Skip to content
× FreshBooks App Logo
Official App
Free - Google Play
Get it
You're currently on our UK site. Select your regional site here:
4 Min. Read

What Are Assets Under Management (AUM)? Definition & Overview

What Are Assets Under Management (AUM)? Definition & Overview

What type of business do you operate? Are you a sole trader or a limited liability partnership? Do you sell products to customers? Or, perhaps you operate a small business in the financial services industry.

That could mean a business such as a bank, mutual fund or hedge fund. If this is the case, how do you keep all your assets organized on behalf of your clients? Assets under management have to do with the total market value of the securities you own or manage.

Here is everything that you need to know about assets under management and an overview of how they work.

Here’s What We’ll Cover:

What Are Assets Under Management?

Calculating Assets Under Management

Key Takeaways

What Are Assets Under Management?

Simply put, assets under management refer to the total market value of the investments you manage for clients. Formulas and calculations are going to vary depending on the company and how they operate. Typically, assets under management include things like bank deposits, mutual funds and cash.

It’s a great way to evaluate a company or an investment to make sure they’re providing you or your clients with a return. As well, assets under management get considered with management performance and management experience. Investors often consider higher investment inflows as a positive indicator. It could mean high quality, excellent management experience or a combination of both.

To explain it in even simpler terms, it's how much money a financial institution or hedge fund is managing for their clients. It’s the total market value for each of the investments.

They can also be managed by a venture capital firm, investment advisor or brokerage company. Assets under management can also get broken down in a few different ways. They can refer to the total assets that are managed for a specific client. Or, they can refer to the total amount of assets that get managed for every client.

Assets Under Management Example

Let’s say that an investor has decided to invest £25,000 into a mutual fund that you manage. Those invested funds then become part of the total assets under management. From here, the fund manager can either buy or sell shares based on the fund’s investment objectives.

They would use all the invested funds without obtaining any special permissions. In the wealth management industry, there are some managers who have certain requirements. If this were the case, the investor might need a minimum amount of personal assets under management to qualify for something such as a hedge fund.

This is because wealth managers need to ensure that they can handle adverse markets without taking a large financial hit. Sometimes individual assets under management can coincide with the net worth of an individual.

Calculating Assets Under Management

There are some different ways that you can calculate assets under management depending on your business. It could depend on the flow of investor money coming in and out of a fund, which can also fluctuate. Asset performance, reinvested dividends and capital appreciation also increase the assets under management.

Some factors can also cause a decrease in assets under management. These can include a decrease in market value, fund closure or a decrease in investor flows. They can also get limited to the investor capital that’s invested across the business.

Key Takeaways

To help determine the strength of a company, assets under management can relate to investment strategy. Some investment companies will also use assets under management to try and attract new investors. Plus, assets can help investors get a better indication as to the size of a business’s operations compared to its competition.

Assets under management can also be used to calculate fees. This is because several investment products are going to charge a management fee that is a fixed percentage.

To keep things simple, assets under management refers to the total value of the investments you manage. These typically include things like bank deposits, cash or mutual funds. It’s a good way to evaluate a company or an investment to make sure your clients can get a return from their investment.

Higher investment inflows and largest assets can often be a positive indicator for investors. This is because it could mean having a high quality and excellent management experience. If you operate a hedge fund, for example, assets under management are how much money you manage for your clients.

Did you enjoy reading this guide? Head over to our resource hub for more content!