StepStone provides investment services to institutional investors focused on achieving excess net (after fees) risk-adjusted private equity returns. These services include:

• Strategic advisory, including program design, investment allocation and customized portfolio construction
• Fund investment recommendation and due diligence
• Specialized separate account discretionary management
• Portfolio Monitoring, Reporting and Analytics

StepStone builds private equity portfolios by accessing the market through a combination of fund investments, co-investments and secondary purchases.

View specific investment types:
Fund Investments | Co-Investments | Secondary Investments

When designing a private equity program and optimizing portfolio exposure StepStone utilizes a proprietary approach to ensure an institutional process and to maximize risk-adjusted returns. This approach includes program design, portfolio construction, portfolio analytics and monitoring and reporting.

Program Design

StepStone has extensive experience working with pension funds, Sovereign funds and foundations to design private equity programs, from initial launch to enhancement of established programs. During such an assignment StepStone typically analyzes issues such as internal staffing and recruiting, use of external advisors and managers, portfolio allocations and commitment amounts, process for portfolio monitoring, reporting and accounting, brand development and PR strategy, use of co-investments, secondary investments and/or strategic direct investments, return benchmarking, development of annual commitment plan and use of portfolio analytics tools.

Portfolio Construction

The first step in StepStone's portfolio construction process is to understand the needs of the client portfolio. StepStone examines factors such as return targets, cash and liquidity needs, risk tolerances and investment policies. This analysis establishes the proper objectives and identifies potential constraints on the portfolio construction.

Next StepStone analyzes the existing client portfolio using its proprietary cash flow pacing model to determine ranges for annual commitments. This model provides a guideline for annual commitment amounts by private equity sector.

The final step in setting optimal allocations is to analyze existing exposures by sector, geography, strategy and manager performance. StepStone identifies over and under-allocations relative to a recommended allocation model. StepStone also identifies under-performing managers that the client may wish to replace in the next fund cycle. Finally, in this analysis StepStone examines whether the portfolio is under-diversified (too few manager relationships) or over-diversified (too many manager relationships).

Armed with this information, StepStone is able to identify the necessary sector exposures for new commitments. Commitment size ranges are determined, and target allocations for existing and new relationships are identified. These new potential commitments are then reviewed against investment policies, and any adjustments in targeted commitments, or recommended policy amendments, are added to the portfolio plan.

Portfolio Analytics

Portfolio analytics typically consist of exposure reporting by geography and industry, at both the fund and portfolio company levels, in addition to performance reporting by fund, with benchmarks by investment strategy and vintage year, through a third-party data provider such as Venture Economics.

StepStone assesses manager performance in two ways. First, through vintage year and comparable fund comparisons via third-party and proprietary data sources. Second, through comparison to a premium above relevant public equity indices. This includes broad indices, such as the Russell 2000 and S&P 1200, as well as industry specific indices, based on the composition of the relevant portfolio.

Monitoring & Reporting

StepStone employs a dedicated back office team that collaboratively works with StepStone’s investment professionals to effect a leading transaction management, back office, and monitoring and reporting platform. StepStone’s performance reporting and portfolio analytics include quarterly and annual reports, and can be supplemented and customized with additional reports as needed. These reports include an executive summary and detailed information regarding cash flows and changes in the portfolio since the previous report. Each report includes an analysis of macro and micro economic trends and capital flows in both public and private sectors, an analysis of the performance of the portfolio and a comparison of such performance relative to benchmarks. Benchmarking analysis will be tailored to the client's specifications. A summary of each partnership investment, including the performance of each portfolio company investment made by each partnership (whether or not it has been realized) and analytical information regarding the client’s geographic and industry exposure is also included in every quarterly and annual report.