What Are Assets Under Management (AUM)?

Assets under management (AUM) is the market value of the investments managed by a person or entity on behalf of clients. AUM is used in conjunction with management performance and management experience when evaluating a company.

When calculating AUM, some financial institutions include bank deposits, mutual funds, and cash, while others limit it to funds under discretionary management from individual investors.

Understanding Assets Under Management (AUM)

AUM is the sum of the market value for all of the investments managed by a fund or family of funds, a venture capital firm, a brokerage company, or an individual registered as an investment advisor or portfolio manager. When an investor has $50,000 in a mutual fund, those funds are part of the total AUM of the pool of funds. The fund manager can buy and sell shares according to the investment objective using all invested funds without obtaining special permissions.

AUM includes the capital the manager can use to make transactions for one or all clients. An investor may need a minimum amount of personal AUM to qualify for a type of investment, such as a hedge fund, to ensure the client can withstand adverse markets. An investor’s AUM may coincide with their net worth and may determine the type of services received from a financial advisor or brokerage company.

Calculating AUM

Calculating assets under management varies among companies and depends on the flow of investor money in and out of a fund. Asset performance, capital appreciation, and reinvested dividends increase the AUM of a fund. Assets under management also increase when new customers and their assets are acquired. A decrease in AUM occurs following losses in the market value or performance of assets, fund closures, and decreased investor in-flows.

The U.S. Securities and Exchange Commission (SEC) requires firms to register with the SEC with AUM ranging between $25 million to $110 million, depending on several factors, including the size and location of the firm. The SEC regulates the financial markets to ensure that it functions properly.

AUM and Fees

AUM is a consideration when calculating fees. Many investment products charge management fees as a fixed percentage of AUM. Financial advisors and personal money managers charge clients a fee as a percentage of personal assets under management. Fees commonly decrease as AUM increases, and financial professionals can attract high-wealth investors.

AUM Examples

SPY

The SPDR S&P 500 ETF (SPY) is an exchange-traded fund. An ETF is a fund that contains several stocks or securities that match or mirror an index, such as the S&P 500. The SPY has all 500 of the stocks in the S&P 500 index. As of June 14, 2023, the SPY had assets under management of $412.25 billion.

EDOW

The First Trust Dow 30 Equal Weight ETF (EDOW) tracks the 30 stocks in the Dow Jones Industrial Average (DJIA). As of June 14, 2023, the EDOW had assets under management of $189.58 million.

The Bottom Line

Assets under management (AUM) is the market value of the investments managed by a person or entity on behalf of clients. AUM can reveal the management performance and experience when investors evaluate a company or investment. The SEC regulates firms with large AUMs to protect investors.