What Are Assets Under Management (AUM)?
According to the US SIF Foundation, US asset management firms hold as much as 12 trillion in assets under management. Find out everything you need to know about wealth management assets under management with our definitive guide. Assets under management explained  Assets under management (AUM) refers to the total market value of the investments or assets managed by a mutual fund, hedge fund, wealth management firm, portfolio manager, or other financial services firm. In other words, assets under management is the total amount of other peoples money that a person or entity controls. In some cases, assets under management includes the total amount of assets that an entity manages for all clients. Otherwise, AUM refers to the total market value of assets managed for specific clients. Generally speaking, assets under management includes funds that the manager can use to make transactions on a discretionary basis. For instance, if youve invested 100,000 in a mutual fund, this money would become part of the overall AUM. Therefore, the manager of the fund could buy and sell stocks and shares using the invested capital without seeking special permission. Its also important to note that the manager of your mutual funds assets under management will charge a management fee covering their compensation and fixed administration costs. Generally, the payment will be a flat rate charged to the overall fund, allocated proportionately to every investor. Depending on the specifics of the fund, the fee could be several percent or several thousandths of a percent. This isnt a simple question, as calculation methods for AUM vary between different companies. For example, some institutions/investors include cash and bank deposits in the calculation, whereas others limit assets under management to discretionary investment funds. Furthermore, because assets under management change as money flows in and out of a fund, it can fluctuate from one day to another. Total assets under management can be a strong performance indicator for financial institutions, as a larger AUM is typically correlated with larger revenues (assuming a constant ROA). Furthermore, the size of financial advisor assets under management is often a measure of prestige by which banks or asset managers are ranked. Financial institutions often use assets under management to compare their performance to competitors and assess industry trends. Analysing wealth management assets under management  When youre analysing assets under management, there are a couple of significant trends to pay attention to. Firstly, its essential to understand that funds with frequent inflows/outflows of investor capital will experience more volatility, meaning that these types of funds are more difficult to manage. There are several solutions to issues like this, including lock-up periods (where its not possible to withdraw funds) or temporary/permanent closures of the fund. We can help  GoCardless helps you automate payment collection, cutting down on the amount of admin your team needs to deal with when chasing invoices. Find out how GoCardless can help you with ad hoc payments or recurring payments.