Our Services

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

Program Design

StepStone has extensive experience working with pension funds, Sovereign funds and foundations and high net worth individuals 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 an accounting, brand development and PR strategy, use of co-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.

StepStone next puts the existing client portfolio into a 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 and manager performance. StepStone identifies over and under-allocations relative to a recommended sector exposure 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.

Co-investment Capabilities

StepStone's fund investment activities focus on finding the most attractive General Partners across the private equity spectrum. StepStone's co-investment activities focus on ensuring access to the most attractive co-investment activities among these GPs.

Co-investments can enhance portfolio returns by quickly building exposure to the best managers. By investing directly in their best deals, co-investing increases exposure to the best-performing GPs in the business. Because commitments are invested immediately, co-investments can reduce the impact of the J-curve. Commitments that are deployed earlier will also distribute returns earlier. Co-investments also typically have lower fees and carry, reducing the weighted average fee-drag and increasing the net return from these relationships.

Co-investments also leverage an investor's position as a limited partner. Co-investment rights often accompany LP interests. GPs will ensure that their best LPs get allocation in their best co-investment deals to ensure commitments to future funds. The deeper knowledge and relationship that an LP gains through involvement in co-investments can result in better information about the market, as well as about specific GPs strengths and weaknesses, enhancing future fund commitments.

LP's who wish to take advantage of the benefits of co-investment, however, need to be able to be proactive, and to move quickly and decisively. This can be a challenge for large institutions for whom alternatives are a small portion of the entire portfolio, and for whom co-investment is only a piece of its alternatives exposure. StepStone provides the solution to this dilemma. We integrate your fund investment activities into your fund investment program to ensure maximum due diligence and market intelligence benefits, deal sourcing and over-all portfolio management and coordination.

StepStone's co-investment process combines traditional fundamental direct investment analysis with fund based analysis of the opportunity. Our professionals have deep direct investment experience, both as principal investors and as legal, business and financial advisors. This expertise allows us to utilize the broadest range of fund analysis and direct transaction analysis techniques. StepStone is in a superior position to review the market for the most attractive co-investment deals available, identify the transactions that will out-perform and be an attractive fit within the over-all private equity portfolio and maximize the allocations that we secure to the targeted investments.

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.