By Bill Alpert

Shares of the private-asset manager StepStone Group blasted through any concerns over its outlook, a day after it reported strong earnings and fund-raising for its March quarter. Despite some recent criticism of the firm's accounting-derived profits, StepStone stock jumped 5.3% Thursday, against a flat market backdrop, to close at $54.74.

In a quarter when many private-asset managers faced headwinds from private-credit investments and artificial-intelligence disruptions of their software bets, StepStone had its best quarter ever, CEO Scott Hart told listeners on Wednesday afternoon's conference call.

"We're thrilled with the excellent results we continue to post," Hart said.

The New York firm pitches its non-listed funds to individual retail investors and smaller institutions, as ways to join the big institution's bets on private equity and venture investments like SpaceX. Shares in that soon-to-go-public space business are one of StepStone's biggest holdings and probably its biggest draw.

Assets under management at StepStone at the end of March rose 23% from the year-ago quarter to $233 billion. Fee-related earnings rose 12% to produce adjusted earnings per share of 57 cents -- beating the 52 cent consensus forecast of analysts for the period, which is the firm's fiscal fourth quarter. For the March fiscal year, adjusted earnings were $2.16 a share.

StepStone incurred a net loss of $6.78 a share on the year under generally accepted accounting principles. That's largely because of big accruals for more than $2 billion it may have to pay to the team managing its fast-growing funds for wealthy individuals.

Beginning in the current June quarter, that fund management team has the right to demand an acceleration of the payout, in amounts that would exceed StepStone's cash balances and substantially dilute its shareholders.

But the company disclosed no such demand in its Wednesday report. Instead, it will pay the team $11 million in cash and $166 million worth of stock in the June quarter. StepStone said the transaction will be accretive to earnings.

StepStone also used the earnings call to address criticism of its accounting.

Many of the holdings in StepStone's funds are stakes in other private funds, or in unlisted stocks like SpaceX, that the firm buys at a discount from other private investors. It books instant accounting gains on these purchases, by adding them to the StepStone funds at the undiscounted valuations of their prior holders.

Such " day one markups" are standard industry practice for secondary market purchases of private investments, and is the accounting treatment called for under GAAP. But it has come in for recent criticism by industry leaders, including Apollo Global Management CEO Marc Rowan, who is working with others to seek a change in the GAAP rules.

Analysts on StepStone's Wednesday call asked Hart about the markups.

"A discount does not prove an asset is overvalued," he said. "It simply shows liquidity has a price." Hart said he doubted the GAAP rule would change.

The CEO also said the day-one markups were small parts of StepStone's investment gains. Out of the past year's 37% return for the StepStone Private Venture and Growth Fund -- which is also known as SPRING -- only four percentage points came from that initial markup, the Hart said.

SpaceX has contributed a big part of the venture fund's gains, from the evidence of SPRING's securities filings. Through its last report, dated December 2025, the fund said the fair value of its holdings was 45% above their cost. Six percentage points of that gain came from SpaceX -- and that's not counting SPRING's holdings in other venture funds that are sitting on SpaceX gains.

One analyst asked Hart if the venture fund's appeal and performance might be affected, once SpaceX comes a public company.

"I think it's more than just a few high-profile companies," Hart said.

Write to Bill Alpert at william.alpert@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

May 21, 2026 18:07 ET (22:07 GMT)

Copyright (c) 2026 Dow Jones & Company, Inc.