Legal Definitions - asset under management

Asset Under Management (AUM) refers to the total market value of all financial assets that a financial institution, investment firm, or individual financial advisor manages on behalf of its clients. These assets can include a wide range of investments such as stocks, bonds, mutual funds, real estate, and other securities. AUM is a crucial metric used to assess the size, influence, and success of an investment entity, as the fees charged for management services are often calculated as a percentage of the AUM.

Here are some examples to illustrate this concept:

• Example 1: A Large Investment Firm

  Imagine a prominent global investment firm that provides services to pension funds, university endowments, and high-net-worth individuals. This firm might oversee a diverse collection of portfolios, including equity funds, fixed-income portfolios, and alternative investments, totaling hundreds of billions of dollars.

  How it illustrates AUM: The combined value of all the stocks, bonds, and other investments that this firm manages for all its clients represents its Asset Under Management. The firm's revenue is largely derived from charging a small percentage fee on this vast sum.

• Example 2: An Independent Financial Advisor

  Consider an independent financial advisor who works with individual clients to help them plan for retirement and other financial goals. This advisor might manage a dozen different client accounts, each containing a mix of mutual funds, exchange-traded funds (ETFs), and individual stocks, with each account ranging from $100,000 to several million dollars.

  How it illustrates AUM: The sum of the market value of all the investments held across all the individual client accounts that this advisor oversees constitutes their Asset Under Management. This figure reflects the total wealth entrusted to their professional guidance.

• Example 3: A Mutual Fund Company

  A company offers a specific "Global Growth Mutual Fund" to the public. Thousands of individual investors and institutions purchase shares in this fund, pooling their money. The fund manager then invests this collective capital into a diversified portfolio of international companies with strong growth potential.

  How it illustrates AUM: The total market value of all the stocks and other securities held within the "Global Growth Mutual Fund" at any given time represents that specific fund's Asset Under Management. This value fluctuates daily based on the performance of the underlying investments and the inflow or outflow of investor capital.