6 million or $0.26 per share. Moving to Slide 5. We generated fee-related earnings of $72.3 million, up 65% from the prior year quarter and we generated an FRE margin of 39%. 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 $14.9 million to revenue, which compares to retroactive fees of $3.7 million in the second quarter of fiscal 2024. Finally, we earned $53.6 million in adjusted net income for the quarter or $0.45 per share. This is up from $30.2 million or $0.26 per share in the second quarter of last fiscal year, driven by both higher fee-related earnings and higher net realized performance fees.

I’ll now hand the call over to Scott.

Scott Hart: Thank you, Seth and good evening, everyone. After posting record results last quarter, we generated even higher fee-related earnings in our fiscal Q2, driven by continued growth in our fee-earning assets. We achieved several fundraising milestones this quarter. We closed the fifth vintage of our private equity secondaries fund, at a total fund size of $4.8 billion, our largest commingled fund to date. We generated nearly $850 million in private wealth subscriptions and surpassed $5 billion in net asset value in our private wealth platform. We are benefiting from multiple evergreen funds in market, a strong distribution network growing brand recognition and strong investment performance. In the four years, since the launch of SPRIM, our first retail-focused evergreen fund, StepStone Private Wealth has evolved into a meaningful contributor to AUM and earnings growth.

While we continue to invest in the platform, private wealth revenue growth is meaningfully outpacing our incremental investments, which is helping to drive operating leverage for the entire firm. Firm-wide, we grew fee-earning AUM by $4 billion and produced another strong quarter of gross AUM inflows of nearly $6 billion across the StepStone platform. Turning to our financial results. We generated $185 million in management and advisory fees and $72 million in fee-related earnings, which are up 30% and 65% year-over-year respectively. This is our strongest fee-related revenue and fee-related earnings on record, even as retroactive fees moderated slightly from last quarter’s record level. Excluding the impact of retroactive fees, our fee-related revenue and fee-related earnings increased 23% and 44% year-on-year respectively, driven by robust growth in our fee-earning AUM particularly in our commingled funds and our evergreen private wealth funds.

Our FRE margin was 39% for the quarter. If you were to exclude the impact of retroactive fees, our FRE margin was 34% for both the quarter and the trailing 12 months our best quarterly and 12-month core margin levels on record. We are reaping the benefits of operating leverage, even as we continue to invest for long-term growth. Shifting gears. In September. we hosted the StepStone 360 Conference, our annual event for private markets clients and investors. The sentiment from our clients at this year’s conference was undoubtedly more positive than in the prior two years, and demand for our offerings and solutions remains very high. Global financial market performance has been strong in the last 12 months, but private market investors still face distinct challenges.

While pressure from the denominator effect has abated, constraints on liquidity remain a challenge due to the extended period of subdued market activity, and corresponding realizations. Appropriately, liquidity was a prevalent theme at our conference. I would like to share some insights from our SPI database on transaction volumes and asset valuations. When we look at the private markets over the last 25 years, annual realizations have averaged just over 20% of the prior year’s net asset value. Over the last three years, this pace of monetization has been cut in half to the lowest levels we have seen since the dot-com bubble burst in the of the early 2000s and the global financial crisis of 2008 and 2009. While the muted pace of realizations is similar to those periods, the duration of this slowdown has been more protracted compared to the decelerations of the dot-com era and the financial crisis.

However, today’s private markets are fundamentally different from those of 2002 and 2009. The slowdowns in monetizations in the 2000s were accompanied by significant price declines, but private market asset values today are broadly higher than they were a couple of years ago. There are pockets of weakness in parts of the real estate and venture capital markets, but the corrections in those areas have been more modest than the bear markets of the past. Some of the drivers of today’s muted realizations such as shifting interest rates and wide bid/ask spreads have started to ease and are expected to continue easing in the coming periods. Other drivers, such as the emergence of longer duration investments in infrastructure and venture capital or the trend of general partners holding on to high-performing assets for longer periods of time, are more structural.

Over the last two and a half years, the median age of investments in the ground has steadily risen. Among mature U.S. PE buyout funds, the number of unrealized investments that have been held for at least five years is now greater than 50%, which is the first time the median hold period has crossed the five-year threshold since we have tracked this data. While this is reflective of slower activity in the last three years, it also represents an opportunity for the coming years as those assets are ripe for harvest. Encouragingly, we are starting to see liquidity pick up within StepStone funds. Realizations have slowly improved over the last year since hitting a low in the first half of fiscal 2024. We have not yet seen a widespread resumption of full asset sales, but sponsors are leveraging alternative means of harvesting investments including partial asset sales, dividend recapitalization, and the use of continuation vehicles.

We expect liquidity to continue to trend up in the coming periods as full-scale M&A and IPOs come back into the market, but the path may not be linear. In this environment of shifting liquidity, we are continuously seeing clients approach StepStone for our solutions. This is particularly true as LPs and GPs have more options to manage liquidity with the continued development of the secondaries market. Our experience, data, and modeling capabilities provide increasingly valuable insights for our clients to model the likelihood of various outcomes and plan for their capital and cash needs. I’ll now turn the call over to Mike to talk about fundraising and progression of fee-earning AUM in more detail.

Mike McCabe: Thanks Scott. Turning to Slide 8, we generated over $30 billion of gross AUM inflows during the last 12 months our best 12-month period ever. Over $21 billion of these inflows came from our separately managed accounts and nearly $9 billion came from our focused commingled funds. In the quarter, our commingled fund additions included approximately $600 million in our private equity secondaries fund for a final fund size of $4.8 billion. Other notable commingled fundraises included interim closes in our special situations real estate secondaries fund and our infrastructure co-investment fund, which collectively contributed about $300 million in the quarter. As Scott mentioned, we also generated nearly $850 million of subscriptions at our StepStone Private Wealth evergreen funds.

Our private wealth platform is now greater than $5 billion. While this still represents a relatively modest share of our total fee-earning AUM, our private wealth vehicles are making up an increasing share of new flows, which provides a positive boost to our growth and a favorable mix shift to our fee rates and our margin. Turning to managed accounts. We generated nearly $4 billion of new additions, which more than replenished the deployment of $1.5 billion out of our undeployed fee-earning capital or UFEC balance. Slide 9 shows our fee-earning AUM by structure and asset class. For the quarter, we grew fee-earning assets by $4 billion. As mentioned, we continue to grow our undeployed fee-earning capital to nearly $30 billion, our highest level ever.

The combination of our fee-earning AUM and UFEC grew to $134 billion, up 5% sequentially and up 27% year-over-year providing us with a high degree of visibility for continued growth in management fees as capital is deployed or activated. We mentioned on our last call that we anticipated that we would activate over $4 billion of capital from our managed accounts by the end of this calendar year. We activated this capital in October, which will be reflected in our fee-earning AUM in the quarter ending December 31st. Offsetting this will be a roughly $500 million distribution in our commingled funds from the roll-off of a legacy private equity secondaries fund, which we expect to be reflected in the upcoming quarter. Slide 10 shows the evolution of our management and advisory fees.

We generated a blended management fee rate of 63 basis points for the last 12 months, higher than the 59 basis points from the prior fiscal year as we benefited from retroactive fees and a higher fee rate from our private wealth offerings. I’ll now turn the call over to David.

David Park: Thanks Mike. I’d like to turn your attention to Slide 12 to touch on our financial highlights. As Scott mentioned, this was another very strong quarter for fee revenues and fee-related earnings. For the quarter, we earned management and advisory fees of $185 million up 30% 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. Fee-related earnings were $72 million for the quarter up 65% from one year ago. We generated an FRE margin of 39% for the quarter up more than 800 basis points versus the prior year quarter. Normalizing for retroactive fees, core FRE margins were over 34% and expanded 500 basis points versus the prior year period.

Moving to expenses. Cash-based compensation was $83 million up 6% from last quarter and up 11% from the prior year. The growth reflected increased headcount primarily driven by annual hires for our analyst class and continued investment in our business development and private wealth teams. General and administrative expenses were $28 million up $1.5 million sequentially and up $5 million from one year ago. The sequential increase in G&A was mostly a function of our annual StepStone 360 Conference, which occurred in September this year as opposed to the typical October schedule. Gross realized performance fees were $23 million for the quarter and $15 million net of related compensation expense. While down from last quarter, net performance fees were up over 150% from one year ago.

As previously mentioned, realized performance fees can be lumpy quarter-to-quarter. When viewed over a rolling 12-month period our net performance fees have increased each quarter since the low point from one year ago. Looking ahead we expect to generate seasonal incentive fees in our upcoming fiscal third quarter primarily related to our SPRING Private Wealth Fund. We expect these incentive fees to be larger than last year’s private wealth incentive fees given growth in the fund. As a reminder the bottom line contribution from private wealth incentive fees is relatively lighter compared to our other performance fees after accounting for performance fee-related compensation and the profits interests. Adjusted net income per share was $0.45 up 73% from one year ago driven by growth in fee-related revenues, FRE margin expansion and higher net performance fees.

Moving to key items on the balance sheet on slide 13. Net accrued carry finished the quarter at just over $700 million up 4% from last quarter and up 10% from the last 12 months. We view our $700 million of net accrued carry as potential future performance fees that will convert to cash as realizations start to pick up. Our net accrued carry is relatively mature with over 80% tied to programs that are older than five years which means that these programs are ready to harvest. And of this amount over 50% is sourced from vehicles with deal-by-deal waterfalls meaning realized carry may be payable at time of investment exit. Our own investment portfolio ended the quarter at $232 million and we had unfunded commitments to our investment programs of $117 million as of quarter end.

Finally, I want to highlight the private debt offering we closed on last month. We issued $175 million of 5.52% senior notes with a five-year maturity. We are using the net proceeds of this issuance to pay down the outstanding balance of our revolver which stood at $175 million as of September 30. By terming out this debt we are lowering our interest cost by approximately 200 basis points or a little more than $3 million per year based on our interest rates and outstanding debt balance as of September 30. Our revolver will stay in place as a source of liquidity to provide added flexibility. This concludes our prepared remarks. I’ll now turn it back over to the operator to open the line for any questions.

Q&A Session

Operator: Thank you. [Operator Instructions] And now we’re going to take our first question and it comes from the line of Alex Blostein from Goldman Sachs. Your line is open. Please ask your question.

Alex Blostein: Hi. Good afternoon, guys. Thank you for taking the question. I was hoping we could start with a discussion on private equity secondaries business and kind of piggybacking on your liquidity comments. And just curious to think about increasing velocity of capital with perhaps stronger M&A backdrop and maybe more equity issuance, and how does that impact sort of growth and volumes in the secondary markets? Is it reasonable to think that secondary volumes could still, sort of, grow off of the recent levels? Or do you think, sort of, healthier public markets backdrop could take away from some of that opportunity and kind of how you think about deploying that capital?

Scott Hart: Sure. Thanks Alex for the question. This is Scott. So look, I think, as we look at 2024 certainly it seems like we’re in line for another record year of activity in the private equity secondaries market here. As we’ve talked about at length in prior quarters that’s driven by both the LP secondaries market as well as the trend towards more GP-led secondaries. And look I think for us we probably think not only about the overall market activity but our own level of activity within the business here. I think we are well-suited to capitalize on both the LP and the GP-led trend. And when you think about the overall size of some of our funds again we mentioned that this current private equity secondaries fund, the largest one that we’ve raised to date at $4.8 billion that still leaves plenty of room for growth when you think about it relative to other players in the private equity secondaries market not to mention some of the other asset classes outside of private equity where we are leaders in the asset class as well.

So look, overall, we spent a lot of time looking at the supply and the demand side of the equation here. I think that private equity secondary is still an area that is undercapitalized relative to the opportunity and that LPs and GPs alike will tap that market really through the cycle here creating continued opportunities for groups like us.

Alex Blostein : Got it. Thanks for that. And then my second question just around profitability and FRE margins, ex retro fees, sounds like north of 35% — sorry, 34%, which is obviously quite healthy, nice expansion there. How are you thinking about it going forward? I know you always try to balance sort of growth in the top line and the investments you’re making in the business. But do you guys feel like we’re at a point where there’s enough scale in the business to deliver a more consistent FRE margin expansion, obviously, normalizing for retro fees for the next couple of years? And what’s kind of the goalpost of where that could go?

Mike McCabe : Hey, Alex, it’s Mike here. We’re very pleased with the way our margins have evolved over the last year or so, and in line with many of the expectations that we had set over the last couple of years. So, we’re very pleased. And I think a lot of the margin expansion that you’re seeing is the result of operating leverage and scale. But I think as a management team, our priority continues to invest in the platform for growth where there are opportunities to grow the business organically and in other areas of the business, whether it’s private wealth or data. So investing for growth is still our priority, but the scale that we’re able to reach across the various asset classes and distribution channels is certainly generating some operating leverage that you’re seeing flow through as we had expected. But David, I don’t know if there’s anything you’d like to add.

David Park: Yes. I’d just add that we’ve had 34% core FRE margins over the last two quarters. And I’d say that’s a reasonable jumping off point going forward. But you should expect to see us continue hiring for the remainder of this fiscal year. So you should see incremental growth in compensation as well as G&A and that’s on the core margins. But on a reported FRE margin basis, you should expect additional retroactive fees for the remainder of the year. We — our PE secondaries fund, which had its final close in September was the largest contributor to the retro fees this year. But aside from that, we do have a few funds in market that will generate retro fees with each closing and these include our real estate secondaries fund, our infrastructure co-investment fund and our growth equity fund.

Alex Blostein : Great. Thank you, guys.

Operator: Thank you. Now we’re going to take our next question and the question comes from the line of Ben Budish from Barclays. Your line is open. Please ask your question.

Ben Budish : Hi. Good evening and thanks for taking my question. Maybe following up somewhat on the margin question. Just thinking about what a pickup in carry next year could mean. So I guess maybe on the carry side, Scott, you talked about how in a normal year, you might realize 25% of your accrued balance. What do you think that could look like next year given your comments that this is sort of unlike past sort of crises where private market assets are looking quite healthy? And then the kind of margin component is, how do you think about what StepStone may do with sort of those higher levels of proceeds? Is there an opportunity to accelerate your FRE margin expansion? Or how else do you think about deploying those — that capital?

Scott Hart: Yes. So let me start by talking about the realization outlook and then we can kind of come back on the second question around margins there. But look, as you heard me say during the call here, certainly encouraged by the fact that we have seen things start to recover off of their lows in sort of mid-2023. But that recovery stalled a bit in the first half of the year here. And so we certainly haven’t seen anything like a return to 2021 levels, have not even seen a return to longer-term averages. And again, some of the things that we point to as the reasons are that we’ve really seen much more activity that we would characterize as partial realizations as opposed to full realizations. I think in terms of what I would point you to for next year is, look, when you look at, since our IPO, the quarterly trend in net realized performance fees, you have now seen both the lows and the highs, right, the lows of COVID and of calendar 2023, as well as the highs of calendar 2021.

And can look at sort of what the longer-term averages are there or the kind of rolling LTM numbers to kind of give you a sense for how we would think about a slightly more normalized level of realizations next year. And then the only other thing I would add is, look, even when we look across our own portfolio, we are encouraged that while it doesn’t show up in the numbers yet today, there have been some announced full realizations that we would expect to kind of work through the pipeline and close sometime during the next calendar year, which I think is encouraging us as well here. But why don’t I let Mike comment here about your the second part of your question?

Mike McCabe : Yes. So, Ben, on the margin question as it relates to any pickup in carried interest or performance fees, to the extent that we are seeing a pickup in performance fees, as you know, we build those, the cash builds throughout the year. And like we did last year, we issued a supplemental dividend that’s payable in June subject to Board approval. And I think that number came out to roughly $0.15 per share last year. And as we experience a pickup in performance fees throughout the rest of this year, we’ll continue to build and then distribute it at the end of the year. Does that answer your question, Ben?

Ben Budish: Yes. Yes, it does. Thank you. Maybe just one kind of separate follow-up and kind of an industry-wide question. At least yesterday’s market reaction tells us that everyone expects that the next one year or two are going to be fantastic for the alternative asset industry. Just curious in your seat as a solutions provider, how are LPs thinking about in particular allocations to private equity? Should a kind of meaningful pickup in DPI result in higher allocations? Or should we just think about it as more broadly in terms of like a healthy ecosystem? Because I think the sort of expectation is credit infrastructure some of these newer areas, there’s room to go, but private equity is quite mature. But just curious what your thoughts are there.

Scott Hart: Yes. Look, I mean, I think in the conversations that we have been having with LPs really around the world — and you’ve heard us say this in the past. But while we have seen that LPs in private equity were for a period of time temporarily overallocated relative to their target allocations, what we were hearing very few LPs talk about was reducing those private equity target allocations. If anything those were flat to growing in certain parts of the world, growing from a low base and therefore had room to run. And so I would tell you that, even in recent conversations at our 360 conference that we referenced during the call, the long-term commitment to the private equity asset class continues to be strong. The belief in the diversification benefits the strong risk-adjusted returns, the control orientation of the asset class continues to be strong.

And so, we feel the interest there is healthy even if not starting from a lower base as some of the other asset classes.

Ben Budish: Okay. Thank you very much,

Operator: Thank you. Now, we’ll go and take our next question and the question comes from the line of Ken Worthington from JPMorgan. Your line is open. Please ask your question.

Ken Worthington: Hi, good evening. Thanks for taking the question. If we look at the undeployed fee-earning capital, it seems like the pipeline is building at a faster pace. Now not just this quarter or last quarter, but this has been going on for some time. I guess maybe two questions here. One is, are the characteristics of this pipeline changing versus what you saw a couple of years ago? Like, are you winning more business further in advance? Are the contracts longer tenured? Is more of it invested versus committed? Or maybe nothing has changed. So, one, has anything sort of changed with what you’re winning? And then secondly, the pipeline is $30 billion now. How long should we — what’s reasonable to think about the conversion of the pipeline into fee-paying AUM? And is it front-end loaded back-end loaded? Is it just straight and linear? Like, how do we think about that? So, those two questions. Thanks.

Scott Hart: Yes. Perfect. Thanks Ken for the question. So, you’re right, the undeployed fee-earning capital balance has grown over time here to just under $30 billion. What I would tell you is actually the characteristics have not changed other than perhaps the size of some of the accounts which have continued to grow. You’ve heard us point in the past to our 90%-plus re-up rate with separate account clients and the fact that on average those accounts tend to grow 30% upon re-up, so some of the numbers have grown larger. But overall, the characteristics in terms of the separate accounts, the strategy, the mix of asset classes I would say has not changed dramatically. The only other thing I would highlight and it’s going to kind of play into the second part of your question is that, we have had some of these situations where the capital doesn’t actually have to be deployed.

It just has not been activated yet due to the timing of the fundraise meaning that we brought on the new separate account or commingled fund before the prior one was fully invested. And so, the reason I said it leads me to the second answer to your question, so that $30 billion we mentioned during the prepared remarks we’ve had over $4 billion of that that already activated here in October. So that brings us down to closer to $25 billion, $26 billion. And then when you look in our presentation where we show the sort of fee-earning AUM overview and walk through you can see that we had about $1.5 billion of deployed capital from undeployed fee — from the UFEC balance this quarter. If you kind of run rate that and get to $6 billion of annual deployment even though we haven’t sort of fully recovered from a deployment standpoint, implies about a 4-year time period to invest the rest of the capital right in line with the three to five years that we have always guided to.

So, that’s how we think about it. It’s something we keep a close eye on in terms of, whether we’ll be able to be very selective while we deploy that capital over time. But I’d continue to point you that 3 to 5-year time period. And the one thing that is going to front-load it is again these activations as opposed to deployment which have happened here in the fiscal third quarter.

Ken Worthington: Okay. Perfect. Mike, to pick on you, wealth management is going swimmingly. What’s next? Are the priorities distribution? Are the priorities product? As you think about the road map, where are you investing company resources to kind of continue the success that you’ve had thus far?

Mike McCabe: Sure. Thanks, Ken. Maybe I’ll take us back to the Investor Day dialogue that we had where we prioritized — and I think Scott shared a really interesting graph of the evolution of the various asset classes. And so when we think about what’s next, if that’s the question, we expect the other asset classes infrastructure real estate and credit to start hitting that inflection point that was presented during our Investor Day that showed call it 10, 12 years into our private equity business, we started achieving certain levels of scale and scale matters in this business. Our various other asset classes are now hitting those threshold pivot points of scale, where we expect to see continued growth rates in those areas.

So to the extent that there’s investment in growth you can expect us to continue to build out those teams backed by — the second part of your question is continue investment in business development across the world and we’ll continue to bring on business development hires to support all the asset classes. But last but not least, the private wealth channel as we mentioned on our prepared remarks cleared the $5 billion mark this quarter. And all of our products seem to be being received quite well across our various distribution platforms both domestically here in the US and abroad. So nothing too new Ken, but I think you can expect to see the other asset classes continue to accelerate in growth and distribution and wealth management continue to grow quite nicely going forward.

Ken Worthington: Great. Thank you very much.

Operator: Thank you. [Operator Instructions] And now we’re going to take our next question. And the question comes from the line of Michael Cyprys from Morgan Stanley. Your line is open. Please ask your question.

Michael Cyprys: Great. Thank you. Good evening. Just a question on M&A. Over the years you’ve done a number of acquisitions expanding across to different asset classes, geographies and distribution reach as well. Curious as you look at the platform today where there might be opportunities to expand even further? And how do you think about capturing opportunities across the private markets as you look out over the next five years? Thank you.

Mike McCabe: Thanks, Mike. Sure. M&A has been an important part of StepStone’s growth in building out the various asset classes as well as distribution capabilities and in private wealth. I think from an M&A standpoint, we have built out the platform pretty much in line with a vision that we have set to be the trusted global partner in the private markets industry. So I think as far as our platform is concerned, it’s largely built out to the extent that there is a way to either accelerate or enhance something we’re currently doing like we did in 2021 with the acquisition of Greenspring which really scaled up our venture capital capabilities. I think we have a great track record of onboarding senior experienced teams and bringing on organizations that will help accelerate or enhance something that we currently do.

Hard to see us deviating much from our current platform design. But as we emphasized late last year and over the years buying in the NCI is a form of internal M&A that we continue to focus on. And as you know we’ve hardwired and prewired the buy-in of NCI over the next several years. And that is largely the focus of our M&A and do so in an accretive way.

Michael Cyprys: Great. Thanks for that. And then just maybe shifting gears over to the wealth side postelection here with scope for maybe more supportive regulatory environment for financial services. Just curious how you’re thinking about the scope for alts to penetrate and access the 401(k) channel which to this point has been out of reach. [Technical Difficulty] might those be overcome? What products might be best suited for the 401(k) channel? How is StepStone positioning for that? And how might your ticker technology be employed here as [Technical Difficulty] to access that channel?

Jason Ment: Thanks, Mike. Jason here. And I think it’s on your end. But you’re breaking up. But I think I’ve got the gist of the question. In terms of private markets for the US defined contribution market, we think that the path forward is going to be within target date, first and foremost, as opposed to being line item menu selection in the 401(k) lineup for the individual. It’s not to say that it couldn’t happen but we think it’s best suited inside the target date wrapper leading to a better tenor match. In terms of the products that are suited, there’s already some adoption within the target date community of private real estate, typically in the open-end core and core plus markets. And so clearly that was a signal from the marketplace that the structure right being able to enter over time, being able to exit over time was important.

And so I think that the technology that’s developed in the wealth channel for the individual personal account, whether it be the tender structures or otherwise, are relatively well suited, whether it stays in a 40 Act wrapper with a ticker or not, they tend to be well suited I believe for that target date community to adopt. The change in administration, surely I would expect that at the top level a more deregulatory environment could be supportive. We don’t believe here at StepStone that regulatory action is required, in any way or legislative action is required in any way for the target date community to adopt private markets. And in fact, again, I would just point to the fact that it actually already is happening in the real estate market.

And I think that’s kind of proof that it works. We’re still in the very early stages from an education perspective with that marketplace. There are a lot of different flavors of what D.C. looks like, who administers it within companies or within asset management platforms. And we’re on a journey of educating that populus, as to not only the investment merits but exactly how the product would work, how it would work with their mid- and back office, the vendors in that space to the extent they’re different from the ones that we typically deal with, et cetera. So something that we are very focused on, have been for nearly a decade now in educating that populus and something that when we look outside the US, we’ve been doing for nearly 15 years now and working with the defined contribution plans in a number of different geographies outside the US.

So we’ve got kind of proven case studies of how it works and that it works well.

Michael Cyprys: Great. Thanks so much.

Operator: Thank you. [Operator Instructions] Dear speakers there are no further questions. I would now like to hand over the call to the management team for any closing remarks.

Scott Hart: Great. Well in that case, thanks everyone for your continued interest in the StepStone story and for your time today. We look forward to connecting with you again next quarter. Thank you.

Operator: That does conclude our conference for today. Thank you for participating. You may now all disconnect. Have a nice day.