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Assets Under Management (AUM) |
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WIKI ANALYSIS| This article is part of WikiProject Definitions. Consider editing to improve it. View articles referencing this definition. |
Assets Under Management (AUM) is the total value of investments a financial services firm manages for itself and its clients.
AUM is a term used by brokerages, mutual fund companies, insurance companies and other companies that manage or invest money as a measure of success and comparison against their competitors. As many of these companies earn a management fee for investing client assets, Interest rate spread on client deposits, or the investment returns on their own funds, all of which are percentages of assets under management, Assets Under Management are an indicator of any asset manager's underlying earnings capability.
The difference between two AUM balances consists of market performance gains/(losses), foreign exchanges movements, net new assets (NNA) inflow/(outflow) and structural effects of the company. Investors are mainly interested in the NNA, which indicate how much money from clients had been newly invested. Furthermore, it's common to calculate the key figure 'NNA growth', which shows the NNA in relation of the previous AUM balance (annualized). NNA growth can also be referred to as organic growth.
Client assets are transactional assets which are used as collateral for specific transactions, e.g. margin accounts.
AUM is also a metric for the individual professional investment manager or registered representative. It may help the prospective investor to gauge the success or failure of a contemplated advisor. Most advisors are happy to reveal their AUM. Barrons runs several annual reports on the top advisors in many categories, with the primary format being AUM. Whether an individual can appropriately handle significant assets, or number of clients, is a question worth asking. Bask office support becomes critical as assets grow. Types of investment, philosophy and style are further metrics. Are all the assets in mutual funds, ETFs or stocks? What is the annual fee and does it include transaction costs? Is the advisor more concerned with getting the 'next dollar' into AUM, or with your personal financial situation? Size does matter. Often in ways you do not think about...
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