Assets Under Management (AUM)

AUM is a common measure of the size and success of investment firms. It includes all the money clients have entrusted to the firm to invest, across funds, separate accounts and other products.

AUM changes for two main reasons. It rises when clients add new money and when investments increase in value, and it falls when clients withdraw money and when markets decline.

For example, an asset manager with 50 billion of AUM at the start of the year might end the year with 56 billion: 4 billion from market gains and 2 billion from net new client money.

AUM matters because many investment firms charge fees as a percentage of the assets they manage. A firm charging 0.5% a year on 50 billion earns about 250 million in fees. As a result, growth in AUM often drives growth in revenue.

Large AUM can bring advantages, such as economies of scale and the ability to lower fees. But very large funds may find it harder to invest efficiently in smaller companies or less liquid markets. When choosing a fund or adviser, AUM gives an indication of scale, but not of performance or suitability.