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Operator
Good afternoon, ladies and gentlemen, and welcome to StepStone's Fiscal First Quarter 2024 Earnings Conference Call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. Press star 1 if you would like to queue up for a question, and press star 2 to remove yourself from the queue. I would now like to turn the conference over to Seth Wise, StepStone's Head of Investor Relations. Please go ahead.
spk00
Thank you. Joining me on today's call are Scott Hart, Chief Executive Officer, Jason Mett, President and Co-Chief Operating Officer, Mike McCabe, Head of Strategy, and Johnny Randall, 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 and our plans for future dividends. 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 and actual dividends declared 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. 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. In addition, 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 first quarter of fiscal 2024. Beginning with slide three, we reported gap net income of $49.4 million. Gap net income attributable to StepStone Group Incorporated was $21.3 million. Moving to slide four, we generated three related earnings of $44.4 million, up 21% from the prior year quarter, and we generated an FRE margin of 32%. The quarter reflected retroactive fees resulting from interim closings of our PE Secondaries Fund, our Multi-Strategy Global Venture Capital Fund, and our Infrastructure Co-Invest Fund, which in total contributed $2.8 million to revenue and fee-related earnings, 140 basis points to FRE margin, and $2.7 million to pretax adjusted net income. This compares to retroactive fees in the first quarter of fiscal 2023 that contributed $2.4 million to revenue, $2.2 million to fee-related earnings and pre-tax adjusted net income, and 130 basis points to FRE margin. Excluding the impact of retroactive fees in both this quarter and the prior year's quarter, we would have grown fee-related earnings by 21%. Finally, we earned $29.4 million in adjusted net income for the quarter, or 26 cents per share. This is down from $47.1 million, or 41 cents per share, in the first fiscal quarter of last year, driven primarily by lower net realizations and partially offset by higher fee-related earnings. I'll now hand the call over to StepStone CEO, Scott Hart.
Scott Hart
Thank you, Seth, and good afternoon, everyone. Over the last year, we have generated a strong progression of fee-related earnings driven by consistent growth in fee-earning assets under management, despite a challenging environment for the private markets and the broader asset management industry. The strength and breadth of our platform enable StepStone to offer a comprehensive set of solutions to our clients, allowing them to proactively invest across economic cycles. Our client-first approach has resulted in strong historic growth, and we expect to continue along this path as we listen and adapt to our clients' needs across evolving market backdrops. Looking at today's environment, our clients remain patient in making capital commitments. However, the broader market appears to be strengthening, and the sentiment among our clients and partners is improving. Public equity indices are up 20 to 40 percent since the market's trough, with strength particularly in technology. Investment realizations remain modest, but we are seeing green shoots with some recent IPO activity and M&A. Increased transactions would not only lead to stronger performance fees, but would help spur fundraising as realized capital that is returned is recycled back into new investments, particularly for those LPs with more mature private markets portfolios. At our investor day in June, we set out a path to at least double our fee-related earnings over the next five years. Since our founding more than 15 years ago, we have taken deliberate steps to build leading teams and capabilities across all the major private market asset classes and strategies, establish solutions for institutional and individual investors, position ourselves in the fastest-growing geographies, and construct leading data and technology platforms that provide StepStone with distinct competitive advantages in delivering private market solutions. As such, we believe the drivers of growth are already in place, namely managed account re-ups, continued success within our commingled funds across both institutional and private wealth clients, deepening market penetration across geographies, and operating leverage. A major contributing factor in our confidence to achieving this long-term growth centers around the diversity of our offerings. Our wide scope of capabilities ensures that we have myriad solutions for different market environments and that we are not concentrated in any one area. I'd like to focus on a few of the avenues about which we are particularly excited. Beginning with secondaries, this is a strategy that we've spoken about on recent calls and warrants continued discussion given how it is resonating with investors in today's environment. Investors are attracted to the strong returns while appreciating the favorable risk and cash flow profile that comes from investing in a seasoned portfolio or asset. At the same time, supply remains strong as GPs and LPs are increasing their adoption of secondaries as a mechanism to harvest returns and generate liquidity. As a trusted partner to GPs and LPs alike, StepStone is well positioned to capitalize on this market given the breadth of our relationships and our data advantage. which comes from managing or advising on over $600 billion of assets and monitoring data on over 15,000 managers. We are currently in market with our private equity secondaries fund, our special situations real estate secondaries fund, and we are now in market with our venture capital secondaries fund, where we are working towards a first close. We also offer secondaries and managed accounts across all the asset classes and see opportunities for further product expansion. The secondary markets in private credit and infrastructure are still relatively new, but are starting to accelerate meaningfully as the primary markets in these asset classes have reached a critical mass and LP's portfolios in those asset classes are seasoning. As the largest solutions provider in infrastructure and a meaningful player in private credit, StepStone is positioned to be a leader in developing these secondary markets. Shifting to the geographic landscape, we continue to find opportunities worldwide. We have a strong global presence with offices in 16 countries, which gives us the footprint to grow internationally with deepening pools of emerging capital. We are also growing in North America, which made up over half of our gross inflows this quarter. The breadth of our offering has proven to be a competitive advantage as we closed on several managed account mandates that were multi-strategy and multi-asset class. Finally, private wealth continues to be an extremely exciting avenue for growth. We are averaging inflows of over $70 million a month for calendar 2023, which compares to a $45 million average for the first seven months of last year. In fact, July was our best month of inflows ever with over $100 million in new subscriptions. When we established our private wealth platform, we did it with the aim of increasing accessibility to the private markets. S-Prime, our core private markets evergreen fund, was designed specifically to help individual investors clear challenges associated with private market investing. For example, S Prime has relatively low investment minimums, is suitable for accredited investors, allows for 1099 tax reporting, and doesn't require capital calls. Last month, we took another significant step to reduce investor friction by publishing a daily net asset value for S Prime, making StepStone among the first platforms to introduce a daily NAV for a multi-asset class private markets fund. investors can now subscribe on a daily rather than just a monthly basis. Additionally, S-Prime is now eligible for the National Securities Clearing Corporation platform for mutual funds, enabling investment via a ticker without the need for subscription documents and simplifying the onboarding process for the investor and financial advisor. I'll now turn the call over to Mike McCabe to speak about StepStone's fundraising and Fearing Asset Growth in more detail.
Seth
Thanks, Scott. Turning to slide seven, We generated $15 billion of gross AUM inflows during the last 12 months, with $4 billion coming from our commingled funds and $11 billion coming from our managed accounts. Slide 8 shows our fee-earning AUM by structure and asset class. For the quarter, we grew fee-earning assets by approximately $2 billion, with $700 million coming from commingled funds and the remainder from separately managed accounts. This quarter's commingled fund inflows came primarily from our PE secondaries fund, our multi-strategy global venture fund, our infrastructure co-investment fund, and our private wealth platform, where we continue to generate strong growth with total assets under management of $1.7 billion. Our investment performance at our private wealth products continues to be very strong. With S-Prime, our evergreen private markets fund for accredited investors, generating a 28% annualized return since inception, and Spring, our evergreen venture and growth equity fund, off to a strong 24% return since its launch in November of 2022. Stepstone Private Infrastructure Fund, or STRUCTURE, is our latest perpetually raised fund for private wealth investors, having been declared effective by the SEC in July. STRUCTURE is an internal fund, seeking current income and long-term capital appreciation by offering accredited investors access to a global investment portfolio of private infrastructure assets. We expect an initial closing later this year. We also increased our undeployed fee-earning capital by more than $1 billion to a balance of approximately $17 billion, positioning us well to capitalize on attractive investment opportunities. Slide nine shows the evolution of our management and advisory fees. We generated a blended management fee rate of 55 basis points over the last 12 months, slightly higher than for fiscal 2023. We produced over $4.50 per share in management advisory fees over the last 12 months, representing an annual growth rate of over 20% since fiscal year 2019. Now before turning the call over to Johnny, I am pleased to announce that we are raising our quarterly dividend from $0.20 per share to $0.21 per share. As a reminder, last November we updated our dividend approach to bifurcate our shareholder distributions between a quarterly dividend that would be based primarily on fee-related earnings and a recurring supplemental dividend that would be paid annually and based primarily on performance-related earnings. By matching our dividend approach to our business model, we can maximize contributions to our shareholders while maintaining a capital-efficient balance sheet. As a reminder, we set last year's quarterly dividends of 20 cents per share prior to this shift in an approach, and therefore had based those dividends on total adjusted net income rather than fee-related earnings. We are pleased that we were able to pay out a healthy 25-cent supplemental dividend this past June even with the mid-year change in approach. This quarter's 21-cent distribution marks the first time we are setting our quarterly dividend based primarily on fee-related earnings. This payout is funded by the vast majority of our fee-related earnings after adjusting for taxes and non-controlling interest. For comparison, this dividend would have represented a high teens percentage increase in our quarterly dividend had we adopted a similar approach last year and based those quarterly dividends on FRA. We expect that our future year's quarterly dividends will increase as we grow FRE. I'd now like to pass the call over to our CFO, Johnny Randall.
Scott
Thank you, Mike. I'd like to turn your attention to slide 11 to speak to our financial highlights. For the quarter, we earned management and advisory fees of $138 million, up 18% from the prior year quarter. The revenue increase is driven by growth in fee-earning AUM from commingled funds that were activated over the last year as well as continued fundraising and deployment across commercial structures. We generated an FRE margin of 32% for the quarter. Retroactive fees in this quarter had a positive impact on the FRE margin of 140 basis points. Excluding the impact from retro fees, our margin was up 60 basis points year-over-year and up 250 basis points sequentially. Cash compensation for the quarter reflected relatively limited hiring activity We expect some pickup in compensation expense next quarter from incremental hiring. G&A will vary quarter to quarter, largely driven by travel and events. We saw a decline in G&A from the previous quarter, which included expenses related to our annual VC investor conference. Gross realized performance and incentive fees were $14 million for the quarter, which is down both year-over-year and sequentially, but generally consistent with the muted level of transactions we have seen in the market. As Scott mentioned, we are seeing some signs that the realization environment is improving. It generally takes a few quarters for transactions to work through the pipeline, so we expect that realized performances will remain modest for the next several quarters. As a reminder, we generally do not control the timing of exit on our investments. Moving to slide 12, adjusted revenue per share was down 20% relative to the prior fiscal year, which is the result of an 80% decrease in gross realized performances per share offset by 19% growth in management and advisory fees per share. Since fiscal 2019, we've grown adjusted revenue per share by 21% compounded annual rate. Shifting to our profitability, on slide 13, we grew fee-related earnings per share by 22% year over year. The increase was primarily driven by growth in management and advisory fees. Looking over the longer term, we have generated an annual growth rate in fee-related earnings per share of 31 percent since fiscal 2019. Our A&I per share is down relative to last year driven by lower performance and incentive fees but has increased at an annual rate of 26 percent over the long term period driven by growth in both fee related earnings and realized net performance fees. Moving to the balance sheet on slide 14 net accrued carry finished the quarter at six hundred nine million up four percent from the previous quarter driven by underlying valuation increases for the period ended March 31st. As a reminder, our crude carry balance is reported on a one-quarter lag. Our own investment portfolio ended the quarter at $154 million. Unfunded commitments to our investment programs were $95 million as of quarter end. Our pool of performance-eligible capital has grown to over $65 billion, and this capital is widely diversified across multiple vintage years and approximately 190 programs. 78% of our unrealized carry is tied to programs with vintages of 2018 or earlier, which means that these programs are largely out of their investment periods and are in harvest mode. 59% of this unrealized carry is sourced from vehicles, but 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.
Operator
Thank you. Ladies and gentlemen, we will now conduct the question-and-answer session. If you have a question... please press star followed by the number one on your touchtone phone. You will hear a three-tone prompt acknowledging your request. If you would like to cancel your request, please press star two. Please ensure you lift the handset if you're using a speakerphone before pressing any keys. Your first question comes from the line of Ben Budish from Barclays. Your line is now open.
Ben Budish
Hi, good evening, and thanks for taking the question. Scott, I was wondering if you could talk a little bit more about secondaries and I'm just kind of curious. It sounds like there's a lot of opportunity there. I know you have a number of funds in the market right now. Can you kind of remind us, how big is that for you right now? And just kind of based on the momentum or the desire of GPs and LPs to transact, where do you think that can go? How do you see it scaling over the next several years?
Scott Hart
Sure. Thanks, Ben, for the question. And obviously, this is a topic that we've been talking about really over the last number of quarters, not only as it relates to the secondaries opportunity as it exists for us in private equity, but also the expansion of the secondaries opportunity across venture, as well as the real estate infrastructure and private credit asset classes. We haven't disclosed an exact total secondaries AUM number, but certainly within each of the asset classes, it's of increasing importance. When you look at our sort of flagship private equity secondaries fund, the previous vehicle was a $2.1 billion fund. We continue to have the largest venture capital secondaries fund, with the prior fund being approximately $2.6 billion. And as you mentioned, in market with our real estate fund. special situations, secondaries fund as well. So, again, I think an increasingly important part of the business for us, and as I mentioned during the prepared remarks, given our positioning in the market and our relationships with both GPs and LPs, one that we think that we are particularly well positioned to continue to capitalize on, you know, clearly as you think about deal activity in the first half of the year here was down slightly relative to last year. But there's probably still a bit of a disconnect between what's hitting the top of the funnel, which has been quite active, versus what has closed. We've obviously talked for some period of time about the bid-ask spread that exists between buyers and sellers. I think that's closing. I think part of what we've seen is a stabilization in valuations between particularly across the private equity and even to some extent the venture space with valuations stabilizing in really Q4 and Q1 of this year, which will give secondary buyers like ourselves a bit more confidence to transact in this market.
Ben Budish
Great. That's helpful. Maybe one follow-up, sort of a high-level question. You know, it seems like the story maybe six to nine months ago was really around like the denominator effect, LPs, you know, were having trouble just based on kind of the math of what was happening in their portfolios. It sounds like maybe the story has shifted a little bit, somewhat similar, but it's more about they're waiting for capital to be returned. But just kind of wondering from your seat, since you sit in the middle of so many GPs and LPs, to what extent with the sort of rise in public markets over the last many months, is the denominator effect still an issue, or are investors still sort of waiting for capital to be returned, or does it take a little bit more time to get confidence? What are your kind of thoughts there?
Scott Hart
Yeah. No, it's a good question. It's certainly the rise in the public markets during the first half of this year takes some of the pressure off. But we've also talked in the past about the fact that it actually wasn't just the denominator, but also the numerator that was contributing to LPs being over-allocated. And the rapid investment pace over the last several years, the fact that private market valuations have held up reasonably well, particularly compared to the public markets, and then a slowdown in realization activity has really starting in the second half of 2022. And so those issues impacting the numerator all still exist. I would say that the recovery in the public markets takes some of the pressure off. It doesn't mean that LPs are completely out of the woods. I think the term that we use in our prepared remarks is we think they're being patient. And part of the reason for that is in the same way that when the public markets declined, we didn't see an immediate resetting of budgets or LPs slamming on the brakes. Well, when that goes in reverse and the public markets recover, again, don't immediately see LPs resetting their budgets. But once again, I would just say it takes a bit of the pressure off.
Ben Budish
Got it. Very helpful. Well, thanks so much for taking the question.
Operator
Your next question comes from the line of Ken Burthington from JP Morgan. Your line is now open.
Ken Burthington
Hi. Good afternoon. Thanks for taking the questions. First for Scott, in the prepared remarks, you talked about S-prime, and I'm sure I screwed this up, so I'm going to pare it back and tell me where I'm wrong, and I'll follow up the question. Now has daily NAV, has registered, I think you said NSCC, with a ticker. It doesn't need subscription documents to be signed. So one, correct me if I'm wrong, but what I'm really after is what are the end implications here for, I guess, one, end investors, and then two, what are the implications here for broadening RIA distribution as well as a build out of sort of regional and wire house distribution? It seems like this could be a big deal. Maybe it's not, but help flesh this out for me.
Scott Hart
Sure. Thanks, Ken. And while I commented on during the prepared remarks, I'm actually going to ask Jason to comment in a bit more detail on your specific question there.
Ken
Sure. Thanks, Ken and Scott. So we think it's a big deal is the short answer. From an ease-of-use perspective, an accredited investor using an RIA or IBD that's using a custodian that's approved the ticker literally buys it on the screen just like any mutual fund. paperwork not required from our perspective. So the ease of use is profound, and for RIAs that have discretionary accounts with their clients, it allows them to kind of buy down, you know, buy into the fund down their entire book in a matter of minutes instead of having subscription agreements filled out by each individual client to go through it all. So the ease of use, and if we're going to is really a lot improved. And when we start to think about what our goal was with S prime, it was, you know, to provide that single ticket access for the accredited investor and to overcome the hurdles that that investor has had in accessing the private markets that could have been managing capital calls that could have been dealing with tax compliance and schedule K ones. Uh, but importantly, uh, It's not easy to fill out a 40- or 50-page subscription agreement either, and now we've been able to eliminate that for a wide swath of U.S.-based investors.
Ken Burthington
Okay. And then, again, I'm sure I messed this up before. What is the timing? I think you said the daily NAV is already live. Are we already, like right now today, to the point where no subscription documents, so it's kind of off to the races? Yes. or is this something that kind of works its way in over the next six months? What is the timing element here?
Ken
Yeah, so it went live middle of last month. And the way it works is Wherever you are custodying that custodian has to approve the process for using the ticker. So we're working our way through, you know, as you know, there are a lot of custodians out there working our way through the custodians to to get them on side. We've got a couple on side so far and continuing that effort. And then separate and apart from those who use a third-party custodian, there are those groups that self-custody, and we'll have to see what the take-up is there. So we don't expect that the subscription agreement is going away anytime soon, and there will be certain groups that will always want to use a subscription agreement for their clients to ensure belts and suspenders from a suitability perspective. But for a large swath, we do expect the ticker to be the... method of choice for accessing the fund.
Ken Burthington
And one last one. You talked about the RIAs. It kind of feels like that's where this may be more helpful. How does this impact sort of the regionals in the wirehouses and your build-up there? I assume it's sort of helpful for one, helpful for all, but maybe it's better on one side than the other, or maybe the wirehouses want subscriptions. Any difference between sort of distribution channels?
Ken
Yeah, I think there is a difference between the distribution channels. The RIAs will definitely use this at a higher percentage. then the IBDs are the wires. We think some of the IBDs will be using this, but probably not all. Some may also use an abbreviated documentation process, so there's some benefit, but not the complete benefit. And for the wires, we expect that'll be the last holdout in terms of wanting to use the ticker instead of sticking with the traditional sub-doc process from a suitability perspective. Okay. So I kind of think this is like equalizing the playing field a bit in terms of the scale of capital amongst the players a bit.
Scott
Great. Thank you very much.
Operator
Your next question comes from the line of Adam Beatty from UBS. Your line is now open.
Adam Beatty
Thank you and good afternoon. I just want to ask about the level of undeployed capital, which is nicely ticking up there. Great to have that sort of backlog for deployment. Looks like deployment may have, of that in particular backlog, may have edged down a little bit in the quarter. So just wondering what you're seeing in the deployment environment and whether there's something about the current undeployed capital in terms of fund mix and profile that would either shorten or lengthen the deployment period. Thanks.
Scott Hart
Sure. Thanks, Adam. So, you know, we've always talked about it is undeployed fearing capital likely to be deployed over a three to five year type of period. I think that still remains the case. And I think that type of time range gives us enough flexibility given the deal flow that we have to deploy responsibly and invest responsibly throughout market cycles here. I think you are right to pick up on the fact that deployment has been slowed a bit, not only in this quarter, but over the last few quarters here. I don't think that'll come as any major surprise given what has gone on in the marketplace more broadly and to some extent comes down to which of our accounts pay-on-invested capital, I would say, while we haven't broken that down precisely, it's a bit more heavily weighted towards some of our co-investment strategies. And, you know, much like the comment I made earlier about secondaries, where there's probably a bit of a difference between what's hitting the top of the funnel versus what is actually closing, we have seen a nice uptick in activity, hitting the top of the funnel, certainly the second quarter of this year up pretty significantly year over year. And I think that's going to be a driver of deployment and investment pace starting to pick up. So as we've talked about on the last few calls, we continue to be patient but are cautiously optimistic given the pickup and deal flow that we've seen of late.
Adam Beatty
Yeah, that makes a lot of sense. Thanks for the detail, Scott. And then just turning back to the wealth channel, really interesting on the daily now for S Prime and many of the features that come along with that. So I think that's really something of a breakthrough there. One of the other components, as you know, of effective retail distribution is the education process. And, you know, which breaks into kind of a conceptual understanding of the product. but also forms of real-time data or monitoring availability. And obviously, DailyNav will fill in one of those major gaps there. But just wondering, given the wealth of information resources that StepStone has, how you might be deploying or considering deploying that information advantage into the retail channel? Thanks.
Ken
Yeah, thanks. This is Jason. you know, in addition to the transparency that's available on the portfolio and the daily ticker, just to be clear, that's an S prime development, not a spring development currently. But in addition to that, you're right. We try to strategically partner with each of the wealth management firms that we work with and try to meet them where they are. They've got differing needs in terms of access to educational materials like you know, the research papers we put out, but also may seek to have a more fulsome access to our data and technology solutions. And we try to partner with them in that way as well if it's helpful. So I think, you know, unlike like a monoline manager, we do have not only a lot of data and technology solutions available, but perspectives on the market that we can be helpful in things that they're doing away from us as well. And I think that's resonated quite well.
Scott Hart
The only thing I would add to that is I think this approach towards education and knowledge transfer is not a far stretch for us given the relationships that we have with our clients, even on the institutional side where we've always had very close partnerships, not the types of relationships where we're just checking in once a year at an annual meeting. We're in very close communication with our clients. hosting training sessions. We actually launched earlier this year our first on the private equity side, Stepstone Academy session for some of our institutional clients. And so now looking for ways to roll that out more broadly to the private wealth space as well.
Adam Beatty
Yeah, so there's potential crossover there.
Scott
That's great. Thank you, guys.
Operator
Your next question comes from the line of Alex Blostein from Goldman Sachs. Your line is now open.
Alex Blostein
Hey guys, good evening. Just building maybe on a couple of more questions around the wealth channel. I think you mentioned that gross sales in July We're running at about $100 million, which is a nice pickup from what you guys have been doing. So if you spend a minute on what the source of that sort of incremental upside has been recently is that addition of new platforms, new advisors, or higher just same-store sales from the kind of existing books that you're seeing. And as you think about the expansion plans into other platforms with, obviously, again, this new structure, would that also entail the ability for direct sales? distribution, or would clients still need to buy through the financial advisors? So, in other words, would folks still be able to buy in, you know, Schwab and Fidelity, or it still has to be really intimidated? Thanks.
Ken
Thanks, Alex. So, a couple things. In terms of where we saw this post-period flows, what drove the uptick, I think, We saw the ticker come into play for sure on S-prime, and we saw, therefore, deeper into the book at mostly the RIA channel. But we also saw some increased flows from the wires and IVDs that we've been on the platform, but it's been kind of in that ramp-up phase, and those things are starting to hit stride. So it was a pretty broad-based tick-up, both across S-prime and Supreme. So really happy to see that. And then in terms of, you know, what could the ticker mean in terms of more direct access, we agree. We do think that this will allow folks to buy into the fund on a variety of different channels, including things like self-directed IRAs in the, you know, the kind of channels you mentioned, as well as other kind of direct-to-consumer platforms.
Alex Blostein
Got it. Great. And then just in terms of the structure of the wealth channel, if I recall correctly, maybe a quarter or two ago, you guys have restructured it where the team gets some of the economics. So maybe just a quick reminder of, you know, in terms of the incremental management fees that will be coming through this channel, what ultimately drops down to the bottom line to the step zone shareholders?
Ken
So if you take the top line management fee, there's roughly a 50-50 ratio. split in those fees with 50% going to StepStone Group and then 50% funding the expenses of the private wealth team. Got it.
Scott
Great. Okay. Thank you.
Operator
Your next question comes from the line of Michael Cipris from Morgan Stanley. Your line is now open.
Michael Cipris
Hey, good evening. I wanted to ask about private credit. It's getting a lot of attention in the marketplace, given some of the challenges in the banking sector. I was hoping you'd talk about your private credit franchise, how that contributed in the quarter, and hopefully you could talk about some of the initiatives you have in place to accelerate growth, and what are some of the steps you might be able to take over the next 12 months?
Scott Hart
Sure. Thanks, Mike, for the question. I think private debt has been a meaningful contributor, not only in the quarter, but really over the last 12 months and beyond, one of the faster-growing asset classes for us. Look, when you talk to our private debt team and platform, one of the things you hear us talk quite a bit about is the fact that we view this as an all-weather situation. strategy, particularly when you think about the core allocation to direct lending. And what happens from time to time is there are opportunities either to diversify your sourcing channels and or enhance your returns. I think one of the things that has happened on the back of the regional banking crisis is really an opportunity to do a couple of those things. One, to diversify sourcing, whether by looking not only at corporate credits, but also real estate and infrastructure debt, and also expect there will be an opportunity to enhance returns and looking at more opportunistic and potentially distressed opportunities down the road here. But where a lot of the attention, you know, has really focused has also just been on this core direct lending allocation as well and just given the rise in base rates, you know, seeing sort of low double-digit gross asset yields. And, you know, I think – As the asset class itself has matured and has been proven a bit more battle-tested, and we've seen sort of the strong downside protection and performance through whether it was COVID, the GFC, or the more recent sort of tech-driven downturn over the last decade, 12, 24 months here, I think that has really garnered a lot of attention amongst LPs. And so it's really opened up the eyes of our LPs and our clients as to the attractiveness and the attractive risk reward of the strategy. In terms of additional steps that need to be taken, I think we've built out the platform. It's a sizable team and sizable business today. But I think some of the real opportunities are going to be capitalizing on the growing co-invest in secondaries opportunity. That's been an area that even with you know, the decline in volumes that we've seen over the last 12 months driven by private equity deal activity, there have been meaningful co-investment opportunities and secondaries, either in the form of buying a portfolio of loans from, you know, from GPs or banks or more traditional LP secondaries. And so I think those are going to be some of the growth avenues going forward here.
Michael Cipris
Great. And then just a follow-up question on retail. I think you mentioned $1.7 billion so far across two or three funds. Can you just update us on where each of those funds are in their phase of getting on the distribution platforms? How many are each on? How many wires are each of them on? And where do you see that or expect that to be in 12 months?
Ken
Sure. Thanks, Mike. The S Prime's on a bit over 150 RIA platforms, 10-plus IBDs, and one wire. Spring is on 50-plus RIAs at this point and a handful of IBDs. The IBDs actually are adopting a bit earlier in spring than what we saw in S prime, which is what we would generally expect to see with a second fund family after a first fund family. So that's been positive. Conversations on additional wires for S prime and an initial wire for spring are continuing and trending very positive. So, look, building out that syndicate for each fund family, not just here in the U.S., by the way, but we can't forget that fourth pillar, which is very important, which is the non-U.S. distribution is well underway. And we've got a nice pipeline outside the U.S. as well with a number of different wealth platforms.
Michael Cipris
Great. Thanks for that. If I could just take one final one in here, just on the daily NAV. Can you just talk a little bit about the hurdles that you had to tackle to bring that sort of innovation to the marketplace, how you thought about some of the pros and cons there, just in terms of perhaps more volatility or less of a smoother ride for the customer, and sort of why now on that versus when you had brought some of these products to the marketplace a couple years ago?
Ken
Sure. Scott mentioned the tremendous amount of data flowing through the platform. We think that is one of the initial linchpins in order to be able to deliver on a solution like this. The second is just a tremendous team that we've got in our data analytics team. and data science team that were able to come up with the modeling around all of this. And then, finally, to implement the technology across our homegrown monitoring and reporting software, SPI reporting, and integrating that into our system and our process for investing is really, you know, the last piece of how to actually be able to implement all of this. So the hurdles are high, I think, for groups to be able to deliver on something like this in a meaningful way. It took a lot of legwork with, you know, all of our vendors and like the auditors, the administrators, et cetera, to get everybody on side with all this. And in terms of the user experience, so far the feedback's been fantastic from the channels. In terms of the why now, it's just taken a long time to get to this point.
Scott
It's not easy. Super. Thank you.
Operator
Your next question comes from the line of John Dunn from Every Quarter ISI. Your line is now open.
John Dunn
Hi, guys, and thank you. You talked about half of gross inflows coming from the U.S. Can you kind of remind us how that compares to past quarters? Was there any kind of idiosyncratic stuff in there, and then maybe the strongest geographies overseas?
Scott Hart
Sure. I mean, just as it relates to the comparison to prior quarters, we haven't always broken out the exact geographic breakdown. But when you look at the overall business and the breakdown of our management and advisory fees, that has typically been in the roughly 70% outside of the U.S., and the remainder in the U.S. And so you can get the sense that is an above average contribution coming from North America. And look, that was driven by a combination of things, one being a number of separate accounts that we closed during the quarter. And as you know, the timing of closing of sizable separate accounts can vary from quarter to quarter. Happen to have a few that closed during the quarter, as well as some of the contributions on our various different commingled funds that had closings during the quarter. I would say from a geographic standpoint beyond that, you know, fairly balanced across other geographies. I'm not sure there's a single geography that we would highlight outside of the U.S. Maybe more broadly, I mean, Europe would have been the most significant contributor, but without getting more specific than that. would probably leave it there.
John Dunn
Gotcha. And maybe just to touch on real estate, can you talk about where you think we are as far as demand for your real estate strategies? Where are you seeing the most and the least demand?
Scott Hart
Yeah, well, look, I think the good news is where we're seeing the most demand is for our flagship real estate special situation secondaries strategy. Jeff Giller, our head of real estate, spent quite a bit of time talking about that strategy during our investor day just a couple of months ago. That is a strategy that is in demand and that we think is very well positioned for the coming investment environment, has not been activated yet. yet as deal volumes are still somewhat subdued today, and as Jeff talked about during our investor day, think that it's the coming wave of refinancing activity that will ultimately catalyze the investment opportunity for us there today. So that's, I'd say, the area that we're seeing the most significant demand on the real estate side.
Scott
Thanks very much. There are no further questions at this time.
Operator
I will now hand over to Scott Hart. Please continue.
Scott Hart
Great. Well, thanks, everyone, for your time and attention today. We look forward to updating you in future quarters. Thanks very much.
Operator
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.
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