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Assets under management (AUM) refers to the total market value of investments or assets that a financial institution manages on behalf of its clients. It is the aggregate amount of capital that investment managers, wealth advisors, and fund companies oversee and invest for their customers.
AUM encompasses the aggregate fair market value of all securities within an asset management firm’s portfolio, including financial assets, real estate, cash, and other asset classes.
As asset values fluctuate daily based on market movements, a firm’s total assets under management change as well. Firms calculate and report AUM periodically as a key metric of their business’s performance.
A company’s total AUM amount fluctuates over time for some of the following reasons:
While capital markets drive most AUM fluctuations, asset management firms also increase their asset base by attracting new customers and additional deposits.
Firms aim to consistently grow AUM over time to signal improving market share and revenue-generation potential.
Many types of institutions track and manage assets under management (AUM), including the following:
Wealth Management Firms
Oversee portfolios of securities and other investments for high-net-worth clients.
Provide advisory and asset management services to institutional investors.
Mutual Funds & Exchange-Traded Funds
Manage diversified investment funds with portfolio holdings being funded by the sale of shares to individual, corporate, and institutional investors.
They oversee and invest assets following alternative investment strategies aimed at generating outsized portfolio returns, typically for high-net-worth customers.
Private Equity Firms
Acquire large ownership stakes in private companies by using funds from investors. They raise capital and increase AUM to pursue further opportunities found in the marketplace.
Real Estate Firms
Own or manage properties and real estate assets that make up their AUM based on their combined market valuations.
Venture Capital Firms
Take equity positions in startup companies to help them grow. Their AUM is determined by the aggregated market value of all companies they have invested in.
The diversity of institutions highlights how AUM provides a consistent metric to gauge the size of their activities and impact across the financial services ecosystem.
Assets under management signal a firm’s stature in the marketplace and reflect investor perceptions of its brand, operations, and ability to generate positive returns. Several factors make growing and maintaining AUM a key business priority:
Revenue Driver: Fees earned for portfolio administration and management are tied directly to the firm’s asset base. A higher AUM figure means higher revenues, everything else being equal.
Profit Indicator: Assuming stable fee structures, an increasing asset pool should be translated into improved profitability over time as costs are spread across an ampler asset base.
Investor Trust: The willingness of investors to entrust their capital to a firm signals institutional confidence in its brand, service quality, stability, and performance.
Marketing Appeal: Total AUM figures are considered a key metric for marketing purposes among institutional, corporate, and high-net-worth investors. Firms can use rapid AUM growth in pitches to attract new customers by tapping on the credibility that this figure conveys.
Economies of Scale: Larger asset pools allow firms to spread infrastructure investments across more capital to improve their profit margins.
While chasing assets can be risky, disciplined AUM gains suggest progress in building capabilities to better serve a wider customer base through long-term investments.
According to research firm ADV Ratings, below are the top 10 asset managers worldwide by total assets under management as of June 2023:
The largest firms are all diversified institutions overseeing multi-asset strategies across markets globally. Their massive asset bases signal investor comfort and underscore operational scale advantages.
The ideal amount of assets under management (AUM) varies depending on the fund’s scope and strategy:
Assets under management reflect investors’ confidence in entrusting capital to institutions for investment and custodial services.
While critical for driving profitability, unrestrained AUM growth can undermine a fund’s performance and neutralize the advantages that attracted the inflows at first.
Firms must balance expansion with staying true to their core competencies to maintain trust.
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Alejandro has seven years of experience writing content for the financial industry and more than 17 years of combined work experience, serving under different roles in multiple business fields including tech and financial services. Before joining Techopedia, Alejandro collaborated with numerous online publications such as Seeking Alpha, The Modest Wallet, Capital.com, Business2Community, EconomyWatch.com, and others, covering finance, business news, trading platform reviews, and educational articles for investors. Alejandro earned a Bachelor's in Business Administration from UNITEC, Venezuela, and a Master's in Corporate Finance from EUDE Business School, Spain. His favorite topics to cover are value investing and financial analysis.
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