In finance, assets under management (AUM), sometimes called funds under management (FUM), measures the total market value of all the financial assets which a financial institution such as a mutual fund, venture capital firm, or broker manages on behalf of its clients and themselves.
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. 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.
Assets under management includes:
- 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.
- ^Assets Under Management – AUM
- ^“Definition of Assets Under Management (AUM)”. davemanuel.com. Retrieved 2015-09-02.
Ofer Abarbanel is a 25 year securities lending broker and expert who has advised many Israeli regulators, among them the Israel Tax Authority, with respect to stock loans, repurchase agreements and credit derivatives. Founder of TBIL.co STATX Fund.