| Summary of Significant Accounting Policies (Policies) | 9 Months Ended | 12 Months Ended |
| Dec. 31, 2020 | Mar. 31, 2020 |
| Basis of Presentation | Basis of Presentation
The accompanying unaudited condensed consolidated financial
statements are prepared in accordance with accounting principles
generally accepted in the United States (“GAAP”) for
interim financial information. Management believes it has made all
necessary adjustments (consisting of only normal recurring items)
such that the condensed consolidated financial statements are
presented fairly and that estimates made in preparing the condensed
consolidated financial statements are reasonable and prudent. The
operating results presented for interim periods are not necessarily
indicative of the results that may be expected for any other
interim period or for the entire year. The condensed consolidated
financial statements include the accounts of the Company, its
wholly-owned or majority-owned subsidiaries and entities in which
the Company is deemed to have a direct or indirect controlling
financial interest based on either a variable interest model or
voting interest model. All intercompany balances and transactions
have been eliminated in consolidation. These unaudited condensed
consolidated financial statements should be read in conjunction
with the audited consolidated financial statements of the Company
for the year ended March 31, 2020 included in the
Company’s prospectus dated September 15, 2020, filed
with the U.S. Securities and Exchange Commission
(“SEC”) on September 16, 2020.
Certain of the StepStone Funds are investment companies that follow
specialized accounting rules under GAAP and reflect their
investments at estimated fair value. Accordingly, the carrying
value of the Company’s equity method investments in such
entities retains the specialized accounting treatment. | Basis of Presentation
The accompanying financial statements of the Company have been
prepared in accordance with accounting principles generally
accepted in the United States of America (“GAAP”).
The initial costs to incorporate the Company have been incurred by
StepStone Group LP. |
| Reclassifications | Reclassifications
Certain prior year amounts have been reclassified to conform to the
current period presentation. Amounts relating to deferred tax
assets that were previously reported within other assets and
receivables have been presented separately in the condensed
consolidated balance sheets as of March 31, 2020. Amounts
relating to foreign currency translation gains and losses that were
previously reported within general, administrative and other
expenses have been presented within other income (loss) in the
condensed consolidated statements of income. | |
| Consolidation | Consolidation
The Company consolidates all entities that it controls through a
majority voting interest or as the primary beneficiary of a
variable interest entity (“VIE”). Under the VIE model,
management first assesses whether the Company has a variable
interest in an entity. In evaluating whether the Company holds a
variable interest, fees received as a decision maker or in exchange
for services (including management fees, incentive fees and carried
interest allocations) that are customary and commensurate with the
level of services provided, and where the Company does not hold
other economic interests in the entity that would absorb more than
an insignificant amount of the expected losses or returns of the
entity, are not considered variable interests. If the Company has a
variable interest in an entity, management further assesses whether
that entity is a VIE, and if so, whether the Company is the primary
beneficiary under the VIE model. Entities that do not qualify as
VIEs are assessed for consolidation under the voting interest
model. The consolidation analysis can generally be performed
qualitatively; however, in certain situations a quantitative
analysis may also be performed. Investments and redemptions (either
by the Company, affiliates of the Company or third parties) or
amendments to the governing documents of the respective StepStone
Funds that are VIEs could affect the entity’s status as a VIE
or the determination of the primary beneficiary.
Under the VIE model, an entity is deemed to be the primary
beneficiary of a VIE if it holds a controlling financial interest.
A controlling financial interest is defined as (a) the power
to direct the activities of a VIE that most significantly affect
the entity’s economic performance and (b) the obligation
to absorb losses of the entity or the right to receive benefits
from the entity that could potentially be significant to the VIE.
Management determines whether the Company is the primary
beneficiary of a VIE at the time it becomes involved with a VIE and
reconsiders that conclusion at each reporting date. When assessing
whether the Company is the primary beneficiary of a VIE, management
evaluates whether the Company’s involvement, through holding
interests directly or indirectly in an entity or contractually
through other variable interests, would give the Company a
controlling financial interest. This analysis includes an
evaluation of the Company’s control rights, as well as the
economic interests that the Company holds in the VIE, including
indirectly through related parties.
The Company provides investment advisory services to the StepStone
Funds, which have third-party clients. These funds are investment
companies and are typically organized as limited partnerships or
limited liability companies for which the Company, through its
operating subsidiaries, acts as the general partner or managing
member. A limited partnership or similar entity is a VIE if the
unaffiliated limited partners or members do not have substantive
rights to terminate or remove the general partner or substantive
rights to participate. Certain StepStone Funds are VIEs because
they have not granted unaffiliated limited partners or members
substantive rights to terminate or remove the general partner or
substantive rights to participate. The Company does not consolidate
these StepStone Funds because it is not the primary beneficiary of
those funds, primarily because its fee arrangements are considered
customary and commensurate and thus not deemed to be variable
interests, and it does not hold any other interests in those funds
that are considered more than insignificant.
The Company has determined that certain of its operating
subsidiaries, StepStone Group Real Assets LP (“SRA”),
StepStone Group Real Estate LP (“SRE”) and Swiss
Capital Alternative Investments AG (“Swiss Capital”),
are VIEs, and that the Company is the primary beneficiary of each
entity because it has a controlling financial interest in each
entity; accordingly, the Company consolidates these entities. The
assets and liabilities of the consolidated VIEs are presented gross
in the condensed consolidated balance sheets. The assets of the
consolidated VIEs may only be used to settle obligations of the
consolidated VIEs. See note 4 for more information on both
consolidated and unconsolidated VIEs. | |
| Non-Controlling Interests | Non-Controlling
Non-controlling Non-controlling non-controlling
Non-controlling Non-controlling
Non-controlling Non-controlling non-controlling | |
| Accounting for Differing Fiscal Periods | Accounting for Differing Fiscal Periods
The StepStone Funds primarily have a fiscal year end as of December
31. The Company accounts for its investments in the StepStone Funds
on a three-month lag due to the timing of receipt of financial
information from the investments held by the StepStone Funds. The
StepStone Funds primarily invest in private markets funds that
generally require at least 90 days following the calendar year end
to provide audited financial statements. As a result, the Company
uses the December 31 audited financial statements of the
StepStone Funds, which reflect the underlying private markets funds
as of December 31, to record its investments (including any
carried interest allocated by those investments) for its fiscal
year-end
The Company does not account for management and advisory fees or
incentive fees on a three-month lag.
To the extent that management becomes aware of any material events
that affect the StepStone Funds during the three-month lag period,
the effect of the events would be disclosed in the notes to the
condensed consolidated financial statements.
In March 2020, the World Health Organization declared the outbreak
of the novel coronavirus (“COVID-19”) COVID-19, | |
| Fair Value Measurements | Fair Value Measurements
GAAP establishes a hierarchical disclosure framework, which
prioritizes and ranks the level of market price observability used
in measuring financial instruments at fair value. Market price
observability is affected by a number of factors, including the
type of financial instrument, the characteristics specific to the
financial instrument and the state of the marketplace –
including the existence and transparency of transactions between
market participants. Financial instruments with readily available
quoted prices in active markets generally will have a higher degree
of market price observability and therefore a lesser degree of
judgment is used in measuring their fair value.
Financial instruments measured and reported at fair value are
classified and disclosed based on the observability of inputs used
in the determination of their fair values, as follows:
•
Level I – Pricing inputs are unadjusted, quoted
prices in active markets for identical assets or liabilities as of
the measurement date.
•
Level II – Pricing inputs are other than quoted
prices in active markets, which are either directly or indirectly
observable as of the measurement date, and fair value is determined
through the use of models or other valuation methodologies. The
types of financial instruments classified in this category include
less liquid securities traded in active markets and securities
traded in other than active markets.
•
Level III – Pricing inputs are unobservable for
the financial instruments and include situations where there is
little, if any, market activity for the financial instrument. The
inputs into the determination of fair value require significant
management judgment or estimation.
In certain cases, the inputs used to measure fair value may fall
into different levels of the fair value hierarchy. In such cases,
the level in the fair value hierarchy within which the fair value
measurement in its entirety falls has been determined based on the
lowest level input that is significant to the fair value
measurement in its entirety. The Company’s assessment of the
significance of a particular input to the fair value measurement in
its entirety requires judgment and consideration of factors
specific to the financial instrument.
The availability of observable inputs can vary depending on the
financial asset or liability and is affected by a wide variety of
factors including, for example, the type of instrument, whether the
instrument has recently been issued, whether the instrument is
traded on an active exchange or in the secondary market, and
current market conditions. To the extent that valuation is based on
models or inputs that are less observable or unobservable in the
market, the determination of fair value requires more judgment.
Accordingly, the degree of judgment exercised in determining fair
value is greatest for financial instruments categorized in Level
III. The variability and availability of the observable inputs
affected by the factors described above may result in transfers
between Levels I, II and III.
The Company considers its cash, cash equivalents, restricted cash,
fees and accounts receivable, accounts payable, investments and
contingent consideration balances to be financial instruments. The
carrying amounts of cash, cash equivalents, restricted cash, fees
and accounts receivable and accounts payable equal or approximate
their fair values due to their nature and/or the relatively short
period over which they are held. See note 6 for additional details
regarding the fair value of the Company’s contingent
consideration balances. | |
| Restricted Cash | Restricted Cash
Restricted cash consists of cash that the Company is contractually
obligated to maintain to secure its letters of credit used
primarily related to its office facilities and other
obligations. | |
| Investments | Investments
Investments primarily include the Company’s ownership
interests in the StepStone Funds, as general partner or managing
member of such funds. The Company accounts for all investments in
which it has or is otherwise presumed to have significant
influence, but not control, including the StepStone Funds, using
the equity method of accounting. The carrying value of these equity
method investments is determined based on amounts invested by the
Company, adjusted for the Company’s share in the earnings or
losses of each investee, after consideration of contractual
arrangements that govern allocations of income or loss (including
carried interest allocations), less distributions received.
Investments include the Company’s cumulative accrued carried
interest allocations from the StepStone Funds, which primarily
represent performance-based capital allocations, assuming the
StepStone Funds were liquidated as of each reporting date in
accordance with the funds’ governing documents. The Company
evaluates its equity method investments for impairment whenever
events or changes in circumstances indicate that the carrying
amounts of such investments may not be recoverable. | |
| Revenues | Revenues
The Company recognizes revenue in accordance with Accounting
Standards Codification Topic 606 (“ASC 606”),
Revenue from Contracts with Customers
Management and Advisory Fees, Net
The Company earns management fees for services provided to its
SMAs, focused commingled funds and distribution management clients.
The Company earns advisory fees for services provided to advisory
clients where the Company does not have discretion over investment
decisions. The Company considers its performance obligations in its
customer contracts from which it earns management and advisory fees
to be one or more of the following, based on the services promised:
asset management services, advisory services and/or the arrangement
of administrative services.
The Company recognizes revenues from asset management services and
advisory services when control of the promised services is
transferred to customers, in an amount that reflects the
consideration that the Company expects to receive in exchange for
those services. SMAs are generally contractual arrangements
involving an investment management agreement between the Company
and a single client, and are typically structured as a partnership
or limited liability company for which a subsidiary of SSG serves
as the general partner or managing member. Focused commingled funds
are structured as limited partnerships or limited liability
companies with multiple clients, for which a subsidiary of the
Company serves as the general partner or managing member. The
Company determined that the individual client or single limited
partner or member is the customer with respect to SMAs and advisory
clients, while the investment fund is generally considered to be
the customer for arrangements with focused commingled funds.
When asset management services and the arrangement of
administrative services are the performance obligations promised in
a contract, the Company satisfies these performance obligations
over time because the customer simultaneously receives and consumes
the benefits of the services as they are performed. The transaction
price is the amount of consideration to which the Company expects
to be entitled in exchange for transferring the promised services
to the customer. Management fees earned from these contracts where
the Company has discretion over investment decisions are generally
calculated based on a percentage of unaffiliated committed capital
or net invested capital, and these amounts are typically billed
quarterly. For certain investment funds, management fees are
initially based on committed capital during the investment period
and on net invested capital through the remainder of the
fund’s term. In addition, the management fee rate charged may
also be reduced for certain investment funds depending on the
contractual arrangement. The management fee basis is subject to
factors outside of the Company’s control. Therefore,
estimates of future period management fees are not included in the
transaction price because those estimates would be considered
constrained. Advisory fees from contracts where the Company does
not have discretion over investment decisions are generally based
on fixed amounts and typically billed quarterly.
Management fees generally exclude reimbursements for expenses paid
by the Company on behalf of its customers, including amounts
related to certain professional fees and other fund administrative
expenses pursuant to the fund’s governing documents. For
professional and administrative services that the Company arranges
to be performed by third parties on behalf of investment funds,
management has concluded that the nature of its promise is to
arrange for the services to be provided and, accordingly, the
Company does not control the services provided by the third parties
before they are transferred to the customer. Therefore, the Company
is acting as an agent, and the reimbursements for these
professional fees paid on behalf of the investment funds are
generally presented on a net basis.
The Company and certain investment funds that it manages have
distribution and service agreements with third-party financial
institutions, whereby the Company pays a portion of the fees it
receives to such institutions for ongoing distribution and
servicing of customer accounts. Management has concluded that the
Company does not act as principal for the third-party services, as
the Company does not control the services provided by the third
parties before they are transferred to the customer. Therefore, the
Company is acting as an agent, and the management fees are recorded
net of these service fees.
The Company may incur certain costs in connection with satisfying
its performance obligations for investment management services
– primarily employee travel costs, organization costs and
syndication costs – for which it receives reimbursements from
its customers. For reimbursable travel costs, organization costs
and syndication costs, the Company concluded it controls the
services provided by its employees and other parties and,
therefore, is acting as principal. Accordingly, the Company records
the reimbursement for these costs incurred on a gross basis –
that is, as revenue in management and advisory fees, net and
expense in general, administrative and other expenses in the
condensed consolidated statements of income. For reimbursable costs
incurred in connection with satisfying its performance obligations
for administration services, the Company concluded it does not
control the services provided by its employees and other parties
and, therefore, is acting as agent. Accordingly, the Company
records the reimbursement for these costs incurred on a net
basis.
Performance Fees
The Company earns two types of performance fee revenues: incentive
fees and carried interest allocations, as described below.
Incentive fees
The Company recognizes incentive fee revenue only when these
amounts are realized and no longer subject to significant reversal,
which is typically at the end of a defined performance period
and/or upon expiration of the associated clawback period (i.e.,
crystallization). However, clawback terms for incentive fees
received prior to crystallization only require the return of
amounts on a net of tax basis. Accordingly, the tax-related
Carried interest allocations
The Company recognizes revenue attributable to carried interest
allocations from a fund based on the amount that would be due to
the Company pursuant to the fund’s governing documents,
assuming the fund was liquidated based on the current fair value of
its underlying investments as of that date. Accordingly, the amount
recognized as carried interest allocation revenue reflects the
Company’s share of the gains and losses of the associated
fund’s underlying investments measured at their then-fair
values, relative to the fair values as of the end of the prior
period. The Company records the amount of carried interest
allocated to the Company as of each period end as accrued carried
interest allocations receivable, which is included as a component
of investments in the condensed consolidated balance sheets.
Carried interest is realized when an underlying investment is
profitably disposed of and the fund’s cumulative returns are
in excess of the specific hurdle rates, as defined in the
applicable governing documents. Carried interest is subject to
reversal to the extent that the amount received to date exceeds the
amount due to the Company based on cumulative results. As such, a
liability is accrued for potential clawback obligations if amounts
previously distributed to the Company would require repayment to a
fund if such fund were to be liquidated based on the current fair
value of their underlying investments as of the reporting date.
Actual repayment obligations generally do not become realized until
the end of a fund’s life. As of December 31, 2020 and
March 31, 2020, no material amounts for potential clawback
obligations had been accrued. | |
| Equity-Based Compensation | Equity-Based Compensation
The Company accounts for grants of equity-based awards, including
restricted stock units (“RSUs”), at fair value as of
the grant date. The Company recognizes non-cash | |
| Income Taxes | Income Taxes
SSG is a corporation for U.S. federal income tax purposes and
therefore is subject to U.S. federal and state income taxes on its
share of taxable income generated by the Partnership. The
Partnership is treated as a pass-through entity for U.S. federal
and state income tax purposes. As such, income generated by the
Partnership flows through to its limited partners, including SSG,
and is generally not subject to U.S. federal or state income tax at
the partnership level. The Partnership’s non-U.S. non-U.S. non-U.S.
Taxes are accounted for using the asset and liability method of
accounting. Under this method, deferred tax assets and liabilities
are recognized for the expected future tax consequences of
differences between the carrying amounts of assets and liabilities
and their respective tax bases, using tax rates in effect for the
year in which the differences are expected to reverse. The effect
of a change in tax rates on deferred tax assets and liabilities is
recognized in income in the period when the change is enacted. The
principal items giving rise to temporary differences are certain
basis differences resulting from exchanges of Partnership
units.
Deferred tax assets are reduced by a valuation allowance when it is
more-likely-than-not
The Company is subject to the provisions of ASC Subtopic
740-10, Accounting for
Uncertainty in Income Taxes more-likely-than-not more-likely-than-not | |
| Tax Receivable Agreements | Tax Receivable Agreements
SSG has entered into an Exchanges Tax Receivable Agreement with the
partners of the Partnership as of the date of the IPO and a
Reorganization Tax Receivable Agreement with certain pre-IPO pre-IPO | |
| Accumulated Other Comprehensive Income | Accumulated Other Comprehensive Income
The Company’s accumulated other comprehensive income consists
of foreign currency translation adjustments and unrealized gains
and losses on the defined benefit plan sponsored by one of its
subsidiaries. The components of accumulated other comprehensive
income were as follows:
As of
December 31, March 31,
Foreign currency translation adjustments $ 53 $ 502
Unrealized loss on defined benefit plan, net
— (324 )
Accumulated other comprehensive income $ 53 $ 178 | |
| Segments | Segments
The Company operates as one business, a fully-integrated private
markets solution provider. The Company’s chief operating
decision maker, which consists of the Company’s co-chief | |
| Recent Accounting Pronouncements | Recent Accounting Pronouncements
In February 2016, the Financial Accounting Standards Board
(“FASB”) issued Accounting Standards Update
(“ASU”) 2016-02, Leases 2016-02 right-of-use 2016-02 non-public right-of-use
In June 2016, the FASB issued ASU 2016-13, Financial
Instruments – Credit Losses available-for-sale non-public
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740):
Simplifying the Accounting for Income Taxes step-up | |
| StepStone Group LP | | |
| Basis of Presentation | | Basis of Presentation
The accompanying consolidated financial statements are prepared in
accordance with accounting principles
generally accepted in the United States (“GAAP”). The
consolidated financial statements include the accounts of
the Company, its wholly-owned or majority-owned subsidiaries and
entities in which the Company is deemed to have a direct or
indirect controlling financial interest based on either a variable
interest model or voting interest
model. All intercompany balances and transactions have been
eliminated in consolidation.
Certain of the StepStone Funds are investment companies that follow
specialized accounting under GAAP
and reflect their investments at estimated fair value. Accordingly,
the carrying value of the Company’s equity method investments
in such entities retains the specialized accounting. |
| Consolidation | | Consolidation
The Company consolidates all entities that it controls through a
majority voting interest or as the primary beneficiary of a
variable interest entity (“VIE”). Under the VIE model,
management first assesses whether the Company has a variable
interest in an entity. In evaluating whether the Company holds a
variable interest, fees received as a decision maker or in exchange
for services (including management fees, incentive fees and carried
interest allocations) that are customary and commensurate with the
level of services provided, and where the Company does not hold
other economic interests in the entity that would absorb more than
an insignificant amount of the expected losses or returns of the
entity, are not considered variable interests. If the Company has a
variable interest in an entity, management further assesses whether
that entity is a VIE, and if so, whether the Company is the primary
beneficiary under the VIE model. Entities that do not qualify as
VIEs are assessed for consolidation under the voting interest
model. The consolidation analysis can generally be performed
qualitatively; however, in certain situations a quantitative
analysis may also be performed. Investments and redemptions (either
by the Company, affiliates of the Company or third parties) or
amendments to the governing documents of the respective StepStone
Funds that are VIEs could affect the entity’s status as a VIE
or the determination of the primary beneficiary.
Under the VIE model, an entity is deemed to be the primary
beneficiary of a VIE if it holds a controlling
financial interest. A controlling financial interest is defined as
(a) the power to direct the activities of a VIE that most
significantly affect the entity’s economic performance and
(b) the obligation to absorb losses of the entity or the right
to receive benefits from the entity that could potentially be
significant to the VIE. Management determines whether the Company
is the primary beneficiary of a VIE at the time it becomes involved
with a VIE and reconsiders that conclusion at each reporting date.
When assessing whether the Company is the primary beneficiary of a
VIE, management evaluates whether the Company’s involvement,
through holding interests directly or indirectly in an entity or
contractually through other variable interests, would give the
Company a controlling financial interest. This analysis includes an
evaluation of the Company’s control rights, as well as the
economic interests that the Company holds in the VIE, including
indirectly through related parties.
The Company provides investment advisory services to the StepStone
Funds, which have third-party clients. These funds are investment
companies and are typically organized as limited partnerships or
limited liability
companies for which the Company, through its operating
subsidiaries, acts as the general partner or managing member. A
limited partnership or similar entity is a VIE if the unaffiliated
limited partners or members do not have substantive rights to
terminate or remove the general partner or substantive rights to
participate. Certain StepStone Funds are VIEs because they have not
granted unaffiliated limited partners or members substantive rights
to terminate or remove the general partner or substantive rights to
participate. The Company does not consolidate these StepStone Funds
because it is not the primary beneficiary of those funds, primarily
because its fee arrangements are considered customary and
commensurate and thus not deemed to be variable interests, and it
does not hold any other interests in those funds that are
considered more than insignificant.
The Company has determined that certain of its operating
subsidiaries, StepStone Group Real Assets, L.P.
(“SRA”), StepStone Group Real Estate, L.P.
(“SRE”) and Swiss Capital Alternative Investments AG
(“Swiss Capital”), are VIEs, and that the Company is
the primary beneficiary of each entity because it has a controlling
financial interest in each entity; accordingly, the Company
consolidates these entities. The assets and liabilities of the
consolidated VIEs are presented gross in the consolidated balance
sheets. The assets of the consolidated VIEs may only be used to
settle obligations of the consolidated VIEs. See note 4 for more
information on both consolidated and unconsolidated VIEs. |
| Non-Controlling Interests | | Non-Controlling
Non-controlling Non-controlling non-controlling non-controlling Non-controlling |
| Accounting for Differing Fiscal Periods | | Accounting for Differing Fiscal Periods
The StepStone Funds primarily have a fiscal year end as of December
31. The Company accounts for its
investments in the StepStone Funds on a three-month lag due to the
timing of receipt of financial information from the investments
held by the StepStone Funds. The StepStone Funds primarily invest
in private markets funds that generally require at least 90 days
following the calendar year end to provide audited financial
statements. As a result, the Company uses the December 31
audited financial statements of the StepStone Funds, which reflect
the underlying private markets funds as of December 31 to
record its investments (including any carried interest allocated by
those investments). The Company further adjusts the reported
carrying values of its investments in the StepStone Funds for its
share of capital contributions to and distributions from the
StepStone Funds during the three-month lag period.
The Company does not account for management and advisory fees and
incentive fees on a three-month lag.
To the extent that management becomes aware of any material events
that affect the StepStone Funds during the three-month lag period,
the effect of the events would be disclosed in the notes to the
consolidated financial statements.
In March 2020, the World Health Organization declared the outbreak
of the novel coronavirus (COVID-19) |
| Fair Value Measurements | | Fair Value Measurements
GAAP establishes a hierarchical disclosure framework, which
prioritizes and ranks the level of market price observability used
in measuring financial instruments at fair value. Market price
observability is affected by a number of factors, including the
type of financial instrument, the characteristics specific to the
financial instrument and the state of the marketplace –
including the existence and transparency of transactions between
market participants. Financial instruments with readily available
quoted prices in active markets generally will have a higher degree
of market price observability and a lesser degree of judgment used
in measuring fair value.
Financial instruments measured and reported at fair value are
classified and disclosed based on the observability of inputs used
in the determination of their fair values, as follows:
•
Level I – Pricing inputs are unadjusted, quoted
prices in active markets for identical assets or liabilities as of
the measurement date.
•
Level II – Pricing inputs are other than quoted
prices in active markets, which are either directly or indirectly
observable as of the measurement date, and fair value is determined
through the use of models or other valuation methodologies. The
types of financial instruments classified in this category include
less liquid securities traded in active markets and securities
traded in other than active markets.
•
Level III – Pricing inputs are unobservable for
the financial instruments and include situations where there is
little, if any, market activity for the financial instrument. The
inputs into the determination of fair value require significant
management judgment or estimation.
In certain cases, the inputs used to measure fair value may fall
into different levels of the fair value hierarchy. In such cases,
the level in the fair value hierarchy within which the fair value
measurement in its entirety falls has been determined based on the
lowest level input that is significant to the fair value
measurement in its entirety. The Company’s assessment of the
significance of a particular input to the fair value measurement in
its entirety requires judgment and consideration of factors
specific to the financial instrument.
The availability of observable inputs can vary depending on the
financial asset or liability and is affected by a wide variety of
factors including, for example, the type of instrument, whether the
instrument has recently been issued, whether the instrument is
traded on an active exchange or in the secondary market, and
current market conditions. To the extent that valuation is based on
models or inputs that are less observable or unobservable in the
market, the determination of fair value requires more judgment.
Accordingly, the degree of judgment exercised in determining fair
value is greatest for financial instruments categorized in Level
III. The variability and availability of the observable inputs
affected by the factors described above may result in transfers
between Levels I, II, and III.
The Company considers its cash and cash equivalents, marketable
securities, fees and accounts receivable, accounts payable,
investments, term loan and contingent consideration balances to be
financial instruments. The carrying amounts of cash and cash
equivalents, fees and accounts receivable and accounts payable
equal or approximate their fair values due to their nature and/or
the relatively short period over which they are held. Management
has concluded that the carrying value of its term loan approximates
fair value, as the term loan is subject to variable interest rates
that adjust with changes in market rates and market conditions, and
the current interest rate approximates that which would be
available under similar financial arrangements. See note 6 for
additional details regarding the fair value of the Company’s
marketable securities and contingent consideration balances. |
| Investments | | Investments
Investments primarily include the Company’s ownership
interests in the StepStone Funds, as general partner or managing
member of such funds. The Company accounts for all investments in
which it has or is otherwise presumed to have significant
influence, but not control, including the StepStone Funds, using
the equity method of accounting. The carrying value of these equity
method investments is determined based on amounts invested by the
Company, adjusted for the Company’s share in the earnings or
losses of each investee, after consideration of contractual
arrangements that govern allocations of income or loss (including
carried interest allocations), less distributions received.
Investments include the Company’s cumulative accrued carried
interest allocations from the StepStone Funds, which primarily
represent performance-based capital allocations, assuming the
StepStone Funds were liquidated as of each reporting date in
accordance with the funds’ governing documents. The Company
evaluates its equity method investments for impairment whenever
events or changes in circumstances indicate that the carrying
amounts of such investments may not be recoverable. |
| Revenues | | Revenues
The Company recognizes revenue in accordance with Accounting
Standards Codification Topic 606 (“ASC 606”),
Revenue from Contracts with Customers
Management and Advisory Fees, Net
The Company earns management fees for services provided to its
SMAs, focused commingled funds and distribution management clients.
The Company earns advisory fees for services provided to advisory
clients where the Company does not have discretion over investment
decisions. The Company considers its performance obligations in its
customer contracts from which it earns management and advisory fees
to be one or more of the following, based on the services promised:
asset management services, advisory services and/or the arrangement
of administrative services.
The Company recognizes revenues from asset management services and
advisory services when control of the promised services is
transferred to customers, in an amount that reflects the
consideration that the Company expects to receive in exchange for
those services. SMAs are generally contractual arrangements
involving an investment management agreement between StepStone and
a single client. In some cases, an SMA will be structured as a
partnership or limited liability company, for which a subsidiary of
StepStone serves as the general partner or managing member. Focused
commingled funds are structured as limited partnerships or limited
liability companies with multiple clients, for which a subsidiary
of StepStone serves as the general partner or managing member.
StepStone determined that the individual client or single limited
partner or member is the customer with respect to SMAs and advisory
clients, while the investment fund is generally considered to be
the customer for arrangements with focused commingled funds.
When asset management services and the arrangement of
administrative services are the performance obligations promised in
a contract, the Company satisfies these performance obligations
over time because the customer simultaneously receives and consumes
the benefits of the services as they are performed. The transaction
price is the amount of consideration to which the Company expects
to be entitled in exchange for transferring the promised services
to the customer. Management fees earned from these contracts where
the Company has discretion over investment decisions are generally
calculated based on a percentage of unaffiliated committed capital
or net invested capital, and these amounts are typically billed
quarterly. For certain investment funds, management fees are
initially based on committed capital during the investment period
and on net invested capital through the remainder of the
fund’s term. In addition, the management fee rate charged may
also be reduced for certain investment funds depending on the
contractual arrangement. The management fee basis is subject to
factors outside of the Company’s control. Therefore,
estimates of future period management fees are not included in the
transaction price because those estimates would be considered
constrained. Advisory fees from contracts where the Company does
not have discretion over investment decisions are generally based
on fixed amounts and typically billed quarterly.
Management fees generally exclude reimbursements for expenses paid
by the Company on behalf of its customers, including amounts
related to certain professional fees and other fund administrative
expenses pursuant to the fund’s governing documents. For
professional and administrative services that the Company arranges
to be performed by third parties on behalf of investment funds,
management has concluded that the nature of its promise is to
arrange for the services to be provided and, accordingly, the
Company does not control the services provided by the third parties
before they are transferred to the customer. Therefore, the Company
is acting as an agent, and the reimbursements for these
professional fees paid on behalf of the investment funds are
generally presented on a net basis.
The Company and certain investment funds that it manages have
distribution and service agreements with third-party financial
institutions, whereby the Company pays a portion of the advisory
fees it receives to such institutions for ongoing distribution and
servicing of customer accounts. Management has concluded that the
Company does not act as principal for the third-party services, as
the Company does not control the services provided by the third
parties before they are transferred to the customer. Therefore, the
Company is acting as an agent, and the management fees are recorded
net of these service fees.
The Company may incur certain costs in connection with satisfying
its performance obligations for investment management services
– primarily employee travel costs, organization costs and
syndication costs – for which it receives reimbursements from
its customers. For reimbursable travel costs, organization costs
and syndication costs, the Company concluded it controls the
services provided by its employees and other parties and,
therefore, is a principal. Accordingly, the Company records the
reimbursement for these costs incurred on a gross basis –
that is, as revenue in management and advisory fees and expense in
general, administrative and other expenses in the consolidated
statements of income. For reimbursable costs incurred in connection
with satisfying its performance obligations for administration
services, the Company concluded it does not control the services
provided by its employees and other parties and, therefore, is an
agent. Accordingly, the Company records the reimbursement for these
costs incurred on a net basis.
Performance Fees
The Company earns two types of performance fee revenues: incentive
fees and carried interest allocations, as described below.
Incentive fees
The Company recognizes incentive fee revenue only when these
amounts are realized and no longer subject to significant reversal,
which is typically at the end of a defined performance period
and/or upon expiration of the associated clawback period (i.e.,
crystallization). However, clawback terms for incentive fees
received prior to crystallization only require the return of
amounts on a net of tax basis. Accordingly, the tax-related
Carried interest allocations
The Company recognizes revenue attributable to carried interest
allocations from a fund based on the amount that would be due to
the Company pursuant to the fund’s governing documents,
assuming the fund was liquidated based on the current fair value of
its underlying investments as of that date. Accordingly, the amount
recognized as carried interest allocation revenue reflects the
Company’s share of the gains and losses of the associated
fund’s underlying investments measured at their then-fair
values, relative to the fair values as of the end of the prior
period. The Company records the amount of carried interest
allocated to the Company as of each period end as accrued carried
interest allocations receivable, which is included as a component
of investments in the consolidated balance sheets.
Carried interest is realized when an underlying investment is
profitably disposed of and the fund’s cumulative returns are
in excess of the specific hurdle rates, as defined in the
applicable governing documents. Carried interest is subject to
reversal to the extent that the amount received to date exceeds the
amount due to the Company based on cumulative results. As such, a
liability is accrued for the potential clawback obligations if
amounts previously distributed to the Company would require
repayment to a fund if such fund were to be liquidated based on the
current fair value of their underlying investments as of the
reporting date. Actual repayment obligations generally do not
become realized until the end of a fund’s life. As of
March 31, 2020 and 2019, no material amounts for potential
clawback obligations had been accrued. |
| Income Taxes | | Income Taxes
For U.S. federal and state income tax purposes, the Company’s
limited partners are individually liable for taxes based on their
proportionate share of the Company’s income and loss.
Accordingly, the Company bears no liability for U.S. federal or
state income taxes.
The provision for income taxes in the accompanying consolidated
statements of income consists of local and foreign income taxes.
See note 11 for more information.
Taxes are accounted for using the asset and liability method of
accounting. Under this method, deferred tax assets and liabilities
are recognized for the expected future tax consequences of
differences between the carrying amounts of assets and liabilities
and their respective tax bases, using tax rates in effect for the
year in which the differences are expected to reverse. The effect
of a change in tax rates on deferred tax assets and liabilities is
recognized in income in the period when the change is enacted.
Deferred tax assets are reduced by a valuation allowance when it is
more-likely-than-not
The Company is subject to the provisions of ASC Subtopic
740-10, Accounting for
Uncertainty in Income Taxes tax-return |
| Accumulated Other Comprehensive Income | | Accumulated Other Comprehensive Income
The Company’s accumulated other comprehensive income consists
of foreign currency translation adjustments and unrealized gains
and losses on the defined benefit plan sponsored by one of its
subsidiaries. The components of accumulated other comprehensive
income were as follows:
As of March 31,
2020 2019
Foreign currency translation adjustments $ 502 $ 432
Unrealized loss on defined benefit plan, net (324 ) (149 )
Accumulated other comprehensive income $ 178 $ 283 |
| Segments | | Segments
The Company operates as one business, a fully-integrated private
markets solution provider. The Company’s chief operating
decision maker, which consists of the Company’s co-chief |
| Recent Accounting Pronouncements | | Recent Accounting Pronouncements
In January 2016, the Financial Accounting Standards Board
(“FASB”) issued ASU 2016-01, Financial
Instruments—Overall (Subtopic 825-10): available-for-sale 2016-01
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) 2016-02
recognize right-of-use
information about leasing arrangements to enable a user of the
financial statements to assess the amount, timing and uncertainty
of cash flows arising from leases. For public business entities,
ASU 2016-02 non-public right-of-use
In June 2016, the FASB issued ASU 2016-13, Financial
Instruments—Credit Losses available-for-sale non-public
In January 2017, the FASB issued ASU 2017-01, Business Combinations
(Topic 805): Clarifying the Definition of a Business 2017-01 2017-01
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement
(Topic 820)—Disclosure Framework—Changes to the
Disclosure Requirements for Fair Value Measurement 2018-13 |
| Use of Estimates | | Use of Estimates
The preparation of consolidated financial statements in conformity
with GAAP requires management to make estimates and assumptions
that affect the amounts reported in the consolidated financial
statements and accompanying notes. Management’s estimates and
assumptions are based on historical experience and other factors,
and these estimates and assumptions require management to exercise
judgment in the process of applying the Company’s accounting
policies. Factors that may affect or influence management’s
estimates and assumptions could include expectations related to
future events that management has deemed reasonable under the
circumstances. Assumptions and estimates related to the valuation
of investments, which directly affect carried interest allocations,
carried interest-related compensation, and the carrying amount of
the Company’s equity in affiliated companies, involve a
higher degree of judgment and complexity, and these assumptions and
estimates may significantly affect the consolidated financial
statements. Actual results could differ from these estimates and
those differences may be material. |
| Cash and Cash Equivalents | | Cash and Cash Equivalents
Cash and cash equivalents include cash held in banks, money market
funds and highly-liquid investments with original maturities of
three months or less at the time of purchase. |
| Marketable Securities | | Marketable Securities
Marketable securities include investments in U.S. Treasury and
government agency obligations, commercial paper, certificates of
deposit, various investment grade securities, and other investments
with original maturities of greater than three months when
purchased. These investments are accounted for as trading
securities, with changes in the fair value of each investment
recorded as other income in the consolidated statements of income.
Interest earned on debt investments is recorded as interest income
in the consolidated statements of income. |
| Fees and Accounts Receivable | | Fees and Accounts Receivable
Fees and accounts receivable represent contractual amounts due to
the Company for management, advisory
and incentive fees, net of allowances as applicable. The Company
considers fees and accounts receivable to be fully collectible.
Accordingly, no allowance for doubtful accounts has been
established as of March 31, 2020 and 2019. If any accounts or
portion thereof are deemed uncollectible, such amounts are expensed
when that determination is made. |
| Due from Affiliates | | Due from Affiliates
Due from affiliates primarily relates to advances made on behalf of
the StepStone Funds for the payment of certain organization and
operating costs and expenses for which the Company is subsequently
reimbursed. See note 12 for further disclosure of related party
transactions. |
| Property and Equipment | | Property and Equipment
Property and equipment primarily consist of leasehold improvements,
furniture, equipment, computer hardware and software and are stated
at cost, less accumulated depreciation and amortization, with the
net carrying amount included in other assets and receivables in the
consolidated balance sheets. Property and equipment are depreciated
over their estimated useful lives using the straight-line method,
and the corresponding depreciation expense is included in general,
administrative and other expenses in the consolidated statements of
income. Property and equipment are depreciated over a period of
three to seven years. Leasehold improvements are amortized over the
shorter of their useful lives or remaining lease terms.
Property and equipment are reviewed for impairment whenever events
or changes in circumstances indicate that the carrying amount of an
asset or asset group may not be recoverable. The Company did not
recognize any impairment charges related to property and equipment
during each of the fiscal years ended March 31, 2020, 2019 and
2018. |
| Foreign Currency | | Foreign Currency
The Company consolidates certain entities that have a non-U.S. Non-U.S. non-U.S. |
| Business Combinations | | Business Combinations
The Company accounts for business combinations using the
acquisition method of accounting, under which the purchase price of
an acquisition is allocated to the assets acquired and liabilities
assumed based on their fair values, as determined by management at
the acquisition date. Contingent consideration obligations that are
elements of consideration transferred are recognized at the
acquisition date as part of the fair value transferred in exchange
for the acquired business. Contingent consideration arrangements
are revalued to fair value each reporting period.
Acquisition-related costs incurred in connection with a business
combination are expensed as incurred and are included in general,
administrative and other expenses in the consolidated statements of
income. |
| Intangibles and Goodwill | | Intangibles and Goodwill
The Company’s finite-lived intangible assets primarily
consist of acquired contractual rights to earn future management
and advisory fee income. Finite-lived intangible assets are
amortized over their estimated useful lives, which ranged from 8 to
11 years as of March 31, 2020. The Company did not have any
intangible assets that were deemed to have an indefinite life as of
March 31, 2020.
Finite-lived intangible assets are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying
amount of the asset may not be recoverable. There were no
impairment charges related to the Company’s finite-lived
intangible assets during the years ended March 31, 2020, 2019
and 2018.
Goodwill represents the excess amount of consideration transferred
in a business combination above the fair value of the identifiable
net assets. Goodwill is assessed for impairment at least annually
using a qualitative and, if necessary, a quantitative approach. The
Company performs its annual goodwill impairment test as of
January 1, or more frequently, if events and circumstances
indicate that an impairment may exist. Goodwill is tested for
impairment at the reporting unit level. The initial assessment for
impairment under the qualitative approach is to determine whether
it is more likely than not that the fair value of a reporting unit
is less than its carrying amount, including goodwill. If the
qualitative assessment indicates that it is more likely than not
that the fair value of a reporting unit is less than the carrying
amount, a quantitative assessment is performed to measure the
amount of impairment loss, if any. The quantitative assessment
includes comparing the fair value of a reporting unit with its
carrying amount, including goodwill. If the carrying amount of the
reporting unit exceeds its fair value, an impairment loss is
recognized equal to the lessor of (a) the difference between
the carrying amount of the reporting unit and its fair value and
(b) the total carrying amount of the reporting unit’s
goodwill. The Company performed annual goodwill impairment
assessments as of January 1, 2020 and 2019 and determined that
there was no impairment of goodwill as of either date. |
| Compensation and Benefits | | Compensation and Benefits
Cash-Based Compensation
Cash-based compensation expense primarily includes salaries,
bonuses, employee benefits and employer-related payroll taxes.
Bonuses are accrued over the service period in which they are
earned.
Equity-Based Compensation
The Company accounts for grants of equity-classified partnership
interests at fair value, as determined as of the date of the grant.
The Company recognizes non-cash non-cash
Performance Fee-Related
A portion of the carried interest allocations earned by the Company
is awarded to employees and other carry participants in the form of
award letters (“carry awards”). Carry awards to
employees and other participants are accounted for as a component
of compensation and benefits expense contemporaneously with the
Company’s recognition of the related realized and unrealized
carried interest allocation revenue and is included in accrued
carried interest-related compensation in the consolidated balance
sheets until the amounts recognized as compensation and benefits
expense are paid. Carried interest-related compensation expense
also includes the portion of net carried interest allocation
revenue attributable to equity holders of our consolidated
subsidiaries that are not 100% owned by us. Upon a reversal of
carried interest allocation revenue, the related compensation
expense, if any, is also reversed. Furthermore, liabilities
recognized for carried interest amounts due to affiliates are not
paid until the related carried interest allocation revenue is
realized.
The Company records incentive fee compensation when it is probable
that a liability has been incurred. The incentive fee compensation
accrual is based on a number of factors, including the cumulative
activity for the period and the distribution of the net proceeds in
accordance with the applicable governing agreement. |
| General, Administrative and Other | | General, Administrative and Other
General, administrative and other expenses reported on the
consolidated statements of income primarily include legal and
professional fees, occupancy costs, depreciation and amortization
expense, placement fees, and other administrative expenses. |
| Concentrations of Risk | | Concentrations of Risk
Financial instruments that potentially subject the Company to
concentrations of credit risk or other risks consist principally of
cash, cash equivalents, restricted cash, investments and fees
receivable. The majority of the Company’s cash and cash
equivalents is held in large, high credit quality financial
institutions. Substantially all cash amounts on deposit with these
large financial institutions exceed federally insured limits;
however, based upon an assessment of the financial condition and
the reputations of these financial institutions, management
believes that the Company’s exposure to credit risk is
remote. The concentration of credit risk related to fees receivable
is generally reduced by the relatively short payment terms extended
to the Company’s clients.
Amounts due to the Company in the form of carried interest
allocations, which are reported as a component of investments in
the consolidated balance sheets, remain subject to investment
performance risk. In certain cases, carried interest allocations
that have been distributed to the Company may remain subject to
clawback, pursuant to the terms of governing documents of the
related funds. Refer to the discussion of carried interest above in
this note 2 for additional details regarding the investment
performance and clawback risk associated with carried interest
allocations that have been recognized in income by the Company
and/or recorded as accrued carried interest allocations in the
consolidated balance sheets. |
