Assets Under Management (AUM): An Overview, Definition, and Illustration

Assets Under Management (AUM): What Is It?

The total market value of the investments held by a portfolio manager or investment firm on behalf of customers is known as assets under management, or AUM.

It is the entire amount of money that has been invested.

The total amount of money invested in a mutual fund or exchange-traded fund (ETF) is known as the fund’s assets under management (AUM).

In a similar vein, the amount you have invested is your own AUM.

When selecting an investment or investment company, investors take AUM into account in addition to other considerations.

KEY POINTS

• The AUM of a fund or business is always changing, reflecting participant buying and selling as well as market conditions.
• A high AUM is regarded by investors as a sign of stability and liquidity.
• A high AUM indicates that the fund has a lot of liquidity, making it simple to sell shares.
• Expenses and fees associated with fund management are frequently expressed as a percentage of the investor’s AUM.

Open a Libertex Account to start Trading  and get a 100% welcome bonus today

Gaining Knowledge of Assets Under Management (AUM)

When examining an investment fund or family of funds, a venture capital business, a brokerage firm, or a person registered as a portfolio manager or investment advisor, AUM is an important figure.

Some financial organizations use cash, mutual funds, and bank deposits for determining AUM, whereas others only consider funds from individual investors that are managed at their discretion.

The capital that the manager can utilize to conduct trades for one or more clients is included in AUM.

To be eligible for a certain kind of investment, such a hedge fund, an investor might need to meet a minimum level of personal AUM.

The kind of services an investor receives from a brokerage firm or financial advisor may depend on their AUM.

An investor’s $50,000 investment in a mutual fund is included in the fund’s total assets under management (AUM).

As long as the specified investment goals are met, the fund management is free to purchase and sell shares without the client’s express consent.

Important
A bigger AUM is frequently regarded by investors as a sign of superior management.

Finding the AUM

The computation of assets under management varies slightly from company to company and is contingent on the inflow and outflow of investor funds.

Additionally, the figures are always changing in reaction to market fluctuations and the quantity of money that investors deposit or remove.

The AUM of a fund is raised by reinvested dividends, capital appreciation, and asset performance.

When new clients sign up, the amount of assets under management also rises.

Following market value declines, fund closures, and a decline in investor inflows, AUM declines.

The entire market value of all the assets that an investment manager manages on behalf of clients is added up to determine AUM.

Stocks, bonds, mutual funds, exchange-traded funds (ETFs), cash equivalents, and other securities may fall under this category.

Each asset held in client portfolios must be identified and valued, taking into consideration fair values, current market prices, and any necessary currency changes.

The total asset value (AUM) is calculated by adding the market values of each asset.

SEC and AUM Regulation

Depending on a number of variables, such as the firm’s size and location, the majority of companies with AUMs between $25 million and $110 million are required to register with the U.S. Securities and Exchange Commission (SEC).

Additionally, counselors managing up to $100 million are subject to state securities regulators.

Advisors must register with the securities regulator of the state in which their primary place of business is situated if they have assets under management under $100 million.

A state-registered adviser may decide to register with the SEC if its AUM reaches the $100 million mark.

Typically, a business must register with the SEC after its AUM exceeds $110 million.

AUM and Charges

AUM may be taken into account when figuring out fees.

The management fees associated with many investment products are expressed as a predetermined percentage of the investor’s AUM.

A fee expressed as a percentage of the personal assets under management is also assessed to clients by financial advisors and personal money managers.

The connection between fees and AUM isn’t always clear-cut.

For instance, you could think that investment managers’ fees rise in tandem with an investor’s AUM.

It is crucial to understand that fee structures might fluctuate significantly among various investment products and clientele groups.

For instance, because active management and research are required, actively managed funds may have greater costs than passively managed funds.

Larger, institutional clients are an additional exception to this rule.

Because of the scale of their investments and their negotiating power, institutional clients may be able to negotiate lower charge rates than retail clients.

To attract big investors, management companies could also aggressively reduce their fees.

Consequently, greater costs are not always associated with higher AUM.

Investment Management Strategy and AUM

Increasing its AUM is one of an investing firm’s ultimate objectives. As a result, the business has more capital to invest, increasing its leverage for future expansion.

AUM growth is also influenced by customer acquisition tactics, however these are not always related to quantitative financial research.

To increase AUM, investment firms can give priority to finding and gaining new clients that share the investment manager’s target market and investing goals.

An additional crucial component of AUM growth plans is product differentiation.

This entails creating cutting-edge investment products and solutions that take into account changing investor preferences, market trends, and legal constraints.

State Street Corp., for example, presents “State Street Alpha” in its 2023 annual report, an architecture platform that is utilized for large-scale data interpretation.

These kinds of new items can help a business raise money from both new and existing clients.

Investor psychology and AUM

Growing a fund’s or investment company’s AUM is influenced by investor psychology.

Investors may devote more funds to investment vehicles during upbeat times.

AUM may decrease as a result of investors taking money out or moving assets to safe havens during bad times.

Herd mentality and other behavioral biases may also be involved.

The ETFs or investment firms with the biggest AUM may be the preferred choice for novice investors.

This may contribute to a risky cycle in which investors make snap decisions rather than thoughtful ones.

An illustration of AUM

As the name suggests, the SPDR S&P 500 ETF (SPY) is an exchange-traded fund that owns stock in every company included in the S&P 500 Index.

SPY had around $572 billion of assets under management as of April 24, 2025.

In addition to SPY, the fund’s manager, State Street Corp., oversees over 200 mutual funds and exchange-traded funds.

The worldwide investment firm’s AUM was $4.7 trillion by the end of 2024.

Describe As If I Were Five

As an investor, you might want to keep track of the assets managed by a fund you are considering investing in or a portfolio manager you may work with.

A high AUM indicates that many investors (or several extremely large investors) have put their money into this fund or management with the hope that it will increase in value.

A low AUM could indicate that, for whatever reason, the fund or manager is not drawing in significant investment.

It could be a young fund, a specialist fund, or a fund that is becoming less appealing.

Further investigation is necessary.

One thing to keep in mind is that an exchange-traded fund’s (ETF) high AUM suggests more confidence in the benchmark the fund tracks than it does in the fund’s sponsoring business.

Instead of being actively managed, the great majority of ETFs are passively managed.

How Do Investment Companies Use AUM as a Tool?

Assets under management are used as a marketing technique by investment firms to draw in new clients. Investors can use AUM to assess how big a firm is in comparison to its rivals.

What Can Prospective Investors Learn From AUM?

Investors frequently use the fund’s AUM as a gauge of its size when assessing a particular fund.

Investment products with high AUMs typically have higher market trading volumes, which makes them more liquid and makes it easier for investors to purchase and sell fund shares.

What Advantage Does a Fund With a High AUM Offer?

Large AUM funds have enough assets to cover any pressure on redemptions.

The impact of a few big investors leaving the fund would be negligible.

The market value of the investments that a person or organization manages on behalf of customers is known as the Bottom Line Assets under Management (AUM).

When investors assess a business or investment, AUM can provide insight into the management’s performance and background.

To safeguard investors, the SEC oversees companies with high AUMs.

Follow for the latest news and information Telegram Channel