Assets Under Management Definition
Assets under management represents the overall market value of assets/capital that an investment fund holds. The fund manager manages these assets and makes investment decisions on behalf of investors.
Assets under management are owned by customers who have a contract with a third-party management provider. The services offered by asset management providers include investment advice and services, fund accounting, tax reporting, business reporting, and more. Asset management service providers include some of the largest banks and financial institutions in the world.
A Little More on What are Assets Under Management
The methods of calculating the assets under administration vary according to the companies. Generally, it includes the fair market value of all of the assets held by the company. The total assets under management of the company will increase when the return on investment rises or when new assets are acquired. The factors that cause declines in AUM include lower market value due to losses in return on investment, closings of funds, and swaps of customers.
Investment companies often use AUM as a marketing tool to attract investors. AUM can help investors obtain an indication of the size of a company’s operations relative to its competitors.
Products with a higher AUM can generally have higher trading volumes in the market that positively influence the liquidity of a product.
Within the asset management industry, some investment managers may have requirements based on AUM, such as the requirement to register the company or undertake additional reporting.
For investors, AUM can also be an important consideration for rates. Investment managers may charge management fees at the price of a fixed percentage of the AUM.
References for Assets Under Management