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Assets under Management

Definition

In finance, assets under management, 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 brokerage house manages on behalf of its clients and themselves.

By definition, asset under management (AUM) is the aggregated market value of the investments for the mutual funds, portfolio management, the hedge fund, money management firms and other services of any financial company.

AUM includes:

  • Capital under the management firms authority
  • Investor capital

The AUM basically fluctuates according to the:

  • Cash inflow and outflow of the specific fund or the company.
  • Changes in the underlying investments and value of the funds/company.

In technical terms, AUM illustrates the volume of the funds, the aggregate asset amount for the clients, and the total managed assets for the clients. The AUM incorporates the funds that managers can make use of for transactions.

For example, if a client has $10000 as an investment portfolio of a company, then the fund manager has the rights to buy/sell shares using the investor’s capital without prior permission.

The SEC (Securities and Exchange Commission) registers every company in the United States that owns more than $30 million in terms of the AUM. Furthermore, the clients/investors AUM is used to determine the services rendered to the investor from a broker or financial advisor.

How are AUM calculated?

The method of calculating AUM varies. It can accelerate when the investment performance shoots up, or when acquiring new assets or customers. On the other hand, it may decrease with a decrease in the investment performance, increase in client turnovers, withdrawals, retrievals, etc.

AUM: How are they important?

The clients/investors are fairly entitled to transparency in the disclosure of asset manager’s workings, and performance over a period of time. This is because, a large number of an asset management company measure success in terms of the competitors size. Accuracy of information and performance is crucial to evaluate how effective an asset management really is.

There are certain ethical standards established by the name of Global Investment Performance Standards (GIPS). These provide corporations, such as investment firms with specific guidelines and policies on how they should report, and calculate the result to their existing and prospective clients.

Also, many companies of asset management charge a certain fee that is equal to the fixed percentage of the AUM. This is crucial for investors to comprehend the calculation of the AUM by the company.


Further Reading


The optimal amount of assets under management in the mutual fund industry
www.tandfonline.com [PDF]
… 71 nificant economies of scale by expanding assets under management … This find- ing suggests that the asset base of a small fund complex is not large enough to absorb the higher costs of increasing its assets, whereas a large fund complex may have already exploited any …

The right amount of assets under managementThe right amount of assets under management
www.tandfonline.com [PDF]
… 71 nificant economies of scale by expanding assets under management … This find- ing suggests that the asset base of a small fund complex is not large enough to absorb the higher costs of increasing its assets, whereas a large fund complex may have already exploited any …

The growth of financeThe growth of finance
www.aeaweb.org [PDF]
… 71 nificant economies of scale by expanding assets under management … This find- ing suggests that the asset base of a small fund complex is not large enough to absorb the higher costs of increasing its assets, whereas a large fund complex may have already exploited any …

Trends in park tourism: Economics, finance and managementTrends in park tourism: Economics, finance and management
www.tandfonline.com [PDF]
… 71 nificant economies of scale by expanding assets under management … This find- ing suggests that the asset base of a small fund complex is not large enough to absorb the higher costs of increasing its assets, whereas a large fund complex may have already exploited any …

Reclassification of financial assets under IAS 39: impact on European banks' financial statementsReclassification of financial assets under IAS 39: impact on European banks' financial statements
www.tandfonline.com [PDF]
… 71 nificant economies of scale by expanding assets under management … This find- ing suggests that the asset base of a small fund complex is not large enough to absorb the higher costs of increasing its assets, whereas a large fund complex may have already exploited any …

Mathematical programming, the capital asset pricing model and capital budgeting of interrelated projectsMathematical programming, the capital asset pricing model and capital budgeting of interrelated projects
www.jstor.org [PDF]
… 71 nificant economies of scale by expanding assets under management … This find- ing suggests that the asset base of a small fund complex is not large enough to absorb the higher costs of increasing its assets, whereas a large fund complex may have already exploited any …

Are financial assets priced locally or globally?Are financial assets priced locally or globally?
www.sciencedirect.com [PDF]
… 71 nificant economies of scale by expanding assets under management … This find- ing suggests that the asset base of a small fund complex is not large enough to absorb the higher costs of increasing its assets, whereas a large fund complex may have already exploited any …

Pricing and hedging path-dependent options under the CEV processPricing and hedging path-dependent options under the CEV process
pubsonline.informs.org [PDF]
… 71 nificant economies of scale by expanding assets under management … This find- ing suggests that the asset base of a small fund complex is not large enough to absorb the higher costs of increasing its assets, whereas a large fund complex may have already exploited any …

'Climate value at risk'of global financial assets'Climate value at risk'of global financial assets
www.nature.com [PDF]
… 71 nificant economies of scale by expanding assets under management … This find- ing suggests that the asset base of a small fund complex is not large enough to absorb the higher costs of increasing its assets, whereas a large fund complex may have already exploited any …



Q&A About Assets under Management


Why do some asset managers measure success based on competitors size?

Some asset managers measure success based on competitors size because it gives them a benchmark for comparison purposes .

Who registers every company in the United States that owns more than 3 million in terms of AUM?

The Securities and Exchange Commission (SEC) registers every company in the United States that owns more than 3 million in terms of AUM.

Are clientsinvestors fairly entitled to transparency in disclosure from asset managers' workings and performance over time?

Yes, they are fairly entitled to transparency because it helps them evaluate how effective an asset manager really is.

Is there a set standard for calculating Asset under Management called Global Investment Performance Standards (GIPS)?

Yes, there are certain ethical standards established by GIPS which provides corporations such as investment companies with guidelines on how to measure success effectively while maintaining accuracy and integrity when disclosing information about their business practices and performance over time .

What is asset management?

Asset management refers to a systematic approach to the governance and realization of value from the things that a group or entity is responsible for, over their whole life cycles. It may apply both to tangible assets (physical objects such as buildings or equipment) and intangible assets (such as human capital, intellectual property, goodwill or financial assets).

What does ISO 55 provide?

The International Standard provides an introduction and requirements specification for a management system for asset management.

What is the definition of Assets under Management?

The aggregated market value of the investments for mutual funds, portfolio management, hedge fund, money management firms and other services of any financial company.

How does AUM fluctuate?

It fluctuates according to the number of assets under management.

Who manages investments on behalf of others?

Investment managers manage the assets of pension funds.

How do you define Asset Under Management (AUM)?

By definition , Asset Under Management (AUM)

What can you determine with a client'sinvestor'sAUM?

You can determine what services a broker or financial advisor will provide based on their client'sinvestorsAUM.

What are some common usages of the term "asset manager"?

The most common usage of the term "asset manager" refers to investment managers who manage the assets of pension funds.

What are two ways to calculate AUM?

There are two ways to calculate AUM. One way is by using a formula and another way is by using an algorithm.

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