Assets Under Management (AUM) may refer to the total market value of the investments that a person or entity manages on behalf of clients. The definition of AUM is crucial in understanding the scale and success of an investment management firm, as it indicates the breadth of the entity’s financial influence and responsibilities.
Assets Under Management in More Detail
AUM includes all the capital raised from investors, earnings, and other funds over which the investment advisor has discretion to invest. This metric is often used to gauge the size of a portfolio managed by a financial institution, a hedge fund, a mutual fund, or a venture capital firm, and it can significantly impact the perceived trustworthiness and expertise of the managing entity.
Furthermore, AUM is important because it often determines the fee structure for investment services; typically, management fees are calculated as a percentage of AUM. Hence, a higher AUM generally translates to higher revenue for the fund manager, contingent on their specific fee arrangement. In summary, Assets Under Management provides a quantitative measure that is central to evaluating a fund’s size, growth, and overall capacity to generate returns on investments.
