StepStone Group (STEP) Risk Analysis

Provisions in our restated certificate of incorporation and bylaws may have the effect of delaying or preventing a change of control or changes in our management. Our restated certificate of incorporation and bylaws include provisions that: - provide that vacancies on our board of directors shall be filled only by a majority of directors then in office, even though less than a quorum, or by a sole remaining director;- provide that our directors can be removed with or without cause, but only upon the affirmative vote of holders of at least 66 2/3% of the voting power of the outstanding shares of our capital stock entitled to vote generally in the election of directors;- provide that any action required or permitted to be taken by the stockholders must be effected at a duly called annual or special meeting of stockholders and may not be effected by any consent in writing in lieu of a meeting of such stockholders;- specify that special meetings of our stockholders can be called only by our board of directors or the chairman of our board of directors;- establish an advance notice procedure for stockholder proposals to be brought before an annual meeting, including proposed nominations of persons for election to our board of directors;- authorize our board of directors to issue, without further action by the stockholders, shares of undesignated preferred stock; and - reflect two classes of common stock, as discussed above. These and other provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors, which is responsible for appointing the members of our management. In addition, we are a Delaware corporation and governed by the Delaware General Corporation Law (the "DGCL"). In general, Section 203 of the DGCL, an anti-takeover law, prohibits a publicly held Delaware corporation from engaging in a business combination, such as a merger, with a person or group owning 15% or more of the corporation's voting stock, which person or group is considered an interested stockholder under the DGCL, for a period of three years following the date the person became an interested stockholder, unless (with certain exceptions) the business combination or the transaction in which the person became an interested stockholder is approved in a prescribed manner. We have elected in our restated certificate of incorporation not to be subject to Section 203. However, our restated certificate of incorporation contains provisions that have the same effect as Section 203, except that they provide that the Principal Holders (as defined below), their affiliates and their respective successors (other than the Company or any of our subsidiaries), as well as their direct and indirect transferees, will not be deemed to be "interested stockholders," regardless of the percentage of our voting stock owned by them, and accordingly will not be subject to such restrictions. The "Principal Holders" are Monte Brem, Scott Hart, Jason Ment, Jose Fernandez, Michael McCabe, Mark Maruszewski, Thomas Keck, Thomas Bradley, David Jeffrey and Darren Friedman (including their respective family trusts and any other permitted transferees).

The price of our Class A common stock has been volatile, and we have a relatively limited trading history. During fiscal 2026, the closing price of our Class A common stock ranged from a low of $42.46, and to a high closing price of $76.27. The closing price of our Class A common stock ranged from a low of $45.91, and to a high of $56.31, from April 1, 2026 through May 20, 2026. The price of our Class A common stock may continue to be volatile in the future. The factors described in this "Risk Factors" section may have a significant impact on the market price of our Class A common stock.

Certain of our consolidated subsidiaries are not wholly-owned by us. To the extent these subsidiaries are not wholly-owned by us, substantially all of the other owners are current StepStone professionals working for the related businesses. See "Management's Discussion and Analysis of Financial Condition and Results of Operations-Organizational Structure-Ownership of Our Businesses." We have relied, and expect to continue to rely, on a combination of our equity ownership, governance rights and other contractual arrangements to control operations of these businesses. As described above, SSG and the Partnership have entered into agreements with each of SRE, SRA and SPD, providing a path to full ownership of these subsidiaries. However, these arrangements may not be as effective in providing us with control over these operations as would wholly owning these subsidiaries. For example, the other owners of these subsidiaries typically have contractual rights to be significantly represented on the board of directors or other governing body of the relevant subsidiary as well as the right to participate in certain decisions affecting the subsidiary, and may assert interests that are in conflict with the interests of StepStone with regard to significant decisions affecting these subsidiaries. As a result, the arrangements we use to control the subsidiaries that are not wholly-owned may not fully protect our interests. If control over these subsidiaries and their operations is exerted less effectively by StepStone, our ability to conduct our business and our results of operations may be adversely affected.

Certain members of our senior leadership team hold significant economic interest in the Partnership directly, and as a result, they may have interests that do not align with, or conflict with, those of the holders of Class A common stock or with us. For example, members of our senior leadership team will have different tax positions from Class A common stockholders, which could influence their decisions regarding whether and when to dispose of assets, whether and when to incur new or refinance existing indebtedness, and whether and when to terminate either Tax Receivable Agreement and accelerate the obligations thereunder. In addition, the structuring of future transactions and investments may take into consideration the partners' tax considerations even where no similar benefit would accrue to us.

Under the Investment Advisers Act, each of the investment advisory agreements for the funds and other accounts we manage must provide that it may not be assigned without the consent of the particular fund or other client. An assignment may occur under the Investment Advisers Act if, among other things, the Partnership undergoes a change of control. As of September 18, 2025, the Class B common stock no longer has the right to control the appointment of directors or to direct the vote on all matters that are submitted to our stockholders for a vote. If a third party acquired a sufficient number of shares to be able, alone or with others, to control the appointment of directors and other matters submitted to our stockholders for a vote, there could be deemed a change of control of the Partnership, and thus an assignment. If such an assignment occurs, we cannot be certain that the Partnership will be able to obtain the necessary consents from our funds and other clients, which could cause us to lose the management fees and performance fees we earn from such funds and other clients.

In the event of a transfer by a non-U.S. transferor of an interest in a partnership that is engaged in a U.S. trade or business, the transferee generally must withhold tax in an amount equal to 10% of the amount realized (as determined for U.S. federal income tax purposes) by the transferor on such transfer absent an exception. Holders of Class B or Class D units include non-U.S. holders. The partners holding Class B or Class D units in the Partnership generally will be entitled to exchange such Class B or Class D units for shares of Class A common stock on a one-for-one basis or, at our election, for cash. To the extent withholding is required and we elect to deliver shares of Class A common stock (rather than cash), we may not have sufficient cash to satisfy such withholding obligation, and we may be required to incur additional indebtedness or sell shares of our Class A common stock in the open market to raise additional cash in order to satisfy our withholding tax obligations.

Prior to September 18, 2025, we qualified as a "controlled company" within the meaning of the corporate governance standards of the Nasdaq Global Select Market, and, consequently, we previously qualified for, and relied on, certain exemptions from corporate governance requirements, including the requirements that (i) a majority of our board of directors consist of independent directors, (ii) director nominees be selected or recommended to the board entirely by independent directors and (iii) the compensation committee be composed entirely of independent directors. However, as of September 18, 2025, we are no longer a controlled company and thus these exemptions are no longer available to us, and we are required to come into compliance with Nasdaq's corporate governance requirements no later than September 18, 2026. We do not currently satisfy all of Nasdaq's corporate governance requirements applicable to non-controlled companies, and, accordingly, we must take actions to achieve compliance by September 18, 2026. We currently do not have a majority of independent directors, our compensation committee does not consist entirely of independent directors, and our directors will not be nominated or selected entirely by independent directors. Accordingly, unless and until we have fully implemented changes necessary to comply with Nasdaq's corporate governance requirements, you will not have the same protections afforded to stockholders of companies that are subject to, and compliant with, all of the corporate governance requirements of the Nasdaq Global Select Market.

In recent years, certain investors have placed increasing importance on sustainability implications of private markets investments to which they commit capital. Certain investors have also demonstrated increased advocacy with respect to existing investments, including by urging asset managers to take certain actions that could adversely affect the value of an investment, or refrain from taking certain actions that could improve the value of an investment. At times, clients have conditioned future capital commitments on the taking or refraining from taking of such actions. Such clients' focus and advocacy related to sustainability and similar matters may constrain investment opportunities we evaluate for them. In addition, institutional clients may decide to not commit capital to future fundraises as a result of their assessment of our approach to and consideration of the sustainability-related cost of investments made by us. Conversely, certain investors have raised concerns as to whether the incorporation of sustainability-related factors in the investment and portfolio management process may be inconsistent with the fiduciary duty to maximize returns for investors. Anti-"ESG" sentiment has gained momentum across the United States, with several states having enacted or proposed "anti-ESG" policies, legislation or issued related legal opinions. For example, (i) boycott bills target financial institutions that "boycott" or "discriminate against" companies in certain industries and prohibit state entities from doing business with such institutions and/or investing the state's assets (including pension plan assets) through such institutions; and (ii) ESG investment prohibitions require that state entities or managers/administrators of state investments make investments based solely on pecuniary factors without consideration of ESG factors. If fund investors subject to such legislation viewed our funds or sustainability practices as being in contradiction of such "anti-ESG" policies, legislation or legal opinions, even though such view or perception may not be accurate, we may not be able to maintain or increase the size of our funds or raise sufficient capital for new funds, which may adversely affect our revenues. In addition, a failure to successfully manage sustainability-related expectations may adversely affect our reputation or erode stakeholder trust. There has also been increasing focus by governmental authorities, investors, customers, activists, the media, governmental and non-governmental organizations, and other stakeholders on a variety of human capital management matters. In January 2025, the current U.S. Presidential administration signed a number of executive orders focused on Diversity, Equity and Inclusion ("DEI") programs, which include a broad mandate to eliminate federal DEI programs and a caution to the private sector to end what may be viewed as illegal discrimination and preferences. Some U.S. states have followed suit, similarly cautioning against practices which may be viewed as illegal discrimination and preferences. The Executive Orders also indicate upcoming compliance investigations of private entities, including publicly traded corporations, foundations with assets of $500 million or more and institutions of higher education with endowments exceeding $1 billion, and changes to federal contracting regulations. In May 2025, the U.S. Department of Justice (the "DOJ") issued a memorandum announcing the Civil Rights Initiative, which aims to use the False Claims Act (the "FCA") to investigate and "pursue claims against any recipient of federal funds that knowingly violates federal civil rights laws" via "racist preferences, mandates, ... and activities," including DEI programs. The initiative covers all federal-funding recipients or contractors that certify compliance with civil rights laws, and will involve collaboration among federal and state law enforcement agencies. The memorandum directs divisions within the DOJ to establish partnerships with state attorneys general and local law enforcement to share information and coordinate enforcement activities and further highlights that Congress authorized private parties to litigate FCA claims and to share in any monetary recovery. A number of our contracts with state pensions require us to comply with all applicable state and federal laws and regulations. As a result of such developments, we may be increasingly subject to competing demands or expectations from different governmental authorities, regulators, clients, investors, and other stakeholders or third parties with divergent views and, if we fail to meet, or are perceived to fail to meet such competing demands or expectations, clients may reduce their investment with us and we may be subject to investigation, significant fines and penalties, and risk of litigation. Sustainability and corporate responsibility matters have also been the subject of increased focus by regulators, including in the EU, the UK and the U.S. For example, the European Commission has adopted regulations as part of a package of legislative measures arising from its Action Plan on Sustainable Finance, which include, without limitation: (a) The Disclosure Regulation EU 2019/2088 regarding the introduction of transparency and disclosure obligations for investors, funds and asset managers in relation to sustainability, which took effect beginning on March 10, 2021 and (b) The Taxonomy Regulation EU 2020/852 regarding the introduction of EU-wide taxonomy of environmentally sustainable activities, which entered into force on July 12, 2020. These and other proposals have resulted in the Non-Financial Disclosure Regulation, EU Taxonomy Regulation and the EU Sustainable Finance Disclosure Regulation. These legislative developments require additional disclosures to clients with respect to sustainability and corporate responsibility factors, which may increase our compliance obligations and expenses, and could lead clients to not commit or recommit capital in our funds. Our EU-based business, as well as any global product sales into the EU, is subject to these requirements. In November 2023, the UK Financial Conduct Authority ("FCA") published final rules on its Sustainable Disclosure Requirements ("SDR"), introducing new rules and guidance for asset managers to make mandatory disclosures at both the manager and product levels, which aim to address potential greenwashing risks through the introduction of sustainable investment labels, disclosure requirements and restrictions on the use of sustainability-related terms in product naming and marketing, as well as through the introduction of disclosures consistent with the recommendations of the Financial Stability Board's Task Force on Climate-related Financial Disclosures ("TCFD"). The FCA has stated that it intends to further expand the SDR and labelling rules in the future. Further, the UK is expected to create UK Sustainability Disclosure Standards ("UK SDS") based on the sustainable disclosure standards developed by the International Sustainability Standards Board ("ISSB"). In the likely event that divergent sustainable investing disclosure obligations arise between the U.S., UK and the EU, this may also present an increased compliance risk if we are required to comply with different regulatory standards. In the U.S., the SEC adopted climate-related disclosure rules for public companies; however, such rules have been subject to litigation, and the SEC has elected to end its defense of such rules and stayed their implementation. Furthermore, the SEC recently indicated that it has initiated steps to rescind the rules. Additionally, California enacted SB 253 and SB 261, which impose climate reporting requirements, including requirements related to greenhouse gas emissions and climate-related financial risk. Certain provisions of these California statutes have been the subject of judicial challenge, including an injunction issued with respect to SB 261, and the ultimate scope and enforceability of these requirements remain uncertain. Other states have proposed similar legislation, although the current U.S. presidential administration has identified deregulation of greenhouse gas emissions as a priority, including at the state level. Additionally, a lack of harmonization globally in relation to sustainability and corporate responsibility-related legal and regulatory reform, combined with ongoing revisions in many of the regulations noted above, leads to a risk of fragmentation in group level priorities across global jurisdictions. This may create conflicts across our global business which could risk inhibiting our future implementation of, and compliance with, rapidly developing standards and requirements. In addition, our brand and reputation are associated with our public commitments to various corporate ESG initiatives, including our goals for sustainability. Any failure or perceived failure to achieve our disclosed commitments could harm our reputation and adversely affect our client relationships or our recruitment and retention efforts. Moreover, positions we take or do not take on social issues may be unpopular with some of our employees or with our clients or potential clients, which may in the future impact our ability to attract or retain employees or clients. While we strive to implement sustainability practices, there can be no assurance that we will be able to identify all sustainability and corporate responsibility issues or will be able to successfully implement our sustainability and corporate responsibility policies. In addition, the use of sustainability and corporate responsibility metrics in the investment process could be subjective and they are not subject to uniform standards, and, as such, there is no guarantee that we will be able to accurately assess and measure the sustainability and corporate responsibility risks and compliance of its investments and potential investments. Sustainability-based exclusionary criteria could result in a StepStone Fund foregoing opportunities to make certain investments when it might otherwise be advantageous to do so, and/or selling certain investments due to their sustainability and corporate responsibility characteristics when it might be disadvantageous to do so. Devoting additional resources to sustainability and corporate responsibility matters could increase the amount of expenses we or our investments are required to bear. For example, collecting, measuring, and reporting sustainability and corporate responsibility information and metrics can be costly, difficult and time consuming, is subject to evolving reporting standards, and can present numerous operational, reputational, financial, legal and other risks. If we do not successfully manage expectations across these varied stakeholder interests, it could erode stakeholder trust, impact our reputation, and constrain our investment opportunities. Given increased U.S. and European legal and regulatory focus on sustainability and corporate responsibility matters, failure to comply with applicable legal and regulatory changes may attract increased regulatory scrutiny of our business, and could result in fines and/or other sanctions being levied against us.

We have a dual class structure, with shares of Class A common stock and Class B common stock outstanding. Although our Class B common stock currently has one vote per share, and therefore does not provide its holders with a disproportionate voting multiple relative to our Class A common stock, certain stockholder advisory firms, institutional investors and other market participants may nonetheless disfavor, or have policies that discourage investment in, companies with multiple classes of common stock. As a result, the dual class structure of our common stock may cause stockholder advisory firms to publish negative commentary about our corporate governance practices or otherwise seek to cause us to change our capital structure and may result in large institutional investors not purchasing shares of our Class A common stock. Any actions or publications by stockholder advisory firms or institutional investors critical of our corporate governance practices or capital structure could also adversely affect the value of our Class A common stock.

In November 2022, we entered into arrangements under which certain members of the SPW management team received a profits interest in SPW and concurrently entered into an option agreement which provides that (i) we have the right to acquire the profits interest at the end of any fiscal quarter after June 30, 2027 in exchange for payment of a call price and (ii) the SPW management team, through an entity named CH Equity Partners, LLC, has the right to put the profits interest to us on June 30, 2026 or at the end of any fiscal quarter thereafter, in exchange for payment of a put price. The applicable call or put price is, in certain circumstances, subject to an earn-out or earn-down. The call or put price will be payable in cash unless we elect to pay up to 75% of the consideration in units of the Partnership, each to be exchangeable into shares of our Class A common stock, and, in either case, rights under one or more tax receivable agreements. If the put is exercised, or if we exercise our call, the consideration under the option agreement may be substantial. We may need to seek equity or debt financing to fund the applicable exercise price. As of March 31, 2026, based on the fair value of the liability classified awards, the estimated minimum and maximum amount of cash that would be potentially payable to settle the liability in the event of a call or put was $564.4 million and $2,257.6 million, respectively. Certain assumptions used in determining the fair value are inherently subjective; therefore, the ultimate settlement amount for the liability classified awards may differ materially from the current estimate.