Greetings, welcome to StepStone Fiscal third quarter 2023 earnings call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Seth Weiss, Head of Investor Relations. Thank you, sir. You may begin.
Thank you. Joining me on the call today are Scott Hart, Chief Executive Officer, Jason Ment, President and Co-Chief Operating Officer, Mike McCabe, Head of Strategy, and Johnny Randel, Chief Financial Officer. During our prepared remarks, we will be referring to a presentation which is available on our investor relations website at shareholders.stepstonegroup.com. Before we begin, I'd like to remind everyone that this conference call, as well as the presentation, contains certain forward-looking statements regarding the company's expected operating and financial performance for future periods and our plans for future dividends. Forward-looking statements reflect management's current plans, estimates, and expectations and are inherently uncertain and are subject to various risks, uncertainties, and assumptions.
Actual results for future periods and actual dividends declared may differ materially from those expressed or implied by these forward-looking statements due to changes in circumstances or a number of risks or other factors that are described in the Risk Factors section of StepStone's most recent 10-K. These forward-looking statements are made only as of today, and except as required, we undertake no obligation to update or revise any of them. In addition, today's presentation contains references to non-GAAP financial measures. Reconciliations to the most directly comparable GAAP financial measures are included in our earnings release, our presentation, and our filings with the SEC. Turning to our financial results for the third quarter of fiscal 2023, we reported a GAAP net loss of $13.6 million. The GAAP net loss attributable to StepStone Group Inc was $6.9 million.
We generated fee-related earnings of $42.7 million, adjusted net income of $31.2 million, and adjusted net income per share of $0.27. The quarter had no impact from retroactive fees. This compares to retroactive fees in the third quarter of fiscal 2022 that contributed $1.2 million to revenue and $1.1 million to fee-related earnings and pre-tax adjusted net income. Before turning to Scott, I'm excited to announce that we will hold our first Investor Day on Tuesday, June 6 in New York. We've grown and evolved since our initial public offering two and a half years ago, and we look forward to covering our progress and introducing several of our key business leaders who are instrumental in driving our growth. We will share further details as the event approaches.
I'll now hand the call over to StepStone's Chief Executive Officer, Scott Hart.
Thank you, Seth, good afternoon, everyone. We delivered strong performance in the calendar year 2022. That is true whether you look at the investment performance we generated for clients, which has continued to outperform the public market equivalents or the solid financial results we delivered for our shareholders. Turning to those financial results on slide five, we earned $31 million in adjusted net income for the quarter, or $0.27 per share. This is down from $49 million or $0.42 per share in the third quarter of last year, driven entirely by lower performance fees for which realizations are dependent on capital market activity. Importantly, our fee-related earnings continue to grow at a strong and steady pace, reflecting the durability of our core business, while our balances of accrued carry and investments remain strong.
For the quarter, we generated $43 million of fee-related earnings, up 16% versus the prior year's quarter. This earnings growth is driven by strong capital formation and continued deployment across asset classes, geographies, and commercial structures. We finished the quarter with $134 billion of assets under management and $83 billion of fee-earning assets. The diversification of our platform and the specialized nature of our offerings give us a critical edge, particularly in today's environment. Given our position as one of the largest investors in the private markets, I would like to take a moment to speak to the market environment and how we are positioned. As we are all aware, 2022 was a challenging year for capital markets. While private assets are not immune to broader market pressures, they have generally fared significantly better than their public equivalents.
Examining major events that spurred past cycles, including the dot-com bubble, the Global Financial Crisis, and COVID, private markets experienced only a fraction of the peak-to-trough public market drawdown. Yet in each of these cases, private markets captured 100% or more of the subsequent recovery. This asymmetric risk capture is a key feature that drives private assets outperformance, and StepStone is well-positioned to take advantage of opportunities in any market environment. Specifically, our extensive toolbox across primaries, co-investments, and secondaries enables us to play offense or defense by partnering with the best managers in the highest quality investments. Pivoting back to the current environment, we are observing softer fundraising compared to the elevated activity over the last several years. Demand for secondaries as a means to capture discounts and co-investments as a cost-effective access point remains robust.
In secondaries, industry-wide deal activity topped $100 billion in 2022, trailing only the record volumes from 2021. We anticipate the coming year's volumes to remain strong. As a reminder, StepStone is a leader in secondaries with active commingled funds and managed accounts in private equity, venture capital, infrastructure, private debt, and real estate. Our capabilities in secondaries are critical in delivering strong returns, particularly in challenging markets, and have been key to our ability to launch private wealth products. Secondary volume naturally lags primary capital raises and is also a function of investments currently in the ground. Private market fundraising has averaged well over $1 trillion a year since 2016, which compares to an average of just over $500 billion in the six years prior.
While unrealized private asset values stand at approximately $10 trillion, or roughly double the value from just three years ago. With more assets available to trade, the backdrop for secondaries is very promising. On LP-led deals, the accelerated fundraising cycle from the last several years, combined with a slower pace of distributions and declines in public market valuations, have resulted in some being over-allocated to private markets. We expect this will lead investors to utilize the secondary market to rebalance their portfolios. On GP-led deals, secondaries are no longer just a mechanism for managers to restructure legacy funds. Top quartile managers are increasingly looking to the secondary market and continuation vehicles to capture future value from high-conviction assets. Moving to co-investments, this remains one of the few ways to mitigate fees in the private markets without sacrificing quality. As a result, LP demand continues to be very high.
The key to success is a strong, high-quality sourcing funnel to allow for discriminating asset selection combined with our superior data, due diligence insights, and underwriting capabilities to drive better investment decisions. Shifting to trends by asset class, in private equity, we expect to see a growing divergence between those who have maintained discipline and those that have simply been riding the market tailwinds. Tougher capital market conditions have led to a moderation in deployment and a less favorable exit environment. We are starting to see a valuation correction across certain sectors, coupled with slowing buyout transaction activity in response to market uncertainty and wide bid-ask spreads. Given the historical relative outperformance of down market vintages, we believe private equity investments made in the coming years will prove to reward those with available capital.
Furthermore, we expect that the denominator effect may catalyze a pickup in LP secondary buying opportunities with favorable discounts, while general partners may look to generate liquidity in a challenging exit environment through GP-led secondary transactions. In venture capital, performance of public technology stocks has been among the worst in the market, and headlines of tech layoffs appear to be a daily occurrence. Despite the day-to-day volatility of the public tech sector, venture capital has proven to be a durable sector, given its ability to capitalize on long-term structural growth trends. Great companies are created in all market cycles. The best vintages of venture capital performance came during the aftermath of the Global Financial Crisis in the early 2010s and after the recession of the 1990s. We believe the next few years will provide a highly attractive entry point.
Furthermore, the venture capital secondaries market is becoming much more active. There are well over $1 trillion of unrealized venture assets in vintages from 2018 and earlier, which we anticipate will spur an acceleration in VC secondary deal flow. We have the largest venture secondaries fund in the market today, and we believe we are well-positioned to continue to benefit with future funds. This interest in venture and growth equity is shared by our clients. Last week, we hosted our venture capital annual meeting where we had nearly 400 clients attend. While venture portfolios have been impacted, there is growing optimism about the go-forward investment opportunity. Moving to private debt, we generated positive returns in 2022, and the environment remains favorable.
The defensive characteristics such as cash income, senior positioning in capital structure, and conservative underwriting make the asset class an all-weather investment strategy. Given primarily floating rate payments, our private debt offering provides protection against rising interest rates. We expect industry-wide deployment opportunities may moderate as less M&A volume and a slower pace of refinancing impact volumes. Our ability to dynamically pivot allocations among sponsors allows for consistent deployment, thereby reducing the cash drag and improving total returns. Real assets have proven to be resilient through market cycles. Many infrastructure and real estate cash flows are linked to inflation, providing a hedge against one of the biggest market risks today. We have products in both asset classes that are purpose-built for the current environment.
Infrastructure has been our fastest-growing asset class in the last 12 months. That growth has come without the benefit of a flagship commingled product. We are now in market with our first infrastructure commingled co-investment fund, for which demand has been very healthy. In real estate, manager-led secondaries present a unique opportunity in today's environment. As debt matures, equity gaps are likely to catalyze recapitalizations of high-quality assets. This is an area in which we thrive. We are currently in market with our flagship real estate product, which is a special situation manager-led secondaries fund. We expect attractive opportunities to deploy capital from this fund in the current environment. I'll now turn the call over to Mike McCabe to speak about StepStone's fundraising and fee-earning asset growth in more detail.
Thanks, Scott. Turning to slide seven, we generated $18 billion of gross AUM inflows during the last 12 months, with $6 billion coming from our commingled funds and $12 billion from managed accounts. Slide eight shows our fee-earning AUM by structure and asset class. For the quarter, we grew fee-earning assets by $3 billion, largely driven by healthy deployment across several SMAs, activations of our PE secondaries fund and our multi-strategy Global Venture Capital Fund, as well as incremental closings in commingled funds and evergreen private wealth offerings. Offsetting these additions were over $2 billion in the distributions line from Separately Managed Accounts. As a reminder, distributions include exit activities, expiring mandates, and step-downs in fee base. The third fiscal quarter was an exciting period for our private wealth platform.
SPRIM, our evergreen private markets fund for accredited investors, continues to generate strong monthly subscriptions with de minimis redemptions of just over 1% for the quarter. We launched offshore parallel and feeder funds in Europe and Australia, and we executed our first close of SPRING, our private venture and growth fund for qualified clients. Aggregate subscriptions across these products were over $300 million during the quarter, bringing total AUM to over $1.3 billion on our private wealth platform. Our investment performance continues to be very strong, with SPRIM generating a 30% annualized return since inception and SPRING off to a very strong start since its launch in November. As Scott referenced, our leading secondary platform is a key differentiator for these products, allowing us to efficiently deploy capital in a diversified manner with strong returns.
Looking over the last 12 months, we have grown fee-earning assets by $12 billion or 16%. We are very pleased with this result, given the current market environment, which impacted the timing of fundraising for all industry participants, particularly in the second half of last year. Going forward, we have not changed our expectations around the target size on current funds and markets, nor do we anticipate a delay in launches of subsequent funds. The determining factor on launching a new fund is not the closing of a prior fund, but rather the deployment of a prior fund. We pride ourselves on our discipline of steady deployment over a multi-year horizon. We have sufficient committed capital in our funds and market, and expect the healthy pipeline of deal flow to continue deploying in attractive opportunities.
This means our timeline for future commingled fundraisers and Separately Managed Account re-ups are largely unchanged. To this point, undeployed fee earning capital stands at $14 billion, down from the previous quarter, driven by activations of our PE secondaries and multi-strategy Global Venture Capital Funds, plus deployment of committed capital and Separately Managed Accounts. We've spoken in the past about the benefit of built-in and highly visible growth that comes from undeployed capital. Even more important is the opportunity that dry powder presents to drive returns. Selective and disciplined investments in down markets have historically delivered the best-performing vintages. Our dry powder, including this $14 billion, positions us extremely well to capitalize on today's environment for our clients. Slide nine shows the evolution of our management and advisory fees.
We generated a blended management fee rate of 54 basis points, which is higher than prior years, due to a mix shift toward commingled funds from the contribution of our expanded venture capital platform. We generated well over $4 per share in management and advisory fees over the last 12 months, representing an annual growth rate of 25% since 2018. We have produced this growth in an extremely capital efficient manner, which should allow us to distribute the vast majority of our adjusted net income to shareholders. As we discussed on our last earnings call, we are aligning our capital distribution approach to our business model. Our payouts will include a quarterly dividend that is generally tied to our fee-related earnings, augmented by an annual recurring supplemental dividend tied to realized performance-based earnings subject to board approval.
For our first three quarters of fiscal 2023, we have declared an aggregate of $0.60 per share in dividends, which represents nearly 100% of our fee-related earnings available to common shareholders. We plan to communicate and pay our supplemental dividend at the conclusion of our fiscal year. With that, I'd like to turn the call over to our CFO, Johnny Randel.
Thank you, Mike. I'd like to turn your attention to slide 11 to speak to a few of our financial highlights. For the quarter, we earned management and advisory fees of $129 million, up 21% from the prior year. The strength in revenue was driven by continued growth in fee-earning assets, including the activations of commingled funds in the quarter. We now have a full year of Greenspring in our results, so the year-over-year quarterly comparisons are on the same basis. Profitability remains very strong as we maintained an FRE margin of 33%, consistent with the last quarter, but down from the year-ago quarter's margin of 35%. We did not receive any retroactive fees in the current quarter, whereas retroactive fees in the year-ago quarter benefited margins by approximately one percentage point. Shifting to expenses.
Compensation was up $3 million sequentially, driven by increased headcount, incentive payments related to the activation of commingled funds, and the timing of year-end bonus accruals. G&A also increased sequentially, driven partially by expenses associated with our StepStone 360 conference, our annual private markets investor conference, which we held in person this year after holding the previous two conferences virtually. With compensation changes effective January first, we expect a step-up in the expense base next quarter. Gross realized performance and incentive fees were $19 million for the quarter, down versus prior periods as realizations have moderated, consistent with the expectations that we previously communicated. We anticipate realized performance fee levels to remain modest in the near term. Moving to slide 12. Adjusted revenue per share is flat for the first three quarters of the year.
We had a 24% growth in per share management and advisory fees, offset by a 37% decrease in per share performance fees. Speaking to the longer term, adjusted revenue per share has grown by a 27% compounded annual rate since fiscal 2018. Shifting to our profitability on slide 13. Fee-Related Earnings per share has grown by 26% in our first three quarters. The increase was driven by growth in management and advisory fees and by margin expansion.
Looking over the longer term, we have generated an annual growth rate of 44% in fee-related earnings per share since fiscal 2018. Our year-to-date ANI per share is down relative to last year, but has increased at an annual rate of 33% over the long-term period, driven by robust growth in both fee-related earnings and realized net performance fees. Moving to the balance sheet on slide 14, gross accrued carry finished the quarter at approximately $1.1 billion, which is roughly $60 million lower than the previous quarter. The decrease is primarily driven by the reduction of underlying valuations during the September 30th period. As a reminder, our accrued carry balance is reported on a one-quarter lag. Our own investment portfolio ended the quarter at $139 million, with the increase from the prior quarter driven by a seed investment into SPRING.
Unfunded commitments to our investment programs were $87 million as of quarter end. Our pool of performance fee eligible capital has grown to $60 billion, and this capital is widely diversified across multiple vintage years and 175 programs. 62% of our unrealized carry is tied to programs with vintages of 2017 or earlier, which means that these programs are largely out of their investment periods and are in harvest mode. 56% of this unrealized carry is sourced from vehicles with deal-by-deal waterfalls, meaning realized carry may be payable at the time of investment exit. This concludes our prepared remarks. I'll now turn it back over to the operator to open the line for any questions.
Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. Our first question comes from Ken Worthington with JP Morgan. Please proceed with your question.
Hi, good afternoon. Thanks for taking the question. Maybe first on distributions. They were elevated, as you mentioned, for the quarter. You mentioned that a lot goes into SMA distributions. Can you talk a little bit about what was driving the elevated distributions this quarter? As we think about the outlook for expirations and other things that you have, visibility on for 2023, calendar 2023, anything that sticks out that we should be aware of? Thank you.
Sure. Thanks, Ken, for the question. As you heard Mike say in the prepared remarks, we did have about $2 billion running through the distribution line there. He mentioned, you know, what some of those drivers might be between realization, step down in fee rates, as well as expirations of existing accounts. We had a pretty normal level of activity across most of those different drivers. The exception that drove the higher number this quarter was the expiration of an account specifically in our infrastructure business with a client that we continue to work with in a variety of different ways.
I would just highlight that from a, from a fee standpoint, would have been something that had a well below average fee rate associated with it. That is something that's going to happen from time to time, particularly with accounts that may pay, for example, on committed capital throughout the life of the vehicle there.
Great. Thank you. Then just sentiment by your clients. You're scaled across multiple asset classes. You've got a lot of diversity by client, by geography. We'd love to hear your insights, particularly in terms of how you see investors altering their asset allocation between private equity, real estate, infra, and credit. I think we've heard universally we're seeing increased allocations, but there's definitely concern about allocations to real estate. Any color that you might have. Thank you.
Yeah, sure. I'll start, and others may want to jump in here as well. I think you're right. I think we've got an interesting perspective, not only because of our activities across the different asset classes within the private markets, but frankly because of the position where we act as both an LP working with our clients, as well as GP out there fundraising amongst LPs on a day in and day out basis. Look, I would say sentiment, you know, continues to be pretty balanced. Hard to generalize in some cases, because for every client that we have today that may be slightly decreasing their allocations coming into 2023, there are a similar number that are maintaining flat or slightly increasing allocations.
I think that the sentiment is, or the understanding amongst LPs is that these are vintage years that they don't wanna miss out on. There's an understanding that commitments that are made today are, you know, not gonna be drawn down immediately, and therefore will ultimately impact their allocations over the coming years here. Still see a fair amount of activity. I expect that some of that activity will be more balanced throughout the course of the year, whereas over the last few years, much of it has been concentrated in the first half of the year. I think today there's probably less of a sense of urgency or rushing into final closes of funds that may drive some of that first half activity. Look, I think you're right to highlight the interest in areas like credit.
I would say across the other asset classes where we operate, it's not so much that we see a lack of interest in the asset class at large. You may be seeing a shift in where the interest is within that asset class. We obviously spent quite a bit of time talking about secondaries in our prepared remarks. You know, that, for example, is an area that I think we're seeing interest across each of the four asset classes.
Great. Thank you.
Our next question comes from Adam Beatty with UBS. Please proceed with your question.
Thank you, good afternoon. Scott, I appreciate all the detail around the different sectors. I wanted to kind of hone in a little bit on venture capital and just kind of what you're seeing there, both in terms of, I mean, you mentioned some secondary, you know, type vintages that, you know, that might be out there, you know, and available at a discount. Just in terms of sort of primary capital formation, you know, is there an acknowledgment, I guess, out in, you know, the world of, you know, smaller private firms and others, you know, that, okay, You know, as you say, great companies, you know, may well be being formed at this time and, you know, is there available capital kind of at the ready, especially in a time where debt may cost more? Thank you.
Sure. I mean, I think there's probably a few, you know, parts to the question there. Within venture, yes, I think there is that recognition that you just referenced, and whether you're looking at the portfolio company level where you've clearly seen a shift from this, you know, growth at all cost mentality towards a more sustainable and, you know, a need to be able to grow profitably. You're seeing it at the portfolio company level. You've also seen it in the fundraising market. While the, you know, If you look at the 2022 figures, you know, they actually stack up fairly well against 2021.
When you look at it quarterly, you can see the trend, and clearly there has been a slowdown in venture fundraising throughout the course of the year. You know, I think with that, with that slowdown, you know, one comes opportunities. The, you know, the venture asset class over the last several years has grown to be a much larger one. There's a tremendous amount of NAV in the ground today. There's, you know, clearly going to be an extended runway, you know, before either the IPO market reopens or some of those companies can be exited. Therefore, we think the secondaries market is going to be a likely path for investors to drive liquidity there. I think that's, you know, that's certainly one of the opportunities we point to.
I think the other one is you've seen a tremendous number of funds and new managers created over the last number of years. I think there's gonna be a, you know, a bit of a concentration in some of your top managers, and really, it's something you've seen in prior dislocations. We talk about, you know, the differential between the haves and the have-nots. I think there's gonna be a market where, you know, you really focus in on those top managers.
Excellent. That's really great. Thank you for all the details, Scott. Just wanna ask about, I mean, I think Mike mentioned kind of a mix shift, you know, between the different kind of major vehicle types. You know, as I look at the commingled funds, it looks like there may have been a tick up in the fee rate, you know, just within that. I don't know if there was something about, you know, different asset classes or other aspects of the mix that might be driving that. Thank you.
Yeah. This is Johnny. I'll take that. It is a combination of those, new commingled funds getting activated with higher rates than the existing portfolio. Just a combination of new funds coming on, that are, you know, at the full rate. It is just a mix among asset classes and between commingled and SMAs for the total fee rate.
It sounds like kind of maturity stage as well in terms of turning on new fees.
That's correct. I mean, as we mentioned in the prepared remarks, we did activate a couple funds during the quarter, so that has an impact. You know, no retro fees, so a very clean quarter in terms of.
Right
... fee level. Great.
That's exactly right. No, no, I appreciate it. Thank you, Johnny.
Our next question comes from Ben Budish with Barclays. Please proceed with your question.
Hi, everyone. Thanks so much for taking the question. I wanted to ask about the retail piece. It sounds like a lot of optimism around kind of strong continued growth there. I was wondering, I guess maybe a two-part question, if, one, you know, you tend to go to market a little bit more through RIAs versus wires, and that market's a little bit more fragmented. Could you talk a little bit about your sort of approach to, you know, advisor engagement and education, just given it's not as easier not quite as easy as walking into, you know, a very large bank, and speaking to a large group. Kind of along the same lines, you know, you haven't seen any redemptions or meaningful increase in redemptions, which has been great.
Can you kind of remind us, like, how is the fund structured to handle liquidity? I think we've all gotten a real education in, you know, non-traded REITs over the past several months, but just curious how, you know, SPRING in particular is set up to handle, you know, potential liquidity, requirements.
Hi, Ben. This is Jason. Thanks for the questions. In terms of the go-to-market and sales support, with the RIAs, you're right that it is much more fragmented. If you think about our network of distribution partners, we've got 150 different platforms allocating with SPRIM, and we've got about 40 allocating with SPRING. There's a Venn diagram there with some overlap. The education component, that's really why you see the CapEx that we've made in building out the private wealth team over the last couple of years. You need to be out in the field with those groups, in their offices.
Conducting education with the financial advisors, potentially with the clients assisting with that as well. We take a lot of time in preparing collateral that's able to be shared by them directly with their clients, as well as conducting events. We conduct diligence sessions in a couple of different locations around the country periodically and invite advisors to come in and do a, you know, a half or full day teach-in as well. It's, it's a multipronged approach for sure. You know, the reality is, a lot of folks have been educating this channel for a long time, and it's gonna continue well on into the future. It's not a one-time event. In terms of the second question on the redemptions, with SPRIM, that's a quarterly tender.
There's a 5% per quarter cap on that tender. We can always elect to do less, but we've tendered for the full amount each quarter. We structure the portfolio from an asset perspective to generate sufficient liquidity. We have a credit facility as well that we can tap in order to assist with liquidity if necessary. With SPRIM as the only fund SPRIM's U.S. fund is the only one that's actually in the active tendering now period. The other thing I would remind you is that the majority of that capital is still in the soft lock-up period, so there's some kind of structural protection against tendering right now.
As it relates to SPRING, the one difference I would cite is that it's a 2.5% per quarter tender as opposed to 5% per quarter tender, given the different focus from an asset perspective.
Okay. Great. Thanks so much. If I could maybe get one more in for Johnny, perhaps. You mentioned in your prepared remarks that you were expecting a step-up in G&A expense next quarter. I was wondering if you could, you know, perhaps quantify that a bit more, and give us a little bit more color on where that's coming from.
Yes. Just to clarify, it's more on the comp line than the G&A line, just given our comp cycle is on a calendar year. January 1st, new base, new bonus accruals begin. It'll be in the comp accrual line. I guess in terms of I guess if you look back at the change, you know, a year ago between the fourth quarter, the first quarter, that % increase is about the same. I don't know we have a guidance %, but, you know, something beyond a normal quarterly increase driven by staff, it would be quarterly increase driven by new hires plus some adjustment on the base.
Okay. That's, very helpful. Thanks so much.
Our next question comes from Michael Cyprys with Morgan Stanley. Please proceed with your question.
Great. Thank you. Good afternoon. You guys have been quite active over the years building out a global diversified platform. I guess as you look at the business today, what strategies, geographies, channels would you like to see added to the platform as you look out over the next five, 10 years that could make sense or ones that you think could be more meaningfully scaled? You've also been quite active on M&A over the years. I guess how much time are you spending on that today versus in recent years?
Maybe I'll start and then hand it to Mike to touch briefly on M&A. In terms of, you know, some of the white space or some of the areas that we, you know, expect to grow over the coming years, I won't kind of rehash our focus on the private wealth, you know, channel. I think we spent quite a bit of time on that in, you know, prior quarters. Clearly, as we not only make progress with SPRIM, but now launch SPRING and think about, you know, how that channel may prove, you know, helpful and successful to us in other parts of our business, that will clearly continue to be an area of focus.
I think the other opportunities that we see probably fall within any of the given asset classes. Not to come back to secondaries again, but I think it's a pretty good example where today, when you look at how fundraising has evolved over the last several years and the resulting net asset value that is in the ground across each of the asset classes where we operate, you know, something like 30% of the current private markets NAV falls in the infrastructure, real estate, and private credit asset classes today relative to private equity. Yet when you look at the secondaries market within any of those asset classes, it's probably closer to, depending on what, you know, what sources you look at, you know, probably under 15%.
I think there's room as those asset classes mature for the secondaries market to follow suit. Again, it's sort of one example, but I think in a lot of other ways, as we look at how the non-private equity asset classes have been evolving, there are similarities. It might be in terms of the specialization amongst managers where, you know, initially you had, you know, a number of generalist funds operating across the entirety of the, you know, infrastructure space, for example. Over time, you see more funds specializing in, you know, whether it's energy transition or even within energy transition, a number of different specialty areas.
I think as you see the number of funds grow, it presents opportunities for us to develop more specialized mandates, you know, which we've already started to do today. I think that's where we see some of the biggest opportunities is probably within each of our asset classes. Why don't I turn it to Mike just to comment on your question about M&A as well.
Yeah. Thanks, Scott. To that point, you know, we don't really see ourselves, you know, adding anything we aren't currently doing.
Rather, I think strategically, you know, we're looking to either augment something we're doing or accelerate perhaps something we're currently doing. You know, we have a track record, as you know, for acquiring and integrating large senior teams around the world. Most recent acquisition of Greenspring, I think, was a good case study and a working example of how we augmented our existing venture capital base and accelerated our growth to $22 billion of AUM with that transaction with a deep team that had a 20-year track record. We got to look at Greenspring as a pretty good case study that we would point to as to what we're looking for. I think strategically we remain opportunistic. It's not like we have a stated goal of rolling up, you know, the industry or any asset classes.
If we see something that's interesting that would fit in well culturally, would drive synergies or growth in some form, we remain active, and we remain engaged. I would say in terms of the current market environment, 2020 and 2021 were pretty busy years. As you know, 2022 saw a pretty significant slowdown across the board. 2023, we're starting to see some early activity that might be going on, but it's still pretty soft, and we don't expect to see much M&A activity this year. Perhaps as we move into 2024 and 2025, you know, opportunities could present themselves, and we'll remain open and engaged. I think we have a pretty good reputation out there for being able to bring on large senior experienced teams.
Great. Thanks for that. Just a follow-up question on the FRE margin. It continues to tick a little bit higher here, at least sequentially 33%. I guess what's the scope for that margin expanding into the mid-thirties that you've spoken about previously? What would be the timeframe? What would it take to hit that? How are you thinking about margin expansion opportunity?
Yeah. Thanks, Mike. It's, it's been great. You know, when we took the company public a couple of years ago, we were, you know, in the mid-twenties FRE margin. Really it was through a combination of scale economies, either through organic growth or inorganic growth through M&A. We've been able to expand our margins by 600 basis points while growing the top line and bottom line. We feel very good about the combination of both our growth and our ability to expand margins. I think at the time when we took the company public, you know, we had guided you and everyone that we felt that, you know, medium to long term, you know, we would see ourselves comfortably in the mid-thirties. As far as, you know, we're concerned, we're on track.
We feel good about, you know, finishing up this year, you know, in the low 30s%. We would hope that scale economies continue to build as we grow our business globally, and we'll continue to see, you know, some margin expansion, you know, over the medium to longer term. We don't have a stated target over a stated timeline. Scott, Jason, and I continue to make a strategic balance between managing the firm for growth and profitability and doing it simultaneously. We remain focused on investing for growth in the medium and long term. We appreciate the question, and we're thrilled with the way things have grown, you know, as we had hoped.
If I could just follow up there just on that point. If you were to look out longer term, I don't know, maybe five or 10 years. I guess where could that margin be longer term for your business? What's appropriate? If we look at some peers out there seem to be meaningfully higher. I guess maybe you could help remind us what's different in terms of your business profile relative to peers that, you know, results in a little bit of a different lower margin profile. At the same time, as you continue to scale and grow the retail business, I imagine that has pretty high incremental margins. Maybe you could kind of help flush that out. Thank you.
Sure. I think our outlook, you know, remains unchanged there in terms of what our guidance has been. You're right. I think the opportunities are there, and we continue to see, you know, our margins improve. I don't think we have a specific target or an outlook on any timeframe.
No. I think it just comes back to the comment, Mike, you made earlier about the balance between growth and profitability. You touched on it, Mike, in terms of the private wealth business and how we've built out that team, even in advance of, you know, the fundraises and the growth that we're now benefiting from. That's a sort of tried and true approach that we've taken when you look at the size and the seniority of the teams that we've built across each of the infrastructure, real estate, private debt asset classes, and again, have benefited from the growth that we're seeing in those areas as well. I think it does come down to making sizable investments in our team to drive what we think the future growth opportunities will be.
Great. Thank you.
Our next question comes from Alex Blostein with Goldman Sachs. Please proceed with your question.
Hey, good afternoon, everybody. Thanks for taking the question. Scott, I was hoping we could build a little bit on your discussion around secondaries, and I appreciate we talked quite a bit about it already this evening, but the supply side of the equation makes a ton of sense, both on the LP side and the GP side. I was hoping you could comment on the demand side of the equation, and why wouldn't the same sort of denominator effects that are plaguing, in a way, some of the primary allocations, you know, impact the secondary ones as well, right? Do people carve it out?
Do people think of that as sort of part of their private equity allocation and therefore, you know, fundraising might be a little bit more challenging there, despite the fact that the opportunity set clearly seems to be growing?
Yeah. No, look, it's a fair question. I think that's why, as I made the comments earlier about our time, both as an LP, but also the GP out there fundraising. You know, we, as we've talked about, are in market with our secondaries fund. I think there's a, you know, tremendous amount of interest in this strategy and have an established, you know, track record and practice there. You know, the denominator effect is real, and in some cases that has led to, you know, things just taking longer than you might have otherwise expected. The other thing is, you know, again, I made the comments about, you know, we've been working with our clients late last year and early this year in terms of setting their new allocations for the year ahead.
Obviously, rolling into a new year doesn't do anything to the denominator effect, but it is, you know, tends to be the time when LPs reset their budgets. I mentioned earlier that I think, you know, there have certainly been some who have reduced budgets, but just as many that are holding them steady because they wanna make sure to maintain exposure to these vintage years. What you may see them doing is within that allocation shifting where, you know, where they are focused and so, you know, perhaps shifting away from, you know, a more, you know, vanilla buyout strategy to secondaries with the view that this is a, you know, attractive time to invest.
It's a fair question in terms of the fact that, you know, those that are looking to allocate to secondaries funds may have their own, you know, may have denominator effect issues. I think it's, you know, clearly an opportunity, and I think we're probably seeing some allocation shift around within budgets this year.
Yep. Interesting. Thanks. My second question for you guys was around data. That's something you've been highlighting since really the time you went public, across both the extensive set of data you have on the portfolio company side, as well as the GP side of things. At a time of sort of increased market volatility, I'm sure LPs are struggling to kinda really think about their allocations and who they're allocating to, you know, more holistically, is there an opportunity for you to monetize the data better? I know you usually just kinda provide it as part of the overall bundle, overall service, is there an opportunity to, you know, not so much white label it, but, you know, think about it more extensively? Thanks.
Yeah, Alex, I think, you know, where we've been able to monetize the data and overlaying the in-house technology team input has been around creating asset management solutions that don't exist but for that wealth of data and the data science team input and the technology solutions we've built on it. You know, I've kind of given the example before of SPRIM and SPRING as great examples where it's the wealth of data coupled with the technology, coupled with the data science team, being able to help us manage those products much more efficiently. And that shows up in the return for the investors. We're doing the same thing with semi-liquid permanent capital type vehicles for institutional investors.
We're utilizing that data in other ways where we're helping to forecast for insurance investors and helping with asset liability matching and the like. I think that's where we've seen the easiest path to monetizing at scale today.
Got it. Very good. Thanks so much.
Our next question comes from John Dunn with Evercore. Please proceed with your question.
Hi, guys. I have a question about the different geographies. Are you seeing any differentiation between overall demand in the different geographies and within that, any differences in preferences, regionally?
I think the biggest differences that we're seeing by geography are in many ways a function of sort of maturity of portfolios where, again, I think it's been well-documented and referenced in terms of U.S. public pensions versus some of the international pools of capital that may just be either coming online or still building into their targeted allocations. I think that's probably the biggest difference we see. Again, I think I've been quick to point out on prior calls that even amongst our U.S. public pension fund clients, there are some that are quite active today and looking at new opportunities. It's why I struggle to generalize at times with the question.
Certainly over the last, you know, 12-18 months, the world has reopened. We've been spending quite a bit of time on the road around the world, you know, seeing various different pockets of interest, whether in, you know, Asia, Middle East, Latin America, et cetera. In terms of where the interest lies, no, I wouldn't point to any major difference in terms of differences by region in terms of where the areas of interest are today.
Gotcha. Just a quick one on the expansion of the retail platform. You talked about Asia and Australia. You know, any difference in expectations there and any differences in, you know, how those locales operated versus your experience in the U.S.?
John, can you just repeat the question? You tailed off there a little bit at the end for me.
Oh, yeah, sure. Expanding the retail platform in Europe and Australia, you know, what are your expectations there and, do you expect any differences in the way those markets work versus, you know, what you have seen in the US?
Thank you. The markets are structured slightly differently, right, market to market in terms of who the major players are and how they function. Europe, you know, doesn't really have the IBD kind of platforms. It tends to be private bank driven, although there are a couple of bulge bracket versions of that that look a bit more like the wires as well. Asia, larger institutions, not a lot of the independent RIA type market, and then Australia, a little bit of a mix.
In terms of how we prosecute that from a go-to-market perspective, we can probably get by with a little bit less density on the private wealth team to cover those markets, just due to smaller number of players that are active in the private markets or expect to be active in the private markets. That would probably be the biggest difference, I would say.
Makes sense. Thanks very much.
There are no further questions at this time. I would now like to turn the floor back over to Scott Hart for closing comments.
I just wanna thank everyone for taking the time to join our call today. We appreciate the continued interest and look forward to speaking with you again, next quarter. Thank you.
This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.