Assets under management

In finance, assets under management (AUM), sometimes called funds under management (FUMl), measures the total market value of all the financial assets which a financial institution such as a mutual fund, venture capital firm, or depository institution manages on behalf of its clients and themselves.[1]

Overview

Assets under management (AUM) is very popular within the financial industry as a measure of size and success of an investment management firm, compared with its history of assets under management in previous periods, and compared with the firm's competitors.[2] Methods of calculating AUM vary between firms. Investment management companies generally charge their clients fees as a proportion of assets under management, so assets under management, combined with the firm's average fee rate, are the key factors indicating an investment management company's top line revenue. The fee structure depends on the contract between each client and the firm or fund.

Assets under management rise and fall. They may increase when investment performance is positive, or when new customers and new assets are brought into the firm. Rising AUM normally increases the fees which the firm generates.

Conversely, AUM are reduced by negative investment performance, as well as redemptions or withdrawals, including fund closures, client defections and other generally adverse events. Lower AUM tend to result in lower fees generated.

Content

The precise definition of AUM varies by institution, as some firms may include certain assets as being "under management," while others may not. Some include bank deposits, mutual funds, and cash in their computation, while others only consider the discretionary funds that investors have given an advisor to trade on their behalf.

While different firms may include assets that others do not in their AUM computation, Assets Under Management typically include:

  • Capital raised from investors;
  • Capital belonging to the principals of the fund management firm.

For example, if fund managers contribute $2B of their own capital to the fund and raise additional $10B from investors, their AUM is $12B.[3]

Net Asset Value vs Assets Under Management

NAV, or Net Asset Value, is the total value of assets minus all its liabilities of a fund, such as a mutual fund or ETF, often shown on a per-share basis. NAV shows what price shares in a fund can be bought and sold at.

AUM by contrast refers to the value of assets managed by an individual or firm, not a fund. Unlike NAV, AUM is in reference to the total value of assets being managed rather than expressed on a per-share basis.[1]

See also

References
  1. "What Is The Meaning of AUM (Assets Under Management)?". Finance Strategists. Retrieved 2020-12-04.
  2. Assets Under Management - AUM
  3. "Definition of Assets Under Management (AUM)". davemanuel.com. Retrieved 2015-09-02.


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