Assets under management
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In finance, assets under management (AUM), sometimes called funds under management, 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—or a decentralized network protocol controls. These funds may be managed for clients/users or for themselves in the case of a financial institution which has mutual funds or holds its own venture capital.
Assets under management (AUM) is popular metric within the financial industry and also in decentralized digital asset space as a measure of size and success of an investment management entity, compared with its history of assets under management in previous periods, and compared with the entity's competitors. Methods of calculating AUM vary between firms or decentralized protocols. 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 may depend on contracted arrangements between each client and the firm or fund. Decentralized protocols also use a variety of ways to incent growth of AUM, typically in the form of offering a return to those who serve the role of providing liquidity on the protocol.
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.
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.
Net Asset Value vs Assets Under ManagementEdit
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.
- "What Is The Meaning of AUM (Assets Under Management)?". Finance Strategists. Retrieved 2020-12-04.
- Assets Under Management - AUM
- "Definition of Assets Under Management (AUM)". davemanuel.com. Retrieved 2015-09-02.