Assets under management
Also known as: AUM
Assets under management is the total of all the investments a fund, financial advisor, or asset manager oversees on behalf of clients at a given point in time. It is the standard measure of size in the investment management , used to compare fund companies, individual funds, and advisory firms against each other.
AUM changes for two separate reasons that are worth telling apart. It rises or falls with the of the underlying holdings, so a market rally lifts AUM even if no new money comes in, and it rises or falls with , meaning new money invested or existing money withdrawn by clients. A fund can gain AUM in a falling market if inflows are strong enough to offset the price decline, and it can lose AUM in a rising market if enough investors pull money out.
AUM matters to investors because many funds charge fees as a percentage of AUM, so a manager's grows directly with the size of the overseen, not necessarily with performance. It also affects a fund's ability to operate, a very small fund may struggle to cover fixed costs, while a very large fund in a narrow strategy can find it harder to trade in and out of positions without moving prices against itself.