StepStone Group Inc. (STEP): 5 FORCES Analysis [Nov-2025 Updated]

You're trying to get a clear-eyed view of StepStone Group Inc.'s competitive moat in the private markets, and honestly, the landscape is getting tighter. Despite managing a massive $709 billion in total capital responsibility and pulling in $767 million in management and advisory fees for fiscal year 2025, the firm faced real pressure, evidenced by that negative net income of $(18,508) thousand in Q4 FY2025. That single number tells you the fight is real, so we need to map out exactly where the power lies-with sophisticated institutional customers, scarce investment talent acting as suppliers, or mega-rivals like Blackstone. Below, Porter's Five Forces framework cuts through the complexity to show you the near-term risks and where StepStone Group Inc. is holding its ground.

StepStone Group Inc. (STEP) - Porter's Five Forces: Bargaining power of suppliers

You're assessing the power of the folks who supply StepStone Group Inc. (STEP) with the core inputs for its business: talent and data infrastructure. Honestly, the power dynamic here is complex, leaning toward high for certain critical inputs.

Highly specialized investment professionals are a scarce, high-power resource in private markets. StepStone Group Inc. relies heavily on this human capital to source and manage deals. As of March 31, 2025, the firm employed approximately 1,130 total staff, a significant portion of which are the key decision-makers: over 375 investment professionals. This concentration of specialized expertise means that losing a few key people could definitely disrupt client mandates and deal flow. To be fair, the firm is scaling its expertise, reporting 1,240 empowered experts as of September 30, 2025.

Underlying General Partners (GPs) also hold strong power because they control the unique deal flow and track records StepStone needs to generate returns for its clients. StepStone Group Inc.'s scale-responsible for approximately $771 billion of total capital as of September 30, 2025-means it must maintain strong relationships with top-tier GPs across private equity, infrastructure, and private debt. The firm's ability to commit significant capital, like the $1.2 billion closed for its inaugural infrastructure co-investment fund, gives it leverage, but the scarcity of truly unique, top-quartile GP access remains a supplier power lever.

Proprietary data and technology, like the SPI platform, help StepStone Group Inc. reduce its reliance on external data vendors. They built this system because, as one partner noted, the necessary data didn't exist digitally in one place. SPI Research, Reporting, and Benchmarking tools integrate the firm's own insights. For instance, SPI Reporting tracked detailed information on over $685 billion of client commitments as of March 31, 2024, showing the massive internal data set being leveraged. This internal development acts as a powerful counter-force to external data providers.

Switching costs are high for replacing key investment talent and core technology systems. Losing a senior investment professional means losing not just their network, but also their deep familiarity with the proprietary data models and historical context within the SPI platform. The cost isn't just recruitment; it's the lost productivity while a new hire gets up to speed on the firm's specific, proprietary analytical environment. This high internal switching cost strengthens the position of the existing talent pool.

StepStone's capital-light model reduces dependence on traditional financial capital suppliers, like banks providing balance sheet financing. The business model is heavily weighted toward management and advisory fees derived from assets under management (AUM). Fee-related earnings (FRE) reached $74.1 million in Q3 FY2025. As of Q2 FY2026, fee-earning AUM stood at $132.8 billion, up 27% year-over-year. While the firm invests its own capital, the primary revenue engine is fee-based, meaning the biggest 'supplier' of capital-the limited partners-are technically the firm's buyers, not traditional suppliers, thus lowering the bargaining power of pure financial capital providers.

Here's a quick look at the scale that influences these supplier dynamics as of late 2025:

The key supplier power factors can be summarized like this:

• Talent Scarcity: High power due to the small pool of specialized investment professionals.
• GP Access: GPs maintain power by controlling unique, high-performing deal flow.
• Data Self-Sufficiency: StepStone Group Inc.'s SPI platform mitigates reliance on external data vendors.
• Talent Retention Costs: High internal costs to replace experienced investment staff.
• Capital Structure: The capital-light focus shifts power away from traditional debt/equity suppliers.

Finance: draft analysis of compensation structure vs. industry benchmarks for investment professionals by next Tuesday.

StepStone Group Inc. (STEP) - Porter's Five Forces: Bargaining power of customers

You're analyzing the power your clients hold over StepStone Group Inc. (STEP), and honestly, it's a nuanced picture. On one hand, you have the sheer size and sophistication of your traditional client base, but on the other, the structure of private markets investing creates some real friction for them to walk away.

Customers are definitely sophisticated institutional investors. StepStone Group Inc.'s client roster includes some of the world's largest public and private defined benefit and defined contribution pension funds, sovereign wealth funds, and insurance companies, alongside prominent endowments, foundations, and family offices. These are not novice investors; they have deep internal resources for due diligence.

These clients are highly fee-sensitive, which means they scrutinize every basis point. They are scrutinizing the $767 million in management and advisory fees reported for fiscal year 2025. When you manage capital at this scale, even small percentage differences in fees become significant dollar amounts, so the pressure to justify fees is constant.

Still, switching costs are high, which is a major anchor for client retention. For many of the core mandates, you are dealing with long-term fund lock-ups and the administrative and strategic complexity of restructuring massive private markets portfolios. As of March 31, 2024, StepStone Group Inc.'s separately managed accounts (SMAs) and focused commingled funds typically had an eight to 18-year maturity at inception, including extensions. That long horizon means clients are locked in for years, even if they become dissatisfied in the short term.

StepStone Group Inc.'s scale itself acts as a powerful stickiness factor. As of September 30, 2025, StepStone Group Inc. was responsible for $771 billion of total capital. This massive scale, which includes $209 billion in assets under management as of that same date, means clients are deeply embedded in a platform that is difficult to replicate elsewhere. It's hard to leave when the platform is that central to your entire strategy.

Here's a quick look at the scale metrics as of late 2025:

The customer base is also diversifying, which dilutes the power of any single client. StepStone Group Inc. has seen increased product offerings aimed at private wealth clients. By September 30, 2025, the Private Wealth AUM reached $12.1 billion, more than double the assets from September 30, 2024. This growth in the wealth channel means that while institutional clients remain crucial, their relative influence is lessened by the growing, albeit smaller, pool of individual and mass affluent investors.

The power dynamic is further shaped by the structure of the private markets themselves:

• Institutional clients manage trillions in assets, demanding top-tier service.
• The potential for a 4 percent average annual return premium over public markets justifies accepting illiquidity.
• Liquidity options vary; some evergreen funds offer quarterly liquidity at 100 percent of NAV for up to 5 percent of the fund.
• Minimum ticket sizes for some non-accredited products are as low as $10,000.
• Client net retention rate was an impressive 120% in fiscal year 2024, showing strong existing client satisfaction.

Finance: draft a sensitivity analysis on fee erosion if the average management fee rate drops by 5 basis points across the $209 billion AUM by next quarter.

StepStone Group Inc. (STEP) - Porter's Five Forces: Competitive rivalry

You're looking at the competitive intensity in the private markets space, and honestly, it's a heavyweight bout. StepStone Group Inc. is competing directly against firms that operate at a fundamentally different scale. The rivalry is fierce, centered on attracting the largest pools of capital.

The competition involves mega-firms like Blackstone, KKR, and Apollo, who command significantly greater scale and Assets Under Management (AUM). For context on the scale difference, as of March 31, 2025, StepStone Group Inc. managed approximately \$189.4 billion in AUM out of \$709 billion in total capital. Compare that to the giants:

Rivalry within this segment hinges on three core areas where StepStone Group Inc. must prove its worth against these behemoths. You see the pressure points in:

• Investment performance benchmarks.
• Fee structure competitiveness.
• Speed and relevance of product innovation.

The industry remains highly concentrated, meaning aggressive competition for Limited Partner (LP) commitments is the norm. When you look at the total private capital industry size, estimated at \$13 trillion, the competition for that capital, especially as pension funds like Aviva look to double their private markets exposure from about 10% to between 20% and 25%, is intense. This push for democratization, targeting an \$80 trillion pool from HNWIs and 401(k)s, only sharpens the focus on securing LP mandates.

StepStone Group Inc. navigates this by differentiating its offering. Instead of solely competing head-to-head on massive, commingled funds, the firm emphasizes customized solutions and its advisory/data services. This strategy helps StepStone Group Inc. avoid the most direct fund-level rivalry with the largest players. For instance, its Fee-Earning AUM (FEAUM) stood at \$121.4 billion as of March 31, 2025, a segment where customization plays a larger role.

Still, the pressure shows on the bottom line. The reported negative net income attributable to StepStone Group Inc. of \$(18,508) thousand in Q4 FY2025, contrasting with an Adjusted Net Income per share of \$0.68 (non-GAAP), clearly suggests high competitive pressure impacting GAAP profitability metrics. That GAAP loss suggests the cost of competing-whether in talent acquisition, technology investment, or fee pressure-is significant.

StepStone Group Inc. (STEP) - Porter's Five Forces: Threat of substitutes

Public equity and fixed-income markets remain the most liquid substitute for capital allocation. For instance, the U.S. equity market returned 16% in the third quarter of 2025, a figure that competes for investor attention against less liquid private market allocations. In the fixed income space, public high yield remains sized around $1.5 trillion, though much of the credit creation growth has shifted to leveraged loans and private credit, which also total approximately $1.5 trillion each. Still, value stocks trade at a 63% discount to growth stocks on a normalized price-earnings ratio basis, suggesting a potential margin of safety in public equities that could draw capital away from StepStone Group Inc.'s core focus.

Direct co-investment and co-sourcing by large institutional investors bypasses StepStone Group Inc.'s fund-of-funds model. This is a significant competitive dynamic, as 88% of Limited Partners (LPs) surveyed plan to allocate up to 20% of their capital to co-investments, seeking reduced fees and greater oversight. This trend is reinforced by non-traditional players like sovereign wealth funds and pension plans adopting a 'control' or lead investor capacity on direct deals. As of March 31, 2025, StepStone Group Inc. was responsible for approximately $709 billion of total capital, including $189 billion in Assets Under Management (AUM), making the pool of capital subject to direct allocation decisions quite large.

Hedge funds and other liquid alternative investment vehicles compete for the same institutional dollars. Global hedge fund assets under management (AUM) reached a record $4.74 trillion in the first half of 2025, attracting $37.3 billion in net new capital during that period. This substantial pool of liquid alternatives offers institutional investors a different approach to uncorrelated returns and downside protection. For context, the largest hedge funds-those managing over $5 billion-took in nearly $30 billion of the total inflows in Q2 2025 alone, showing where large institutional dollars are concentrating outside of traditional private market funds.

New technology-enabled platforms offer simpler, lower-cost access to private market exposure, democratizing a space StepStone Group Inc. has long served. The overall private markets sector is projected to grow to more than $20 trillion by 2030. This growth is increasingly fueled by private wealth, which is projected to contribute approximately 60% of AUM growth in private markets over the next decade. StepStone Group Inc.'s own Private Wealth platform AUM reached $12.1 billion as of the second quarter of fiscal year 2026, but the broader trend suggests increasing competition from platforms catering to this segment, which saw High-Net-Worth Individuals (HNWI) grow by over $3.8 trillion from 2022 to 2023.

Here's a quick look at the scale of the substitute capital pools versus StepStone Group Inc.'s fee-earning base as of late 2025:

The pressure from these substitutes manifests in several ways:

• LPs demanding lower fee structures on direct co-investments.
• Increased competition for deal flow from large multi-strategy asset managers.
• The need for StepStone Group Inc. to rapidly scale its Private Wealth platform, which hit $12.1 billion AUM.
• Public market performance, such as the 16% return in U.S. equities in Q3 2025, setting a high bar for illiquid alternatives.
• The sheer size of the hedge fund industry at $4.74 trillion AUM competing for institutional mandates.

StepStone Group Inc. (STEP) - Porter's Five Forces: Threat of new entrants

Barriers are high due to the need for a multi-cycle track record to build investor trust.

The private equity fundraising environment in 2025 remains challenging, with fundraising expected to remain tough. When capital flows, the winners are funds with a clear, differentiated strategy and a record of consistent performance. StepStone Group raised $18 billion in new capital for separately managed accounts and $11 billion for commingled funds over the last twelve months ending in Q2 FY2026.

Significant regulatory hurdles and compliance costs must be overcome to operate globally.

Firms with an international presence face regulatory cross winds, with changes to MiFID II requiring implementation by September 2025. The global market for ESG disclosures remains fragmented. New SEC leadership in 2025 has extended compliance dates for rules such as the amendments to Form PF.

Building a competitive data and technology platform, like StepStone Group\'s, requires substantial investment.

StepStone Group promotes its SPI platform, which collects data on thousands of private fund managers and investments. As of November 2025, StepStone Group has a team of 535 people, which includes 271 partners.

The scale needed to manage $189 billion in AUM is a major capital and credibility barrier.

StepStone Group reported total capital responsibility of approximately $723 billion as of Q2 FY2026. The latest reported Assets Under Management (AUM) for StepStone Group reached $209.1 billion in Q2 FY2026.

New entrants can target niche strategies or specific geographic markets with relatively lower barriers.

Some structural changes are lowering barriers in specific areas, such as StepStone Private Wealth Solutions eliminating accreditation status for several of its wealth products in the US. StepStone Group also expanded to new geographic markets, including opening an office in Jeonju, South Korea, in June 2025.

The relative scale of StepStone Group\'s operations compared to potential new entrants can be seen in the following figures:

New entrants may find lower initial hurdles by focusing on specific asset classes or geographies where established firms have less penetration, or by targeting the private wealth channel with lower minimums.

• Lower investment minimums for some wealth products reduce entry friction for smaller investors.
• European UCI Part II structures launched in early 2025 aim to provide ease and transparency similar to US offerings.
• The secondary market, which raised $102 billion in 2024, is a growing area where specialized managers can focus.