Loading the player...

What is an 'Assets Under Management - AUM'

Assets under management (AUM) is the total market value of assets that an investment company or financial institution manages on behalf of investors. Assets under management definitions and formulas vary by company.

Some financial institutions include bank deposits, mutual funds and cash in their calculations; others limit it to funds under discretionary management, where the investor assigns responsibility to the company.

BREAKING DOWN 'Assets Under Management - AUM'

Assets under management describes how much of investor’s money an investment company controls. Investments are held in a mutual fund or hedge fund and are managed by a venture capital company, brokerage company or portfolio manager.

AUM indicates the size of the fund and may refer to the total amount of assets managed for all clients or the total assets managed for a specific client. It includes the funds the manager can use to make transactions. For example, if an investor has $50,000 in an investment portfolio, the fund manager can buy and sell shares using the investor's funds without obtaining the investor’s permission.

Fluctuating daily, AUM depends on the flow of investor money in and out of a particular fund and asset performance. It also fluctuates based on changes in the company investments or the value of a fund.

In the United States, once a firm has more than $30 million in assets under management, it must register with the Securities and Exchange Commission. An investor’s AUM determines the type of services received from a financial advisor or brokerage company. Many companies have requirements based on AUM, and it may determine if an investor is qualified for a certain type of investment because some investments have minimum purchase requirements.

Calculating AUM

Methods of calculating assets under management varies among companies. It may increase when investment performance increases or when new customers and new assets are acquired. It may decrease when investment performance decreases, and because of client turnovers, fund closures, withdrawals or redemptions. Assets under management includes investor capital and can include capital owned by the investment company executives.

Why AUM Matters

Several investment companies charge management fees that are a fixed percentage of assets under management and it is important for investors to understand how companies calculate AUM. Investment companies use assets under management as a marketing tool to attract investors. It helps investors get an indication of the size of the company's operations relative to its competitors. However, it is only one aspect in evaluating a company and does not offer full details about the investment potential of the company.

How to Compare AUM

Investors want to know how much money from other investors is flowing into a company. Therefore, an investor should understand how to compare AUM. More assets under management is not always better. It may be helpful to search for below-average to average net assets as a method to compare AUM. Assets under management provides insight into a company, but when compared against other factors such as market capitalization, it discloses true insight into an investment company.

RELATED TERMS
  1. Funds Management

    The management of the cashflow of a financial institution. The ...
  2. Investment Manager

    A person or organization that makes investments in portfolios ...
  3. Investment Management

    A generic term that most commonly refers to the buying and selling ...
  4. Management Fee

    A charge levied by an investment manager for managing an investment ...
  5. Money Manager

    A business or bank responsible for managing the securities portfolio ...
  6. Managed Account

    An investment account that is owned by an individual investor ...
Related Articles
  1. Investing

    Explaining Assets Under Management

    Assets under management is a metric that measures the market value of assets that an investment company manages for investors.
  2. Investing

    Is the Hedge Fund Industry Too Concentrated?

    Learn about trends in the hedge fund industry. Discover why a relatively small number of funds holds a significant majority of total assets.
  3. Investing

    The 8 Biggest International Asset Managers in 2016 (ALV, LGEN)

    Learn more about eight of the largest investment management companies headquartered in Europe, as ranked by assets under management.
  4. Financial Advisor

    Top 5 Asset Management Firms for Portfolios in 2016 (PIMCO, BLK)

    Learn how finding the right asset management firms may be difficult and discover the top five asset management firms to consider for your portfolio in 2016.
  5. Managing Wealth

    World's Top 10 Hedge Fund Firms

    Ready for the high-risk, high-return hedge fund investments? Here is a list of the top hedge fund investment firms.
  6. Managing Wealth

    Morgan Stanley On the Trends in Asset Management (MS)

    Learn about trends in the asset management industry and future prospects for its growth, according to a May 2016 Morgan Stanley report.
  7. Personal Finance

    The World’s Top 10 Hedge Fund Firms

    Here are the top hedge fund firms, based on recent asset under management totals.
  8. Investing

    The 5 Biggest Asset Managers at the End of 2015 (BLK)

    Learn about the worldwide asset managers that prospered in 2015 despite a year of very poor performance in stocks, bonds and commodities.
  9. Financial Advisor

    Capital Group: Investment Manager Highlight

    Discover Capital Group, one of the largest but least-known global asset managers. Learn about Capital Group's 85-year history of steady returns to investors.
  10. Managing Wealth

    What is Asset Management?

    In the investment world, asset management refers to active management of an investor’s portfolio by a financial services company – usually an investment bank.
RELATED FAQS
  1. What percentage of asset management firms are privately held and not publicly traded?

    Explore asset management firms, a major part of the financial services sector, and learn about the respective markets served ... Read Answer >>
  2. Where does a hedge fund get its money?

    Learn how a hedge fund is structured and how the managing partner of the fund goes about the process of finding and soliciting ... Read Answer >>
  3. Why do mutual fund companies charge management fees?

    Learn why mutual funds charge their investors management fees, which include the cost of hiring investment advisors and various ... Read Answer >>
  4. How much of the asset management industry has moved from traditional managers to ...

    Learn about the growth of the hedge fund and alternative asset management industry and the change in regulations, preferences ... Read Answer >>
  5. What is the difference between passive and active asset management? (SPY)

    Find out about active asset management, passive asset management, how these strategies are utilized and the differences between ... Read Answer >>
  6. Where do most fund managers get their market information?

    Many fund managers, whether they manage a mutual fund, trust fund, pension or hedge fund, have access to resources that the ... Read Answer >>
Hot Definitions
  1. Graduate Record Examination - GRE

    A standardized exam used to measure one's aptitude for abstract thinking in the areas of analytical writing, mathematics ...
  2. Graduate Management Admission Test - GMAT

    A standardized test intended to measure a test taker's aptitude in mathematics and the English language. The GMAT is most ...
  3. Magna Cum Laude

    An academic level of distinction used by educational institutions to signify an academic degree which was received "with ...
  4. Cover Letter

    A written document submitted with a job application explaining the applicant's credentials and interest in the open position. ...
  5. 403(b) Plan

    A retirement plan for certain employees of public schools, tax-exempt organizations and certain ministers. Generally, retirement ...
  6. Master Of Business Administration - MBA

    A graduate degree achieved at a university or college that provides theoretical and practical training to help graduates ...
Trading Center